Question & AnswerQ&A (Republic Act No. 7471)
The official title of Republic Act No. 7471 is the "Philippine Overseas Shipping Development Act."
The main policy objectives are to develop and maintain a Philippine Merchant Marine with qualified Filipino officers and crews, assist in the development and expansion of overseas shipping, encourage private investment in vessel acquisition and modernization, and create a favorable climate for private enterprises.
Philippine overseas shipping means the transport of goods and/or passengers by a ship owned and operated under the Philippine flag by a Philippine shipping enterprise, except for ships operated solely between ports in the Philippines.
A Philippine shipping enterprise must be a citizen or association/corporation organized under Philippine laws with at least 60% of its capital owned by Filipino citizens, and engaged exclusively in Philippine overseas shipping.
Philippine shipping enterprises are exempt from import duties and taxes on the importation of oceangoing vessels for registration under the Philippine flag and spare parts for repairs or overhaul, subject to conditions such as designated repair facilities accredited by MARINA.
They are exempt from income tax on income derived from Philippine overseas shipping for ten years from the date of approval. Conditions include reinvesting most of their net income in vessel acquisition or modernization and restrictions on withdrawal of reinvested amounts for ten years thereafter.
Vessels must be acquired with funds outside the Philippine banking system, without guarantees from the monetary authority or financial institutions, and the vessel serves as sole collateral. Foreign exchange for loan servicing and operation must be financed from vessel earnings only.
The President of the Philippines may requisition vessels in times of war or national emergency for naval or military purposes either absolutely or temporarily, with compensation based on fair market or charter value determined if necessary by arbitration.
Violations may be penalized with a fine up to Ten thousand pesos (P 10,000), imprisonment of up to five years, or both. Corporate officials and employees responsible may also be held liable, and government employees may face dismissal and administrative sanctions.
MARINA is responsible for approving vessel acquisitions, accrediting repair facilities, promulgating implementing rules and regulations in consultation with monetary and finance authorities, filing of mortgage documents, and submitting an annual report on the Act's implementation to the President and Congress.
All vessels benefiting from the Act's incentives must be registered under the Philippine flag. Deletion from registry is allowed only after MARINA determines that no other Philippine enterprise is interested or the vessel is to be scrapped.
No, foreign exchange for servicing loans, operation, maintenance, repair, supplies, and equipment must be financed from vessel earnings and no foreign exchange shall be provided by the monetary authority or Philippine banking system for those purposes.
The Act takes effect fifteen (15) days after its publication in at least two newspapers of general circulation.