Cabotage is the transport of goods or passengers between two places in the same country by a transport operator from another country. It originally applied to shipping along coastal routes, port to port, but now applies to aviation, railways, and road transport as well. Cabotage rights are the right of a company from one country to trade in another country. In aviation, it is the right to operate within the domestic borders of another country. Most countries do not permit aviation cabotage, and there are strict sanctions against it, for reasons of economic protectionism, national security, or public safety. One notable exception is the European Union, whose Member States all grant cabotage rights to each other.
Etymology
The term "cabotage" is borrowed from French. It is derived from caboter which means "to travel along the coast". The origin of caboter is obscure: it may come from cap or cabo "cape", or it may refer to a type of boat. Attempts to link the name to the Italian explorer Cabot are not supported by evidence.
In shipping
Cabotage laws apply to merchant ships in most countries that have a coastline so as to protect the domestic shipping industry from foreign competition, preserve domestically owned shipping infrastructure for national security purposes, and ensure safety in congested territorial waters. For the history of cabotage in UK law, see Navigation Acts. In the United States, the Merchant Marine Act of 1920 requires that all goods transported by water between U.S. ports be carried on U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents. The Passenger Vessel Services Act of 1886 states that no foreign vessels shall transport passengers between ports or places in the United States, either directly or by way of a foreign port. Indonesia implemented a cabotage policy in 2005 after previously allowing foreign-owned vessels to operate relatively freely within the country. In the Philippines, the Tariff and Customs Code of the Philippines which is also known as the Cabotage Law restricts coastwise trade or the transport of passengers and goods within the country, to vessels with Philippine registry which has to secure a coastwise license from the Maritime Industry Authority. After the passage of Foreign Ships Co-Loading Act or the Republic Act No. 10668 in 2015, foreign vessels with cargo intended to be exported out the country may dock in multiple ports in the country before transiting to a foreign port. In the EU, rights to cabotage in newly-admitted Member States were restricted; but this introductory provision was abandoned after criticism in the light of the Paros ferry disaster. The Hague–Visby Rules, a convention which imposes duties on maritime carriers, apply only to "carriage of goods by sea between ports in two different states", and thus do not apply to cabotage shipping. However, section 1 of the UKCarriage of Goods by Sea Act 1971 declares that the Rules "shall have effect... where the port of shipment is a port in the United Kingdom, whether or not the carriage is between ports in two different States...".
In passenger aviation
Cabotage rights remain rare in passenger aviation. The Chicago Convention prohibits member states from granting cabotage on an exclusive basis, which has limited the availability of cabotage as a bargaining chip in bilateral aviation agreement negotiations. Cabotage is not granted under most open skies agreements.
European Union
Carriers licensed under EU law are permitted to engage in cabotage in any EU member state, with some limitations. Ryanair, easyJet, Vueling, Wizz Air, and Aer Lingus have bases and operate domestic services outside their home countries.
The Closer Economic Relations agreement allows Australian air carriers to fly domestically and internationally from New Zealand and vice versa. An Australian carrier, Jetstar, flies domestic routes within New Zealand. Air New Zealand offers one international destination from Australia outside New Zealand, flying between Sydney, Australia and Rarotonga of the Cook Islands. Air New Zealand also flies one domestic route in Australia, between Sydney, Australia and Norfolk Island, Australia. Previously, Qantas Jetconnect, Pacific Blue and Ansett New Zealand were Australian-owned airlines based in New Zealand that operated domestic New Zealand services. Australia also permits foreign-owned airlines incorporated under Australian law to operate on domestic routes, although it prohibits such airlines from operating international routes as Australian flag carriers. They can, however still operate international routes if they are operated by an Australian-owned subsidiary.
Chile
has the most liberal cabotage rules in the world, enacted in 1979, which allow foreign airlines to operate domestic flights, conditional upon reciprocal treatment for Chilean carriers in the foreign airline's country. This unusual regime is partly due to Chile's geographical need for air service, and partly to incentivize liberalization in other countries amid the international expansion of its flag carrier LATAM Chile, which now has major operations in many other Latin American countries. Like Australia, Chile allows foreign companies to set up Chilean subsidiaries to offer domestic flights in Chile, regardless of reciprocity.
The "modified sixth freedom" refers to the right to carry passengers between two points in country A through a hub in country B; for instance, a Boston-Toronto-Seattle itinerary. Such services are currently considered to constitute cabotage and are not permitted. In 2002, the United States fined Asiana Airlines for selling tickets from the mainland US to Guam and Saipan via Seoul.
Tag rights
Certain airlines operate services within a foreign country without the right to carry local traffic. For instance, Qantas operates service between New York and Los Angeles solely for use by international connecting passengers. Such services are not generally considered to be cabotage.
In road transport
The European Union allows limited cabotage for road transport. A non-resident carrier which has driven to another EU country is allowed pick up and deliver a further load inside the host country before returning to the border.
