JAPANESE SHIPOWNERS’ ASSOCIATION
Kaiun Building, 2-6-4, Hirakawa-cho
Chiyoda-ku,Tokyo 102-8603, Japan
Tel : +81-3-3264-7180
Fax : +81-3-5226-9166
E-mail: int@jsanet.or.jp

6 July 2012, Tokyo
Mr Alberto Alemán Zubieta
Administrator/CEO
Panama Canal Authority of the Republic of Panama
Dear Mr Alemán
Re: JSA’s further comments on the revised tolls proposal dated on June 27, 2012
The Japanese Shipowners’ Association (JSA), which is a nationwide shipowners’ associationconsisting of 100 Japanese shipping companies, hereby submits its further comments to thePanama Canal Authority (ACP) with regard to the revised tolls proposal published on 27
June 2012 (hereinafter referred to as “the revised proposal”) that defers the implementation
date of new Canal tolls to October 2012 and October 2013.
While appreciating establishment of an additional consultation period to 12 July 2012 forfurther comments in response to the proposed deferment, the JSA is deeply disappointed at
the revised proposal itself as it regrettably does not respond at all to our requests made in
our previous submission on 17 May 2012, in which we urged the ACP to (1) withdraw its
proposal for toll increases in 2012 and 2013; (2) review the current consultation process infavour of a true consultative dialogue to discuss toll adjustment guidelines that are stable,reasonable and transparent over an agreed longer period of time; and (3) place the pricing
policy under ”Proposals for the Expansion of the Panama Canal”, issued by the ACP in April,2006 (hereinafter referred to as the “2006 Proposals”) back onto the table for further
consideration.
The JSA wishes to take this opportunity to reiterate how shipping companies have been
beset with operating losses exceeding US$ 6 billion1 incurred in 2011 in an adverse
environment in which, for instance, bunker prices remain high and the global economy isfacing an intensifying headwind due to delayed US economic recovery, protracted fiscal andfinancial problems in Europe, and monetary tightening in China.

1Furthermore, theALPHALINER Weekly newsletter Volume 2012 Issue 15
JSA further comments final

continued strong yen against the US dollar, partially due to sovereign risks, imposes furthersevere burdens on Japanese carriers.
Under such circumstances, you told us, in effect, at the JSA/ACP meeting in Tokyo in June2012 that the ACP had not implemented toll increases at the rate of 3.5% per year until now.
However, we need to clarify the fact that, as shown in Figure 1, for Containers, the toll
increased by as much as 63.6% for 5 years from 2006, in other words 10.4% increase peryear.

Likewise, for Tanker 8.6%, for Dry Bulker and Car Carrier 7.9% respectively.

Obviously the increases are much higher than the 3.5% annual toll increases planned in2006, irrespective of the fact that we never accepted the original plan either.

Constant toll

increases resulted in the growth of transit revenues in 2011 to US$ 1961 million* by 146% in
only 5 years from 2006, such revenues excluding effects of PCUMS growth (see Figure 2).
Figure 1

Figure 2
Actual Growth of PCUMS, Canal Revenue during corresponding period
PCUMS Tons

2005

2006

2007

2008

2009

2010

2011

2012

2013

279

296

312

309

299

301

322

-

-

Growth

94

100

105

104

101

102

109-

-

Transit Revenue

1,117

1,344

1,538

1,745

1,817

1,758

2,131--

Growth

83

100

114

130

135

131

159--Net Income484

676

807

1,028

1,007

964

1,229--Growth72100

119

152

149

143182--Growth @ 3.5% p.a. 97

100

104

107

111

115

119

123

127

Unit; Million tons,Million US$Growth; 2006=100*US$ 1344 million × 1.458 (transit revenue growth in 2011/ PCUMS Ton growth in 2011) = US$1961 million
Source of Figure 1 and 2: ACP HP, Annual Report

Taking the case of JSA member companies as just an example, the potential impact of theproposed toll increases in 2012 and 2013 alone could be additional accumulative costs
reaching approximately US$76 million during the period from 2012 to 2025, subject to sameships types, sizes & the number of transits during the period (see Figure 3).

This number,

US$76 million, will no doubt be resulted in much higher number, in other words, extra
financial burdens on Japanese carriers, due to increased transits after the expansion work is
JSA further comments final

completed.

Figure 3

Source: Japanese Shipowners’ Association

While JSA duly recognises that the Panama Canal is the most important national asset ofPanama, we are afraid that ACP does not seem to take into consideration the essential rolethat the Canal plays in maintaining and fostering smooth global trade, and that suchrepeated and excessive toll increases adversely impact both the shipping industry and its
end users.

We will appreciate your fully evaluating necessity of stability of tolls to maintainand further increase cargo passage through Panama Canal for the mutual benefit of allconcerned parties global-wide.
With the strong prospect of healthy increase of PCUMS, we are of the view that theconstruction costs for the Canal expansion could be fully recovered using current Panama
canal toll from the increased revenues within several years after the expansion work iscompleted.

It can therefore be said that the current ACP pricing policy to constantly

increase tolls would unduly impose excessive burdens on Canal users, especially Asianshipowners, and would not be understood by shippers either.
Finally, the JSA would like to again urge the ACP to rescind the revised proposal
immediately and to hold a consultative dialogue with maritime representatives for considered
prior discussion on your draft long-term pricing guidelines with the aim of making them stable,reasonable and transparent.

Under the guidelines, we also request you to have sufficientdialogue with a broad range of Canal users, including shippers, before every formal proposal
involving toll structure changes and/or increases on any occasion.

In this regard, additional
JSA further comments final

consultations with Asian representatives other than through current channels would also behighly appreciated.
We sincerely believe that such mutual and constructive consultations could establish a
win-win relationship between the Panama Canal Authority and Canal users, resulting in anenhanced prestige for the Republic of Panama throughout the world.

In response to yourrequest regarding consultation in respect of the Canal’s operation at several meetings withthe maritime industry, we are ready to contribute with pleasure to action for enhancing amore efficient operation of the Canal through closer dialogue, which could lead to increasing
the number of transiting vessels and consequently stabilise Canal tolls.
Mr Alemán, we would appreciate your sincere response in writing to our above requests.

Yours sincerelyAkimitsu AshidaPresident
The Japanese Shipowners’ AssociationCC: His Excellency Jorge Kosmas Sifaki, Ambassador of the Republic of Panama to Japan

JSA further comments final