CODE OF COMMERCE OF THE PHILIPPINES

COMMERCIAL CONTRACTS FOR TRANSPORTATION

ARTICLE 349. A contract of transportation by land or water ways of any kind shall be
considered commercial:

1. When it has for its object merchandise or any article of commerce.

2. When, whatever its object may be, the carrier is a merchant or is habitually
engaged in transportation for the public.

ARTICLE 350. The shipper as well as the carrier of merchandise or goods may
mutually demand that a bill of lading be made, stating:

1. The name, surname and residence of the shipper.

2. The name, surname and residence of the carrier.

3. The name, surname and residence of the person to whom or to whose order the
goods are to be sent or whether they are to be delivered to the bearer of said bill.

4. The description of the goods, with a statement of their kind, of their weight, and of
the external marks or signs of the packages in which they are contained.

5. The cost of transportation.

6. The date on which shipment is made.
7. The place of delivery to the carrier.

8. The place and the time at which delivery to the consignee shall be made.

9. The indemnity to be paid by the carrier in case of delay, if there should be any
agreement on this matter.

ARTICLE 351. In transportation made by railroads or other enterprises subject to

regulation rate and time schedules, it shall be sufficient for the bills of lading or the
declaration of shipment furnished by the shipper to refer, with respect to the cost, time
and special conditions of the carriage, to the schedules and regulations the application
of which he requests; and if the shipper does not determine the schedule, the carrier
must apply the rate of those which appear to be the lowest, with the conditions inherent
thereto, always including a statement or reference to in the bill of lading which he
delivers to the shipper.
ARTICLE 352. The bills of lading, or tickets in cases of transportation of passengers,
may be diverse, some for persons and others for baggage; but all of them shall bear the
name of the carrier, the date of shipment, the points of departure and arrival, the cost,
and, with respect to the baggage, the number and weight of the packages, with such
other manifestations which may be considered necessary for their easy identification.

ARTICLE 353. The legal evidence of the contract between the shipper and the carrier
shall be the bills of lading, by the contents of which the disputes which may arise
regarding their execution and performance shall be decided, no exceptions being
admissible other than those of falsity and material error in the drafting.
After the contract has been complied with, the bill of lading which the carrier has issued
shall be returned to him, and by virtue of the exchange of this title with the thing
transported, the respective obligations and actions shall be considered cancelled,
unless in the same act the claim which the parties may wish to reserve be reduced to
writing, with the exception of that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return the bill of lading
subscribed by the carrier, because of its loss or of any other cause, he must give the
latter a receipt for the goods delivered, this receipt producing the same effects as the
return of the bill of lading.
ARTICLE 354. In the absence of a bill of lading, disputes shall be determined by the
legal proofs which the parties may present in support of their respective claims,
according to the general provisions established in this Code for commercial contracts.

ARTICLE 355. The responsibility of the carrier shall commence from the moment he
receives the merchandise, personally or through a person charged for the purpose, at
the place indicated for receiving them.

ARTICLE 356. Carriers may refuse packages which appear unfit for transportation;
and if the carriage is to be made by railway, and the shipment is insisted upon, the
company shall transport them, being exempt from all responsibility if its objections, is
made to appear in the bill of lading.

ARTICLE 357. If by reason of well-founded suspicion of falsity in the declaration as to

the contents of a package the carrier should decide to examine it, he shall proceed with
his investigation in the presence of witnesses, with the shipper or consignee in
attendance.
If the shipper or consignee who has to be cited does not attend, the examination shall
be made before a notary, who shall prepare a memorandum of the result of the
investigation, for such purposes as may be proper.
If the declaration of the shipper should be true, the expense occasioned by the
examination and that of carefully repacking the packages shall be for the account of the
carrier and in a contrary case for the account of the shipper.

ARTICLE 358. If there is no period fixed for the delivery of the goods the carrier shall
be bound to forward them in the first shipment of the same or similar goods which he
may make point where he must deliver them; and should he not do so, the damages
caused by the delay should be for his account.

ARTICLE 359. If there is an agreement between the shipper and the carrier as to the
road over which the conveyance is to be made, the carrier may not change the route,
unless it be by reason of force majeure; and should he do so without this cause, he
shall be liable for all the losses which the goods he transports may suffer from any other
cause, beside paying the sum which may have been stipulated for such case.
When on account of said cause of force majeure, the carrier had to take another route
which produced an increase in transportation charges, he shall be reimbursed for such
increase upon formal proof thereof.

ARTICLE 360. The shipper, without changing the place where the delivery is to be
made, may change the consignment of the goods which he delivered to the carrier,
provided that at the time of ordering the change of consignee the bill of lading signed by
the carrier, if one has been issued, be returned to him, in exchange for another wherein
the novation of the contract appears.
The expenses which this change of consignment occasions shall be for the account of
the shipper.

ARTICLE 361. [The merchandise shall be transported at the risk and venture of the
shipper, if the contrary has not been expressly stipulated.
As a consequence, all the losses and deteriorations which the goods may suffer during
the transportation by reason of fortuitous event, force majeure, or the inherent nature
and defect of the goods, shall be for the account and risk of the shipper. cdta
Proof of these accidents is incumbent upon the carrier.]

ARTICLE 362. Nevertheless, the carrier shall be liable for the losses and damages
resulting from the causes mentioned in the preceding article if it is proved, as against
him, that they arose through his negligence or by reason of his having failed to take the
precautions which usage has established among careful persons, unless the shipper
has committed fraud in the bill of lading, representing the goods to be of a kind or
quality different from what they really were.

If, notwithstanding the precautions referred to in this article, the goods transported run
the risk of being lost, on account of their nature or by reason of unavoidable accident,
there being no time for their owners to dispose of them, the carrier may proceed to sell
them, placing them for this purpose at the disposal of the judicial authority or of the
officials designated by special provisions.

ARTICLE 363. Outside of the cases mentioned in the second paragraph of Article
361, the carrier shall be obliged to deliver the goods shipped in the same condition in
which, according to the bill of lading, they were found at the time they were received,
without any damage or impairment, and failing to do so, to pay the value which those
not delivered may have at the point and at the time at which their delivery should have
been made.

If those not delivered form part of the goods transported, the consignee may refuse to
receive the latter, when he proves that he cannot make use of them independently of
the others.

ARTICLE 364. If the effect of the damage referred to in Article 361 is merely a
diminution in the value of the goods, the obligation of the carrier shall be reduced to the
payment of the amount which, in the judgment of experts, constitutes such difference in
value.

ARTICLE 365. If, in consequence of the damage, the goods are rendered useless for
sale and consumption for the purposes for which they are properly destined, the
consignee shall not be bound to receive them, and he may have them in the hands of
the carrier, demanding of the latter their value at the current price on that day.

If among the damaged goods there should be some pieces in good condition and
without any defect, the foregoing provision shall be applicable with respect to those
damaged and the consignee shall receive those which are sound, this segregation to be
made by distinct and separate pieces and without dividing a single object, unless the
consignee proves the impossibility of conveniently making use of them in this form.
The same rule shall be applied to merchandise in bales or packages, separating those
parcels which appear sound.
ARTICLE 366. Within the twenty-four hours following the receipt of the merchandise,
the claim against the carrier for damage or average be found therein upon opening the
packages, may be made, provided that the indications of the damage or average which
gives rise to the claim cannot be ascertained from the outside part of such packages, in
which case the claim shall be admitted only at the time of receipt.

After the periods mentioned have elapsed, or the transportation charges have been
paid, no claim shall be admitted against the carrier with regard to the condition in which
the goods transported were delivered.

ARTICLE 367. If doubts and disputes should arise between the consignee and the
carrier with respect to the condition of the goods transported at the time their delivery to
the former is made, the goods shall be examined by experts appointed by the parties,
and, in case of disagreement, by a third one appointed by the judicial authority, the
results to be reduced to writing; and if the interested parties should not agree with the
expert opinion and they do not settle their differences, the merchandise shall be
deposited in a safe warehouse by order of the judicial authority, and they shall exercise
their rights in the manner that may be proper.

ARTICLE 368. The carrier must deliver to the consignee, without any delay or
obstruction, the goods which he may have received, by the mere fact of being named in
the bill of lading to receive them; and if he does not do so, he shall be liable for the
damages which may be caused thereby.

ARTICLE 369. If the consignee cannot be found at the residence indicated in the bill
of lading, or if he refuses to pay the transportation charges and expenses, or if he
refuses to receive the goods, the municipal judge, where there is none of the first
instance, shall provide for their deposit at the disposal of the shipper, this deposit
producing all the effects of delivery without prejudice to third parties with a better right.

ARTICLE 370. If a period has been fixed for the delivery of the goods, it must be
made within such time, and, for failure to do so, the carrier shall pay the indemnity
stipulated in the bill of lading, neither the shipper nor the consignee being entitled to
anything else.
If no indemnity has been stipulated and the delay exceeds the time fixed in the bill of
lading, the carrier shall be liable for the damages which the delay may have caused.

ARTICLE 371. In case of delay through the fault of the carrier, referred to in the
preceding articles, the consignee may leave the goods transported in the hands of the
former, advising him thereof in writing before their arrival at the point of destination.
When this abandonment takes place, the carrier shall pay the full value of the goods as
if they had been lost or mislaid.

If the abandonment is not made, the indemnification for losses and damages by reason
of the delay cannot exceed the current price which the goods transported would have
had on the day and at the place in which they should have been delivered; this same
rule is to be observed in all other cases in which this indemnity may be due.

ARTICLE 372. The value of the goods which the carrier must pay in cases if loss or
misplacement shall be determined in accordance with that declared in the bill of lading,
the shipper not being allowed to present proof that among the goods declared therein
there were articles of greater value and money.

Horses, vehicles, vessels, equipment and all other principal and accessory means of
transportation shall be especially bound in favor of the shipper, although with respect to
railroads said liability shall be subordinated to the provisions of the laws of concession
with respect to the property, and to what this Code established as to the manner and
form of effecting seizures and attachments against said companies.

ARTICLE 373. The carrier who makes the delivery of the merchandise to the
consignee by virtue of combined agreements or services with other carriers shall
assume the obligations of those who preceded him in the conveyance, reserving his
right to proceed against the latter if he was not the party directly responsible for the fault
which gave rise to the claim of the shipper or consignee.

The carrier who makes the delivery shall likewise acquire all the actions and rights of
those who preceded him in the conveyance.

The shipper and the consignee shall have an immediate right of action against the
carrier who executed the transportation contract, or against the other carriers who may
have received the goods transported without reservation.

However, the reservation made by the latter shall not relieve them from the
responsibilities which they may have incurred by their own acts.

ARTICLE 374. The consignees to whom the shipment was made may not defer the
payment of the expenses and transportation charges of the goods they receive after the
lapse of twenty-four hours following their delivery; and in case of delay in this payment,
the carrier may demand the judicial sale of the goods transported in an amount
necessary to cover the cost of transportation and the expenses incurred.

ARTICLE 375. The goods transported shall be especially bound to answer for the cost
of transportation and for the expenses and fees incurred for them during their
conveyance and until the moment of their delivery.

This special right shall prescribe eight days after the delivery has been made, and once
prescribed, the carrier shall have no other action than that corresponding to him as an
ordinary creditor
ARTICLE 376. The preference of the carrier to the payment of what is owed him for
the transportation and expenses of the goods delivered to the consignee shall not be
cut off by the bankruptcy of the latter, provided it is claimed within the eight days
mentioned in the preceding article.

ARTICLE 377. The carrier shall be liable for all the consequences which may arise
from his failure to comply with the formalities prescribed by the laws and regulations of
the public administration, during the whole course of the trip and upon arrival at the
point of destination, except when his failure arises from having been led into error by
falsehood on the part of the shipper in the declaration of the merchandise. If the carrier
has acted by virtue of a formal order of the shipper or consignee of the merchandise,
both shall become responsible.

ARTICLE 378. Agents for transportation shall be obliged to keep a special registry,
with the formalities required by Article 36, in which all the goods the transportation of
which is undertaken shall be entered in consecutive order of number and dates, with a
statement of the circumstances required in Article 350 and others following for the
respective bills of lading.

ARTICLE 379. The provisions contained in Articles 349 and following shall be
understood as equally applicable to those who, although they do not personally effect
the transportation of the merchandise, contract to do so through others, either as
contractors for a particular and definite operation, or as agents for transportations and
conveyances.
In either case they shall be subrogated in the place of the carriers themselves, with
respect to the obligations and responsibility of the latter, as well as with regard to their
rights.
LAWS RELATED TO VESSELS AND SHIPPING IN THE PHILIPPINES

CODE OF COMMERCE

ARTICLE 573. Merchant vessels constitute property which may be acquired and
transferred by any of the means recognized by law. The acquisition of a vessel must
appear in a written instrument, which shall not produce any effect with respect to third
persons if not inscribed in the registry of vessels.

The ownership of a vessel shall likewise be acquired by possession in good faith,

continued for three years, with a just title duly recorded. In the absence of any of these
requisites, continuous possession for ten years shall be necessary in order to acquire
ownership.

A captain may not acquire by prescription the vessel of which he is in command.

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[With respect to Article 573, read P.D. No. 474, Sections 3 & 12(h)

Presidential Decree No. 474

PROVIDING FOR THE REORGANIZATION OF MARITIME FUNCTIONS IN THE

PHILIPPINES, CREATING THE MARITIME INDUSTRY AUTHORITY, AND FOR
OTHER PURPOSES

Section 3. Definition of Terms. The terms, as used, in this Decree, shall have the
following meaning, unless the context of the particular usage of the term indicates
otherwise;
a. "Maritime Industry", briefly referred to as "industry" in the broadest concept of the
term. All enterprises engaged in the business of designing, constructing,
manufacturing, acquiring, operating, supplying, repairing and/or maintaining vessels,
or component parts thereof; of managing and/or operating shipping lines, stevedoring
arrastre and customs brokerage services, shipyards, drydocks, marine railways,
marine repair shops, shipping and freight forwarding agencies and similar enterprises.

b. "Vessels" or "Watercraft" Any barge, lighter, bulk carrier, passenger ship freighter,
tanker, container ship, fishing boats or other artificial contrivance utilizing any source of
motive power, designed, used or capable of being used as a means of water
transportation operating either as common contract carrier, including fishing vessels
covered under Presidential Decree No. 43, except (1) those owned and/or operated by
the Armed Forces of the Philippines and by foreign governments for military purposes,
and (ii) bancas, sailboats and other waterborne contrivance of less than three gross
tons capacity and not motorized.

c. "Philippine national" A citizen of the Philippines; or a partnership or association

wholly owned by and composed of citizens of the Philippines; or a corporation
organized under the laws of the Philippines of which at least sixty per cent of the
capital stock outstanding and entitled to vote is owned and held by Philippine citizens;
or a trustee of funds for pensions or other employee retirement or separation benefits,
where the trustee is a Philippine national and at least sixty per cent of the funds will
accrues to the benefit of the Philippine nationals: Provided, That where a corporation
and its non-Filipino stockholders own stock in an enterprise, at least sixty percent of
the members of the governing board of both corporations must be Philippine nationals.

d. "Philippine flag vessel" A vessel or watercraft registered under Philippine laws.

e. "Foreign flag vessel" A vessel or watercraft registered under the laws of a country
other than the Philippines.

f. "Philippines shipping companies" Philippine nationals registered and licensed under

the laws of the Philippines to engage in the business of overseas and/or domestic
water transportation.
Section 12(h). Approve the sale, lease or transfer of management of vessels owned by
Philippine Nationals to foreign owned or controlled enterprises.

-------------------------------------

ARTICLE 574. Builders of vessels may employ the materials and follow, with respect
to their construction and rigging, the systems most suitable to their interests. Ship
owners and seamen shall be subject to what the laws and regulations of the public
administration on navigation, customs, health, safety of vessels, and other similar
matters.

ARTICLE 575. Co-owners of vessels shall have the right of repurchase and
redemption in sales made to strangers, but they may exercise the same only within the
nine days following the inscription of the sale in the registry, and by depositing the
price at the same time.

-------------------------------------

[With respect to Article 575, read Article 1620 of Civil Code]

Article 1620. A co-owner of a thing may exercise the right of redemption in case the
shares of all the other co-owners or of any of them, are sold to a third person. If the
price of the alienation is grossly excessive, the redemptioner shall pay only a
reasonable one. Should two or more co-owners desire to exercise the right of
redemption, they may only do so in proportion to the share they may respectively have
in the thing owned in common. (1522a)

------------------------------------

ARTICLE 576. In the sale of a vessel it shall always be understood as included the
rigging, masts, stores and engine of a streamer appurtenant thereto, which at the time
belongs to the vendor. The arms, munitions of war, provisions and fuel shall not be
considered as included in the sale.

The vendor shall be under the obligation to deliver to the purchaser a certified copy of
the record sheet of the vessel in the registry up to the date of the sale.
ARTICLE 577. If the alienation of the vessel should be made while it is on a voyage,
the freightage which it earns from the time it receives its last cargo shall pertain
entirely to the purchaser, and the payment of the crew and other persons who make
up its complement for the same voyage shall be for his account.

If the sale is made after the vessel has arrived at the port of its destination, the
freightage shall pertain to the vendor, and the payment of the crew and other
individuals who make up its complement shall be for his account, unless the contrary is
stipulated in either case.

ARTICLE 578. If the vessel being on a voyage or in a foreign port, its owner or owners
should voluntarily alienate it, either to Filipinos or to foreigners domiciled in the capital
or in a port of another country, the bill of sale shall be executed before the consul of
the Republic of the Philippines at the port where it terminates its voyage and said
instrument shall produce no effect with respect to third persons if it is not inscribed in
the registry of the consulate. The consul shall immediately forward a true copy of the
instrument of purchase and sale of the vessel to the registry of vessels of the port
where said vessel is inscribed and registered.

In every case the alienation of the vessel must be made to appear with a statement of
whether the vendor receives its price in whole or in part, or whether he preserves in
whole or in part any claim on said vessel. In case the sale is made to a Filipino, this
fact shall be stated in the certificate of navigation.

When a vessel, being on a voyage, shall be rendered useless for navigation, the
captain shall apply to the competent judge on court of the port of arrival, should it be in
the Philippines; and should it be in a foreign country, to the consul of the Republic of
the Philippines, should there be one, or, where there is none, to the judge or court or to
the local authority; and the consul, or the judge or court, shall order an examination of
the vessel to be made.

If the consignee or the insurer should reside at said port, or should have
representatives there, they must be cited in order that they may take part in the
proceedings on behalf of whoever may be concerned.
ARTICLE 579. After the damage to the vessel and the impossibility of her being
repaired, in order to continue the voyage had been shown, its sale at public auction
shall be ordered, subject to the following rules:

1.The hull of the vessel, its rigging, engines, stores, and other articles shall be
appraised, after making an inventory, said proceedings to be brought to the notice of
the persons who may wish to take part in the auction.

2.The order or decree ordering the auction to be held shall be posted in the usual
places, an announcement thereof to be inserted in the Official Gazette and in two of
the newspapers of the largest circulation of the port where the auction is to be held,
should there be any. The period which may be fixed for the auction shall not be less
than twenty days.

3. These announcements shall be repeated every ten days, and their publication shall
be made to appear in the records.

4. The auction shall be held on the day fixed, with the formalities prescribed in the
common law for judicial sales.

5. If the sale should take place while the vessel is in a foreign country, the special
provisions governing such cases shall be observed.

ARTICLE 585. For all purposes of law not modified or restricted by the provisions of
this Code, vessels shall continue to be considered as personal property.

ARTICLE 589.If two or more persons should be part owners of a merchant vessel, a
partnership shall be presumed as established by the coowners. This partnership shall
be governed by the resolutions of the majority of the members.

If the part owners should not be more than two, the disagreement of views, if any, shall
be decided by the vote of the member having the largest interest. If the interests are
equal, it should be decided by lot.The person having the smallest share in the
ownership shall have one vote; and proportionately the other part owners as many
votes as they have parts equal to the smallest one.
A vessel may not be detained, attached or levied upon in execution in its entirety, for
the private debts of a part owner, but the proceedings shall be limited to the interest
which the debtor may have in the vessel, without interfering with the navigation.

ARTICLE 591.All the part owners shall be liable, in proportion to their respective
ownership, for the expenses for repairing the vessel, and for other expenses which are
incurred by virtue of a resolution of the majority. They shall likewise be liable in the
same proportion for the expenses for the maintenance, equipment, and provisioning of
the vessel, necessary for navigation.

ARTICLE 592. The resolution of the majority with regard to the repair, equipment, and
provisioning of the vessel in the port of departure shall bind the minority, unless the
minority membersrenounce their interests, which must be acquired by the other co-
owners, after a judicial appraisement of the value of the portion or portions assigned.
The resolutions of the majority relating to the dissolution of the partnership and sale of
the vessel shall also be binding on the minority.

The sale of the vessel must be made at public auction, subject to the provisions of the
law of civil procedure, unless the co-owners unanimously agree otherwise, saying
always the right of repurchase and redemption provided for in Article 575.

ARTICLE 593. The owners of a vessel shall have preference in her charter over other
persons, under the same conditions and price. If two or more of them should claim this
right, the one having the greater interest shall be preferred; and should they have
equal interests, the matter shall be decided by lot.

ARTICLE 606. If the captain should be a co-owner of the vessel, he may not be
discharged unless the ship agent returns to him the amount of his interest therein,
which, in the absence of agreement between the parties, shall be appraised by experts
appointed in the manner established in the law of civil procedure.

ARTICLE 607. If the captain who is a co-owner should have obtained the command of
the vesselby virtue of a special agreement contained in the articles of association, he
may not be deprived of his office except for the causes mentioned in Article 605.

ARTICLE 608. In case of the voluntary sale of the vessel, all contracts between the
ship agent and the captain shall terminate, reserving to the latter his right to the
indemnity which may pertain to him, according to the agreements made with the ship
agent. They vessel sold shall remain subject to the security of the payment of said
indemnity if, after the action against the vendor has been instituted, the latter is found
to be insolvent.

------------------------------

Presidential Decree No. 761

AMENDING SECTION EIGHT HUNDRED SIXTY OF THE TARIFF AND CUSTOMS
CODE OF THE PHILIPPINES, AS AMENDED, BY ALLOWING THE REGISTRATION
OF VESSELS THE OWNERSHIP OF WHICH IS VESTED IN CORPORATIONS OR
ASSOCIATIONS, AT LEAST SIXTY PERCENT OF THE CAPITAL STOCK OR
CAPITAL OF WHICH BELONG TO CITIZENS OF THE PHILIPPINES, AND FOR
OTHER PURPOSES

Section 1. Section 806 of the Tariff and Customs Code of the Philippines, as amended,
is hereby amended to read as follows:

Sec. 806. Certificate of Philippine Registry. Upon registration of a vessel of domestic

ownership, and of more than fifteen tons gross, a certificate of Philippine registry shall
be issued for it. If the vessel is of domestic ownership, and of fifteen tons gross or less,
the taking of the certificate of Philippine registry shall be optional with the owner.
"Domestic ownership, as used in this section means ownership vested in citizens of
the Philippines or corporations or associations organized under the laws of the
Philippines at least sixty per centum of the capital stock or capital of which is wholly
owned by citizens of the Philippines, and, in the case of corporations or associations
which will engage in coastwise trade the president or managing directors thereof shall
be such citizens: Provided, That the members of the crew of the vessel, except
specialized fishing vessels, shall all be citizens of the Philippines, Provided, That the
certificate of Philippine registry issued to a vessel prior to the approval of this Code
shall not be affected; Provided, further, That any vessel of more than fifteen gross tons
which on February eight, nineteen hundred and eighteen, had a certificate of Philippine
registry under existing law, shall likewise be, deemed a vessel of domestic ownership
if there has been no change in its ownership or if the capital of the association or
capital stock of the corporation owning such vessel has not been transferred to
persons
who are not citizens of the Philippines and if any such vessels should have been totally
lost through shipwreck, collision or any other marine disaster while being lawfully
operated, it may be replaced with another vessel of the same or lesser tonnage by the
same person, association or corporation owning and operating same by virtue of this
section, under such terms and conditions as may be prescribed by the Maritime
Industry Authority consistent with public policy and with the view of its utility for
government service in case of war or any public emergency: Provided, further, That
the controlling interest of the association or corporation shall not be considered as held
by the citizen of the Philippines; (a) if less than sixty percent of the capital or capital
stock is held by such citizens or such capital or capital stock is subject to any trust or
fiduciary obligation in favor of any person not a citizen of the Philippines; (b) if less
than sixty percent of the capital or capital stock in said association or corporation
entitled to vote is in the hands of citizens of the Philippines; (c) if by means of (a) any
contract or agreement, more than forty percent of the capital or capital stock can be
voted directly or indirectly in favor of any person not a citizen of the Philippines: or (d) if
by other means, the control of more than forty percent of the capital or capital stock of
the association or corporation is conferred upon or allowed to be exercised by any
person not a citizen of the Philippines."

Section 2. The above definition of "domestic ownership" notwithstanding, an enterprise

duly registered with the Board of Investments, under R.A. 5186 or 6135, whether or
not entirely owned by foreign nationals, may register its own vessels under the
provision of the section immediately preceding if such vessels are to be used
exclusively to transport its own raw materials and finished products in Philippine
waters as an incident to its manufacturing, processing or business activity registered
with the Board of Investments and certified to by said Board as an essential element in
the operation of the registered project.

Section 3. Any provision of the law, decree, executive order, or rules and regulations to
the contrary notwithstanding, the Maritime Industry Authority is hereby vested with the
exclusive authority over the registration and documentation of Philippine vessels, as
well as the issuance of all certificates, licenses or other documents necessary or
incident to such registration and documentation.

Section 4. The Maritime Industry Authority shall be subject to approval by the Office of
the President, issue such rules and regulations implementing the provisions of this
decree.

Section 5. All laws, decrees, executive orders, or rules and regulations, or parts
thereof, inconsistent with this Decree are hereby repealed or modified accordingly.

Section 6. This Decree shall take effect immediately.

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CA 65 - COGSA

TITLE I - Section 1. When used in this Act

(a) The term "carrier" includes the owner or the charterer who enters into a contract of
carriage with a shipper.
(d) The term "ship" means any vessel used for the carriage of goods by sea.

---------------------------------

CIVIL CODE

Article 1132. The ownership of movables prescribes through uninterrupted possession

for four years in good faith.

The ownership of personal property also prescribes through uninterrupted possession

for eight years, without need of any other condition.With regard to the right of the
owner to recover personal property lost or of which he has been illegally deprived, as
well as with respect to movables acquired in a public sale, fair, or market, or from a
merchant's store the provisions of Articles 559 and 1505 of this Code shall be
observed. (1955a)

Article 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or moreinstallments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee's failure to pay cover two or more installments. In this case, he shall
have no further action against the purchaser to recover any unpaid balance of the
price. Any agreement to the contrary shall be void. (1454-A-a)

Article 1485. The preceding article shall be applied to contracts purporting to be leases
of personal property with option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing. (1454-Aa)

Article 1486. In the case referred to in two preceding articles, a stipulation that the
installments or rents paid shall not be returned to the vendee or lessee shall be valid
insofar as the same may not be unconscionable under the circumstances. (n)

-------------------------------

Republic Act No. 7471

AN ACT TO PROMOTE THE DEVELOPMENT OF PHILIPPINE OVERSEAS

SHIPPING

SECTION 1. Title. — This Act shall be known and cited as the "PhilippineOverseas
Shipping Development Act."

SECTION 2. Declaration of Policy. — It is hereby declared the policy of the

Government of the Philippines to:

(a) Develop and maintain a Philippine Metropolitan Marine composed of well-

equipped, safe and modern vessels most suited for, Philippine requirements and
conditions, manned by qualified Filipino officers and crew, and owned and operated
under the Philippine flag by citizens of the Philippines or by associations or
corporations organized under the laws of the Philippines, at least sixty percent (60%)
of the capital of which is owned by citizens of the Philippines;

(b) Assist in the development, recovery and expansion of Philippine overseas shipping
capable of meeting the requirements of the expanding international trade of the
Philippines;
(c) Provide assistance to Philippine Shipping enterprises and encourage the long
range vessel acquisition development modernization and expansion through private
investments without direct government financial assistance; and

(d) Create a Healthy climate to attract private enterprises.

SECTION 3. Definition. — As used this Act:

(a) "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 when the ship is operated solely between ports in the Philippines;

(b) "Philippine shipping enterprise" means a citizen of the Philippines or an association

or corporation organized under the laws of the Philippines, at least sixty percent (60%)
of the capital of which is owned by citizens of the Philippines and engaged exclusively
in Philippine overseas shipping;

(c) "MARINA" means the Maritime Industry Authority;

(d) "Monetary authority" means the Central Bank of the Philippines and any other
agency in charge of foreign exchange controls; and

(e) "Regulation" means the rules and regulations promulgated pursuant to

Section 10 hereof.

SECTION 4. Foreign Exchange Requirements. — Foreign exchange requirements of

Philippine Shipping enterprises for the purchase of oceangoing vessels for registration
under the Philippine flag, for repair or improvement of vessels, for importation of
engines, spare parts, accessories, supplies, containers and for other expenses
required for the operation of vessels in foreign ports or in the high seas, when
recommended by the MARINA, shall be made available to the Philippine shipping
enterprise subject to the regulations.

SECTION 5. Acquisition of Oceangoing Vessels. — Philippine shipping enterprises

may likewise acquire oceangoing vessels for Philippine overseas shipping upon
approval by the MARINA, subject to the guidelines prescribed in the regulations:
provided, that:

(a) The funds utilized in the acquisition of the vessel are financed from sources other
than the Philippine banking system;
(b) No guaranty of the monetary authority or of any Philippine government or private
financial institution is granted or extended for the purpose;
(c) The vessel serves as sole collateral for the financing of the vessel and no other
asset of the Philippine shipping enterprise is pledge, mortgaged, or used as security in
case of default;
(d) All foreign exchange requirements for the servicing of the loan, the operation,
maintenance and repair of the vessel, the purchase of supplies and related equipment
shall be financed solely from earnings derived from the operation of the vessel and no
foreign exchange shall be made available by the monetary authority and the Philippine
banking system for these purposes;
(e) Mortgage documents and/or other financial agreements shall be filed with the
monetary authority and such other government agencies in charge of such mortgage
formalities; and
(f) Any excess foreign exchange earning shall be inwardly remitted and surrendered to
the Philippine banking system.

SECTION 6. Exemption from Import Duties and Taxes. — The importation by a

Philippine shipping enterprise of oceangoing vessels for registration under the
Philippine flag shall be exempt from the payment of import duties and taxes. The spare
parts for the repair and/or overhaul of vessels shall likewise be exempt from the
payment of import duties and taxes provided, that such items are destined or
consigned either to:

(a) A Philippine dry-docking or repair facility, accredited by the MARINA and registered
as a customs-bonded warehouse, which will undertake the necessary repairs and
works on the vessel; and

(b) The vessel in which the items are to be installed: provided That, if such items are
found in locations other than the two (2) aforementioned ones or in places not
authorized by customs, the person or entity in possession of such items shall be
subject to full duties and taxes, including surcharges and penalties.
Local manufactures or dealers who sell machinery, equipment, materials and spare
parts to a Philippine shipping enterprise shall be entitled to tax credits for the full
amount of import duties and taxes actually paid thereon, or on parts or components
thereof, subject to the approval of the Secretary of Finance, upon the recommendation
of the MARINA.

SECTION 7. Exemption from Income Tax. — A Philippine shipping enterprise shall be

exempt from payment of income tax on income derived from Philippine overseas
shipping for a period of ten (10) years from the date of approval of this Act: provided,
that:

(a) The entire net income, after deducting not more than ten percent (10%) thereof for
distribution of profits or declaration of dividends, which would otherwise be taxable
under the provisions of Title II of the National Internal Revenue Code, is reinvested for
the construction, purchase, or acquisition of vessels and related equipment and/or in
the improvement of modernization of its vessels and related equipment in accordance
with the regulations; and

(b) The cumulative amount so reinvested shall not be withdrawn for a period of ten
(10) years after the expiration of the period of income tax exemption or until the vessel
or related equipment so acquired have been fully paid, whichever date comes earlier.
Any amount not so invested or withdrawn prior to the expiration of the period stipulated
herein shall subject to the corresponding income tax, including penalties, surcharges
and interests.

SECTION 8. Registration and Deletion of Vessels. — All vessels owned by Philippine

shipping enterprises and availing of the incentives under this Act shall be registered
under the Philippine flag. Said vessels can only be deleted from the Philippine registry
after the MARINA has determined that:

(a) No other Philippine shipping enterprise is interested in acquiring the vessel; or

(b) The vessel has to be scrapped.

SECTION 9. Requisition of Vessels. — The President of the Philippines may, in times

of war and other national emergency, requisition absolutely or temporarily, for any
naval or military purpose, any and all vessels of the Philippine registry. The
Government shall pay the owner or operator of the vessel, based on normal conditions
at the time of requisition;

(a) The fair market value, if the vessel is taken absolutely, or

(b) The fair charter value, if the vessel is taken temporarily. In case of disagreement,
such fair value shall be determined by an arbitration committee composed of:
(c) One (1) member to be appointed by the MARINA;
(d) One (1) member to be appointed by the owner or operator of the vessel; and
(e) One (1) member to be appointed by the two (2) members so appointed.

The decision of the arbitration committee shall be final and binding on both parties.

SECTION 10. Rules and Regulations. — The MARINA, in consultation with the
monetary authority and the Department of Finance, shall jointly formulate and
promulgate the rules and regulations necessary for the implementation of this Act
taking into consideration the policies and programs of the Government for the
development of the Philippine overseas shipping.

SECTION 11. Annual Report. — The MARINA, in coordination with the monetary
authority and the Department of Finance, shall submit an annual report to the
President of the Philippines and the Congress of the Philippines on the implementation
of this Act, which report shall include:

(a) The amount of foreign exchange earned, acquired and spent by Philippine shipping
enterprises;
(b) The amount of income tax and import duties and taxes for which exemption have
been granted;
(c) The additional oceangoing vessels constructed, purchased or acquired, the
improvement made thereon and the additional related equipment procured; and
(d) Such other information as the MARINA may deem necessary or the President of
the Philippines may require.

SECTION 12. Penal Provisions. — Violation of the provisions of this Act or the rules
and regulations promulgated to implement the same shall be punished by a fine of not
more than Ten thousand pesos (P10,000) or imprisonment for not more than five (5)
years, or both such fine and imprisonment, at the discretion of the court.

If the violation is committed by an association or corporation, the penalties prescribed

hereunder shall be imposed on the president the chief executive officer and the other
officials and employees responsible for the violation.

If the violation is committed by a government official or employee, he shall, in addition

to the penalties prescribed hereunder, be dismissed from the government service with
all administrative penalties accessory thereto.

SECTION 13. Repealing Clause. — All laws, executive orders, regulations, or parts
thereof, inconsistent with the provisions of this Act are hereby repealed, amended or
modified accordingly.