Local shippers wary over Foreign Ships Co-Loading Act

Local shipping players concerned over increased competition from foreign shipping, the readiness of ports, and potential smuggling
OPENING UP. Local shippers are worried about foreign shippers muscling in and the readiness of domestic ports to handle more cargo. File photo by Agence France-Presse / Jay Directo

MANILA, Philippines – The Foreign Ships Co-Loading Act signed by President Benigno Aquino II last week and hailed as a hallmark in liberalizing the shipping industry has players in the local shipping industry wary.

The Act allows foreign vessels to dock and co-load in multiple ports and is seen to reduce logistics costs for producers, create a more efficient import and export system, and lead to lower prices for consumers.

Local shippers, however, are worried that they would lose cargo that would otherwise be handled by their ships to foreign lines.

With the new law, domestic ships will now have to compete with foreign vessels which have much bigger economies of scale.

Increased competition

Pete Aguilar, legal counsel of the Philippine Interisland Shipping Association (PISA), said  “It’s a misnomer. The law did not lift cabotage it will only allow co-loading of goods for export and import.”

“Its impact on shipping cost may be difficult to determine at this point. But definitely the new law will give access to foreign ships to load cargoes usually carried by domestic vessels will result in reduced revenues for local ship-owners,” said businessman Edgardo Lacson who has interests in the shipping industry. 

Lacson added that the impact of the law will depend on the shipping rates to be charged by the foreign flagged vessels vis-a-vis local freight. 

The leaders of local industry also are unsure of the readiness of the ports, and of the markets hosting those ports, to handle increased cargo volumes.

The Philippine Ports Authority (PPA) itself admits that while ports might be able to handle bigger cargo volume, it is still unclear whether foreign shipping lines will go to other ports outside of their current schedule.

The ports may be able to handle big ships but a big consideration is whether or not there is enough volume in a certain area where a port is situated, the PPA said at the Maritime League breakfast forum held on July 22.

Concerns over tax and smuggling

The inclusion of bulk and break bulk (cargo that aren’t in containers) also raises concerns on possible smuggling and pilferage, said Rona Gatdula executive director of the Philippine Liner Shipping Association (PLSA).

The bill initially was meant to cover only containerized cargo but was expanded to include all types of cargo during the bicameral sessions.

Gatdula said this creates a challenge for the Bureau of Customs (BOC) to guard against additional smuggling.

“The key is the enforcement. Now that the co-loaded goods would not be confined to containerized cargo, (it may be hard to)  distinguish the smuggled goods. And some goods of these can be diverted,” Gatdula said.

Gatdula added that local vessels have the capability to handle co-loaded goods but it would be better if the PPA had a comprehensive ports development program and the playing field on the tax regime between foreign and domestic ships is levelled.

“Government never addressed the need to have modern ports. That would truly lower the cost of doing business. Even some of the major ports are lacking in terms of equipment,” Gatdula said.

Foreign shipping firms are not subject to tax and pay just  3% on Philippine gross billing while domestic companies have to pay 32% income tax. – Rappler.com