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.).

tefasco no gantry

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

tefasco gantry

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