By Bernie Cahiles-Magkilat
The government has been urged not to slap new regulations on shipping lines such as an outright ban on importers and traders’ surcharges as doing so would hamper competition among international carriers, according to a new study.
A study on “International Shipping in the Philippines” by Epictetus E. Patalinghug, who presented his paper at the Wallace Business Forum on “The Importance of International Shipping to Philippine Economy,” has recommended against the implementation of new regulations on the imposition of surcharges by shipping lines.
To address the short-run policy concerns, the study recommended that the Department of Trade and Industry (DTI) may refocus the thrust of the planned Joint Administrative Order (JAO) from banning outright the imposition of surcharges to the drafting of monitoring rules and guidelines specifying the criteria and procedures to be followed by carriers when they impose surcharges.
“These rules may require carriers to publish their charges in advance, the condition that requires the imposition of surcharges, the timing of the imposition, the rules on adequacy of notice of implementation, and the criteria for the termination of a particular surcharge,” the study added.
In June this year, the DTI wanted to issue an Executive Order (EO) to replace the original plan of a JAO. Both orders seek to reduce logistics costs but the EO has more authority than a JAO.
DTI Secretary Ramon Lopez said the EO will seek to establish the parameters in rate setting to stop overcharging and arbitrary fees imposed by shipping firms on importers. This means shipping firms will have to justify their rates and the additional charges. The EO will also look into certain legalities and penalties on violations.
The EO or JAO, which has remained hanging, was the government’s supposed response to truckers, brokers and importers who decried what they called as arbitrary fees being imposed by shipping firms. They identified these charges as demurrage, detention, container imbalance surcharge, control fees, peak season, among others.
At present, the Philippines has the highest cost of logistics to sales in ASEAN.
The study further said that shipping companies may voluntarily publish or post in their websites an all-in freight charges.
In recommending against an outright ban on the imposition of arbitrary surcharges to importers, the study defended the shipping lines’ side, stating that the risk of collusion among shipping firms is low vis-à-vis the benefits of transparency in an industry with many players.
“The long-term thrust of government policy is to build regulatory capacity in a single agency (e.g. BOC or MARINA) which will then be tasked to promulgate rules and regulations regarding charges that may be imposed by international shipping lines, logistics service providers, customs brokers, cargo truck operators, terminal operators, and cargo yard operators,” the study added.
The study also cited that international laws such as Liner Conferences, US Federal Maritime Commission notices, and EU Maritime Transport Agreement allow the imposition of surcharges by carriers provided that parties affected by the surcharges have prior notices.
“The regulatory trend in international shipping is to promote deregulation and procompetitive policies. The proposal to regulate fees and charges of international shipping lines rests on the assumption that some shipping lines plying the intra-Asia routes impose excessive and questionable destination charges to the consignees,” the study added.
In the Philippines, the study noted that international shipping industry also plays a crucial role in fostering economic growth.
Foreign cargo throughput in the Philippines from 2010 showed an upward trend over the period in all types of cargo. The ratio of foreign cargo to domestic cargo is at least 1.5 for the period with the highest ratio of 1.86 occurring in 2014, the year of port congestion caused by the temporary truck ban by the City of Manila from February to September of that year.
While the foreign cargo volume surged, economic growth was also rising by at least 6.1 percent to a high of 7.6 percent for the period, with the exception of 2011 growth which was an outlier at 3.7 percent. The period registered an average growth rate of 6.3 percent which was one of the highest growth in Asia, except for China in that period.
In terms of shipcalls, at berth and at anchorage, it showed that the number of shipcalls at berth exceeded 10,500.
As a result, for the 2011-2016 period, exports grew at an average annual rate of 3.71 percent, while imports grew at an average annual rate of 6.99 percent. The imbalance in the export-import trade value is responsible for the imbalance in the number of export-import containers at the ports.
Based on the study, the structure of the international shipping industry is shown to be competitive rather than monopolistic.
International trade contributes to the growth and dynamism of the Philippine economy in the recent years, and international shipping is a partner for Philippine growth and development.
But port efficiency is an important determinant of shipping costs. Manila port is globally ranked at the low end of the roster of international ports both in productivity and efficiency.
The regulatory environment does not encourage forming closed conferences and the trend towards forming or joining alliances does not pose as barriers to entry in the international shipping industry.
In sum, the international shipping industry is the engine facilitating this robust and dynamic trade of the Philippines with its prosperous Asian neighbors as well as with the rest of the global markets.
In turn, this robust and dynamic foreign trade supports the development and growth of the national economy.
In conclusion, the study said that international shipping plays an important role in the international supply chain and in the smooth functioning of global trade and in expanding global markets.