Logistics Glossary

Cabotage

What Is Cabotage?

The term cabotage refers to the transportation of goods or passengers between locations in the same country by an individual or company from outside the country. The word was originally specific to the transportation of goods by sea, but the definition of cabotage has since been extended to cover the transportation of goods or passengers by air, rail, and road.

Another way of putting it would be to say that, in most countries, transport services must be provided by that country itself, and not by foreign companies or individuals.

What Are Cabotage Laws?

Nowadays, most cabotage laws apply to airplane flights rather than container transportby sea. Aircraft from one country are not allowed to enter another country, pick up passengers or goods, and transport them around that country. The restrictions usually apply only to the transport of goods or passengers for a fee but sometimes apply even when no payment is made at all.

There are almost no countries that permit aviation cabotage. On economic, security or public safety grounds, they prefer it if companies from inside their borders are the ones doing the jobs and enjoying the profits. In Europe, however, all countries that are members of the European Union are allowed to move around and trade freely in one another’s territories.

Disaster Relief

In the USA, a foreign air carrier is allowed to carry passengers between points within the country only if it is in the public interest. This occurs if some kind of emergency situation arises that is not part of the normal conditions under which business is usually carried out. Even then, the normal cabotage laws can only be overruled if there is no reasonable alternative and if denying the transportation would lead to unnecessary hardship.

Why Is Cabotage Important?

In addition to the transport of goods, some cabotage laws (not in the USA) are directed at tax, investment, customs, or immigration practices. The laws a country decides to institute may be aimed at protecting national security, protecting the environment, creating jobs, or making it easier to own ships. Of the countries that are members of the UN, 80% of those with major ports have cabotage laws.

The goal of cabotage laws is the reduction of competition for domestic produce, the smooth procurement of critical resources during conflicts, the strengthening of national capacity, the preservation of national security, and the creation of jobs. Unfortunately, these laws have not always had the desired effect.

In developing countries, in particular, cabotage regulations are often applied very loosely. In Nigeria, for example, cabotage laws have been in place since 2003, but up to 2017, Nigeria has almost constantly relied on cabotage waivers to allow vessels into the country even when they do not meet the legal requirements.

However, the problem is not the cabotage regulations themselves but rather the implementation of the regulations.

Putting cabotage regulations into place is ultimately a self-interested action for a country to take because the regulations are meant to maximize the value of the shipping industry and to help distribute the profits where they are most needed.

When cabotage regulations are properly implemented, they benefit everybody.