A PLAN by the Philippine Ports Authority (PPA) to introduce tariff rates on empty containers has been opposed by the Association of International Shipping Lines (AISL), which said that any addition to shipping costs will not augur well with the country’s efforts to rebound from the debilitating effects of the coronavirus disease pandemic.
The AISL, in a position paper sent to the PPA board last October 8, said the imposition of tariff, or arrastre, on empty containers at the Manila and Batangas ports would mean that international shipping lines will have to pay an estimated additional cost of P5.4 billion, based on the 2019 container volume data.
“Shipping lines have to recover the additional cost; otherwise the option left to them is to reduce capacity in order to remain efficient. Hence, the need to pass on the estimated cost increase of P5.4B to customers becomes the viable option,” AISL said.
The AISL pointed out that passing the additional cost to customers could “further increase the cost of freight and logistics to the detriment, in particular, of small and medium-size enterprises.”
The group added that if the PPA pushes through with its plan, this would adversely affect the country’s competitive edge in the shipping industry compared to its Southeast Asian neighbors.
The AISL noted that the Philippines already ranks highest in terms of handling costs for 20-footer and 40-footer containers among its Southeast Asian neighbors, including Singapore.
“(That is why) applying arrastre on empties will only add to the overall cost for lines servicing the Philippines, and further skew comparison with the SEA countries,” he said.
AISL said the imposition of arrastre charges on empty containers comes at a time when the Philippine economy is already under severe stress because of the coronavirus pandemic.
“It strikes a big blow to the cost of doing business in the Philippines,” one of the group’s directors said.
AISL added that empty containers were never assessed any arrastre charges in the past because these were considered an extension of the ship’s equipment or gear.
The AISL pointed out that even the Bureau of Customs “has never departed from this principle.”
“Unless manifested as importations, empty containers are exempt from the payment of duties and taxes, they being considered as part of the ship’s gear,” the AISL stressed.
The group also noted that arrastre is a form of charge against cargo as defined by Republic Act No. 1371.
“The marked distinction between a ship’s gear and a cargo has been well delineated, and the two terms cannot be regarded as interchangeable,” the group argued, adding that being part of the ship’s gear, empty containers should not be levied any tariff.