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Fee increases, secretariat formation raises concern

By Giff Johnson

MAJURO, Marshall Islands (Marianas Business Journal, April 9, 2012) – A sub-regional government shipping oversight body's plan to establish a secretariat has become a political hot potato, sparking debate among member governments over the issue and prompting the presidents of Palau, Federated States of Micronesia and Marshall Islands to direct the entity not to raise rates for shippers.

For most Micronesia observers, the Micronesian Shipping Commission is an obscure partnership of the three freely associated states that meets infrequently and stays under the radar as it regulates commercial shipping linking the area with Asia and the United States. But a decision reached in February to raise annual shipping fees charged to the handful of shippers serving the Micronesia area from $10,000 to $50,000 a year blew up into a heated debate on the floor of the Marshall Islands Nitijela (parliament) in early March about the benefits of the MSC. The agreement to jack up rates caught the new government of Marshall Islands President Christopher Loeak off guard - though the agreement to increase rates was signed in the name of his government, he and other officials claimed to be unaware of the action. This led Loeak to join Presidents Johnson Toribiong of Palau and Emanuel Mori of the Federated States of Micronesia at the Micronesian Chief Executives Summit in Guam in mid-March to sign a letter to the MSC to "delay the implementation of any new rates until further consultation between the Micronesia Shipping Commission, the shipping firms and our representatives." (See "Presidents oppose shipping permit fee increase" in the March 26 issue of the Journal.)

The political-level squabbling in the Marshall Islands over the merits of the MSC prompted Moses Russel, acting executive director of the MSC, who is based in Pohnpei, to send a four-page letter to officials in the three countries explaining the benefits of the MSC and why the entity sees the need to establish itself as a full secretariat.

The Micronesian Shipping Commission was originally established soon after the end of the Trust Territory period with the goal of preventing "tramp" vessels and limited entry companies to enter into the Marshall Islands, Federated States of Micronesia and Palau to undercut long-term, existing shippers. The point being that reliable service by a handful of international shippers was preferable to a cut-rate service that might end after only a few months, while putting shipping companies out of business.

Critics of the fee hikes and MSC expansion plan say the entity has worked just fine the way it is established. "What used to take three ministers and three advisors three days to accomplish now takes a director, an official MSC office, vehicles, staff and stays in ports to discuss shipping requirements that have just slightly increased over the last 20 years," said an editorial in the March 30 edition of the Marshall Islands Journal. "The individual countries deciding how to manage their own shipping is not complicated. If it was not broken, why is it being fixed at the consumers' expense?"

Russel said the proposed increase is based on an operational budget that has been reviewed, discussed and revised over a period of three years since the issue was first discussed with the carriers in 2009, and reflects the bare minimum need of the MSC, which is $352,639.

The planned $40,000 a year increase in the annual shipping fee "will not impact Matson's service to Marshall Islands," said Len Isotoff, Matson's Guam-based general manager. He is supportive of the MSC, saying it has played a positive role in a region that is characterized by "vast distances between the islands, low traffic volumes and modest infrastructure."

Isotoff said the partnership approach among all involved in shipping in the sub-region "has helped develop shipping infrastructure to what it is today. The MSC must continue the partnership approach and work with all the stakeholders in order to be successful."

The five Vessel Operating Common Carriers that will be subject to the fee hike if the plan goes ahead include Matson, Kyowa/FSM Line, Mariana Express Line Ltd., RHIA and Reef Shipping. A group of cargo handlers known as "Non-Vessel Operating Common Carriers" include Palau Shipping, Triple B/PML, Ambyth Shipping, CTSI and NYK provide cargo consolidation and assist the shipping lines with moving cargo in the Micronesia area.

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