Shipping lines call PPA proposed Tier 2 port rates “insensitive”

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  • Philippine Liner Shipping Association members described as “insensitive” the Philippine Ports Authority’s proposed base rates for Tier 2 ports
  • The ports will be bid out under the agency’s new terminal management policy
  • They say the proposed Tier 2 rates are the same as Tier 3 rates being enforced without taking into consideration position papers submitted by oppositors

The Philippine Liner Shipping Association (PLSA) strongly opposed implementation of the Philippine Ports Authority’s proposed base rates for Tier 2 ports to be bid out under its new terminal management policy.

Given headwinds created by the COVID-19 pandemic and exacerbated by the Russian-Ukraine conflict, “subjecting the economy to yet another round of increases …to be borne by port stakeholders, cargo owners, shippers and shipping lines, is insensitive and with no fiscal support makes government impervious to the general public and to the consumers’ woes”, PLSA said in a position paper dated March 15.

In separate public hearings on March 11 and 14, PPA proposed tariff to be used by cargo-handling and terminal operators that will win Tier 2 port contracts under PPA’s Port Terminal Management Regulatory Framework (PTMRF).

READ: PPA proposes cargo-handling rates for Tier 2 ports

Under the proposal, the tariff for domestic cargoes at Tier 2 ports will be the same as the tariff for Tier 3 ports “for uniformity as Tier 2 and Tier 3 mostly handle domestic cargoes.”

For foreign cargoes, PPA is proposing that the tariff be based on the current Cebu Port Authority foreign tariff plus an additional 10%.

PLSA said it is against the proposed Tier 2 rates as they are the same as Tier 3 ports’ rates, which “continue to be implemented despite the submission of position papers then opposing the same, despite vehement and unceasing dissent from shippers, local Chambers of Commerce, shipping lines, among others.”

PLSA claimed the then proposed Tier 3 rates in 2019 “were hastily subjected to public bidding and winning bidders markedly dominated and won between two select companies.”

READ: PPA uniform rules on port tariff out

Several industry organizations have asked for suspension of Tier 3 rates under PPA Administrative Order No. 10-2019 pending thorough consultation with stakeholders, as they claim the new rates are very much higher than previous rates.

READ: NEDA regional council backs suspension of new port tariffs in Visayas

“We fear that cargo-handling rates at Tier 2 ports, having the same and equal CH rates currently implemented at Tier 3 ports, subject of public consultations held March 11 and 14, 2022, may be a ‘farce’,” PLSA stated.

The group said that during both public hearings on March 11 and 14, “PPA did not present any formula to show how the tariff rates were computed” for Tier 2 ports.

“As such, it is difficult to determine the reasonableness and the basis for the proposed uniform rates,” PLSA pointed out.

It said during the hearings, PPA explained that Tier 2 domestic cargo-handling rates were “copied” from existing cargo rates of Cagayan De Oro – the highest in the country – while foreign rates are based on existing cargo-handling rates for foreign cargoes at Cebu port plus an additional 10%, of which 7% covers inflation and 3% extraordinary situations such as the pandemic.

“Otherwise, there was no sufficient explanation, no feasibility study to validate why CH rates at said ports were used as bases,” PLSA stated.

Moreover, PPA did not provide explanation on how the increase in existing rates at Tier 2 ports Iloilo and Davao vis-à-vis the proposed tariff will be supported by the provision of infrastructure, deployment of equipment and necessary gear to justify such increases, PLSA said.

The association said PPA did not disclose other relevant information during the public hearings, such as key performance indicators, economic market projections, and technical and equipment deployment scheduling, among others.

“In the spirit of transparency, PPA should have provided such information to PISA [Philippine Inter-island Shipping Association]-PLSA whose members are among the major port stakeholders, noting the astronomical increases resulting from the proposed CH rates which will be borne by both shipping lines and cargo owners/shippers/consignees,” PLSA said.

Similar to the public hearing for Tier 3 ports tariff, PLSA said PPA did not present any guidelines on how cargo-handling rates at Tier 2 ports will be implemented.

PLSA noted that in its position paper for Tier 3 ports tariff submitted on September 9, 2019, it opposed the use of the term stevedoring, which bundled arrastre and stevedoring.

The group explained: “Such term sowed confusion among [shipping lines] and cargo owners, noting that stevedoring has always been a vessel-related charge thus paid for by the SLs (shipping lines). Upon the release of the guidelines, it was provided that SLs were mandated to collect all ‘stevedoring’ fees, ensure proper ‘accounting’ and remit the same to the Terminal Operator.

“We are constrained to strongly oppose this again as SLs should not be made a collecting agent for the payment of stevedoring rates nor take out from the cargo owners/shippers the option to directly pay for CH fees due them.”

Further, PLSA said PPA did not present a regulatory impact assessment to show the impact of such increases on port stakeholders, in particular, and on consumers in general, as required by Republic Act No. 11032 or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018.

PLSA noted “any and all increases attendant to any PPA-mandated increase, including costs for repositioning empty containers of shipping lines, costs due to the imbalance in trade volume southbound vis-à-vis northbound, costs in delays owing to port congestion and vessel queues due to the inefficient implementation of port development – dreaded to most likely happen at the bidding for Iloilo ports – and as such shipping lines will be constrained to pass on all increases to its clients, customers, cargo owners, consignees, forwarders and shippers.”

PLSA also shared its position on the conduct of biddings under PTMRF, pointing out that “biddings should be made more transparent, observers invited at the least, shall include concerned stakeholders with technical knowledge of port operations.”

It added that the award of contract should not be based on the highest concession fee only among the bidders but rather on the bid most responsive to requirements of port infrastructure and minimum cargo-handling rate to be charged to port users, effectively balancing cost, quality of service and efficiency.

The proposed tariff for Tier 2 ports is still subject to the evaluation by the PPA Board technical working group and for approval of the PPA Board.

PPA in 2020 started bidding out Tier 3 ports under its PTMRF, which 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. – Roumina Pablo