Manila North Harbor operator seeks PPA reversal of ruling on foreign cargo handling

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A portion of Manila North Harbour’s Terminal 1, which is only 45% utilized, will be used for foreign operations. Photo courtesy of Manila North Harbour Port, Inc.
A portion of Manila North Harbour’s Terminal 1, which is only 45% utilized, will be used for foreign operations. Photo courtesy of Manila North Harbour Port, Inc.
A portion of Manila North Harbour’s Terminal 1, which is only 45% utilized, will be used for foreign operations. Photo courtesy of Manila North Harbour Port, Inc.

Manila North Harbour Port, Inc. (MNHPI) is asking the Philippine Ports Authority (PPA) to issue a new ruling allowing the company to handle foreign vessels and cargoes at Manila North Harbor.

Barring this, MNHPI may file charges against PPA officer-in-charge and assistant general manager for operations Raul Santos. The port authority has earlier barred the company from engaging in international trade at Manila North Harbor which, it said, is primarily a domestic port, but which runs contrary to earlier pronouncements of the Bureau of Customs (BOC).

“We hope that the new administration sees the positive effects to the consumers of allowing foreign ships to dock at domestic ports, as is really the intention of the new law,” MNHPI chief executive officer Richard Barclay told PortCalls in an interview, referring to Republic Act (RA) 10668 or the Foreign Ships Co-Loading Act. RA 10668 allows foreign shipping lines to dock at multiple Philippine ports and co-load import and export cargoes cleared by the BOC.

BOC and PPA have issued conflicting orders on whether North Harbor can accept foreign vessels and cargoes. PPA has ruled otherwise while BOC has given MNHPI authority to do so.

READ: BOC orders giving North Harbor authority to handle foreign cargo questioned

Santos on June 21 issued Memorandum Order (MO) No. 08-2016 prohibiting MNHPI from providing terminal services to foreign vessels at Manila North Harbor, citing limitations in the PPA contract granted to the port operator.

READ: PPA bars Manila North Harbour from engaging in international trade

The memo was issued in reaction to BOC’s earlier twin orders allowing MNHPI to handle foreign vessels and cargoes at Manila North Harbor. Customs Memorandum Order (CMO) 11-2016 and CMO 12-2016 effectively allow North Harbor operator MNHPI to service foreign vessels and cargoes, in view of the passage of Foreign Ships Co-Loading Act which took effect on September 15, 2015.

READ: BOC lays out North Port rules for handling foreign cargo

The CMOs were preceded by a December 2015 order by BOC that awarded MNHPI a certificate of authority to operate as an authorized customs facility (ACF). As ACF, MNHPI can handle and store imported goods that are immediately discharged from an arriving airplane, vessel, or other means of international transport.

Barclay contended that the PPA memorandum was addressed to the port manager of National Capital Region North, chief pilot of the Manila Bay Harbor Pilots Partnership, and all shipping lines and agents concerned, but not to MNHPI, the subject–and the one most affected–by the ruling.

On June 23, law firm Diaz Del Rosario & Associates wrote Santos, on behalf of its client MNHPI, asking to “immediately cancel and rescind” MO 08-2016.

In lieu of the memo, it asked Santos to issue a new PPA order allowing MNHPI to render terminal services to foreign vessels and cargoes pursuant to RA 10668, its implementing rules and regulations, and applicable orders of BOC.

“Otherwise, we shall institute appropriate criminal and administrative actions against you and all those responsible, for violation of the Anti-Graft and Corrupt Practices Act with the Office of the Ombudsman, this without prejudice to our client filing the appropriate complaint for damages against you and the PPA for depriving our client of its clear positive right under the law to render international terminal services for the benefit of the government and port users in Manila,” it added.

The law firm said the PPA memorandum “arbitrarily discriminated against and unlawfully excluded MNHPI by prohibiting it from providing terminal services to foreign vessels at the Manila North Harbor, a privilege which should be equally granted to and enjoyed by all port operators with the enactment of Republic Act No. 10668 and its implementing rules and regulations, Joint Administrative Order No. 001-2016, as well as Republic Act No. 10667 (“Philippine Competition Act).”

BOC had said the legal basis for issuing CMOs 11-2016 and 12-2016 was, among others, RA 10668. Sections 4 and 5 of RA 10668 expressly grant the customs commissioner the power to authorize any foreign vessel to take or convey import or export cargoes at any Philippine port that is authorized by a government contract to handle domestic, import, or export cargo, BOC pointed out in one of its memos.

PPA, on the other hand, cited Section 4.02, Article IV of the Contract for the Development, Management, Operations, Maintenance of the Manila North Harbor between PPA and MNHPI, which “expressly provides that MNHPI shall provide and undertake domestic terminal services only at the Manila North Harbor.” MNHPI’s 25-year contract was granted by PPA in 2010.

In the law firm’s letter to Santos, it pointed out that the section mentioned in the contract by the “PPA memo order contains no restrictive word that limits the services of MNHPI only to domestic terminal services.”

“Section 4.02 of the Concession Contract which [Santos] referred to only provides that ‘the Contractor (MNHPI) shall provide and undertake domestic terminal services in Manila Harbor’,” it said, adding that the word “only” in the PPA memorandum order “does not appear in the contract provision itself.”

It noted that the alleged contract limitation “does not actually exist” and that although the contract expressly mentions that MNHPI will be operating domestic terminal services, “there is no explicit or implicit prohibition in the concession contract which bars MNHPI from handling foreign vessels and cargoes, moreso at present in the light of RA 10668 and its IRR.”

The law firm added that the PPA memorandum did not consider Section 11.01 of the concession contract, which states that “all existing laws, rules and regulations that are now or may hereafter be promulgated by the government” “shall be read into and made an integral part of this contract.”

Thus, it said, the alleged prohibition in the PPA memorandum “is not only contrary to the provisions of RA 10668” and its IRR, but is “also against the concession contract between PPA and MNHPI,” which deems that law and rules and regulations hereafter promulgated should be “made an integral part” of the contract; and by the subsequent enactment of the laws, the contract is deemed amended/supplemented.

While awaiting final decision from the incoming leadership of PPA, Barclay said they hope North Harbor can start accepting foreign vessels and cargoes by the third quarter of this year.

“We are looking initially at two to three vessels a week,” Barclay pointed out, adding that the current draft in North Harbor is -10 meters.

He said that portion of Terminal 1, which is only 45% utilized, will be used for foreign operations. He noted that some foreign carriers have already signified firm interest in calling North Harbor “but PPA is stopping them.”

Barclay said North Harbor is compliant with all requirements under CMO 30-2015, which provides the guidelines and requirements for operating an ACF. “Customs is satisfied we can do it,” Barclay remarked. He added that he has assured domestic carriers that their operations will not be affected once MNHPI starts catering to foreign vessels.

Once North Harbor is allowed to handle foreign shipments, Barclay said the facility will impose tariff similarly used by other international port operators.

MNHPI has written a letter to PPA saying it obligates itself to remit 20% of its gross income from cargo-handling tariff to PPA once it takes on foreign cargoes. – Roumina Pablo