Eilat Port enjoys monopoly on Far East car imports

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Eilat Port, which has begun privatization proceedings, receives most of its revenue from importing cars manufactured in the Far East.

Eilat Port's main source of income is based on a problematic government order whose legality is questionable. The order gives Eilat Port exclusive import rights on cars produced in the Far East, and prevents other ports from competing with it. This is a case of a bizarre government intervention in the free market that is contrary to stated government policy, which advocates competition between the ports.

Doubtful if it would withstand the High Court

Eilat Port Company, which has begun privatization proceedings, receives most of its revenue from importing cars manufactured in the Far East. For example, Israel imported 123,000 vehicles through Eilat Port in 2010. Importing vehicles through Eilat Port incurs lower sea transport costs, but requires the importers to pay land transport costs from Eilat to the central warehouses along the Mediterranean Coast.

"Globes" has learned that in the 1990s, the Ministry of Transport issued an order requiring importers to import cars through Eilat Port as a condition for receiving an import license. The order applies to all cars manufactured in Japan, Korea, China and all other Far East countries. Government officials admitted to "Globes" that "It is unlikely that the order would withstand a High Court decision." However, these same officials said that until today, no car importer has attacked the order and appealed to a court. They say that the reason for this is that it is clearly more profitable to import from Eilat Port.

Importing from Ashdod or Haifa Ports lengthens the ship's journey and requires the importer to pay a toll of $150 per car for passing through the Suez Canal. Sales tax is also higher since it is applied at a fixed rate on shipping costs. Land transport is relatively cheaper: NIS 200 per car.

However, automotive industry officials claim that car importers fear going to court against the state. They are also surprised: "If the free market in any case prefers Eilat Port, why is government intervention necessary?"

Ashdod and Haifa Ports looked into the possibility of entering the market and were even willing to split the Suez Canal toll with the importers. The cancellation of Eilat Port's exclusivity could especially help Haifa Port, since it does not currently control a significant part of this market share.

The Ministry of Transport said that there has been no government policy instruction given to the import authorities at the Ministry of Industry, Trade and Labor.

Published by Globes [online], Israel business news - www.globes-online.com - on July 13, 2011