REVISED RULES AND REGULATIONS IMPLEMENTING DEREGULATION OF DOMESTIC SHIPPING RATES

Pursuant to PD 474, and E.O. 125/125A, and consistent with the
domestic shipping deregulation policy of the government as embodied
under EO Nos. 185 and 213, the Board of Directors of the Maritime
Industry Authority (MARINA) in its 151st Regular Meeting held on 16
December 1999 approved the following rules and regulations to implement
the deregulation of domestic shipping rates:

I. OBJECTIVES

1.           To deregulate domestic shipping rates in line with the general policy direction of deregulation;

2.           To create an investment climate designed to attract
more and new players in the domestic shipping industry under the
environment of free market competition; and,

3.           To foster the deregulation of domestic shipping by way of lesser government intervention.

II. COVERAGE

This Circular shall apply to all persons, partnerships,
corporations, firms and entities engaged in the operation of domestic
shipping liner service, for compensation, commercial or public use,
involving the carriage of passengers and/or cargoes between various
ports and places in the Philippines, as well as the users/recipients of
such services.

III. DEFINITION OF TERMS

1.           Liner Service — The operation of
domestic water transportation which publicly offers its services without
discrimination to any user, has regular ports of call/destination and
has fixed sailing schedule and frequency.

2.           Monopolized Route/Link — When a market
or route/link is served either by only one (1) franchised operator, by a
group of franchised operators beneficially owned by a single
individual, or by a family/corporation, or by a cartel, which results in
the absence of competition, or lack of effective competition, or
exclusion of competition.

3.           Cartelized Route/Link — When a market
or route/link is served by a group of individuals/operators which enters
into an informal agreement, arrangement or understanding among
themselves, whereby such consenting parties by concerted action or in
conspiracy with each other, shall commit acts or practices constituting
combinations in restraint of trade or shall by any artificial means
restrict trade or prevent free competition, including any act allocating
markets or customers, pooling returns or profits, charging unreasonably
high rates to the detriment of public interest or engaging in cutthroat
or ruinous competition to the detriment of other shipowners or
operators in a particular route, or other similar acts.

4.           Cost-effective/Competitive Shipping Service
— When two or more operators in a given route are charging rates
commensurate to the level and quality of shipping service being
provided, such that any variation in the level and quality of shipping
service provided among the operators will result in corresponding
variations in rates being charged by each operator.

Lack of effective competition is deemed existing if the rates
charged are unreasonably high and prejudicial to public welfare and
interest as determined by MARINA or the service rendered is at the
minimum level of the prescribed standards and not commensurate with, the
rates being charged and other similar cases.

In such cases, effective competition would be fostered by the entry of new operator which can offer either of the following:

a)      better service at the given prevailing rate; or
b)      lower rates at the same level of service being provided.

5.           Basic Commodities — Refers to rice, palay, corn, corngrits, fruits, and vegetables.

6.           Transit Cargoes — Cargoes intended for
import or export carried by vessels engaged in the domestic
inter-island trade between ports of the Philippines.

7.           Pioneering Route/Link — When a market or route/link is not presently served by any operator.

The meaning of other terms/phrases used herein is as defined in
relevant Memorandum Circulars or as generally understood in maritime
industry practice.

IV. GENERAL PROVISIONS

1.           All vessels, whether DOT or non-DOT accredited, shall comply with the MARINA-prescribed service standards.

2.           Adjustments in passage and freight rates due to
increases/decreases in fuel prices shall continue to be governed by the
provisions of Memorandum Circular No. 67 or its subsequent amendments.

3.           Shipowners/operators who intend to adopt an upward
adjustment of their regulated rates shall continue to be governed by the
relevant provisions of Memorandum Circular No. 74/74A/74B or its
subsequent amendments.

V. DEREGULATION OF PASSAGE RATES

1.    Non-DOT Accredited Vessels. All non-DOT accredited
passenger-carrying vessels are hereby required to reserve and allocate
at least fifty percent (50%) of their total authorized passenger
capacity for third class accommodations in accordance with the
MARINA-prescribed service standards. The rates for these accommodations
shall continue to be regulated by the MARINA.

The rates for first and second class accommodations of Non-DOT
accredited passenger-carrying vessels shall continue to be deregulated
provided that such accommodations meet the MARINA-prescribed service
standards.

2.           DOT-Accredited Vessels. All passenger-carrying
vessels catering to tourism as duly certified by the Department of
Tourism, or vessels of any size or type serving DOT-identified priority
links or areas, are hereby exempt from the requirement of allocating
fifty percent (50%) of its total authorized passenger capacity for third
class accommodation. The rates for first and second class
accommodations of all passenger-carrying DOT-accredited vessels shall
continue to be deregulated provided that such accommodations meet the
MARINA-prescribed standards.

3.           Route/s or Link/s determined by the MARINA as pioneering subject to the provisions of Section VIII (1.a) hereof.

VI. DEREGULATION OF CARGO/FREIGHT RATES

The following cargoes shall be deregulated:

1.         Class “A”, “B” and “C”, whether containerized or non-containerized	4.         Unitized cargoes
2.         Transit Cargoes	5.         Those carried in a pioneering route/link as determined by the MARINA subject to the provisions of Section VIII (1.a) hereof.
3.         Livestocks

VII. INSTANCES WHERE REGULATED RATES WILL APPLY

1.           Third Class accommodation, whether DOT or non-DOT accredited vessel
2.           Second Class accommodation under any of the following:

a)      Non-DOT accredited vessel which offers only First and
Second Class accommodations under the MARINA-prescribed service
standards.
b)      Non-DOT accredited vessel which offers Third Class
accommodation of less than 50% of the total authorized passenger
capacity.

3.           Tourism-oriented vessels whose owners opt to have their passage rates rationalized/prescribed by the MARINA.
4.           Non-Containerized/Non-Unitized Basic Commodities
5.           Monopolized or Cartelized Route/Link — The passage and
freight rates where a route/link is still monopolized or cartelized
shall remain regulated until such time that a new operator offering the
same-type of service is authorized to provide cost-effective/competitive
shipping service.
6.           Lack of effective competition in the route/link

VIII. GUIDELINES FOR ADOPTION OF DEREGULATED RATES AND RATE ADJUSTMENTS

1.         Adoption of Deregulated Rates

a)      Upon the effectivity of this Circular, domestic
shipowners/operators with franchise (CPC/PA) whose rates are presently
regulated but are deemed qualified for deregulated rates as provided
under Sections IV and V hereof, shall file a formal notice with the
MARINA for adoption of deregulated rates in a prescribed form which
shall indicate the name of covered vessel/s, authorized route/s,
authorized rates per link/s.

b)      Shipowners/operators who are qualified under this Circular
to adopt deregulated rates shall be issued an Order by the MARINA which
shall contain, among others, the name of the vessel/s, authorized
route/s, authorized rate/s and validity of CPC/PA, within thirty (30)
days from receipt of the notice to adopt deregulated rates.

c)      Shipowners/operators who are not qualified to adopt
deregulated rates shall be informed of their deficiencies and/or lacking
requirements within five (5) days from receipt of such notice.

d)      Shipowners/operators with pending application for issuance
of CPC/PA shall adopt and observe the procedures under item (a) above.

2.         Passage and Freight Rate Adjustments

a)      Shipowners/operators who intend to adopt an upward
adjustment of their deregulated rates shall file a written notice in a
prescribed form with the MARINA.

b)      The shipowners/operators shall cause the simultaneous
publication of such notice once in one (1) daily newspaper of national
circulation and one (1) daily newspaper of regional circulation in the
port/s affected by the rate adjustment. For regional operations,
publication once in a newspaper of regional circulation in the
areas/ports affected by the rate adjustment shall be sufficient. The
size of the notice as published must at least be 4” x 5½”. The affidavit
of publication, newspaper clipping and copy of the newspaper issue
where the notice was published shall be submitted to the MARINA within
five (5) days from such publication.

c)      The shipowners/operators shall cause the posting of such
notice in conspicuous places at the affected port/s, vessel/s, company
premises, passenger terminals and ticketing office/s. The size of the
notice shall proximate the size of a cartolina.

d)      The adjusted rates shall take effect fifteen (15) days
after the date of publication subject to the provisions of Section VIII
hereof.

e)      In the case of deregulated passage and freight rates,
specific rate levels adopted shall remain in force for at least three
(3) months before any upward adjustments thereof can be availed of by
the concerned shipowner/operator.

f)       Domestic shipowners/operators who intend to adopt a
downward adjustment of their deregulated rates shall file a written
notice with the MARINA and the same shall take effect immediately.

IX. CONDITIONS WHICH WARRANT MARINA INTERVENTION/REGULATION

1.         The MARINA shall, after due notice and hearing, intervene under any of the following:

a)      Passengers and/or shippers file a complaint against the
rates and services of the shipowners/operators provided sufficient
basis/justification is submitted.

b)      Shipowners/operators refuse to carry cargoes especially basic commodities without just and reasonable cause.

c)      MARINA, in the course of its regular enforcement and
monitoring activities, finds any violation under this Circular committed
by the shipowners/operators.

2.         The MARINA shall, after due notice and hearing, reassume regulation under any of the following:

a)      The route/link has become monopolized, cartelized or lacked effective competition.

b)      The vessel/s Certificate of Compliance (COC) issued
pursuant to the provisions of MARINA-prescribed service standards has
been withdrawn/cancelled or has expired.

c)      The vessel/s DOT accreditation has been withdrawn/cancelled or has expired.

X. REPORTORIAL REQUIREMENTS

1.         Shipowners/operators shall submit to the MARINA quarterly
reports of the actual rates charged by their vessel/s for each category
of passage and freight, as well as other special rates charged, not
later than thirty (30) days after each quarter, whether such rates are
regulated or deregulated.

2.         As provided under MC 49-B or its amendments,
shipowners/operators shall submit an Annual Report of Operations and
Finances, as certified by an independent auditor, in the
MARINA-prescribed form.

3.         The MARINA may subject to audit the financial statement
submitted by the concerned shipowners/operators by the Commission of
Audit.

4.         Within ninety (90) days from effectivity of this
Circular, shipowners/operators shall apply with the MARINA’s Domestic
Shipping Office to subject their vessel/s to the Passenger Service
Rating System (PSRS) and/or Cargo Service Rating System (CSRS).

XI. FILING FEES

1.         For vessels below 35 GT	—>	P   300/vessel
2.         For vessels 35 GT to 49 GT	—>	P   500/vessel
3.         For vessels 50 GT to 100 GT	—>	P1,000/vessel
4.         For vessels 101 GT to 500 GT	—>	P2,000/vessel
5.         For vessels above 500 GT	—>	P3,000/vessel

XII. SANCTIONS AND PENALTIES

After due notice and hearing, shipowners/operators found to have
committed any of the following violations shall be subject to the fines
and penalties as herein provided:

1.         First Category:

a)      Violations:

(i)         Non-submission of Quarterly Reports on Rates	(iv)       Failure to issue passenger tickets
(ii)        Late submission of Quarterly Reports on Rates	(v)        Failure to issue Bill of Lading
(iii)       Incomplete Submission of  Quarterly Reports on Rates

b)      Penalties:

(i)    First Infraction — P 5,000.00 per violation plus warning
(ii)   Second Infraction — P10,000.00 per violation and/or suspension of CPC/PA of not less than one (1) week
(iii)  Third Infraction — P25,000.00 per violation and/or revocation of CPC/PA

Each infraction of a vessel may constitute one or more violations,
which shall be heard and decided upon by the MARINA. Subsequent
infractions of the same vessel not necessarily involving the same
violation(s) previously committed shall warrant a suspension or
revocation.

2.         Second Category:

a)      Violations:

(i)         For refusal to carry and shutout of cargo without just and reasonable cause
(ii)        Practices which constitute combinations in restraint of
trade or which result in the lack of effective competition in a
route/link

b)      Penalties: For above-mentioned violations, a P25,000.00
fine per violation and/or revocation of CPC/PA shall be imposed.

3.         Third Category:

a)      Other violations of any of the provisions of this Circular not falling under (1) and (2) above.

b)      Penalty — Fine of P25,000.00 per violation and/or suspension/revocation of CPC/PA.

XIII. REPEALING CLAUSE

Memorandum Circular No. 117 is hereby repealed. Any provision of
other MARINA circulars otherwise inconsistent herewith is
modified/amended accordingly.

XIV. SEPARABILITY CLAUSE

Should any provision or part of this Circular be declared by
competent authority to be invalid or unconstitutional, the remaining
provisions or parts hereof shall remain in full force and effect and
shall continue to be valid and effective.

XV. EFFECTIVITY

This Circular shall take effect fifteen (15) days after its
publication once in a newspaper of general circulation in the
Philippines.

Adopted: 16 Dec. 1999

(SGD.) AGUSTIN R. BENGZON
Administrator