Domestic shipping lines send wish list to DOTr

• Domestic shipping lines have sent the DOTr a long wish list: policy reforms for the domestic shipping industry to cut transport and logistics costs, and to promote ease of doing business

• The Philippine Inter-island Shipping Association noted government policies and regulations are arbitrarily approved and imposed on the industry despite their negative impact

• The association is pushing for passage of the bill amending the PPA charter, exclusively assigning the agency with a purely rate-fixing function

• The IRR for RA 11659 (Public Service Act) should include the domestic shipping industry as a public utility, thereby retaining the 60%-40% Filipino-foreign ownership ratio of domestic shipping companies, PISA proposed

Domestic shipping lines have sent to the Department of Transportation (DOTr) their wish list containing policy reforms for the domestic shipping industry to lower transport and logistics costs and promote ease of doing business.

In a letter to Transport Secretary Jaime Bautista dated November 10, the Philippine Inter-island Shipping Association (PISA) said it urgently seeks the department’s support and immediate intervention for the domestic shipping industry, which it said “has been underrated and never seen as a partner of government in nation-building and economic development.”

As the country tries to recover from the impact of the pandemic and the continuing rise in petroleum product prices compounded by Russia’s invasion of Ukraine, PISA said the domestic shipping industry faces another challenge: government policies and regulations “indiscriminately approved and forced to be implemented despite [their] negative impact to the industry.”

The umbrella organization of local shipping lines and shipping-related organizations, the group said these policies add substantial costs and complicate shipping lines’ operations and way of doing business.

PISA added that government port projects that are privatized more often impose astronomical increases in cargo handling charges on shippers and cargo owners that are ultimately borne by consumers and the public.

The group said it strongly supports the Philippine Ports Authority’s (PPA) move announced in September to suspend port rate increases and biddings for terminal management contracts under the Port Terminal Management Regulatory Framework (PTMRF), which will be subject to a review with the possibility of lowering existing rates.

READ: PPA freezes rate hike requests, bidding of ports

PISA said the policy recommendations are for the consideration of the present administration and the 19^th Congress.

To lower the cost of doing business, the group suggested the following policy reforms:

• Immediate passage of the bill amending the PPA charter, exclusively assigning the agency with a purely rate-fixing function similar to the Toll Regulatory Board. Port development should be the Department of Public Works and Highways’ responsibility while port management and operation can be bid out to the private sector entities that offer the lowest bid to ensure reasonable port charges.
• Passage of House Bills 0317 and 1954 prescribing open pilotage and optional pilotage for domestic ships except in ports declared by the ports authority to be on compulsory pilotage.
• Passage of a bill amending Republic Act No. 9483, specifically Section 22(a), which imposes a 10-centavo per liter levy on tankers and tanker-barges for every transshipment or delivery of persistent oil. The amendment should consist of either a total repeal of the impost, or the levy to be imposed on the product or its owner.
• Amendment of Presidential Decree 1221, which requires all Philippine-owned and/or registered ships to undertake repairs and drydocking with the Maritime Industry Authority-registered ship repair yards, to allow domestic ships of bigger tonnage to drydock in other countries. Drydocking costs in the Philippines are 40% higher than in other Association of Southeast Asian Nations.
• Include in the crafting of implementing rules and regulations for RA 11659 (Public Service Act) the domestic shipping industry as a public utility, thereby retaining the 60%-40% Filipino-foreign ownership ratio of domestic shipping companies.
• Immediate suspension of PPA’s Central Ticketing System subject to a further review and evaluation due to a lack of stakeholder involvement, especially of passage shipping lines that have invested in an existing ticket booking system.
• Immediate suspension of the implementation of uniform tariff at ports under PTMRF due to a lack of stakeholder consultation/involvement, especially in ports already bid out but without gear, equipment, infrastructure, improvement, or development provided upon takeover by the winning bidder. Retract Tier 3 cargo-handling rates and revert to previous rates.
• Immediately suspend for further review the implementation of PPA’s prescribed waste reception fees for the lack of public consultation and for increasing the rates without value and unduly promoting monopoly in the provision of garbage collection services in all PPA ports.
• Immediately conduct an in-depth review of government maritime policies and regulations to determine needed policy changes or reforms that would improve the performance of existing systems to assure their flexibility, efficiency and effectiveness in response to ever-changing maritime technology and global practice.

To achieve economies of scale in the domestic shipping market, PISA recommends the following:

• Creation of shipping hubs/industry clusters as a long-term solution to reduce freight and logistics costs under a national development plan that would cluster manufacturing and production centers around port and airport infrastructure. Many economic and agricultural zones are spread all over the country, making it very challenging to bring goods to market, PISA noted.
• Improve port and transport infrastructure leading to and from ports to achieve efficient, cost-effective intermodal transport connectivity.

PISA also noted that foreign ships enjoy benefits not accorded to vessels in the domestic trade. In a comparative analysis of factors influencing operating costs of foreign and domestic vessels plying Philippine waters, PISA pointed out that domestic shipping lines are slapped a 12% value-added tax (VAT) for fuel while foreign shipping lines are exempt. In addition, domestic shipping lines are subject to 12% VAT on gross freight and a 32% corporate income tax, while foreign shipping lines are levied common carriers tax of 3% on gross receipts and 2.5% tax for gross Philippine billings.

Domestic shipping owners and operators pay 12% VAT and 3% duties when importing vessels, and pay 12% VAT on imported steel plates, spare parts, and other supplies.

PISA also seeks transparency or availability on the PPA website of key performance indicators in terms of port productivity so stakeholders may determine compliance with minimum standards or specific targets stated in the terminal contract at all ports bid out or awarded under the PTMRF.

The group noted specific concerns, including PPA’s policy on escalation of cargo-handling tariff every three years based on the consumer price index, mandatory pilotage, mandatory tree-planting as a pre-condition to the issuance and renewal of PPA accreditation and registration that did not undergo public consultation, the high cost of low-sulfur fuel in compliance with the International Maritime Organization’s 0.50% sulfur cap by January 2025, and other MARINA and Office for Transport Security policies.

In August this year, PISA provided the new heads of MARINA and PPA its list of issues and recommendations, some of which also found their way on the new wish list. – Roumina Pablo