‘Cohorts’ in shipping sector blamed for high rates

Published June 14, 2021, 8:00 AM

by Bernie Cahiles-Magkilat

The government is urged to act on domestic or foreign shipping entity or entities in “cohorts”, imposing excessive charges at will and creating sort of legal monopolies at the mercy of local traders.  

This issue was raised by Michael Raeuber, chairman and group CEO of the country’s leading integrated logistics firm Royal Cargo Inc. at the at the virtual “Enhancing Competition for Competitiveness and Economic Recovery” forum organized by the Joint Foreign Chambers (JFC) of the Philippines.

Raeuber said that while the Philippine Competition Commission (PCC) can prevent market controlling or domineering positions of companies from being created with the imposition of rules, the shipping sector’s situation is a different matter.

“What happens if a domestic or foreign corporate entity or entities in cohorts create situations where they totally avoid any competition by imposing charges at will to persons and companies they have not even negotiated with and, consequently, have no contract with,” Raeuber asked.

Raeuber raised this lingering issue as foreign shipping lines have been charging several kinds of fees on shipments and consignees.

Raeuber further noted that shipping line conferences functioning as legal monopolies are supposed to be structures of the past. Therefore, he said, concerted actions to circumvent markets and international rules, such as Incoterms, should be “disallowed perhaps even criminalized.”

He cited the destination charges being imposed by foreign shipping lines to consignees as abusive. 

“The problem of undefined abusive destination charges being imposed by foreign shipping lines, in circumvention of Incoterms, charged to parties with whom they have no contract with, in complete absence of any market, has been with us and other countries for years,” he stressed.

Incoterms, a widely-used terms of sale, are a set of 11 internationally recognized rules which define the responsibilities of sellers and buyers. Incoterms specifies who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities.  

While shipping line operations may not be considered a public utility in the future amended Public Service Act, Raeuber stressed that the foreign investment in business protected by domestic cabotage rules, may “need to consider safeguards against abusive anti-market practices of such investors.”

In addition, the pioneering logistics player in the country also raised an issue against the Philippine Ports Authority (PPA). Raeuber noted that PPA dual role as regulator and operator only lead to excessive charges to the port users and eventually the public. PPA supports market concentration and prevents competition at the same time. “Would that be an issue for the PCC to look at?,” asked Raeuber.

The Philippine Exporters Confederation Inc. has been raising concerns on “exorbitant and duplication of port charges” that make the country’s logistics and transportation cost in the country the highest in the Southeast Asia region. 

 The exporters’ group had asked PPA to act favorably on their request by issuing a revised administrative order to remove the high cost of port charges.

PhilExport cited doubling of cost in the proposed collection of P1,587 in cranage in addition to the existing arrastre fee of P1,575. In addition, shippers are charged demurrage fees for delayed pullout of shipment, which is not of their own doing. 

PCC Chairman Arsenio Balisacan, one of the speakers at the forum, responded that the high cost of logistics in the country is a common knowledge.

“Of course, everybody here is aware of the high cost of logistics in this country,” said Balisacan citing inefficient logistics systems and challenges in an archipelagic country.

The high logistics cost in the country has been brought to the attention of the PCC, which has an ongoing investigation on the matter.

Balisacan said that PCC is closely coordinating with the Department of Trade and Industry to address the logistics cost in the country. He assured the logistics sector that their investigation could provide some resolution to the issues hounding the industry.