PPA issues tariff for Tier 2 ports

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PPA issues tariff for Tier 2 ports
Tariff for Tier 2 ports is patterned after those for Tier 3 ports. Photo of Zamboanga port, a Tier 3 port, courtesy of the Philippine Ports Authority.
  • The Philippine Ports Authority issued the tariff for Tier 2 ports
  • PPA Administrative Order No. 02-2023 provides the base rates to be adopted by cargo-handlers and terminal operators for ports categorized as Tier 2 under PPA’s Port Terminal Management Regulatory Framework
  • The tariff follows closely those for Tier 3 ports, which are based on Cagayan de Oro port rates, the highest among PPA rates
  • AO 02-2023 takes effect on June 1

The Philippine Ports Authority (PPA) has issued the tariff for Tier 2 ports.

PPA Administrative Order (AO) No. 02-2023 dated May 9 provides the base rates to be adopted by cargo-handlers and terminal operators for ports categorized as Tier 2 under PPA’s Port Terminal Management Regulatory Framework (PTMRF).

Embodied under PPA Administrative Order (AO) No. 03-2016, PTMRF outlines guidelines for awarding terminal management contracts and prescribes categorizing investments into six tiers to make it easier to determine the investment arrangements of a port. The framework aims to promote private sector participation in port operations in order to provide higher quality service.

AO 02-2023 takes effect on June 1. The order covers rates for, but not limited to, the following:

  • cargo-handling charges
  • stevedoring fee
  • bagging rates
  • line handling rates
  • other cargo-handling related charges
  • roll-on/roll-off terminal fee
  • passenger terminal fee
  • porterage rate
  • waste reception fee

Terminal operators/cargo-handling operators with existing development, management and operation contract and cargo-handling service contract should use the existing cargo-handling tariff as indicated in their respective contracts.

The tariff for domestic cargoes under Tier 2 ports are similar to the existing Tier 3 tariff, which is based on Cagayan de Oro port’s rates, which are the highest among PPA ports. The rates, embodied under AO 10-2019, are already being implemented in several Tier 3 ports.

Several industry organizations have requested for suspension of AO 10-2019 pending a thorough consultation with stakeholders as they claim the new rates are so much higher than previous rates. PPA general manager Jay Santiago, however, claimed the impact of Tier 3 rates is minimal compared to other logistics costs.

RELATED READ: Tier 3 port tariff stays, says PPA

For foreign cargoes, the rates were based on the current Cebu Port Authority foreign tariff plus an additional 10%.

During the March 2022 public hearing, then PPA Commercial Services Department acting manager Leila Martinez explained that of the additional 10%, 7% represents the consumer price index (CPI) all items adjustment factor from 2019 to 2021, while the 3% is for unforeseen events that may affect the cost of investment such as the pandemic or the Russia-Ukraine war.

Martinez said Cebu port is the closest international port to Iloilo and Davao, which are Tier 2 ports, and “therefore the rates should be competitive with [those] ports.”

In explaining why the proposed rates for foreign cargoes are 10% higher than Cebu port’s existing rates, Martinez noted that imports to Iloilo are usually discharged from the port origin to Manila or Cebu, then transferred to a domestic terminal, before being shipped to Iloilo.

“With Iloilo and Davao opening up to international cargo, a big chunk of the costs are removed,” she said, adding that the cost of shipping directly to Iloilo or Davao “is actually much lower despite the slightly higher vessel-related cargo handling charges.”

Moreover, Martinez said a competitive tariff is needed to attract investments and have the necessary equipment in Tier 2 ports as they require massive capital outlay spread in a 20-year concession.

Under AO 02-2023, adjustment of cargo-handling tariff of ports under the Tier 2 will be every three years, provided that the financial and operational obligations of PPA AO 03-2016 were complied with and the key performance indicators indicated in the contract were attained.

In adjusting the cargo-handling rates under AO 02-2023, the formula to be used is the CPI adjustment factor. For other tariff items, adjustment will be based on the formula as approved by PPA.

PPA since 2020 has been bidding out port terminal management contracts under its PTMRF. Currently, 19 ports have been bid out. Of these, one port is considered Tier 2 –Davao-Sasa port the contract of was  won by Globalport Davao Terminal Inc. last year — while 18 ports are under Tier 3: Puerto Princesa, Ormoc, Tabaco, Legazpi, Zamboanga, Iligan, Ozamiz, Calapan, Tacloban, Nasipit, Matnog, Fort San Pedro, Pulupandan, Surigao, Masao, Tagbilaran, Pagadian, and Pasig River.

PPA’s Santiago earlier said they hope to bid out within the year the port terminal management contracts for the ports of Iloilo and General Santos, which will be under Tier 2.

Under Tier 2 ports, the winning contractor will be responsible for the physical landside infrastructure, above ground fixtures and semi-fixtures, and mobile-handling equipment, while PPA is responsible for physical undersea infrastructure. The concession period for Tier 2 port terminal management contracts is 20 years.