DOMESTIC SHIPPING DEVELOPMENT ACT OF 2004

Case Overview and Summary

Summary of Republic Act No. 9295 (Domestic Shipping Development Act of 2004)

Declaration of Policy (Section 2)
- Promote Filipino ownership of vessels under Philippine flag
- Attract private capital to invest in shipping industry
- Provide assistance and incentives for growth of Philippine domestic merchant marine fleet
- Encourage improvement and upgrading of existing fleet and crew to meet international standards
- Ensure viability of domestic shipping operations
- Encourage development of shipbuilding and ship repair industry

Definitions (Section 3)
- Defines terms like domestic shipping, domestic trade, domestic ship operator/owner, shipper, MARINA, ship/vessel, importation, spare parts, certificate of public convenience, cargo handling equipment, shipbuilding, ship repair, shipyard, shipbuilder/ship repairer

Investment Incentives for Domestic Ship Operators (Section 4)
- Exemption from value-added tax (VAT) on importation and local purchase of passenger/cargo vessels 150 tons and above, engines, spare parts (subject to age limit)
- Exemption from VAT on importation of life saving equipment, safety/rescue equipment, communication/navigational equipment, steel/metal plates (subject to conditions)
- Net operating loss carry over for 3 consecutive years
- Accelerated depreciation of fixed assets

Authority of MARINA (Sections 5-10)
- Only domestic ship owners/operators can engage in domestic shipping
- Foreign vessels need special permit from MARINA to operate domestically
- MARINA issues certificates of public convenience to qualified domestic ship operators
- Domestic ship operators can establish their own rates (subject to MARINA monitoring)
- Vessels must comply with safety standards set by MARINA
- MARINA has powers related to registration, licensing, route setting, inspection, enforcement, etc.

Rates (Sections 11-13)
- Domestic ship operators can fix their own passenger/cargo rates
- Obligation to carry mail, preferential rates for government cargo
- MARINA can regulate rates in monopolized routes

Compulsory Insurance Coverage (Sections 14-15)
- Domestic ship operators must have adequate insurance coverage for passengers and cargo
- MARINA can require other compulsory insurance coverage

Prohibited Acts and Practices (Section 16)
- Lists prohibited acts like operating without permit, refusing passengers/cargo, violating safety rules, inadequate insurance, etc.

Fees, Fines and Penalties (Sections 17-18)
- MARINA can impose fees for licensing, supervision, regulation, etc.
- MARINA can impose fines and penalties for violations like permit revocation, operation without permit, safety violations, etc.

Shipbuilding Incentives (Section 19)
- Exemption from VAT on importation of capital equipment, machinery, spare parts for shipbuilding/repair (subject to conditions)
- Net operating loss carry over for 3 years
- Accelerated depreciation of fixed assets

Restrictions on Vessel Importation (Section 20)
- After 10 years, MARINA to evaluate capability of registered shipyards to build vessels for domestic trade
- If capable, domestic ship operators discouraged from importing vessels that can be built locally

Transitory Provisions (Sections 21-23)
- Existing liner operators can continue operating during transition period
- Newly acquired vessels must be classed by recognized classification society
- MARINA to implement mandatory retirement program for unclassed vessels

Other Provisions
- Temporary takeover of operations by State during emergencies (Section 24)
- Separability clause (Section 25)
- Repealing of inconsistent laws (Section 26)
- Effectivity 15 days after publication (Section 27)