The Association of International Shipping Lines opposed a plan by the Philippine Ports Authority to introduce never-before-assessed arrastre rates on empty containers, saying any addition to shipping costs will not augur well with the country’s efforts to rebound from the impact of the coronavirus pandemic.
AISL said in a position paper to the PPA board on Oct. 8 the imposition of the arrastre charge on empty containers at the Manila and Batangas ports meant international shipping lines would 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 told the PPA board.
AISL said 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.” It said this could also adversely affect the country’s competitive edge in the shipping industry compared to Southeast Asian neighbors.
AISL said the Philippines already ranks highest in terms of handling costs for 20-footer and 40-footer containers among Southeast Asian countries, including Singapore. “[That is why] applying arrastre on empties will only add to the over-all cost for lines servicing the Philippines, and further skew comparison with the SEA countries,” it said.
AISL said the imposition of arrastre charges on empty containers comes at an inopportune time with the Philippine economy already under severe stress because of the pandemic. “It strikes a big blow to the cost of doing business in the Philippines,” one of the directors said.
The group said empty containers were never assessed any tariff or arrastre charges in the past because these were considered as extension of the ship’s equipment or gear. It said 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,” AISL said.
AISL said arrastre was a form of charge against cargo as defined by Republic Act No. 1371. “Thus, 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 said, adding that being part of the ship’s gear, empty containers should not be levied any arrastre charge.