Shipping sector balks at extra R5.4-B arrastre fees

International shipping lines balk at paying an extra R5.4 billion as the Philippine Ports Authority (PPA) seeks to impose never-before-assessed arrastre rates on empty containers.

The Association of International Shipping Lines (AISL) opposed PPA's imposition of arrastre charges on empty containers at the Manila and the Batangas ports. Should the PPA follow through with the charges, shippers only have two viable options, both disagreeable, in order to recover the additional cost being slapped on them, the AISL warned.

Either they reduce their capacity to remain efficient or pass on the R5.4-billion cost increase to customers, the AISL told the PPA board.

Passing the arrastre charge to customers will “further increase the cost of freight and logistics, to the detriment of small and medium-size enterprises," they underscored.

Worse, PPA's slapping arrastre charges on empty containers will "adversely affect the country’s competitive edge in the shipping industry compared to its Southeast Asian neighbors."

Already, the Philippines ranks highest in terms of handling costs for 20footer and 40-footer containers in Southeast Asia, the AISL argued.

“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,” the association reiterated.

The PPA's imposition of arrastre charges on empty containers comes at "a most inopportune time" with the Philippine economy already under severe stress due to the coronavirus pandemic.

“It strikes a big blow to the cost of doing business in the Philippines," the AISL maintained.

In fact, empty containers were never assessed any tariff or arrastre charges in the past because they were considered as extension of the ship’s equipment or gear.

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, as part of the ship’s gear,” the AISL pointed out.

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. The two terms cannot be regarded as interchangeable,” the group argued further.

As part of the ship’s gear, empty containers should not be levied any arrastre charge, they concluded.