THE surging freight charges amid shortage of container vessels has triggered an investigation by the Philippine Competition Commission (PCC) on potential price-fixing among industry players.
PCC Chairman Arsenio M. Balisacan confirmed to the BusinessMirror there is an ongoing investigation on the shipping service sector amid the heightened freight charges earlier flagged by the export industry.
“The PCC is looking into the allegations that there are anti-competitive practices in the provision of international shipping services,” he said. “Investigation is ongoing.”
Balisacan stressed that price-fixing by cartels is punishable by administrative fine and imprisonment under the Philippine Competition Act (PCA).
Price-fixing is an anti-competitive practice wherein competing businesses agree to control the prices, which usually result in higher rates for the consumers.
The BusinessMirror earlier reported that the local industry has been affected by shipment delays arising from the shortage of vessels amid container imbalances during this pandemic. The delays, which take about a month or so, have been a burden to the export-oriented manufacturers’ supply chain and even revenues.
In addition, the lack of container supply has led to the increase of freight charges.
Henry Basilio, chairman of the networking committee on transportation and logistics of the Export Development Council, earlier sounded the alarm on the surging freight rates amid imbalances of empty containers. He noted that the cargo handling cost has doubled with the cranage fee amounting to P1,587, in addition to the arrastre fee of P1,575.
Cranage fee is the price paid for the use of cranes when loading and unloading ships. Arrastre fee is charged for the handling, receiving and custody of shipments.
The competition authority cannot pinpoint yet when the investigation will conclude as it must secure enough proof of anti-competitive behavior first before filing charges.
“PCC is doing its best to conclude its investigation the soonest possible time, but could not provide a specific date,” Balisacan said. “Key is the presence of sufficient evidence to warrant filing of charges against violators of the PCA.”
Check cost validity
In conducting the probe, the Philippine Exporters Confederation Inc. (Philexport) said the competition regulator should go over each of the freight costs and see if they are “valid.”
“We suggest for the PCC to unbundle the freight cost and check each item if valid. I know there are fees such as cleaning fee, congestion fee, container deposit fee, imbalance fee, etc.,” Philexport Assistant Vice President Flordeliza C. Leong told the BusinessMirror.
Leong added the brokers and freight forwarders have been complaining that their container deposit fees “have not been refunded or slow to be refunded.”
The deposit fees are estimated to have reached billions already, Philexport said.
“The issue of increasing freight rates by shipping lines has long been an issue and considered one of the impediments to export growth,” she said. “Addressing this will help lessen trade costs and make us more competitive.”
The Philexport official recently told this newspaper that shipment delays due to shortage of containers began in the last quarter of 2020 when production picked up anew.
In addition, she noted that irregular port operations and employees working in shortened hours amid the pandemic, among others, contributed to the delays.
Review competition
The United Nations Conference on Trade and Development (Unctad), in a recent policy brief, urged competition authorities to monitor both the freight rates and market behavior amid the container imbalance.
The international agency noted that shippers have complaints over no access to empty containers for exports; high freight rates; and blank sailings, which refer to skipped port calls resulting in mismatch of supply and demand for empty vessels.
“It remains important for policy-makers to continue to strengthen national competition authorities in the area of maritime transport and ensure that they are prepared to provide the requisite regulatory oversight,” Unctad said.
The UN agency noted that other competition regulators have been investigating as well if there is abusive behavior on the part of maritime transport providers.