National Port Advisory Council

Minutes of the Regular Meeting NPAC No. 01-2007

PPA Board Room, South Harbor, Port Area, Manila

20 March 2007, 2:00PM

I.       Attendance

II.    Call to Order

2.1   The NPAC Chairman called the meeting to order at 2:15 PM. He informed the members of the issuance on PPA Administrative Order No. 04-2006 which presently governs the creation and operation of the NPAC. Briefly, the Chair cited the reasons why the Council became inactive, e.g. inter-locking representation, difficulty in mustering quorum and limitation of term of representatives which prompted the review of NPAC membership and the issuance of the new Administrative Order.

2.2   Chair Sevilla stated that, under AO 04-2006, membership in the NPAC was limited to sectors specifically mentioned in the PPA Charter. He announced, however, that MARINA and DOTC have been included as members since this is in the best interest of the Council.

3.  Presentation of PPA AO 04-2006 “Revised Guidelines on the Operation of the National Port Advisory Council”

3.1             NPAC Secretary Amelia Aquino made a brief presentation on AO 04-2006 with emphasis on its salient features as follows:

§         Membership was reduced from thirty-three (33) to thirteen (13) groups from both the government and private sector.

§         The position of the Council Vice-Chair was removed. The designated Acting PPA General Manager / Officer-in-Charge shall automatically assume the NPAC Chairmanship when the PPA General Manager is not available.

§         The Committee on Port Operations and Committee on Port Tariff were merged into a single Committee on Port Operations & Tariff.

§         PPA retains the Chairmanship for the Committee on Port Operations & Tariff and for the Committee on Port Development, as well as the seat for the Vice-Chairmanship for the Committee on Port Labor Relations and Committee on Port Community Welfare.

§         Procedures for the participation of non-members were provided. Elevation of issues from non-members to the Council may be coursed through either the Port Management Advisory Council (PMAC) or to any of the sponsoring NPAC members.

§         The Term of Office of members’ representatives is no longer fixed at one year.  For members from the government panel, representatives shall be appointed by and may be removed/replaced by their respective agency heads. In the case of members from the private sector, their representatives shall be designated by their respective umbrella organizations and shall be confirmed by the NPAC Chair.  They may be removed by a simple majority vote of members for violation of NPAC rules or through the designation of their replacement by their umbrella organizations.

3.2             She also reported that except for the CACP (Consumer’s Group), PSB and BOC, all members have formally communicated their choices of Committee in which they will be participating. BOC, for its part, has signified its intention to participate in the Committee on Port Development only through a telephone call.

3.3             The pending/unresolved issues under the old NPAC were, likewise, enumerated for the consideration of the reconstituted Council. These are as follows:

4.     Validation of World Bank Report On Terminal Handling Cost in ASEAN Region

4.1.          Chairperson Sevilla stated that the World Bank Report on Terminal Handling Cost (Agenda Item B) is interrelated with Agenda Items C & D which are “Unbundling of Shipping Cost” and “Charges imposed by AISL”, respectively.

4.2.          As a backgrounder, he shared to the Body that in several Cabinet Meetings he attended in the past where the President’s Directive on finding ways and means to lower transport cost was discussed, there had been an immediate impression that PPA is charging unreasonable rates such that a conclusion is arrived at that port charges in the Philippines is high.

4.3.          He further shared his experience in several meetings with NEDA and of the PPA Board where Sec. Romulo L. Neri  mentioned the World Bank Report and the statement in that report that port charges in the Philippines are highest in the Region. Because of this, the Chair suggested during the most recent PPA Board Meeting that there should be proper clarification when referring to “port charges”, since all charges occur at the port, and there must a clear distinction between charges that go to PPA and those that go to other entities at the port.

4.4.          For transparency and fairness, the Chair exhorted the NPAC to determine (a) the particular entity which imposes charges, (b) how much is charged, and (c) how the rates or amounts compare with what PPA is charging. He emphasized that there are port-related and non-port-related charges but when these are reported by the media the distinction disappears and all are referred to as PPA charges alone.

4.5.          The Chair invited the Body to validate the World Bank Report and in the process come up with means to reduce transport cost as directed by the President to help in further improving the  economy.

4.6.          At this point, Ms. Emma Susara delivered a presentation on the World Bank Report on Terminal Handling Cost together with the PPA analysis on the figures contained therein. Details of the charges imposed by AISL and other entities were also presented. Significant points of the presentation are as follows:

On World Bank Report

§         The World Bank Report claimed that the cost to export  a 20-footer container is $1,336 in the Philippines as compared to $ 848 in Thailand, $335 in China and $ 382 in Singapore.

§         The breakdown of the $1,336 transport cost in the Philippines, as cited by ADB covers four areas, namely (a) Documentation, (b) Inland Transportation, (c) Customs Clearance and Technical Control, and (d) Ports and Terminal Handling.

§         Ports and Terminal Handling, which entails the biggest chunk at $994 of the $1,336, includes domestic transshipment ($500), cargo handling/arrastre ($175), terminal handling charge ($45) and port charges ($274).

PPA Analysis: Breakdown of Port Related Transport Costs, WB Report

§         Port-related costs are those paid to PPA (wharfage) and those paid to the terminal operator (container handling).

§         For export cargoes a 20-footer container from the Philippines will entail   wharfage and container handling charges amounting to $5.19 (PhP 259.70) and $46.02 (PhP 2,301.00) only at exit port. For imports, wharfage and container handling charges would amount to $10.19 (PhP519.35) and $56.36 (PhP2,818.00) only at entry port.

§         Combined port-related export costs (wharfage and container handling) represent a measly 3.83 percent of the total $1,336 WB figure or merely 5.15 percent of the $994 Ports & Terminal Handling component-charges. For imports, however, the cost is a bit higher but still low as it represents only 5.00 percent of the total WB figure and 6.71 percent of the Ports & Terminal Handling component-charges.

PPA Analysis: Port Related Charges vs. Non-Port Related Charges 

§         Non-port related charges are those neither imposed nor regulated by PPA. They vary depending on the quotations of logistics companies.

§         In one analysis, port-related charges are shown to amount to only $66.75 (P3,337.35) and $51.21 (P2,560.70), for import and export respectively for a  20-footer container cargo while non-port related reaches as much as $423.32 (P21,166.50) for imports and $260.60 (P13,030.00) for exports.

§         This analysis discloses that bulk of the “Port and Handling Terminal Costs” cannot be attributed to the charges that the PPA and Terminal Operators impose. Other iterations/examples presented pointed to the same results.

§         Particular reference was made to those miscellaneous shipping charges which AISL and its members impose, among which are Terminal Handling Charge (THC), Bank guarantee fee, Documentation Fee, Detention Charge, Container Deposit, Washing and Insurance.

4.7.          In concluding, the Chair declared (a) that the charges attributable to PPA do not even exceed five percent (5%) of the total transport cost reported by the World Bank, and (b) that most of the items listed under “port charges” are actually non-port charges and refer to those being collected by shipping lines, terminal operators and transport component in the delivery of cargoes to and from the country. The Chair strongly stated that the analysis/presentation of PPA rebuts the World Bank Report.

4.8.          CSD Manager Susara was instructed by the Chair to provide all members of the Council with a copy each of the presentation to serve as their reference in the discussion of the issue on transport cost reduction in other fora.  In the latter part of the discussion, she was further advised by the Chair to identify the sectors that are actually collecting the components of the non-port related charges.

5.  Measures to Reduce Transport Cost

5.1             The Chair, in soliciting comment from AISL on how international shipping lines can contribute in the President’s Directive to reduce transport cost, cited some areas which should be looked into, such as container deposits, insurance, extension of demurrage period and terminal handling charge.

5.2             Atty. Cruz (AISL), in replying, expressed their need to revalidate the figures released by World Bank mentioning the comprehensive explanation given by ICTSI on why the WB figures are misleading.  He also gave his comments on each cost item being questioned. In relation to this discussion, the GM offered to furnish NPAC with a copy of the Aboitiz study on a related subject.

5.3             Mr. Q. Tan (PISA) also raised question on the correctness of the auxiliary charges appearing in the World Bank Report and cited that the domestic shipping lines impose only half of the reported charge.

5.4             Various measures/recommendations were offered such as conduct of a detailed study with line item comparison of rates by country in the region before resorting to regulatory process (Mr. Carlos, PCCI), inclusion of all legitimate charges in the Bill of Lading (Ms. Lopez, PUC), conduct of public hearing when setting charges (Mr. Colona, PUC), institution of government regulatory body that should oversee the sea freight industry (Mrs. Saludo, PPA-BOD), etc.

 5.5             After a lengthy discussion on the charges being collected by international shipping lines, the Body finally agreed on the following: 

·         That AISL and its members shall be encouraged to review the terminal handling charge and other charges perceived to be extraneous with the end in view of eliminating and/or reducing them.   This shall be formalized in the form of a Resolution and a copy of this shall be submitted to the respective Board of AISL and PPA.

·         That, pursuant to a standing AISL policy, container deposit shall not be imposed from qualified shippers provided that they have no outstanding account with AISL or any of its members.

5.6             Other concerns of exporters were raised as regard the basis for entitlement to the special transit rates imposed by PISA on export cargoes.  A meeting between PISA and PUC was suggested to settle the issue and to come into terms/be aligned with the President’s directive to support exporters. The need for PISA to standardize rates for its clients also surfaced.

5.7             Relatedly, and in response to the query of Mr. Akol (PCASO) on application of cargo handling rates, PPA AGM for Operations Cecilio clarified that transit cargo covered by transit manifest  from the origin port, and is classified as foreign from origin, may have to be imposed rates corresponding to foreign cargo. PPA shall review its policy statement that transit cargo should be imposed cargo handling rates for domestic cargo in the light of changes on documentation.  For his part, Mr. Akol has been requested by the Chair to submit an official query.

6.  Manila North Harbor Modernization Project (MNHDP)

6.1       The Chair presented the updated development plans for MNHDP and explained the rationale for the PPA Board decision to proceed with a single-operator scheme.

6.2       Mr. Carlos (PCCI), commented that while the EO issued during the Estrada Administration and early study made by PCCI both recommended a two-operator scheme, recent development of Pier 15 at South Harbor and the Harbor Center now offer the desired competition. Hence, PCCI now supports the single-operator scheme in view of the magnitude of development required if Phases I and II would be developed at the same time.  Mr. Carlos aired PCCI hope, however, that a different operator will be selected to attend to the next phase of development since this will offer the competition required.

6.3       Upon the request of Mr. Carlos, NPAC members shall be allowed to comment on the Terms of Reference for the Manila North Harbor Modernization Project. Mr. Carlos stressed that there must be provisions that should meet the objective of competition which is lowering of rates.

6.4       The Chair informed the Body that to keep the cost low, PPA is not even considering to derive additional income from the Project and will not impose additional charges.  Instead, PPA just hopes to continue generating its present level of revenue.

7. Other/Administrative Matters

7.1       Mrs. Saludo proposed that the concerns of the truckers be tackled in the next meeting, details of which shall be later presented.

7.2       Chair Sevilla instructed that all Committees must have been organized before the next Council Meeting; hence, Committee members must have submitted to the NPAC Secretariat their nominees for the Chairmanship for the Committee on Port Operations & Tariff and Committee on Port Development, and Vice-Chairmanship for the Committee on Port Labor Relations & Port Community Development.

7.3       The Body agreed that Regular Council Meeting shall be held every two months (the next being May 2007), every third Thursday of that month at 10:00AM at PPA Board Room.

8. Adjournment

The meeting was adjourned at 4:15 PM

Prepared by:

        (signed)

CIELITO M. CABARCO  

Member, NPAC Secretariat

Certified Correct by:                                              Noted by:

        (signed)                                                                   (signed)

AMELIA M. AQUINO                                             ATTY. OSCAR M. SEVILLA

    Secretary, NPAC                                                              Chairman, NPAC