Manila port congestion exacts heavy toll on Customs

FOR 15 years, Remedios Princesa’s work week was composed of five days. With the congestion of Manila’s port, however, Princesa no longer has a weekend.

By BusinessMirror -March 28, 201972

By Samuel P. Medenilla, Rea Cu, Elijah Felice Rosales & Jovee Marie N. Dela Cruz | Reporters

Princesa, adviser of the Bureau of Customs Employees Association (Bocea), and majority of the over 3,000 workers of the BOC are now on the verge of suffering a burnout as the ongoing port congestion forces them to work even during weekends.

Making the circumstance even worse, the former Bocea president said, is that the affected workers do not get any overtime pay during the weekends.

“This is what is really painful for us. That we do not get any compensation in return [for our additional services],” Princesa told the BusinessMirror in an interview.

According to BOC Spokesman Erastus Sandino B. Austria, the congestion at the port of Manila could be traced to two issues: empty steel containers and turnaround time of trucks.

“One of the reasons there is port congestion is because the turnaround time of trucks is very slow [as] shipping lines [are] not able to accommodate the empty containers we are going to return,” Austria, a lawyer, told the BusinessMirror. “Sometimes it takes us about three to five days not being able to return the empty container, so [a] truck will not be able to make its rounds unless it returns the empty container.”

Multiple issues

Ryan P. Esponilla of the Confederation of Truckers Association of the Philippines (CTAP) said the issues also arise from the fact that shipping lines are not regulated.

Esponilla, CTAP’s legal counsel, said the association believes unregulated shipping lines is the root cause of the port congestion problem.

“What is important for us is that the operations of the shipping lines be regulated. Right now, there is no regulatory body, that’s why they can operate and charge fees that the government can’t control,” Esponilla told the Businessmirror. “The problem with that is the charges imposed by the international shipping lines [are] passed on to importers, brokers, until it reaches the prices of basic commodities because that’s logistics.”

The CTAP said truckers are charged with penalties that are imposed by shipping lines for every delay in the deliveries of laden and empty containers, which are not even at uniformed rates. The group added truckers are also asked for a container deposit even when they already have insurance for the container paid as equipment insurance premium.

“The biggest problem right now is the shipping lines and their charges. They just have to be regulated. The reason why the turnaround time of the trucks is slow is because of the empty containers of the shipping lines,” Esponilla said. “And we have a 90-day staying period; after 90 days it has to be shipped out because the government can seize it if its overstaying and impose customs tariff and taxes, but it is not being implemented.”

At a loss

ESPONILLA added “there are a lot of charges from the shipping lines.”

“If we pull out empty containers we are required to give a container deposit. The problem is, when the container is not delivered to the container yard on time, the deposit decreases,” he said. “So we are really at a loss: we didn’t create the problem so why would they decrease our deposit?”

Esponilla further explained that the amount of the charges varies depending on the shipping lines, since “they don’t impose uniformed [rates].”

CTAP Chairman Ruperto S. Bayocot told the BusinessMirror that container deposits being asked from truckers is around P10,000 for a 40-footer container and P5,000 for a 20-footer container. Penalties for the delay in the delivery of the container ranges from standby charges, storage charges or demurrage charge starts at a minimum of around P580.

“We estimate that we lose more than 60 percent just because of congestion and having no container yard,” Bayocot said. “It’s big, halos magsasara na nga kami. [We’re near shutting down.]”

The CTAP’s not the only one fearing the full impact of port congestion.

People familiar with the matter informed the BusinessMirror that even exporters of milk products have been affected by the recent port congestion in Manila ports. The port congestion, according to sources, delayed the outbound shipments of locally manufactured milk products.

Collectors cursed

BOC collectors are now at the receiving end of a stick from BOC employees ordered to work seven days a week.

According to Princesa, the arrangement, which is barely in its second month of implementation, is not sustainable since many of the BOC employees are now protesting against it due to fatigue and stress.

“Many workers are now really angry and are now taking the issue personally,” she told the BusinessMirror. “Some of them have been calling the collectors as inhuman and even demons.” 

The prolonged duty also means additional costs that some BOC workers, particularly those with a low salary grade, cannot afford.

“Those in salary grades 1 to 10 only get [between] P12,000 to P15,000,” Princesa said. “Now if they will have to report to the office two additional days in week, they would have to spend more for their food and travel fare.”

She added that many BOC employees are now working beyond their usual threshold.

“Many of us could only rest if our machine finally bogs down,” Princesa said.

Refusal refused

PRINCESA said the arrangement began after the BOC issued a memo requiring all workers to render service even during the weekends for the entire 2019 to help address the port congestion. The workers began this arrangement last February.

Those who will refuse weekend duties face sanctions from the BOC management.

In her 15 years of service for the BOC, Princesa said this was the first time BOC workers were mandated to work on a Saturday and a Sunday.

Princesa retired from the BOC last month and is now working as the treasurer of the BOC Provident Fund Inc., which is also located within the BOC grounds in Manila.  

She said the BOC would usually only resort to using weekend duty from September to December, when the port in Manila will be swamped with cargoes in time for the Christmas season.

But even on such occasions, she said weekend duty only covered Saturdays.

Personally, the Bocea official said she doesn’t think the weekend service is an efficient way to solve the congestion.

“During the weekdays, BOC would process thousands of entries, but in a weekend, the number of [processed entries] will not even reach 50,” Princesa said.

Overtime, compensation

TO finally address the issue, Princesa said Bocea members will have a general assembly next week to meet with officials of the BOC.

Out of the 3,017 employees of BOC, 2,200 are members of Bocea.

“Based from the reports we heard, the management would like to address [during the meeting] the issue of overtime,” Princesa said. 

While the Bocea said it would prefer the outright abolition prevailing weekend duties, the association believes this may not be possible due to port congestion.

Instead, Princesa said the Bocea will be pushing for the proper compensation of BOC employees, as well as the use of a skeletal force during weekends to minimize the number of workers, who will be on duty that time.

“Hopefully, they would finally allocate the budget so we can have overtime pay,” Princesa said.

Under Civil Service Rules, government employees with an approved Authority to Render Overtime Service are entitled to either overtime pay or to use the Compensatory Time-Off (COT) privilege.

Princesa, however, lamented that while they don’t get any overtime pay, they are still not allowed to use COTs.

Costs, commitment

In a recent interview with reporters, Trade Secretary Ramon M. Lopez admitted that if left unresolved, port congestion could slow down trade.

“Yes, of course [there is an impact on the] cost of money, the cost also of charges being made. For any delay in the turnaround time of the trucks, that has a cost, too,” Lopez said. “These are the causes of higher costs, that is why we want to solve this. We need smoother operations [at our ports].”

Hence, the government will release within the next two weeks a joint administrative order (JAO) that will address port congestion and regulate high shipping fees, as these are the two issues that Lopez said are hurting the country’s trading activities.

The JAO, he added, contains measures aimed at keeping yard utilization rate of Manila ports between 60 percent and 65 percent.

As of March 4, yard utilization rate of the Port of Manila fell to 64 percent, according to the BoC. On the other hand, the number of laden and empty containers went down to 78 percent and 47 percent, accordingly.

This was better than the port situation in the first week of January, when yard utilization rate was at 98 percent and the number of laden and empty containers was at 100 percent and 93 percent, respectively.

Laden containers

Based on BoC data, the average yard utilization rate of the Manila International Container Port (MICP) for January was at 90.88 percent, which decreased to 89.90 percent as of February 18.

In January this year, the dwell time for import laden containers was at 9.65 days at the MICP, while export laden ones was at 7.65 days. The average number of days for the dwell time of containers posted decreases coming into February as the dwell time of import laden containers averaged to 8.71 days while export laden ones was at 5.22 days as of February 18, 2019.

For the Port of Manila (POM), its average utilization rate for January reached 94.10 percent, which also decreased to 90.67 percent as of February 18.

Dwell time for import laden containers reached 9.02 days and export laden ones at 12.69 days for January, also posting decreases as the POM reported a import dwell time averaging to 7.76 days and export dwell time at 11.10 days as of February 18, 2019.

Austria explained that under international standards, a 70 to 80 percent yard utilization rate reported by port operators is still within manageable levels and does not fall under port congestion yet, as well as an import dwell time of 10 days or lower.

Unequal flow

Austria further said that the port congestion could affect the country’s trade. He explained that since the Philippine economy is gaining ground, most of the shipments in the country are imports, leading to an import and export imbalance and to the many empty containers staying at the port.

“Volume of importations have really increased because the economy is growing. We need all of these materials for consumption and for manufacturing,” Austria said. “Manufacturing is slowly improving because these are at the top of the agenda of the administration.”

Based on BOC data, the volume of exports for January this year reached 2.095 billion kilograms (kg) with a total value of P32.295 billion, while imports totaled 11.218 billion kg with a value of P531.143 billion.

“We are a net importing country. I’m not so sure about the statistics but let’s say for every five import-laden boxes, on average only one or two go out with content,” Austria said. “So there’s an imbalance between import and export, that is why you have so many empty containers that stay here in the Philippines.”

Esponilla echoed the sentiments of the BOC on being a net importing country since the country is seen to be an import oriented economy.

“One of the problems as well is that we have an export-import imbalance because our economy is import oriented,” he added. “So for every five imported containers that arrive here, only one container goes out as our export, so it’s 5:1. We are dependent on imports.”

Seeking regulation

Customs Commissioner Rey Leonardo B. Guerrero remains optimistic that the JAO, which aims to help address the port congestion problem in the country, would be issued this month as the technical working group (TWG) for the measure is already finalizing the draft.

“Yes [this month]. The JAO TWG will have another meeting to finalize the draft,” Guerrero told the BusinessMirror in a text message.

According to Austria, the JAO focuses on regulating the business practices of the shipping lines, which right now is very much deregulated, among others.

“That is why there’s a proposed JAO that will regulate the business practices of the shipping lines because there really isn’t any,” Austria, who is also the Manila International Container Port’s (MICP’s) District Collector told the BusinessMirror in an interview.

Government agencies included in the crafting of the JAO include the Department of Transportation (DOTr), which oversees the Philippine Ports Authority (PPA), the Department of Finance (DOF) for the BOC, as well as the Department of Trade and Industry (DTI).

While the BOC remains hopeful that the JAO would be issued this month, Bayocot told the BusinessMirror he personally sees a three-month to six-month period before the JAO gets issued, and not an easy one month.

“It’s being discussed now,” Bayocot said.

Total response

The CTAP earlier said that international shipping lines doing business in the country should be mandated to have their own container yards, which can house the number of empty containers that can’t be accommodated by the existing container depots at the moment as it has already used up its storage capacity.

Austria agreed that the international shipping lines should have their own container yards to house their respective containers, as this will free up space in other container depots which will enable truckers to pull out more laden containers at the ports which will help normalize the turnaround time for the truckers.

CTAP VP for External Affairs Maria B. Zapata said in an earlier news conference that although the JAO is not seen to solve the entire port congestion problem in the country, it will provide “more or less halfway relief to the problem.”

For the part of the BOC, Austria also pointed out that there should be a regulatory body, or that the powers of an agency linked to the operations of shipping lines should be expanded, to monitor and control the business operations of the shipping lines.

“I think the most ideal situation is for all actors involved to behave responsibly and not to take advantage of the situation,” he said.

Esponilla explained that under the Customs Modernization and Tariff Act (CMTA) the BOC has the power to regulate third parties involved in the logistics chain or those parties that are doing business with the bureau including shipping lines, truckers and port operators, among others.

Engaging stakeholders

Apart from the JAO, Austria explained that the BOC is implementing a number of measures at their level as well as the ports with continuous coordination with its stakeholders in line with addressing the issues that lead to congestion at the piers.

He pointed out that the designated examination area of the International Container Terminal Services Inc. (ICTSI) is being refurbished to open more doors so that more containers can be examined at any given time. This move is seen to declog or clear out dockets at the port of overstaying containers. After being inventoried, the overstaying containers due for condemnation or auction can now be quickly implemented.

“So that’s one category with overstaying containers that we can deal with from the yard to lower yard utilization,” he added.

A legal framework was also provided to the Asian Terminals Inc. (ATI) and the ICTSI in line with the transfer of containers that went through failed bidding and are up for disposal, allowing for its transfer to a inland bonded depot facility to free up more space at the ports.

“There are some boxes that have gone through failed bidding and we see a slow timeframe for its disposal. We’ve already given the legal framework both to the ATI and ICTSI for the transfer of these containers to an inland depot bonded facility so we free up more space,” he said. “So that’s the immediate short-term solution of the BOC.”

Recommended actions

Austria emphasized that the most important aspect of solving the port congestion problem in the country is for all stakeholders to work together as each aspect reverberates to all players whether it is the government or the private sector.

“So there’s a JAO, which is interagency, and the BOC is also doing something on its own initiative. At the port level, we also implement what we can do here, so it’s a multipronged approach. What we are saying is that at our level we are taking the initiative to fix the problem for our stakeholders,” he added. “And we are very happy that the port operators are cooperative about it and some shipping lines have also expressed their willingness to cooperate because it’s really affecting the supply chain.”

He said that even though the BOC is not main actor in the logistics chain, like most people assume, it still implements measures that help its stakeholders as well as sustain solutions for the elimination of congestion at the ports.

“People were saying that we were downplaying the issue on port congestion but truth be told we just wanted to be responsible. It doesn’t mean that government doesn’t recognize that there are problems in the supply chain, but for customs, what we hope that people will understand is that customs clearance exists in the middle of the supply chain,” he said. “What we are primarily responsible for is customs clearance of our goods whether for imports and exports.”

Going out

REP. Winston Castelo of Quezon City, meanwhile, is proposing to shift container traffic to Batangas and Subic ports to ease congestion in Manila ports.

House Bill 1593, or the proposed Container Traffic Cap in Ports Act “contemplates not just a timely but a long-term solution to the problem of congestion at the Manila Port due to the fact that volume of container traffic is more than this port could handle,” said Castelo, the chairman of the House Committee on Metro Manila Development.

The bill mandates the Philippine Ports Authority (PPA) to shift container traffic to Batangas and Subic ports, thereby putting a cap on the volume of containers at the Manila Port.

The measure said the PPA should also renegotiate current contracts for further development.

“Unless a policy is put in effect, the problem worsens,” he added. “Thus, this measure mandates the Philippine Ports Authority to shift container traffic to Subic and Batangas Ports, and it should renegotiate current contracts for further port development at Manila Port to instead be implemented at Subic and Batangas Ports in terms of new terminals and additional berths.”

Meanwhile, Deputy Speaker Arthur Yap of Bohol said there is a need to reform the country’s port administration to improve services.

Yap said his House Bill 8005 seeks to separate the regulatory and development functions of the PPA by converting it into a Philippines Ports Corp. (PhilPorts) and transferring its regulatory functions to the Maritime Industry Authority (Marina).

In 1974, Yap said the PPA was created by virtue of Presidential Decree 857, as amended, to implement an integrated program for the planning, development, financing and operation of piers or port districts for the entire country.

Through the years, he said the port users such as domestic shippers, exporters and importers have complained of lower service levels, inefficient port operations and ever-increasing port charges.

“They claim that the high cost of transport serves as an effective barrier to increased trade—both local and foreign—and undermines the country’s overall competitiveness,” Yap added.

Optimism on Jao

LOPEZ said the government is just waiting for final inputs from industry players on how to further regulate fees charged by shipping lines and stabilize yard utilization rate.

“[The JAO] is still subjected to consultation, as stakeholders are still submitting their inputs [and we are awaiting them] so that we can fine-tune the order,” Lopez said. “We will be signing that hopefully within one week or two weeks. It should have been [issued] last week, but some stakeholders have yet to input.”

“Hopefully, we can include in the JAO measures regulating fees charged by shipping lines,” he added. “We hope to regulate that.”Image Credits: Nonie Reyes

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