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‘Plan to regulate shipping fees faces legal challenge’

‘Plan to regulate shipping fees faces legal challenge’
Elijah Felice Rosales -October 31, 2019

THE government’s plan to regulate shipping fees through a joint administrative order (JAO) will only face legal challenge and eventually fail, as no single agency right now has the mandate to implement such policy, experts warned on Wednesday.

In a study commissioned by the Wallace Business Forum, economist Epictetus E. Patalinghug of the University of the Philippines (UP) said the government should rethink its plan of regulating shipping fees under a draft JAO. Such move, he argued, could work against the Philippines in a period when “the regulatory trend in international shipping is to promote deregulation and pro-competitive policies.”

“The proposal to regulate shipping 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,” Patalinghug said.

“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 the benefits,” he added.

For Patalinghug, what the government should do is build regulatory capacity in a single agency that will be tasked to craft rules and regulations on charges that may be imposed by shippers, logistics service providers, customs brokers, cargo truck operators, terminal operators, as well as cargo yard operators.

Patalinghug added the DTI should refocus the thrust of the JAO. Instead of prohibiting outright the imposition of surcharges, he said the order should contain monitoring guidelines specifying the criteria and procedures to be followed by shippers when imposing 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 UP economist explained.

In an interview with reporters at the sidelines of the forum where he presented his study, Patalinghug warned of possible legal challenges to the government if it proceeds with the issuance of the JAO without changing the regulatory powers of either the Bureau of Customs (BOC), Maritime Industry Authority (Marina) or the Philippine Ports Authority (PPA).

“My point is, [there’s need to] create an arrangement for monitoring before imposing that, [just like] in the United States [where] the Federal Maritime Commission is doing that,” Patalinghug said.

“It will be challenged because it is not in the Customs Modernization Act, giving functions to either Marina, or BOC, to regulate surcharges. That’s my problem with the JAO. It will surely face a legal challenge. That, unless they create a law giving a particular agency—BOC or Marina or PPA—because this [regulation of shipping fees] is another function, another responsibility,” he cautioned.

‘Check capacity first’
In a separate interview, Ateneo Center for Economic Research and Development Director Alvin P. Ang said the government should strengthen the capacity of whatever agency will be tasked to regulate shipping fees.

“You have to evaluate first who has the capacity to do it. The first is who can do it, before you do the JAO. This is one of the challenges here: we jump to the solution, but we’re not looking at the capacity. The government’s capacity is very limited,” Ang said.

“In my opinion, you have to do an inventory of their [agencies’] capacity. That’s the critical part of any regulatory reform: look not at the regulatory process, but the regulatory capacity first. Only after that should you do regulatory reform,” he added.

According to a joint study by the Department of Trade and Industry (DTI) and the World Bank, the Philippines has the highest logistics cost when pitted against regional manufacturing rivals Thailand, Vietnam and Indonesia. In the Philippines, firms spend 27.16 percent of their sales on logistics services: in Thailand, 11.11 percent; in Vietnam, 16.3 percent; and in Indonesia, 21.4 percent. As such, the DTI and the Departments of Transportation and of Finance are crafting a JAO that will regulate shipping fees to bring down trading cost.