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FOBAP urges Philippines to complement US shipping law

FOBAP urges PH to complement US shipping law
Bernie Cahiles-Magkilat June 23, 2022

The Foreign Buyers Association of the Philippines (FOBAP) has urged the Philippine government to regulate shipping and standardize industry rates similar to the newly enacted shipping industry law amid continuing high freight costs of shipping lines servicing local exporters.

In a statement, FOBAP President Robert M. Young noted that US President Joe Biden already signed into law last week the Ocean Shipping Reform Act 3580, which is considered a milestone of the US shipping industry law in almost quarter century.

“The US law will crack down on skyrocketing international ocean shipping costs and regulate unfair practices plus ease the long problematic supply chain backlogs that are raising prices for USA consumers, as well as in the global market including the Philippines,” said Young.

CEO Steve Lamar of American Apparel & Footwear Association of America (AAFA), in which FOBAP is a signatory support member, has been a leader advocate for the US bill.

With this development in the US shipping industry, FOBAP has strongly urged that the Philippine government complement and support the American law to cascade the cost reduction in shipping rates to the local industries, especially exports, where the

Philippines is lagging behind its Asean neighbors in terms of export sales and productivity.

Young noted the two pending bills in Congress — HB 4462 and HB 4316 — that need urgent attention. Both bills aim to provide fair and transparent charges, regulate and standardize industry rules among shipping lines and its agents, cargo forwarders and brokers.

Young also pushed for charter amendment of Philippine Ports Authority to review its charges on port fees, among others.

Young, who is also executive member of the Export Dev Council, noted that pre-pandemic, the freight cost for 1×400 food container to Long Beach, LA from Manila costs $4,000, but had gone up four to five times at the height of the pandemic to $16,000 to $20,000 on first come first serve basis.

Lately, prices have gone slightly to $10,000 to $15,000 but Young said that is still double the $4,000 base rate before the pandemic. Young attributed the softening in freight cost of the major shipping lines in the country to the passage of the US law.

Freight cost to Japan ranged from $400 for 1×20 cubic foot container and $800 for 1×40 cubic foot container pre-pandemic, but the rates also went up by three to four times during the pandemic.

While the freight costs are charged to the importers, Young said these are just being passed on to the exporters or the buyers, making the Philippine export more expensive and can no longer compete in the international market.

One scenario, Young said, is that foreign buyers could just cancel out the Philippines in their export radar.

When shipping rates go up exorbitantly, Young said, other charges like brokers and local agents also raise their rates.

The passage of the two pending bills will need the political will of the next administration just like what Biden had done in the US shipping industry, he said.

The two bills also seek amendments to the PPA charter.