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PANAMA CANAL AUTHORITY PROPOSES CHANGES TO PRICING SYSTEM, REGULATIONS

Date: 02-FEB-2007

CANAL MOVES TOWARD A CHARGE THAT REFLECTS THE
 COMMERCIAL VALUE OF THE CANAL’S ROUTE AND SERVICE IT PROVIDES

PROVIDES THREE YEARS OF PRICE STABILITY, AN INDUSTRY REQUEST

INDUSTRY AND INTERESTED PARTIES REQUESTED TO COMMENT;
PUBLIC HEARINGS SLATED FOR MARCH 14, 2007

PANAMA CITY, Panama, February 2, 2007 – On January 25, 2007, the Panama Canal Authority’s (ACP) Board of Directors gave authorization to proceed with a formal proposal to restructure the Canal’s pricing system and certain regulations. The proposal was officially published today and can be accessed at www.pancanal.com.

Value of the Panama Canal
As the world becomes more interconnected – barriers dropping, tariffs reduced – the significance of the Panama Canal and its function in the global supply chain become more important. Shippers moving goods from the U.S. Gulf Coast to Asia can save up to 10 voyage days via the Panama Canal, and vessels traveling from the West Coast of South America to the U.S. East Coast shave an estimated eight to 16 voyage days compared to alternative routes. Given the cost increases in shipbuilding, fuel and vessel operations, the route through the Panama Canal has significantly increased its value to its users.

In addition, the Canal has become more efficient and is transiting more tonnage. Despite these more challenging demands, the Canal continues to increase overall efficiency and reduce transit time. Moreover, in FY 2006, the Canal tied its own 2004 safety record with just 10 accidents out of 14,194 transits – the fewest number of accidents in 81 years.

Proposed changes to the pricing system and Canal regulations include:

  • Maximum Displacement Draft vs. Arrival Draft: The ACP is proposing a change for vessels charged based on their displacement to simplify and streamline the process. The Canal proposes that the charge is based upon the maximum displacement draft instead of the arrival draft to assess tolls according to the specified tonnage rate.
  • Administrative Changes: Some administrative changes have been made, but these changes will have no economic impact whatsoever. These revisions provide necessary linguistic and grammatical clarifications to the document or reinsert missing words to processes and procedures.
  • Passenger Vessels: Regarding passenger vessels, the ACP is proposing an assessment of tolls based on maximum passenger capacity. In general, under this change, large vessels will be charged tolls on a per berth basis, and smaller ships will continue under the Canal tonnage tolls system. These changes are largely due to suggestions from industry representatives and evidence another example of the ACP listening to the industry.
  • Tolls: The adjustments and implementation dates of proposed tolls depend on each segment that transits the Canal: container vessels, passenger vessels, general cargo, refrigerated cargo, dry bulk, tankers and vehicle carriers. These adjustments provide Panama Canal price stability for three years. Of note, tolls for non container segments have not increased in the last four years.

“This proposal is well thought out and well researched. We recognize the value of the Panama Canal and its service to the shipping and maritime communities, and, indeed, to global trade. These new prices will allow us to continue providing the industry with the service they want and the service they deserve. At the same time, they will allow us to make the programmed investments for the Panama Canal Master Plan, which proposes to expand the capacity of the existing Canal through the construction of a third set of locks. The industry has continually requested price stability and we have included this in our proposal and extended it until 2009, unparalleled in the industry,” said ACP Administrator/CEO Alberto Alemán Zubieta. 

Formal consultation on the proposal begins today and will continue until March 12, 2007, at 4:15 p.m. EST. The ACP will consider inputs, suggestions and feedback from interested parties. The ACP welcomes data, opinions, written statements (in English or Spanish) before the above deadline in person, via courier or by mail. In addition, a public hearing will be conducted March 14, 2007, in the “Ascanio Arosemena” auditorium, Balboa, Republic of Panama at 9:00 a.m. EST. For more information or to obtain an electronic copy of the proposal (in both English and Spanish), please visit: www.pancanal.com.

About the Panama Canal Authority
The Panama Canal Authority (ACP) is the autonomous agency of the Government of Panama in charge of managing, operating and maintaining the Panama Canal. The operation of the ACP is based on its organic law and the regulations approved by its Board of Directors. For more information, please refer to the Panama Canal Authority’s Web site: www.pancanal.com

The Authority’s responsibility to the Panamanian people is paramount. The Canal belongs to the people and benefits from the Canal should accrue to as many Panamanians as possible. The Authority will plan its future so that it will continually contribute to the economic development and welfare of the citizens of Panama.