FEATURE | Why the Philippines’ only luxury cruise ship is no longer sailing

7107 Islands Cruise in Manila's North Harbor in 2014 (Photo: MarineTraffic.com/Capt.Turboboss)

The 106-metre 7107 Islands Cruise, the first – and, so far, only – luxury cruise ship ever owned and operated by a Filipino company, was envisioned as a key component of a grand plan of promoting Philippine tourism like never before.

The plan involved sailing out of Manila or Subic and bringing people to some of the islands whose beaches have made the Southeast Asian country a favourite holiday destination, even among tourists from overseas.

No Filipino-owned enterprise had ever embarked on such an ambitious undertaking. However, Esteban C. “Steve” Tajanlangit Jr., a seasoned local property developer and resort owner, decided he would be the one to make it happen, confident that the vessel will be up to the challenge.

Originally built for the Mediterranean

The vessel that was selected for the monumental task was a Panamanian-flagged cruiseliner that was owned and operated by Copenhagen-based C&C Marine just prior to its acquisition by Tajanlangit’s 7107 Islands Shipping Corporation (ISC) in 2007.

Originally completed as a vehicle ferry by Spanish shipyard Union Naval Valencia in 1968, the vessel first sailed under the name Vicente Puchol with local operator Trasmediterranea. It was subsequently put up for sale after the original owners decided that its relatively small size made it unsuitable for sustained operations in the Mediterranean.

Vicente Puchol was sold in 1987 to Piraeus-based Attica Shipping, which converted it into a cruise ship with accommodations for 256 guests, re-registered it under the Greek flag, and renamed it Arcadia. In 1990, it began sailing on Adriatic and Aegean itineraries under charter with StarLauro Cruises (now MSC Cruises) and was renamed Angelina Lauro. However, the vessel’s tenure with StarLauro was brief, and it was handed back to Attica and reverted to its previous name in 1991.

Arcadia resumed its Aegean Sea itineraries with Attica, and this included a period during which it was operated jointly with Dolphin Hellas Shipping Golden Sun Cruises. The vessel changed hands again in 2002 when it was purchased by Anaconda Maritime, reflagged to Panama, and renamed Caribic Star.

Three years later the vessel was sold yet again, this time to C&C Marine, under which it operated as Coco Explorer 2.

Smooth sailing

ISC officially began domestic cruise operations shortly after it acquired Coco Explorer 2 in November 2007. The vessel was then renamed 7107 Islands Cruise, an obvious homage to the 7,107 islands that comprise the Philippines.

By this time, the vessel had five decks with 137 cabins that can accommodate up to 370 passengers. Amenities included a pool, a spa, a gym, a sauna, a children’s play area, a dining hall, a lounge, a bar, a mini-theatre, a souvenir shop, and even an onboard hospital.

The company also started offering a selection of available cruise packages to Boracay, Coron, Puerto Galera, and some of the other popular beach destinations throughout the Philippines.

The first couple of years was practically smooth sailing for Tajanlangit and the vessel. Onboard evening parties were a regular occurrence, and guests at these parties even included some of the biggest names in Philippine society, such as former First Lady and well-known socialite Imelda Marcos.

Unfortunately for Tajanlangit, an apparent lack of appreciation for local laws had a much more damaging effect than he probably realised at first, and it was only a matter of time before this came to the attention of the authorities.

The beginning of the end

In January 2008, an anti-smuggling task force under the Philippine Bureau of Customs (BOC) issued a subpoena on the Panamanian-flagged vessel to seek an explanation for its continued presence in Philippine territory. ISC then filed an application for an authority to acquire the vessel with local maritime regulatory body Maritime Industry Authority (MARINA) on March 3, 2008. MARINA subsequently granted ISC authority to acquire the vessel the following May.

Shortly after being awarded a Certificate of Registration and Tax Exemption by the Subic Bay Freeport Zone, ISC finally executed an Import Entry and Internal Revenue Declaration (IEIRD) on February 4, 2009, in effect declaring itself as importer of the vessel – one year and five months after it first entered the Philippines.

After having gathered sufficient evidence against the owners, the Philippine government, through the Department of Finance (DOF), ordered the immediate confiscation of the vessel.

The BOC, following two weeks of surveillance work, then seized the vessel as soon as it docked in Manila on May 30, 2009 – somewhat unsurprisingly, while a party was being held on board – because of the owners’ failure to pay two years’ worth of import duties amounting to PHP19.8 million (US$429,880).

ISC’s top management vehemently opposed the seizure, calling it unwarranted and insisting that no importation laws had been violated. The DOF nonetheless remained adamant, claiming that Tajanlangit and his people had deliberately kept their actual plans for the vessel unknown to anyone outside of their company.

Some called the BOC’s seizure of the vessel a crushing blow for Steve Tajanlangit, who lost his battle with cancer less than two years later at the age of 56. His closest acquaintances have stated that this action by the government exacted a tremendous toll on his already deteriorating health and led to his having died a broken man.

A years-long legal battle

ISC took the matter to court and asserted that importation did not occur in this instance, as C&C Marine had originally intended to dock the vessel at the Port of Batangas nearly 100 kilometres south of Manila so that it could undergo repairs.

ISC further insisted that Tajanlangit’s decision to acquire the vessel came well after it first entered Philippine waters in September 2007 and not at any prior time. In other words, the company claimed that neither it nor Tajanlangit was under any obligation to pay import duties since the vessel was already in the Philippines when the decision to purchase it was first considered and then finally made.

The Philippine Court of Tax Appeals (CTA), which presided over the case, said that the following facts were established over the course of various investigations:

  • Both C&C Marine and ISC claimed the vessel was brought to the Port of Batangas purely for repairs in September 2007. However, records showed no repairs of any kind were carried out while the vessel was berthed there and while it was still owned by C&C Marine. Actual repairs were carried out in another port – Mariveles in Bataan province north of Manila – and only after the vessel became the property of ISC later that same year.
  • The vessel’s records also showed that the Port of Batangas was to be its final destination while it was still the property of C&C Marine, thus indicating that the previous owner had no intention of ever taking it out of the Philippines despite the claim of it being brought there only to undergo repairs.
  • On September 12, 2007, a mere eight days following the vessel’s arrival in Philippine waters, Tajanlangit made a deposit of US$216,000 to C&C Marine. This was then followed 12 days later by a memorandum of agreement (MOA) between Tajanlangit and C&C Marine for the purchase of the vessel for a price of US$1.8 million. Tajanlangit paid this amount in full by the following November, thus finalising the transfer of ownership of the vessel to ISC.

ISC repeatedly emphasised that no importation took place upon the vessel’s arrival in Batangas. Also, the company claimed the vessel itself was eligible for exemption under Section 1202 of the Tariff and Customs Code of the Philippines (TCCP), which states that only cargo and not vessels are subject to payment of import duties.

ISC added that the vessel’s flag state of Panama had remained unchanged at the time as there had been no certification of deletion or cancellation of registration in the official registry book of the flag state. The vessel, ISC claimed further, was therefore able to freely leave the port of entry after repair and drydocking, or even without undergoing repairs, since the customs authorities supposedly have no jurisdiction to detain it for non-payment of duties and taxes.

However, the CTA said in a 2014 decision that, based on all the evidence gathered in connection with the case, an agreement had already been reached between Tajanlangit and C&C Marine regarding the purchase of the vessel even prior to its arrival in Philippine waters. Evidence to that effect included:

  • Ports of call stating that the purpose of the trip of the vessel to the Philippines is for “delivery” and not repairs as claimed by ISC; and
  • An earlier admission by Tajanlangit himself saying that he inspected the vessel twice in Thailand “preparatory to purchase” in 2006, the year before it finally sailed for the Philippines.

The court added that, even with the assumption that the vessel’s purpose for entering the Philippines was merely for repair, ISC failed to observe the requirements of conditionally-free importation of articles brought into the country solely for purposes of repair. C&C Marine was also unable to produce any documents required under Section 105 of the TCCP, which covers conditionally-free importations.

In response to ISC’s claim that the vessel is not covered by Section 1202 of the TCCP, the CTA said the provision therein “does not distinguish between vessels and other articles brought in for importation.” The CTA reinforced this decision by citing an earlier ruling by the Philippine Supreme Court that Section 1202 of the TCCP will apply to a vessel “especially when it is the very article to be imported.”

The CTA concluded that importation had indeed taken place upon Coco Explorer 2‘s arrival in Batangas on September 4, 2007, commenting that importation is “the act of bringing an article into the country from the outside” and that importation is “completed once the taxable or dutiable commodity is brought within the limits of the port of entry.”

The CTA added that the MOA between ISC and C&C Marine, as well as the series of events following the vessel’s arrival in Batangas, “reflect a well-thought scheme to import the vessel [while escaping] payment of duties and taxes for such importation” instead of merely being “a spur of the moment decision” by the parties involved.

The events in question included the following:

  • The vessel’s failure to secure a transshipment permit, which is required of foreign articles (vessels included) simply passing through the country;
  • The fact that no repairs were carried out at the Port of Batangas while the vessel was still owned by C&C Marine despite the claim by both ISC and C&C Marine that repairs were the vessel’s sole purpose for entering the said port;
  • The vessel’s entry into Philippine territory without passing through a customhouse, thus violating Section 1201 of the TCCP;
  • Records proving that the vessel later entered and docked at the Port of Manila in December 2007 without the necessary customs clearance (as it was then still sailing under the Panamanian flag and was therefore a foreign-registered vessel);
  • The fact that the authority to acquire the vessel was requested from MARINA well after it already began sailing operationally in Philippine waters and only after the issuance of a subpoena by the BOC, leading the court to conclude that the requesting of the said authority – which was necessary – was executed by ISC merely as an afterthought;
  • The fact that ISC’s formal declaration of importation was not filed until over a year had passed since the vessel’s arrival and purchase (and only after the award of a certificate of tax exemption, which actually only covered importation of raw materials, capital equipment, and household and personal items for use solely within the Subic Bay Freeport Zone).

The court ruled that the documents produced by both ISC and the DOF during the legal proceedings “unfolded the real intention [of ISC] to make the Philippines the port of destination of the vessel” and not simply as a temporary repair stop.

The vessel was subsequently ordered put up for auction, and an appeal by ISC to insist that open bidding be done in place of a sealed bidding – alleging that open bidding was “an internationally accepted practice in ship auctions” – was rejected by the CTA. The basis for the rejection was Section 8 of Customs Administrative Order 10-2007, which states that sealed bidding is to be done when disposing of articles that are under customs custody.

In any event, ISC’s owners and management had not expressed any objection to the disposal of the vessel or to the fact that its disposal would be executed via public auction.

Current disposition

Shortly following its seizure, 7107 Islands Cruise was brought to Manila’s North Harbor, where it has since been laid up and exposed year-round to the country’s sometimes unforgiving weather. It remains unknown whether the vessel has finally been auctioned off, though this possibility seems unlikely given its age and the number of years it has spent pierside and inactive while under Philippine government custody.

Although the CTA ruling remains in effect, those in Steve Tajanlangit’s circle insist he was simply striving to make an honest living and that it was not his intention to circumvent any legal obligation to pay taxes and duties. Others believe that his unfamiliarity with the cruise ship business and the shipping business in general, due to his having been involved in property and resort development for so long, had put him at a disadvantage, hence the failure to fully appreciate existing laws that covered importation.

Whatever the actual circumstances that ultimately resulted in its forfeiture, the Philippines’ first – and last – luxury cruise ship enjoyed a very brief service life that likely prevented its tourism-promoting potential from ever being fully realised.

Baird Maritime

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