US embassy cable - 05TEGUCIGALPA1843

C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 001843 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC AND L/EB 
STATE FOR EB/TRA (DHAYWOOD) 
TREASURY FOR DDOUGLASS 
COMMERCE FOR AVANVUREN, MSIEGELMAN 
JUSTICE FOR APURCELL 
STATE PASS AID FOR LAC/CAM 
 
E.O. 12958: DECL: 09/07/2015 
TAGS: EWWT, KJUS, ECON, ECPS, EINV, PGOV, KMCA, HO 
SUBJECT: SHIPPERS HIKE HONDURAN PORT FEES, SPURRING 
ALLEGATIONS OF CARTELIZATION 
 
REF: TEGUCIGALPA 1825 AND PREVIOUS 
 
Classified By: Classified By: Economic Chief Patrick Dunn for reasons 1 
.4 (b) and (d) 
 
1. (C) On August 26, the private shippers' umbrella 
organization -- the Central America Discussion Agreement 
(CADA) -- informed Honduran importers and exporters that 
effective September 1, shippers would raise container 
handling fees by USD 5-15 per container.  According to CADA, 
this price increase is to offset the additional 
administrative costs associated with the new GOH-imposed 
non-intrusive inspection (NII -- gamma-ray scanning) regime. 
The Honduran private sector is livid, and calls this raise 
"the straw that broke the camel's back."  They allege this is 
merely the latest in a series of price-fixing decisions by 
CADA, and they intend to test the waters for launching an 
anti-trust lawsuit in a U.S. court.  What makes this case 
more than the usual private sector maneuvering for position 
is private comments to EconChief by the Minister of Finance 
William Chong Wong that he, too, believes the shippers are 
acting as a cartel and are in fact price gouging. 
 
2. (C) CADA is a group of shipping companies active in 
Honduras that reportedly meets periodically in Coral Springs, 
Florida, to discuss and agree upon prices and fees.  The 
group is composed of leading companies including APL, Crowley 
Liner Services, Dole Ocean Cargo Express, Great White Fleet, 
Maersk Sealand, King Ocean, and Seaboard Marine.  In addition 
to a letter documenting the fee increase for NII, Post also 
has copies of letters documenting a general fee increase for 
container handling, and has been informed by the private 
sector that historically all such price increases are issued 
jointly by the CADA, from their Florida office. 
 
3. (SBU) Econ Chief has discussed this issue over the last 
several days with President of the Honduran Industrialists 
Association (ANDI) Adolfo Facusse, President of the 
Tegucigalpa Chamber of Commerce Amilcar Bulnes, Executive 
Director of the Honduran Private Enterprise Council (COHEP) 
Bejamin Bogran, President of the Cortes Chamber of Commerce 
Oscar Galleano and Executive Director Raul Reina.  All are 
"fed up" with the shippers' behavior, and all alleged at one 
time or another during our discussions that the shippers were 
acting as "a cartel" or were illegally conspiring to set 
prices.  In addition to the letters, which they consider 
prima facie evidence of collusion, the businessmen point out 
that shipping a container from the Gulf Coast of the U.S. to 
Honduras is more expensive than shipping one from Los Angeles 
to Hong Kong.  Even accounting for economies of scale, volume 
discounts and the like, they say, such prices can only be 
explained by price gouging on the part of the shippers. 
 
4. (SBU) Three of these private sector groups -- ANDI, the 
Tegucigalpa Chamber, and COHEP -- have formally requested 
information on whether and how they could file a case in the 
U.S. alleging violation of Taft-Hartley anti-trust laws, 
basing their claim of U.S. jurisdiction on the fact that the 
coordination meetings take place in Florida.  The group 
pointed out that when a similar challenge was filed in Costa 
Rica, CADA dropped its rates there significantly.  Such a 
case has not been filed in Honduras because until August 2005 
no anti-trust legislation existed under which to charge the 
shippers.  That legislation has now been approved by Congress 
but is not expected to enter into force until late 2006, 
leaving a suit in the U.S. as the private sector's only 
recourse. 
 
5. (SBU) No U.S. firm has approached Post directly about this 
matter, but Post notes that there are an estimated 170 
U.S.-owned light industrial manufacturers (maquilas) in 
Honduras that are dependent on containerized sea-freight 
services for both import of production inputs and export of 
finished goods.  Post also notes that approximately 75 
percent of all container traffic that transits Puerto Cortes 
-- Honduras' largest port -- is destined for the U.S.  While 
these allegations have been presented by the Honduran private 
sector, there is clear U.S. economic interest in determining 
if price collusion or cartelization is happening. 
 
The scanning fees issue 
----------------------- 
 
6. (C) In the most recent case, CADA determined that as a 
group it would raise fees passed on to importers for 
gamma-ray scanning to USD 20 across the board.  As Post 
reported previously (ref a), these fees were arduously 
negotiated between the GOH and the private sector, with the 
result that full containers imported for domestic consumption 
would be charged USD 15 for scanning, while full containers 
laden with inputs for re-export (such as fabric for apparel 
assembly operations) would be charged only USD 5.  CADA has 
unilaterally raised that formerly differential fee to a flat 
rate of USD 20, imposing a 35 to 300 percent increase for 
"administrative overhead."  According to Galleano, whose 
Chamber includes a number of shippers as members, this is not 
a real fee, but rather a signal from the shippers that they 
do not want responsibility for administering the fee at all. 
The shippers claim that knowing which kind of import is which 
is too complicated and expensive, and should be the 
responsibility of the national port company, ENP. 
7. (SBU) EconChief spoke with Mohand Merzkani, Senior 
Financial Advisor for Puerto Cortes, who explained that ENP 
could not undertake such a responsibility.  First, he pointed 
out, ENP has relationships with the shippers, not with the 
individual importers.  Second, the shippers must manifest and 
bill for each container anyway, and so are the logical choice 
to undertake the task of billing for scanning as well. 
Third, he said, the administrative burden of being in contact 
with hundreds or thousands of importers would be too much for 
ENP to handle.  Finally, he said, who would the ENP bill in 
the case of empty containers, which must also be scanned and 
paid for, since in that case there is no importer, only the 
shipping company itself. 
 
8. (C) The private sector seems unanimous in its position 
that the shippers should not be given the responsibility for 
billing for the inspection fee.  According to Bulnes, the 
private sector has been through this before, with port 
security fees.  In the case of port security fees, a 
surcharge of USD 40 was to be charged for physical 
infrastructure upgrades to Puerto Cortes.  Following several 
rounds of negotiations between the private sector and the 
GOH, that fee was reduced by the GOH to USD 16 per container, 
and the shippers were given responsibility for collecting it. 
 The shippers immediately added USD 4 to the fee for 
"administrative costs."  That fee is still in place, and 
would be charged in addition to the scanning fee, leading, in 
the case of a maquila importer, to per-container surcharges 
of USD 21 for security and scanning, plus USD 19 in fees for 
"administrative overhead" on the part of the shipping 
company.  The private sector finds this excessive, and 
complains that with every such fee Honduras loses 
competitiveness versus other CAFTA countries. 
 
9. (C) Time is running out, as the fees were set to be 
charged effective September 1, 2005.  On that date, the 
scanning contractor, CAMOSA, was to begin scanning 
operations.  Those operations would be billed to the Ministry 
of Treasury at USD 37 per full container and USD 17 per empty 
container.  The lower costs passed on to the private sector 
reflect GOH subsidies for the fees, based on the cost 
recovery that is expected as a result of improved customs 
collections as scanning reveals under-invoicing and other 
forms of customs evasion.  According to Bogran, those fees 
have been suspended pending resolution of this dispute. 
Shippers, the ENP, and the private sector met in a series of 
discussions August 29-31 to address this problem, but without 
apparent success. 
 
10. (C) Comment:  Post is following this issue with interest, 
and would welcome any insights the Department can provide as 
to the applicability of U.S. anti-trust legislation to the 
instant case and any advice as to Post's role in such a 
process.  End comment. 
 
Williard 
Williard