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Marine Log

March 12, 2007

Shipowners ask Panama Canal Authority to rethink toll increases

The International Chamber of Shipping (ICS)--with the support of BIMCO, Intercargo and Intertanko--has submitted formal comments to the Panama Canal Authority (ACP). They express the shipping industry's "serious concerns" about the major toll increases proposed in connection with the planned expansion of the Panama Canal.

"ICS members have cautiously accepted the concept of sectoral pricing, and the introduction of charges per berth for larger passenger vessels," says ICS Secretary General, Tony Mason, who will represent the industry at a public hearing in Panama on March 14. "However, we are very disappointed that our repeated request that increases in tolls should be equitable,transparent and spaced over a sufficient amount of time appear, by and large, to have been ignored."

"The official Expansion Proposals referred to projected increases in tolls of 3.5 percent per annum over a twenty year period" says Mason. "However, the actual proposals would lead to increases ranging from 26 percent to 34 percent over the first three years (equal to 8 to 10 percent per annum) with increases for container carrying vessels and larger passenger ships considerably in excess of 10 percent per annum."

ICS says that in any other industry, changes of this magnitude over such a short period of time would be regarded as unacceptably large.

ICS believes the proposed increases have too short an initial notice period and are spread over too short a time period for adequate long term planning or for effective absorption of additional costs.

"In particular" says Mason "the three months notice for some sectors will cause significant problems. Six months notice of the initial increases, and phasing in the increases over, say, six rather than three years, would be far more reasonable."

ICS says the ACP's proposals do not appear to represent a fair distribution of costs between current and future users.

"Canal users feel that increases in Canal dues should be matched by a tangible improvement in the service provided, and that they should not be expected to provide up-front financing for a major infrastructure project from which they may not individually derive any benefit," says Mason.

ICS has suggested that ACP explores further the extent to which external financing can be used to spread the costs over a larger period of time.

To avoid undermining industry confidence, and given previous ACP statements about the intention to double tolls over the next twenty years (which would equate to 3.5 percent per annum), ICS is seeking a commitment that the overall result of present and future increases will not exceed the expected annual average of 3.5 percent.