Last week SCMAP—alongside the Philippine Chamber of Commerce and Industry, the Philippine Exporters Confederation, and the Export Development Council—submitted a joint position paper to the House of Representatives’ Committee on Transportation. In it, we expressed our support for two proposed pieces of legislation that aim to regulate destination and other charges imposed by foreign shipping lines operating in the country.
The first, House Bill 4316, aims to compel these shipping lines to comply with INCOTERMS regulations in assessing shipping charges. The second, House Bill 4462, seeks to mandate the Maritime Industry Authority to act as regulator for the aforementioned charges.
The hope is with these proposals in place, there will be greater transparency and accountability when it comes to assessing logistics costs. When these charges follow the terminology set through globally accepted standards such as INCOTERMS, shippers will have a better idea of what they’re being charged for and can seek more cost-efficient providers in a more informed manner. These proposals also allow for greater competition, as they even out the playing field and compel shipping lines and other logistics providers to offer value-adding services to make them stand out from the pack.
As it stands, there are great variations in the charges being imposed upon shippers. Depending on the cargo being delivered, the destination from port to warehouse, and any other services the shipping line offers, charges cover the gamut from terminal handling, documentation and equipment imbalance to container maintenance and cleaning, the charges often going by different terms per shipping line. (You can see illustrative figures in our position paper, which is uploaded on our website, scmap.org.) This, arguably, provides a loophole for shipping lines to charge more than is justifiable.
Ultimately, destination charges would cover 30% to 50% of total shipping charges borne by businesses—a big chunk of the roughly 27% of total sales costs that go to logistics, according to the most recent Logistics Efficiency Indicators survey conducted by the Department of Trade and Industry. These costs are high and ultimately unchecked, and hamper any business’ ability to invest in improving their products and services. Therefore, regulating charges at a national level—guided by globally accepted terminology—would allow for more competitive businesses, more competitive logistics providers, and more competitive supply chains, which are particularly important in import-heavy countries like the Philippines.
The impact of these proposals goes beyond competitive shipping charges, however. Regulation of these costs would lead to more competitive prices for services typically outside the purview of shipping lines, like warehouse storage and drayage, which are charged according to market rates and are therefore indirectly affected by the rates set by shipping lines. While the proposals are concerned with charges imposed by foreign shipping lines, we also believe these can provide a template for addressing the issue of high domestic shipping costs, as well as provide a framework for authorities to assess petitions for increases in, say, cargo handling rates in ports—and make any such hikes truly consultative rather than unilateral.
In the end, these measures would go a long way in determining our prospects for economic recovery amidst the COVID-19 pandemic. Already many businesses are struggling to keep up due to limited demand, dampened confidence and continuing uncertainty. If we are to stage a quick recovery, we must ensure that these businesses are able to continue to operate, employ people, and promote consumption. The issues affecting global trade today—container shortages, port congestion, high prices—are making matters more difficult, especially for smaller businesses who are not able to leverage their size and scope to negotiate advance rates. In these times, every little bit helps. We call for regulation of shipping charges not to be an antagonist to shipping lines and other logistics providers—why would we do that to our partners?—but to be of support to businesses who rely on them, and on whose survival the prospects of our economy, of our country, of our people for years and decades to come rely on.
Henrik Batallones is the marketing and communications director of SCMAP, and editor-in-chief of its official publication, Supply Chain Philippines. More information about SCMAP is available at scmap.org.