Instead of an outright ban or regulation of surcharges imposed by international shipping lines, the Philippine government should draft rules to monitor such surcharges, according to a study commissioned by The Wallace Business Forum (TWBF).

“A Study on International Shipping in the Philippines,” written by Dr. Epictetus Patalinghug and presented in October, recommends that the Department of Trade and Industry (DTI) refocus the joint administrative order (JAO) it is drafting with the Department of Transportation and the Department of Finance for the creation of monitoring rules that specify the criteria and procedures to be followed by carriers when they impose surcharges.

The draft JAO is a DTI-led initiative intended to regulate origin and destination charges imposed by foreign carriers, and to lessen or eliminate port congestion to address the high cost of international shipping. High shipping cost is a frequent complaint among stakeholders.

First presented to stakeholders for comments last February, the JAO originally had a July launch which did not push through. Trade Secretary Ramon Lopez later said the JAO will be turned into an Executive Order to give the proposed policy more teeth.

A Study on International Shipping in the Philippines

Dr. Epictetus Patalinghug presented on 30 October results of “A Study on International Shipping in the Philippines” commissioned by TWBF.

The JAO specifies that no origin and destination surcharges other than freight shall be charged by international shipping lines, regardless of whether the cargo is freight prepaid or freight collect, and that market forces allowed to determine surcharges and other fees freely. It also requires freight rates to include all charges, including terminal handling cost, container imbalance cost, emergency cost recovery charge, and bunker price adjustment from point of origin to point of destination.

The Patalinghug study, however, noted that the “regulatory trend in international shipping is to promote deregulation and pro-competitive 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. Granting, without accepting, that this hypothesis is true, the question to ask is how does this alleged practice arise in an industry that is considered competitive? And the most important issue is whether the burden and cost of the proposed regulations on the regulatory agencies and the requesting parties are far below its benefits.”

The study said the Association of International Shipping Lines, a group of foreign container shipping lines operating in the Philippines, has questioned the legal authority of the Bureau of Customs, eyed as the lead implementer of the JAO, to regulate charges imposed by shipping lines, arguing that Republic Act 10863 (Customs Modernization and Tariff Act) does not give the customs bureau such authority.

Furthermore, the World Shipping Council (WSC) argues that “surcharges are usually separated by shipping lines from base freight rates in order to specifically address the cost impacts to shipping operations and to achieve greater predictability in shipping lines’ revenue stream and to gain better transparency and understanding of shipping lines’ costs,” the Patalinghug study pointed out.

It added that according to WSC, surcharges are generally intended to recover distinct and identifiable costs separate from basic transport service, or to address rising or constantly fluctuating costs.