Panama Canal Rate Increase Hearing
By
Jim Sayers

The Panama Canal Commission (PCC) has proposed an increase in the rate charged to small vessels (125 feet or less) that transit their "big ditch." They are asking that the fee be raised to $1,500.00 per vessel per transit, a significant increase over the current transit rate of $2.04 per ton. This increase will place an unfair burden on the majority of small vessels that need to use the canal each year.

For most people it is common knowledge that, in 1977 a treaty was made with Panama that provides for the turn over of the Panama Canal to the Republic of Panama. Under the provisions of the treaty this will take place on December 31, 1999 at 12 o'clock noon. (Not 12 o'clock midnight as it is often erroneously reported in the press.) In any case, until that date, the canal is a possession of The United States, and subject to US law. Under the provisions of The Administrative Procedures Act, The PCC (a federal corporation) is bound by law to conduct hearings into any proposed action that will affect the canal users, and / or taxpayers. Because of this legal obligation, the mandate of the PCC is to allow concerned individuals the opportunity to respond to the "proposal" that will raise the transit rates. Because of the law, on Friday the 13th of February the PCC held a hearing at the Canal Zone to determine if there was any opposition to the proposed increase in the transit rates for small boats.

For most small boat owners, under the new formula the best case scenario available is roughly a 300 percent increase over the current rate being charged. However, for many other boat owners, it could be (according to the Commissions' own figures) a whopping 10,500 percent increase! The economic impact of this increase would not only be debilitating to cruisers, but to charter boats, and sport fishing boats that use the canal on a regular basis.

Anyone who has read the proposal, or had exposure to members of the Board, can see that the members of Commission seem to have already made up their minds about raising the transit rate to $1500.00 for all small boats. To some, they seem to have conveyed the impression that they regard these hearings as a mere formality that should be disposed of as quickly as possible. What they did not count on was that there would be such a well-organized opposition to the rate increase. Had the hearings been conducted at any of the major port cities in the United States they would have had an overwhelming attendance, but the PCC knew this and elected to hold the hearings at the Miraflores Locks in the Canal Zone of Panama. The result was that a relatively small number of people (roughly 35) showed up to testify. What this group lacked in numbers was more than compensated with knowledge and a certain fighting spirit. They were well prepared to discuss the issues, and to fight to keep the rates at a reasonable level, not only for themselves, but also for the thousands of boat owners worldwide that did not know of the hearings.

This small, but significant group was comprised of a cross section of interests. The bulk of the participants were yacht owners who are currently transiting the canal. There were also Panamanians who make their livelihood by providing goods and services to the yachts, and a couple of individuals who represent vessels that must transit the canal more than once a year. Off the record there were many Panama Canal Pilots lined up in opposition to the rate increase. However, there was only one Canal Pilot, (the only woman Panama Canal pilot) who courageously confronted her superiors on the Commission with the facts concerning how small boats (really) affect canal operations.

Not surprisingly, the Panamanian tourist bureau (IPAT) was there to argue that a significant increase in transit rates would directly impact tourism, and hurt their efforts to increase tourism in Panama as well as the general economy of Panama. Luckily for all of us, this is a political issue, too important to be dismissed arbitrarily by the Canal Commission. This, as it turns out, makes the tourist bureau a strong ally of the yachting community.

The hearing got off to a roaring start when Mr. Ed Higgins and Mr. Craig Owings presented a well-prepared analysis of exactly how the rate increase would negatively affect both the yacht owners, and the yacht facilities associated with the canal. They came armed with professionally produced materials that they themselves had created. Copies of the materials were given to each member of the panel, and large color versions were displayed to the attendees in the auditorium. Each one graphically showed information that was gathered from a survey of the yachts currently at one of the three major boat clubs in the Canal Zone, and from other research as well.

As Mr. Higgins addressed each of the issues using the data from the survey. The information clearly contradicted the Commissions' own assumptions about the yachts, and how they impact the canal operations. It also showed the Commission that they were steadily losing money from some major shipping sources. It was a powerful, direct hit, and it appeared to have stunned the assembled directors. It was interesting to see the look on the faces of The Canal Directors as they watched the well-prepared opposition unfold. One director would later state privately that it was a better presentation than those usually given by many of the large shipping companies.

In addition to the "common sense" arguments presented by the majority of the speakers, there was also a challenge put forth on the legal ramifications of the arbitrary rate increase being considered by the Commission. Mr. Carl Duane Carlsmith, a boat owner from Hawaii now living in Panama, was one of two attorneys that testified on behalf of the cruising community. He pointed out that the notice to the community of cruising yachts was not adequate, and that the method of accessing fees was unfairly selected according to the status of the owner rather than the net tonnage displacement. The other attorney, Señor Jaime Arias, is a Panamanian citizen heavily involved with the boating community in Panama. His wife, Julie, is involved with a yacht charter service and she testified on issues relating to how the proposed rate increase will impact yacht charter services active in Panama.

Mr. Charles Warner, a cruiser, issued a strong challenge to the Board to justify the rate increase based on the price per ton formula. The Board made little effort to answer his questions, and at times even appeared confused by the issues that he raised. Earlier in the proceedings Mr. Jimmy Coleman of Panama City, attempted to question the Commission and was told (in no uncertain terms) that the Commission was not obligated to answer any questions, and indeed would not do so at these hearings. The Commission also attempted to keep the press corps from entering the hearings. This situation was finally resolved after news of this became known to some of the participants inside the hearing room.

The Panama Canal Commission has produced a booklet that purports to tell how the small vessel traffic, primarily yachts & fishing boats create unnecessary delays and cause a disproportionate economic burden on the canal. The study draws a number of conclusions, but it lacks any real supporting evidence for the conclusions. It is a well-known tactic to make false assumptions about something then use those assumptions to draw conclusions favorable to a particular point of view. It quickly became evident to the Commission that the yacht owners were not buying into the merry-go-round of false assumptions that they were putting fourth. Collectively, the assembled yacht owners and other boaters in attendance had hundreds of canal transits under their belt and knew what it was like to transit the canal. They could, without effort, challenge the erroneous data that the Canal Commission was trying to peddle as fact. This was most evident in the testimony of Captain Sara Terry, a senior canal pilot with years of experience in the canal. If anything was driven home to the Commissioners' it was that people who are resourceful enough to sail to Panama from the United States or Europe are equal to the task of transiting the canal without having a problem or creating a problem.

During the course of the hearings, several alternate proposals for yacht transits were offered. This had the affect of destroying any argument that the Canal Commission could present concerning small boats causing delays or the need for increased costs. It was made clear to the Commission that several other viable alternate proposals existed, but the Commission refused to comment on these proposals during the hearing.

It is hard to gage the affect that hearings had on the Commission. The outcome will not be known until they have had a chance to review and consider the information. (If they are even predisposed to do this.) Some longtime canal watchers have stated that they have little faith that the hearings will yield anything in the favor of the small boat owners, but others claim to have detected a change in the demeanor of the Commission--presumably brought on by the testimony of the witnesses.

Will the transit rate actually increase to $1,500.00 per boat, or will the voice of reason penetrate the ivory towers of The Panama Canal Commission? The question still remains unanswered, and at this point, no decision has been announced. Many believe that no amount of evidence will sway the Commission, and that a legal challenge may be need to keep the rates at a reasonable level, or to reverse the rate increase, should it come to that. It would be premature to speculate about the outcome, because even the old timers admit that they don't really know what the Commission will do. Last year we had a case in which incorrect information concerning the Panama Canal Transit Fees was published in a respected sailing magazine. This time around let's wait until the Commission makes public its decision before we cry wolf.

Copyright © 1998 Jim Sayers: Jim@surfspin.com


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Copyright © 1998 Pedro Miguel Boat Club
November 13, 2000 07:06