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PPA order sets formula for cargo-handling tariff adjustment

The Philippine Ports Authority (PPA) is prescribing a standard formula for cargo-handling (CH) tariff adjustment.

Among other provisions, PPA Administrative Order (AO) 02-2018 signed by PPA general manager Atty. Jay Daniel Santiago and effective on March 8, allows the cargo-handling/terminal operator to apply for a CH tariff adjustment if the consumer price index (CPI) has increased by at least 5% within a three-year period.

In determining the adjustment in CH tariff, the new formula to be used is the CPI Adjustment Factor, which is the existing tariff multiplied by the quotient of the new CPI (all items) Philippines over the old CPI (all items) Philippines.

In order to set a uniform base year for future applications of the simplified formula, all affected CH rates will be adjusted based on the CPI as of 2017. Adjustment of CH tariff shall be every three years if requirements are complied with.

To be eligible for adjustment of the cargo-handling tariff, AO 02-2018 Section 5.2 states that a cargo-handling/terminal operator must have fully complied with its contracutal commitments; have no outstanding obligation due to PPA; have fully complied with the CH compliance report; and have complete and timely submission of engineering, operational, and audited financial reports.

All conditions on rate adjustments mentioned in the existing contracts of CH/terminal operators shall be amended by AO 02-2018 sections 5.1 and 5.2.

The CH/terminal operator that applies for adjustment of the CH tariff shall file the petition, supported with basis and justification, with the Port Management Office (PMO). Once the petition is validated, the PMO shall set a public hearing and convene a hearing panel.

The hearing panel shall be composed of technical assistants of members of the PPA Board, which include the National Economic and Development Authority, Department of Transportation, Department of Trade and Industry, Department of Finance, Maritime Industry Authority, Department of Public Works and Highways, Department of Environment and Natural Resources, Office of the Government Corporate Council, and a private sector representative.

AO 02-2018 notes that “no public hearing for CH tariff adjustment shall be conducted without the proper Notice sent by the PMO Secretariat concerned at least 10 calendar days prior to the scheduled hearing.”

The notice shall also be served to all affected sectors, such as the shipper’s council, port users, stakeholders, relevant industry sectors and associations, passenger groups, local government units, nongovernmental units, and other interested parties. The PMO may also invite other affected sectors not mentioned in the AO.

When necessary, participants in the public hearing shall be allowed to submit their position in writing 10 calendar days to the proponent, which in turn shall reply to the position of the participant within three calendar days of receiving the position paper.

The hearing panel shall evaluate the documents submitted and file a report of its recommednations to the PPA Board within seven calendar days.

The approval of the adjustment of CH tariff “is vested with the PPA Board of Directors,” AO 02-2018 notes.

In August last year, PPA conducted a public hearing on its proposal for a simple and standard formula for computing port and cargo-handling rates in a bid to ease and reduce the cost of doing business on the waterfront.

Supervising financial specialist Catherine Esto, in a presentation during the public consultation, said that under the previous formula and methodology for computing rate adjustments for port dues—dockage at berth fees, dockage at anchorage fees, lay-up fees, storage, and wharfage—adjustment recommendations usually took five years to be approved.

PPA’s Port Pricing Review Committee (PRRC) also suggested adopting a uniform and standard formula for rate adjustments based on CPI—a statistical measure of the average retail pricing of goods and services commonly purchased by a particular group of people in a particular area. CPI is computed and provided by the Philippine Statistics Authority. The suggestion to use CPI was approved by stakeholders.

Esto said the use of CPI is recommended by the PPRC because it is simple, is a standard reference data, and needs no validation of numerous financial and operational documents. It is also the most objective, as the applicant won’t have to submit documents to the ports authority as all data will be coming from a third source. – Roumina Pablo

Image courtesy of adamr at FreeDigitalPhotos.net

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