Panama Canal Authority Proposes New Pricing Structure

The Panama Canal Authority released a formal proposal to change its pricing structure to move toward a market-oriented business model that allows for greater customer service and continual improvements to the Canal. As global trade continues to expand, the shipping industry has evolved significantly and the Canal's 90-year-old pricing structure needs to be changed to meet the increasing demands of a dynamic market place. "This historic shift in our business model is the first step toward changing the long-standing, one-size-fits-all pricing structure and replace it with a system that is more tailored to individual customer needs," said Alberto Aleman Zubieta, the Canal Administrator. "The new system provides a strong foundation for continual improvements to the Canal, ensuring fast, safe and efficient transit." Aleman Zubieta said the total Canal transit time has been reduced from 32.9 hours in 1999 to 23.9 hours in 2001. He added that there has been a 54 percent reduction in the vessel accident rate index, declining from 37 in fiscal year 1996 to 17 for fiscal year 2001. "To continue the type of efficiency and safety improvements our customers deserve, we must maintain a permanent modernization program and we must change our pricing structure," Aleman Zubieta said. Under the new pricing structure, average Canal toll rates will increase by 13 percent, and an additional $200-per-wire fee will be charged for ancillary locomotive services.

"The Panama Canal is still the best Canal deal in the world by far," said Aleman Zubieta. "This price change is reasonable and fair for all and will have minimal impact on trade and consumers. It amounts to less than two percent of total transportation costs for goods transported through the Canal. All interested parties have the option to comment in the next 30 days on the ACP's proposal -- in writing or by attending a public hearing in Panama City on July 19. Once the public comment period has ended, the ACP will review all submissions and make its recommendations for final approval by the Canal's Board of Directors for a new pricing structure.

Under the proposal: * Prices will continue to use the same Panama Canal measurement system,which is based on the volumetric capacity of each ship. * The locomotive services will be rated as an additional ancillary service. All ships pay for ancillary services they require such as use of tugboats, line handlers and extra pilots. * The pricing structure will continue to be the same for all Canal transiting vessels, regardless of the type of cargo or its point of origin. * The proposal segments vessels by recognized industry standards: container ships, passenger ships, general cargo ships, dry bulk carriers, liquid bulk carriers, reefers and car carriers. Market studies are underway for each segment. * The new pricing structure is consistent with the principles of international law and the practices of other international canals such as Suez. "The ACP is committed to permanent modernization and safety enhancements," Mr. Aleman Zubieta said. "Today's move will help us continue to improve our service to Canal customers."