A Philippine Competition Commission investigation is looking at the “potentially abusive behavior” of the shipping industry
PCC is coordinating with the Department of Trade and Industry on the issue of high freight rates
PCC chairman Arsenio Balisacan said details of the investigation will remain undisclosed for now
The Philippine Competition Commission (PCC) is conducting an investigation on “potentially abusive behavior” of the shipping industry, according to PCC chairman Arsenio Balisacan.
In a statement, Balisacan said PCC is coordinating with the Department of Trade and Industry (DTI) on the issue of high freight rates. He noted that logistics, including shipping, “is one of PCC’s sector priorities, considering that this sector is vital during the pandemic and to economic recovery.”
Balisacan, however, said they “cannot disclose details [of the investigation] at this time.”
PortCalls sought comments from the Association of International Shipping Lines, members of which include foreign carriers calling the Philippines; no response has been received as of press time.
Balisacan’s statement was issued in anticipation of a Lower House Committee on Transportation (COTr) hearing on April 30 and in response to a policy brief on high freight rates released by the United Nations Conference on Trade and Development (UNCTAD).
Proposed regulation of shipping charges
The COTr hearing tackled HBs 4316 and 4462, which both seek to regulate and standardize the local charges imposed by foreign shipping lines operating in the Philippines.
The bills were filed in 2019 to address concerns raised over the years about the high cost of imports that stakeholders and private sector groups said resulted from “excessive and questionable” destination charges imposed by international shipping lines and their agents.
Government agencies and private sector groups during the COTr hearing backed the passage of the two bills. COTr has approved a motion to create a technical working group—composed of concerned government agencies and the private sector—to consolidate the two bills.
UNCTAD recently released a policy brief examining why freight rates surged during the pandemic and giving recommendations to avoid a similar situation in the future.
One of the recommendations is that governments must ensure competition authorities have the resources and expertise needed to investigate potentially abusive practices in the shipping industry, particularly during the pandemic which disrupted global trade and caused a shortage in containers and ship supply capacity issues.
According to the policy brief, shipping lines “have earned high rates of return during the pandemic, with double-digit operating profits for some container carriers in 2020.”
While there may be several reasons for the shortage in containers and ship supply capacity, including the disruptive nature of the pandemic and associated restrictions, the policy brief said it is also important to ensure that national competition authorities can monitor freight rates and market behavior.
In a statement, UNCTAD said although the pandemic’s disruptive nature is at the core of the container shortage, “certain strategies by carriers may have delayed the repositioning of containers at the beginning of the crisis.”
“Providing the necessary oversight is more challenging for authorities in developing countries, who often lack resources and expertise in international container shipping,” it added.
Balisacan noted that the Competition Unit of UNCTAD “has been facilitating cooperation and sharing of experiences among national competition authorities, especially benefiting young competition authorities, such as PCC, in developing countries.”
Even prior to UNCTAD’s policy brief and the COTr hearing, DTI in 2018 already requested PCC to look into the alleged excessive and unreasonable charges imposed by foreign shipping lines on Filipino importers and exporters.
Trade Secretary Ramon Lopez earlier said “these excessive charges and fees are recurring issues that have brought significant negative impact on our local industries.”
A 2017 joint study by DTI-Export Development Council (EDC) and National Competitiveness Council (NCC) detailed the pricing scheme of several international shipping lines and found questionable destination and origin charges supposedly imposed on local importers and exporters.
The joint report, titled “Potentially Avoidable International Shipping Cost and Other Charges,” was authored by Dr. Enrico Basilio, NCC’s transport chair of both the Infrastructure and Trade Logistics Working Group and EDC’s Networking Committee on Transport and Logistics, and Michael Raeuber, president of Royal Cargo Group of Companies.
The study revealed some shipping lines allegedly developed a scheme to make freight cost less transparent to benefit exporters overseas at the expense of Philippine importers, costing the Philippine economy roughly US$2 billion to $5 billion annually.
Over the years, many industry fora, meetings, and conferences have tried to address stakeholder concerns over foreign shipping lines’ charges, specifically destination and local charges. At those meetings, it was noted that no government agency had direct jurisdiction over international shipping lines and the charges they imposed. – Roumina Pablo