DROGHERS ACT - HOW OUTMODED LEGISLATION STIFLING EFFECTIVE TRADE & INVESTMENT
As a twin island state, movement of cargo by sea between ports within each island and between both islands should be a no-brainer. Instead, the process can be so inefficient and burdensome that international carriers opt to call at only one port, and cargo that can effectively be moved by sea instead has to be moved by road and by heavily subsidized ferry; in the case of Tobago. The single piece of legislation responsible for this is the Droghers Act.
The Droghers Act was first passed into law in 1914 and has since been amended twice; in 1921 and in 1964. On a basic level, the Act was designed to regulate the movement of vessels coastwise, as a means of regulating trade within ports in Trinidad & Tobago. This piece of legislation is also mirrored in the Customs Act as “Coastwise Trading”. As far as facilitating regulation goes, the Droghers – as it is more commonly known, has long outlived its usefulness, and now acts only as an obstacle and a deterrent to efficient transporting of cargo between Ports within Trinidad and Tobago, and even between Trinidad and Tobago; which are treated as two separate states under this Act.
Genesis of the Droghers
From an historical perspective, at the time that the Droghers Act was first passed, Trinidad & Tobago, like many of its neighbours, was a British colony. The British, in an attempt to control their borders – specifically from an influx of foreign goods from Venezuela at the time, designed legislation that prevented Spanish cigarettes and alcohol from finding their way into the colonies and into what the British considered their territory. They achieved this by ensuring that any vessel in Trinidad moving by sea from one port to another was required to be registered as a drogher. The Act was therefore meant to regulate, control and at the same time derive some revenues from any such movement along ports on its coast.
To be fair, somewhat similar “protectionist” legislation exists in other countries even today. In the United States, the Merchant Marine Act of 1920, also known as the Jones Act, is a United States federal statute that provides for the promotion and maintenance of the American merchant marine. Among other purposes, the law regulates maritime commerce in U.S. waters and between U.S. ports, and requires that all goods transported by water between U.S. ports be carried on U.S.-flagged ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents. This law would ensure, for example, that any Japanese fishing vessel fishing just outside US territorial waters would be restricted in plying its trade at ports along the US coast.
The major distinction between the Jones Act and the Droghers Act however is utility and applicability. Even the name Droghers is indicative of the datedness of this legislation.
A Drogher is defined as “A small craft used in the West India Islands to take off sugars, rum,
etc., to the merchantmen; also, a vessel for transporting lumber, cotton, etc., coastwise”.
Operating the Droghers in the 21st Century
Even if the Droghers Act as it stands was relevant today, the administration of it would now be done in a vastly different world from the world that existed then. At the moment, a vessel that is licensed to move coastwise, in addition to getting the Droghers Certificate, also acquires a Droghers Book. Everytime such a vessel enters a port to work, the Book on board has to be taken ashore to the Customs & Excise area on the port for a stamp. The same process has to be repeated when the vessel leaves the port and the entire process in repeated on entering another port.
In practical terms, if a vessel arrives at a “finger” berth, the seaman with the Book can simply hop off the vessel and proceed to Customs. However, on many occasions if the berth does not allow this or if the vessel is conducting its business at the anchorage or is even if she is waiting at the anchorage before business can be conducted, the vessel has no choice but to hire a launch to take the seaman from the vessel to the shore and vice versa. The cost of such a hire stands at a whopping US$250 one way. This means that the average cost to a vessel, just to transport the seaman to and from the port is a whopping US$500 to enter the port and another US$500 to leave the port. Customs will not even allow the Book to travel on land with greatly reduced cost, but insist that it is done like it has always been done. Now bear in mind this cost is imposed just to administer the Droghers Book and is not revenue to the Government but rather
a third party intermediary.
Persons in the sector have been trying without success to effect change in the Droghers Act for decades! More often than not, recommendations to try new things require extensive lobbying with no results at the end of the day. Of course, this old Act that could quite easily be taken off the books since the whole philosophy of trade with Trinidad has changed so drastically and/or has been replaced with some modern version. Given the slow pace involved in legislative changes in this country, an alternative could be a change to at a minimum, improve the administrative process. Guyana for example, had such an Act, possible since their location presented the same problems with the Spanish Main. However, they have taken it off the books decades ago! For simplicity, if the powers that be could amend the process so that this physical Droghers stamp can simply be an electronic approval, this expensive taxi fare could be avoided, and the process immediately rendered more efficient. The actual cost of the stamp to
a customer with a 7625 DWT vessel is less than TT $50.00 for each stamp. It seems barely worth the effort. Customs of course will gain about TT $225 on the same transaction! The entity bearing the cost of this is the international vessel doing business here. This cost is just one of the unnecessary costs to be borne by an organisation that wants to set up business here and needs to navigate coastwise.
If one were to examine the case say of a bunker operator in Trinidad. This cost has to be passed on the vessels seeking to bunker here. This additional cost may only succeed in making the cost of bunkers uncompetitive in the region, and has the effect of pushing the customer to another less expensive port. The cost of bunkers (fuel) is the single largest recurring cost on
any vessel, and buyers are very good at finding ports with the least expensive cost for fuel.
The Government has commissioned yet another team to look into the Maritime Sector with a view to improving its competitiveness and growing the sector. The maritime community is waiting with bated breath for the impact of the Committee, and while the announcement was made nearly a year ago, no one seems to know who the principals are, and what their plan is to achieve what is broadly termed growth and development goals, and what progress has been made so far. Nevertheless, given that our Maritime sector is largely a service oriented one – with a significant export oriented component, we recommend that legislative reform be given high and urgent priority. The importance of trade facilitating legislation and regulation cannot be overstated. A trade facilitating environment is essential for attracting foreign investment.
This simplified evaluation examined the impact of one piece of legislation. A follow-up article in this series will comprehensively evaluate how disparate legislation, regulation, and institutions are stymieing investment in the maritime industry.