Scrap PPA container monitoring system, 17 business groups urge Marcos

  • 17 business organizations called on President Ferdinand Marcos, Jr. to immediately scrap the Philippine Ports Authority policy implementing the container registry and monitoring system
  • They said the direct cost from additional insurance, transaction and trucking fees mandated by the system will result in an almost 50% increase in cost of importing goods or an additional annual import cost of at least P35 billion
  • The groups said the system “threatens to cripple the transport and logistics industries and the national economy as a whole”
  • It will worsen inflation, is not a solution to port congestion, and is a “clear usurpation of Customs function”, they noted

Immediately scrap the Philippine Ports Authority (PPA) policy on the container monitoring system, 17 business groups urged President Ferdinand Marcos, Jr. in a letter published on January 24, noting the system will result in an almost 50% hike in the cost of importing goods due to additional fees mandated by the system.

As a result, import cost will also jump by at least P35 billion annually, they said.

The policy “threatens to cripple the transport and logistics industries and the national economy as a whole”, the groups said in their letter.

They noted the “wide consensus among stakeholders that the PPA’s proposed additional container monitoring system, the Trusted Operator Program-Container Registry Monitoring System (TOP-CRMS) and Empty Container Storage Shared Service Facility (ECSSSF) under PPA Administrative Order No. 04-2021 (PPA AO 04-2021), will end up derailing your Administration’s economic recovery efforts.”

The letter was signed by:

  1. Philippine Chamber of Commerce and Industry
  2. Federation of Filipino-Chinese Chamber of Commerce and Industry, Inc.
  3. Philippine Exporters Confederation, Inc.
  4. Supply Chain Management Association of the Philippines
  5. Philippine Association of Meat Processors, Inc.
  6. Philippine Multimodal Transport and Logistics Association, Inc.
  7. Alliance of Concerned Truck Owners and Organizations
  8. Alliance of Container Yard Operators of the Philippines
  9. Association of International Shipping Lines
  10. Association of Off-dock CFS Operators of the Philippines
  11. Customs Brokers Federation of the Philippines
  12. Pasig Port Users United
  13. Philippine Liner Shipping Association
  14. Philippine Ships’ Agents Association
  15. Port Users Confederation of the Philippines, Inc.
  16. Practicing Customs Brokers Association of the Philippines, Inc.;
  17. United Portusers Confederation of the Philippines, Inc.

On the other hand, two big industry organizations — the Confederation of Truckers Association of the Philippines and Chamber of Customs Brokers, Inc. — manifested their support for the system, saying it is the first time the government has stepped in to address the issue on container deposit.

The 17 business groups said the implementation of the TOP-CRMS/ECSSSF has been “consistently and vehemently” opposed by various stakeholders since the first public consultation held on June 15, 2021.

AO 04-2021 prescribes the policy on the registration and monitoring of foreign containers entering and leaving PPA ports. It requires foreign containers to register in the TOP-CRMS and establishes the collection of container insurance in lieu of the controversial container deposit.

CRMS is an electronic system to monitor and track the location of all foreign-owned containers originating from foreign ports, and entering and leaving ports under PPA’s jurisdiction. TOP is a know-your-customer mechanism that aims to help eliminate redundant procedures in container registration and monitoring.

PPA earlier said TOP-CRMS is the solution to the long-standing issue on return of container deposits imposed by foreign shipping lines. It will also help manage return of foreign empty containers.

The groups estimated though that the direct financial cost alone from the additional insurance, transaction, and trucking fees required by TOP-CRMS will result in an almost 50% increase in the cost of importing goods or, in real terms, an additional annual import cost estimated to be at least P35 billion.

“This shocking amount does not even include the other incidental costs arising from the implementation of TOP-CRMS/ECSSSF,” the groups noted.

Under the proposed implementing operational guidelines (IOG) of AO 04-2021, freight forwarders, customs brokers, importers, and consignees should secure container insurance in the amount of P980 plus value-added tax (VAT) per container through TOP-CRMS as a requirement for container discharge. Moreover, all empty containers for re-export are required to be endorsed to a PPA-designated staging facility at least 72 hours prior to departure; this entails a service fee of P3,520 plus VAT per container beyond the first three days.

The groups said PPA’s plan to require the transfer of empty containers to PPA-authorized staging facilities outside the ports will create additional bottlenecks for all containers going in and out of Manila ports, leading to severe congestion in the surrounding areas in Metro Manila, driving up costs for overhead, labor, equipment, and external services.

“All these could significantly increase the program’s actual cost to the economy,” they pointed out.

PPA “fails to consider that the ultimate victim of these additional costs is the ordinary Filipino consumer, who is already bleeding from an inflation rate of 8.1%.”

Moreover, the groups said it is unclear if PPA has considered reaching out to the National Economic and Development Authority (NEDA) to fully understand the impact of PPA AO-04-2021 and TOP-CRMS/ECSSSF, “especially at a time when the country is reeling from the effects of the pandemic, the Russia-Ukraine conflict, fuel price volatility, and global supply chain disruptions.”

PPA general manager Jay Daniel Santiago earlier said AO 04-2021 was approved by the PPA Board, which includes, among others, representatives of NEDA and the Department of Trade and Industry.

The groups also pointed out that TOP-CRMS, as admitted by one of PPA’s officials in an event on January 16, was not designed to address smuggling and that its anti-smuggling objective is “merely incidental” – a “surprising turnaround (that) belies earlier claims that the TOP-CRMS is an effective anti-smuggling tool.”

They pointed out tracking of containers is just one part of curbing smuggling and it is already being implemented by the Bureau of Customs in keeping with its mandate under the Customs Modernization and Tariff Act (CMTA).

Further, the groups said recent digitalization programs launched by BOC “have shown progress as evidenced by the 34.1% increase in its 2022 collections vs. 2021” and has also improved the agency’s capability to detect the more sophisticated forms of customs fraud.

“This is in line with international experience that solving smuggling in its various forms requires a holistic, whole-of-government approach…”

They said the holistic approach considered in the digitalization and modernization strategy adopted by BOC in bringing itself to global standards has received the support of World Bank, which approved a US$88.28 million loan in 2020 for the Philippine Customs Modernization Program.

The groups reiterated that TOP-CRMS is “a clear usurpation of Customs function.”

“Combating smuggling and the monitoring of containers from the time of discharge from the vessel up to loading for export are among the primary responsibilities of the Bureau of Customs, while the PPA’s role under its charter is the development and administration of ports falling within its administrative jurisdiction,” they pointed out.

On TOP-CRMS’ objective of addressing the issue on the return of container deposits, the groups noted this is already among the concerns House Bill No. 04933 aims to address. “PPA should not preempt action being taken by the legislative branch of government and assume upon itself the role of the regulator of international shipping lines, which it is most definitely not.”

They said the matter should be left to the final determination of Congress, which aims to settle issues involving local fees and charges imposed by international shipping lines.

The groups also belied claims that TOP-CRMS is a solution to port congestion, noting this lies instead “in the development of port infrastructure and maximizing the assets that PPA already has and not what it will still acquire, accredit or purchase.”

“The TOP-CRMS/ECSSSF, from what it claims to achieve, is more of a restrictive plan aimed at diverting the growing volume of containers to another location which would keep the problem out of sight of the port and present a false picture of the real situation.”

They said utilizing space at PPA-accredited staging facilities to ease the demand for space inside the terminals is “merely a palliative measure that is destined to fail in the short term” because as the economy expands, the demand for more space will heighten.

The groups also claim that AO 04-2021 does not comply with the basic requirements of the Constitution, laws, and international best practices, and is inconsistent with the requirements of the Philippine Competition Act.

They said the requirement for truckers and other service providers to register under one system, which would then nominate and assign them to individual transactions (i.e., empty reposition), “demolishes the autonomy of shipping lines and truckers to negotiate, manage and monitor their current and prospective vendors.”

The situation “creates a monopoly where multiple service providers are at the mercy of the winning bidder for TOP-CRMS, a serious concern under the Philippine Competition Act [PCA].”

The joint venture of NextIX, Inc. and Shiptek Solutions Corp., the lone bidder for the TOP-CRMS, won the project with a bid price of P877.6 billion.

The groups claimed PPA has not undertaken a competition impact analysis on AO 04-2021 and has therefore failed to comply with the PCA.

Relatedly, they said the port authority held only one public consultation on June 15, 2021 prior to the issuance of AO 04-2021 in September 2021. The consultation was attended by select stakeholders and succeeding consultations already dealt with the proposed IOG.

“Worse, even after supposedly ‘listening’ to the comments, the PPA has continuously disregarded stakeholders’ continuing written objections to TOP-CRMS/ECSSSF without any valid explanation. Likewise, position papers expressing strong opposition to PPA AO 04-2021 have remained unanswered to date, much less in writing.”

The agency’s “failure to analyze the impact of TOPS-CRMS and coordinate with stakeholders could lead to a repeat of the 2014 port congestion fiasco.”

The groups said the “lack of rigorous analysis of policy options and lack of proper coordination with stakeholders” resulted in disastrous port congestion in 2014 with an economic cost of at least P43.8 billion. – Roumina Pablo

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