Shipping lines considering insurance surcharge hike

Following the Sept. 11 terrorist attacks on the United States, and the ensuing global economic downturn, domestic shipping lines are mulling over a policy of collecting an insurance surcharge to recover increased insurance costs. The insurance surcharge is similar to the additional fees already being collected by the airlines.

“Much as the shipping lines would like to avoid this added cost to the passengers and shippers, they find the urgent need to levy a surcharge to recover the increased cost of insurance,” Attorney Josephine Uranza, president of the Domestic Shipowners Association, said.

Costs for required insurance coverages have dramatically increased post-Sept. 11, after insurance companies imposed higher fees to recover losses arising from the incident.

“As much as possible, shipping lines do not want to burden the shipping public with additional charges because we want our prices to remain competitive, but we have to recover the additional burden imposed on us by the insurance companies which they have started to collect on all insurance policy renewals of the shipping lines,” Uranza explained.

Apart from the global economic crisis, the industry has to weather low trade volumes, a decline in the number of passengers, and a weak peso that has greatly affected the country’s imports. According to Uranza, these problems, coupled with decrepit port facilities and poor road infrastructure, inflate the cost of maritime transportation.

Colonel Leonardo Odoño, executive director of the Philippine Interisland Shipping Association, believes that the government needs to effect a maritime policy reform to enable the industry to bring down the cost of doing business in the Philippines for shipowners.

“The government and the private sector should also work together to relieve Filipino shipowners of problems such as the lack of efficient port facilities, imbalance in cargo traffic and lack of economies of scale in cargo movement,” Odoño said.

The domestic shipping industry has, in the last year, asked government to rationalize incentives so that it may enjoy the same incentives being enjoyed by the overseas shipping and the domestic airline industries. “In order to remain competitive, the industry must be granted access to the same incentives and tax exemptions being enjoyed by these two sectors,” Uranza pointed out.