The TEFASCO vs PPA Case

Nowadays, there are already many private ports in operation in the country. This is because companies have the urge to build their own ports for simplicity of operation, savings and security. Some shipping companies also build their own ports for the same reasons and some are simply in the business of ports like the big ICTSI (International Container and Terminal Services Inc.) of taipan Enrique Razon Jr., one of the wealthiest businessman in the country.

Actually, if municipal ports are excluded there are more private ports than ports run by the Philippine Ports Authority (PPA) and the Cebu Ports Authority (CPA) which is in charge of Cebu Province ports. However, the most numerous in the country are the municipal ports which are under the LGUs (local government units) as most of the coastal towns in the country has ports that mainly cater to the fishermen and the passenger-cargo motor bancas. Some municipal ports are actually former PPA ports that were turned over to the LGUs mainly for political and practical reasons (as in the revenue will never cover the operational costs like labor, utilities, security, transportation, etc.).

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The whole of TEFASCO. With no gantry cranes yet. Photo by Mike Baylon of PSSS.

The terms for the approval of private ports is actually vague for me and I wonder if the rules are actually set in stone. This is because I have heard of cases where it seems the spirit if not the letter of the pioneering case clarifying that is really followed. The case I am referring to is the TEFASCO vs PPA case which unsurprisingly went on for 27 years as cases between big shots normally take that long in the Philippines. Since this case was finally decided by the Supreme Court it should have been the law as it is held that decisions of the Supreme are considered part of the law of the land. TEFASCO is the Terminal Facilities and Services Corp. which is located in Ilang, Davao City.

“….In a nutshell, the issues in the two (2) consolidated petitions are centered on: (a) the character of the obligations between TEFASCO and PPA; (b) the validity of the collection by PPA of one hundred percent (100%) wharfage fees and berthing charges; (c) the propriety of the award of fifty percent (50%) wharfage fees and thirty percent (30%) berthing charges as actual damages in favor of TEFASCO for the period from 1977 to 1991; (d) the legality of the imposed government share and the MOA stipulating a schedule of TEFASCO’s arrears for and imposing a reduced rate of government share; and, (e) the propriety of the award of attorneys fees and damages….”

Some of more relevant points decided by the Supreme Court on the said case:

“….Secondly, we hold that PPA’s imposition of one hundred percent (100%) wharfage fees and berthing charges is void. It is very clear from P.D. No. 857 as amended that wharfage and berthing rates collectible by PPA “upon the coming into operation of this Decree shall be those now provided under Parts 1, 2, 3 and 6 of Title VII of Book II of The Tariff and Customs Code, until such time that the President upon recommendation of the Board may order that the adjusted schedule of dues are in effect.”34 PPA cannot unilaterally peg such rates but must rely on either The Tariff and Customs Code or the quasi-legislative issuances of the President in view of the legislative prerogative of rate-fixing.

Accordingly, P.D. No. 441 (1974) amending The Tariff and Customs Code fixed wharfage dues at fixed amounts per specified quantity brought into or involving national ports or at fifty percent (50%) of the rates provided for herein in case the articles imported or exported from or transported within the Philippines are loaded or unloaded offshore, in midstream, or in private wharves where no loading or unloading facilities are owned and maintained by the government. Inasmuch as the TEFASCO port is privately owned and maintained, we rule that the applicable rate for imported or exported articles loaded or unloaded thereat is not one hundred percent (100%) but only fifty percent (50%) of the rates specified in P.D. No. 441.

As regard berthing charges, this Court has ruled in Commissioner of Customs v. Court of Tax Appeals36 that “subject vessels, not having berthed at a national port but at the Port of Kiwalan, which was constructed, operated, and continues to be maintained by private respondent xxx are not subject to berthing charges, and petitioner should refund the berthing fees paid by private respondent.” The berthing facilities at Port of Kiwalan were constructed, improved, operated and maintained solely by and at the expense of a private corporation, the Iligan Express. On various dates, vessels using the berthing facilities therein were assessed berthing fees by the Collector of Customs which were paid by private respondent under protest. We nullified the collection and ordered their refund –

The only issue involved in this petition for review is: Whether a vessel engaged in foreign trade, which berths at a privately owned wharf or pier, is liable to the payment of the berthing charge under Section 2901 of the Tariff and Customs Code, which, as amended by Presidential Decree No. 34, reads:

Sec. 2901. Definition. – Berthing charge is the amount assessed against a vessel for mooring or berthing at a pier, wharf, bulk-head-wharf, river or channel marginal wharf at any national port in the Philippines; or for mooring or making fast to a vessel so berthed; or for coming or mooring within any slip, channel, basin, river or canal under the jurisdiction of any national port of the Philippines: Provided, however, That in the last instance, the charge shall be fifty (50%) per cent of rates provided for in cases of piers without cargo shed in the succeeding sections. The owner, agent, operator or master of the vessel is liable for this charge….”

“….Sec. 2901. Definition. – Berthing charge is the amount assessed against a vessel for mooring or berthing at a pier, wharf, bulkhead-wharf, river or channel marginal wharf at any port in the Philippines; or for mooring or making fast to a vessel so berthed; or for coming or mooring within any slip, channel, basin, river or canal under the jurisdiction of any port of the Philippines (old TCC).

Sec. 2901. Definition. – Berthing charge is the amount assessed a vessel for mooring or berthing at a pier, wharf, bulkhead-wharf, river or channel marginal wharf AT ANY NATIONAL PORT IN THE PHILIPPINES; for mooring or making fast to a vessel so berthed; or for coming or mooring within any slip, channel, basin, river or canal under the jurisdiction of ANY NATIONAL port of the Philippines; Provided, HOWEVER, THAT IN THE LAST INSTANCE, THE CHARGE SHALL BE FIFTY (50%) PER CENT OF RATES PROVIDED FOR IN CASES OF PIERS WITHOUT CARGO SHED IN THE SUCCEEDING SECTIONS. (emphasis in the original)….”

Which just means the PPA cannot arrogantly charge any amount it wants. It is still subject to the existing laws of the land. And whatever, the classification if a port is “national” or not is important. If the PPA gets 100% of the wharfage and berthing charges, how can a private port survive especially when the PPA or the government has not invested anything in the private port? That is almost confiscatory already.

Other juicy things pointed out by the Supreme Court”

“….It is, therefore, our considered opinion that under Section 2901 of The Tariff and Customs Code, as amended by Presidential Decree No. 34, only vessels berthing at national ports are liable for berthing fees. It is to be stressed that there are differences between national ports and municipal ports, namely: (1) the maintenance of municipal ports is borne by the municipality, whereas that of the national ports is shouldered by the national government; (2) municipal ports are created by executive order, while national ports are usually created by legislation; (3) berthing fees are not collected by the government from vessels berthing at municipal ports, while such berthing fees are collected by the government from vessels moored at national ports. The berthing fees imposed upon vessels berthing at national ports are applied by the national government for the maintenance and repair of said ports. The national government does not maintain municipal ports which are solely maintained by the municipalities or private entities which constructed them, as in the case at bar. Thus, no berthing charges may be collected from vessels moored at municipal ports nor may berthing charges be imposed by a municipal council….”

So an LGU cannot charge berthing charges. I wonder how many LGUs can actually cited for contempt. But they have no problem because 100,000 lawyers in the country won’t file contempt charges if they will not be paid for that.

The Supreme Court further added:

“….Moreover, PPA is bereft of any authority to impose whatever amount it pleases as government share in the gross income of TEFASCO from its arrastre and stevedoring operations….” (bold letters were in the original decision)

“….Henceforth, PPA shall collect only such dues and charges as are duly authorized by the applicable provisions of The Tariff and Customs Code and presidential issuances pursuant to Sec. 19, P.D. No. 857. PPA shall strictly observe only the legally imposable rates. Furthermore, PPA has no authority to charge government share in the gross income of TEFASCO from its arrastre and stevedoring operations within its subject private port in Davao City….”

The case adverted to is here:

http://www.chanrobles.com/scdecisions/jurisprudence2002/feb2002/135639.php

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TEFASCO port with the gantry cranes. Photo by Mike Baylon of PSSS.

Maasin Port Is An “Anomaly” And So Is The City

Maasin City as a provincial capital of Southern Leyte is an ”anomaly” but this is in no way meant to insult it and its people. But there is no other provincial capital in the country where the capital is the last and furthermost locality. And that becomes a problem for the people of its towns on the other end like San Ricardo and Silago. They would have to spend several hours on the road just to reach their capital should they need a transaction there. And funny, to reach Maasin faster, even public vehicles go back through Bato in the neighboring  Leyte province to take the mountain road that starts at Bontoc town because it is shorter and travel time is faster. Going back, many take the same road too.

Donna Simon

Maasin port by Donna Simon

Maasin port became an anomaly too because of that road. Ferries from Cebu would rather dock in Bato or Hilongos port in Leyte rather than Maasin port and its vehicles and the shuttles (called “boat service” when the ferries are not boats) will also take the Bato to Bontoc road. But the national government through the Philippine Ports Authority (PPA) will always give priority to Maasin port because it has the designation as a provincial port even though the de-facto ports of entry now of Southern Leyte are the Hilongos and Bato ports in Leyte province.

Those two mentioned ports were so deadly especially with an extension like shuttle buses for passengers and a shortcut to Bontoc via Bato. The two killed the overnight ferries to Sogod, Liloan and Cabalian (or San Juan) especially those of ill-fated Maypalad Shipping (pun intended). Those ports have no chance as their ferries arrive near noon while ferries In Hilongos and Bato aided by shuttle buses can deliver passengers in those towns before breakfast. And the over-all fare is even lower because land fares are much cheaper than sea fares. Moreover, going to Cebu they would have just to wait for the shuttles instead of taking a local commute to the port and no transfers are needed.

Even Cokaliong Shipping Lines Inc. (CSLI) which has been loyally serving Maasin port (it was a bread and butter of the company in its earlier years) cannot increase its frequency to the city as its passengers now are just from Maasin and the towns between Maasin and Bontoc. In rolling cargo, unless they do some sacrifice they cannot match the rates of the ROROs serving Hilongos and Bato because the distance of the two from Cebu is shorter.

There is even no hope now of a fielding a RORO to the ports of Sogod, Liloan and Cabalian because in rates it can never compete with the Hilongos and Bato ROROs whose rates will be much lower because of the much shorter distance. Sogod, Liloan and Cabalian might be a little far but a car or a truck can easily roll to that and the fuel consumed will be much less compared to a RORO rate. Plus the total time will be way shorter. No way they can really win.

I do not think this situation will change in the future because one can’t change geography.  And thus one thing that could have boosted Maasin, that of being a good port of entry is really not around. Maasin could also not be a port of entry from Surigao like in the old past when ports were lacking because it is the farthest locality of Southern Leyte from Surigao.

In my wandering thoughts , I cannot even understand why Maasin became the capital of Southern Leyte when Sogod is the center point of the three “tentacles” of the province – the series of towns to Maasin, the series of towns to Silago and the series of towns to San Ricardo at the tip of Panaon island. Sogod could have been the commercial town of the province but a direct ship to Cebu hampered that, I think. Now, so-many intermodal trucks roam Southern Leyte already.

In the old past, liners from Manila also came to Maasin, Sogod and Cabalian. But those days are long gone now and will never come back again. Intermodal trucks from Manila have already cobbled up many of the cargo to the eastern seaboard of the country so much so that the old great port of Tacloban is diminished now.

And that also diminished Maasin port. Especially since the Palawan Princess of Sulpicio Lines which called on the port before is also gone now. Whatever, long live Maasin!

Newest Developments in the MARINA Line of Thinking About Ferries

There were two notable developments in the MARINA line of thinking about ferries recently although it is still in draft form and probably it might still have to go through hearings and the opposition of shipping companies. One, it will insist that henceforth new-build local ferries and surplus imported ones will have to be stern-docking. It seems the ones currently sailing in the country will not really be banned after all or be forced to convert.

MARINA says that this is for safety in sailing. But I really cannot comprehend what ghosts or ghouls are they fearing. We never had a ferry that is bow-loading that was lost at sea through a ramp or bow failure nor have a ferry sink through a collision and the failure of the bow. For sure, the MARINA Administrator is thinking of the Estonia and Herald of Free Enterprise sinking in Europe when the two ferries sank because of some dumb failure to close the bow and the other the failure of the bow door of the ship itself.

Our ferries that are bow-loading are all small and their bow ramps are line of sight with the bridge and usually there are crews of the ships and of the trucks that are in the car deck. It is impossible to be missed that a ramp is not closed with all the possible people that can see it even in the night. It won’t just easily fall off while sailing because if there is a crack or worse the ramp would have already fallen in the loading process or else give a signal that it is giving way soon.

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A small, bow-loading ferry which shows that the ramp is very visible from the bridge

Up until today there are so many bow-loading ferries in Japan, China, Korea, Europe that are still sailing. Those countries are more advanced that ours shipping-wise and in the design. Now, I don’t know why we should be more popish than the Pope. That is why I called the fears of Amaro as simply ghosts. Does he want to claim in the world that we were the first to ban bow-loading ferries? That is simply laughable and other countries will just snicker at us.

One effect though if this MARINA rule pushes through is we can’t import basic, short-distance ferries anymore as all of these are bow-loading. This type has been questioned for its safety before as these were classed in Japan for just inland sea and bay operations only. Now, I don’t know if the real motive of Amaro is to do away with this type.

Anent this, existing bow-loading ferries henceforth are banned from using their bow ramps to stop the ship. This is what is done by the small ferries and the LCTs which are loath in using bollards and their anchors and its resultant longer docking maneuver time. Aside from the possible wharf damage, MARINA is fearful of the damage it can cause the ramps of the ships.

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Mae Wess ferries just use the ramp to hold the ship in place

But I wonder if MARINA ever did any serious study on this. The best example they can study are the ferries of Mae Wess of Davao which is also known as CW Cole which are Davao-Samal short-distance ferries of LCT and double-ended ferry designs. These don’t use their bollards and anchors and instead use reversing of screws and the lowering of the ramps in the causeway-type wharf to stop the ship. If there is no swell that ramp laid atop the wharf keeps the ferry in its place even though the ropes of the ship are not deployed. If there is a swell then the helmsman uses the screws to push the ferry to the causeway-type wharf thereby keeping it immobile.

The Mae Wess/CW Cole ferries depart twice in an hour for up to 16 hours in a day and so they normally would have 25 or so dockings in a day. I have yet to hear a ramp of theirs fall off because of using the ramp to stop the ship. As for the wharves they own it so MARINA and the Philippine Ports Authority (PPA) cannot really complain. PPA is really the entity in charge of government-owned ports and I am just wondering how come MARINA is the one complaining first about wharf damage when that thing is withing the purview of the PPA.

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Scouring of the wharf of the private BALWHARTECO Port is visible but a scoured wharf is very good in stopping the ship. The damage can easily be repaired and BALWHARTECO takes that as normal wear and tear in the course of business.

In the Bicol ferries I have heard of ramp damage in their bow-loading ferries but that was not because of using the ramp to stop the ship but because of the overweight loads that bends the ramps and there are cases of ramp fracture because of this. That is why sometimes very heavy loads like carriers of really heavy equipment have a hard time securing a ride because the ferries avoid them due to possible ramp damage. I know of a case once in Matnog that the deal was a Grand Star RORO ferry would take in just that single load solo and the vehicle would have to pay for nearly the full load of the ship (now this kind of load is not taken by the newly-fielded Cargo RORO LCTs).

I don’t know. It has long been my observation that our government simply issues orders without concrete studies. And I have also observed that true experts does not matter in our government. That is because government functionaries think that they are the “experts” when at times they know next to nothing especially if they are just political appointees or entered government service by having an MBA (“Me Backer Ako”). Worse, armchair scholars who do not really ride ships also pretend that they are “shipping experts” when in actuality they are not.

Another development which is a welcome one because of opposition is there would no longer be retirement of ships arbitrarily based on age and instead it will be based on inspections which should be the case anyway. In other countries where shipping is more advanced than ours there is no such thing as forced retirement because of age. There, Port State Control (PSC) inspections are the means. If a ship cannot pass the surprise PSC inspections it gets detained and won’t be able to sail until the serious deficiencies are corrected. Sometimes it gets to a point that remedying the deficiencies will already cost a lot of money and so the ships are simply sold to the breakers. Or sent to some Third World country like the Philippines where there are no strict standards and inspections.

https://en.wikipedia.org/wiki/Port_State_Control

Port State Control is not being used in the Philippines because ship owners oppose it. It has been said that if PSC is implemented here then only a few of our ships will pass that and the moving of goods will then be hampered.

What we do instead is we let a slew of local inspection and certification societies qualify our ships. That became the system because our maritime regulatory agency MARINA does not have enough skills and people to inspect our ships since the agency is not composed of maritime professionals. For ship inspections before departure that function has been devolved by MARINA to the Philippine Coast Guard (PCG) since the agency don’t have offices in all our ports. But then the PCG is also not composed of maritime professionals too and so most times their primary role just sinks to the level of counting the passengers to check if the ship is not overloaded.

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Coast Guard people doing pre-departure inspection work

Linearly, older ships might really be less safe as aging might mean more things can go wrong at the level of the equipment of the ship. But I am not implying here that they are not safe as safety is a very relative term. In the recent years, actually our ship losses went down and I think the most proximate reason for this is when the wind blows a little or if the swell reaches a foot high then voyages of our ships even the big ones are then suspended. In a clear sea the chance of a ship sinking even if it loses propulsion is very low.

The government too does not want to take chances when the weather becomes a little inclement. The main reason is there are not enough search and rescue assets around and if there are those are not found in the busy sea lanes but in the big cities where there is more “civilization”. Like PCG ships would rather be in Cebu port rather in the Camotes islands. In Surigao Strait when a ship is in distress sometimes the Coast Guard have to borrow some ferry or tug. Or not send out a ship at all like in the Maharlika Dos incident.

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The Philippine Coast Guard in Cebu

What remains to be seen now is what standard will MARINA use in the inspections to certify our ships. That could be the bloody part in the push and pull of MARINA and the ship owners. But at least that might be better than what happened in our bus industry. JICA, the Japan International Cooperation Agency recommended the technical inspection of our buses but the bus owners balked at the Japan standard. Next, JICA suggested using the Singapore technical standard and the bus owners balked again. And so the LTFRB, the regulatory agency that has buses within its power then set an arbitrary 15 year-old automatic retirement scheme for buses. The engine running hours or wear and the kind of maintenance no longer mattered. I don’t know if I will cry when I heard buses still capable of 120kph being retired forcibly. At least it will be good if that thing will not happen to our ships especially the ones being maintained well.

I will be attuned for what will be the final version that will come out of MARINA. I just hope the final result will be fair to all concerned including the riding public.