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The proposed joint administrative order that seeks to address port congestion, high logistics costs, and inefficient return of empty containers is eyed for signing in August
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Customs commissioner Ariel Nepomuceno said they aim to have the JAO out before the anticipated seasonal recurrence of port congestion starting October
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Nepomuceno said Finance secretary Frederick Go, who is one of the draft JAO’s signatories, “is on top of it and he has committed that this will happen because it’s needed”
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The joint order will provide guidelines on port yard utilization and transparency on charges in the handling of cargoes by customs third parties and other logistics providers
The proposed joint administrative order (JAO) that seeks to address port congestion, high logistics costs, and inefficient return of empty containers is eyed for signing in August, according to Customs commissioner Ariel Nepomuceno.
“I think it should be out within August… because we’re anticipating the cyclical occurrence of the port congestion beginning October,” Nepomuceno said in a chance interview with the media on July 14.
He said Finance secretary Frederick Go, who is one of the draft JAO’s signatories, “is on top of it and he has committed that this will happen because it’s needed.”
Nepomuceno said with the JAO, there will finally be an agency that will orchestrate and harmonize the actions of all involved agencies in solving the problem of congestion.
READ: BOC issues draft JAO addressing local shipping charges, yard utilization
Under the draft JAO, which will provide guidelines on port yard utilization and transparency on charges in the handling of cargoes by customs third parties and other logistics providers, BOC will be the lead implementing agency.
Other agencies involved agencies are the Department of Finance (DOF), Department of Transportation (DOTr), Department of Trade and Industry (DTI), Bureau of Internal Revenue, Philippine Ports Authority (PPA), Maritime Industry Authority, and the Philippine Competition Commission.
The draft JAO, which was opened for comments from stakeholders from July 7 to 13, is a revival and significant expansion of a 2019 proposal that aimed to regulate origin and destination charges imposed by foreign carriers operating in the Philippines and to ease port congestion. BOC Office of the Commissioner Deputy Chief of Staff Atty. Chris Noel Bendijo earlier said the new JAO “expressly provides provisions for the BOC to sort of be the lead agency” and will be “all-encompassing” — covering not just shipping lines but truckers, container yards, and other logistics providers.
The issuance of the draft JAO comes amid high yard utilization at Manila international terminals.
READ: PortCalls Special Report on Manila’s Cargo Crisis (Part 1) — When Sea and Air Feel the Squeeze
Manila’s Cargo Crisis (Part 2): Capacity Crunch at the Airport
Manila’s Cargo Crisis (Part 3): What Needs to Happen
The draft JAO acknowledges that “stakeholders of the Philippine logistics services sector have identified high logistics cost, excessive and non-transparent fees, charges and surcharges imposed by customs third parties and other logistics providers, inefficiencies in port utilization, and other regulatory constraints as factors adversely affecting the competitiveness of the sector.”
The JAO aims to “promote efficient, transparent, and cost-effective international shipping and logistics, ensure efficient utilization of ports, and facilitate the movement and storage of cargoes.” It pursues four specific policy goals:
- Efficient port utilization
- Transparency in local charges imposed by customs third parties and logistics providers
- Accurate customs valuation
- Controlled temporary admission of containers
The JAO will apply to all customs third parties — including importers, exporters, carriers, airlines, shipping lines, shipping agents, freight forwarders, consolidators, port and terminal operators, and warehouse operators — as well as trucking companies and container yard and depot operators. Under Republic Act No. 10863, or the Customs Modernization and Tariff Act, third parties transacting with BOC on behalf of importers and consignees are treated equally as true importers or consignees.
Under the draft JAO, shipping lines must report to BOC all charges currently collected, including the amount and justification for each. BOC will have authority to standardize the nomenclature of such charges across shipping lines and set ceilings on fees. This authority will include the power to disapprove any increase, or cause its reduction or removal when found unjustified.
Once charges are properly identified, shipping lines will not be allowed to increase rates or impose new charges without BOC approval, DOF concurrence, and public consultation. Provisional increases may be allowed in times of declared national emergency or when market conditions warrant, in coordination with PPA.
Charges found to be legitimate destination charges will be subject to value-added tax and other local taxes.
All international shipping lines and cargo truck operators must also regularly submit to BOC and DTI their monthly average freight rates per route, within one month of the JAO’s effectivity and on a monthly basis thereafter.
The draft JAO proposes specific rules on container deposits and demurrage that directly address longstanding industry grievances. Some of these include the following:
Container deposits must be refunded within 15 days of the shipping line’s receipt of returned empty containers; no container deposit should be imposed if other forms of security are available to guarantee the container’s return.
No demurrage or detention charges may be imposed if the failure to return the container is due to the fault of the shipping line — such as when it did not acknowledge within 24 hours a request on where to return the container, or did not assign a container yard or port terminal within 48 hours of the request.
Shipping lines are prohibited from imposing an indirect lien or holding the release of a consignee’s shipment due to outstanding demurrage and detention liabilities from a previous or different transaction.
Shipping lines are also prohibited from withholding container deposit refunds for returned empty containers beyond the 15-day period.
On port congestion management, PPA must establish and periodically review port-specific congestion indicators covering terminal design, operational capacity, cargo profile, vessel traffic, container dwell time, berth occupancy, truck turnaround time, and other relevant operational indicators.
The DOTr secretary, upon recommendation of the PPA Board, will declare the existence of port congestion or emergency cases resulting in serious disruptions in port operations. If port congestion is declared, PPA may designate extension ports, and foreign vessels in the congested port may be directed to berth there.
On yard utilization, Port of Manila and Manila International Container Port operators, together with BOC and PPA, must determine within 15 days of the JAO’s effectivity the specific percentage of yard utilization deemed normal. Pending such determination, 75% yard utilization will be considered optimal.
When yard utilization within two consecutive weeks increases by 5% above the threshold, BOC will implement the transfer of laden containers in accordance with the JAO’s provisions or under PPA Administrative Order No. 02-2019. When overall yard utilization exceeds 100% or port congestion is declared, foreign vessels may be allowed to berth and unload cargo at an extension port.
The draft JAO proposes a container yard policy that applies regardless of whether port congestion exists:
- Shipping lines must ensure the availability of container yards and their capacity to receive returned containers. BOC may designate an alternative yard if the designated container yard fails to confirm or reject the empty container due to lack of space.
- Shipping lines and/or their agents will not be allowed to impose detention charges and must bear all re-routing costs to the alternative container yard designated by BOC.
- Truck operators, customs brokers, or freight forwarders must ensure that the empty container — upon confirmation of the return date and time — is delivered within 48 hours; violations will be sanctioned by BOC.
- Shipping lines that import international containers in excess of more than 30% of their yard allocation within 15 days will be subject to penalty, unless they have identified an accredited container yard for temporary storage or have provided a sweeper vessel to evacuate excess containers.
All container yards acting as third parties for shipping lines in the storage of temporarily admitted containers must be accredited with BOC and comply with accreditation conditions.
BOC will also create or accredit automated systems to monitor container movement from discharge to load-out, including intermediate transfers. The proposed JAO provides penalties for violations ranging from P5,000 to P10,000, depending on the nature of the offense. An oversight committee composed of all agencies with identified roles under the JAO will be formed to oversee implementation and conduct periodic reviews of the policy.
While the JAO is still not out, BOC has continued coordination meetings with stakeholders to address high yard utilization at ports, particularly in Manila international terminals. BOC has also issued a memorandum dated June 19 providing three immediate measures to address high yard utilization and improve cargo movement in Manila international terminals.
Nepomuceno also noted that legislated solutions are “better” when asked about bills filed in Congress that also seek to strengthen government agencies’ oversight functions over shipping charges imposed by international shipping lines operating in the Philippines.— Roumina Pablo
