Omnibus Maritime Code

Henry L. Basilio
Co-Chair
Export Development Council
Transport and Logistics Networking Committee

September 10, 2007

 Outline

Cost of Exporting a Container

MO 244 – Crafting of Omnibus

Maritime Code

EDC Proposed inputs to the

Omnibus Maritime Code
 Lowering the Cost of Exporting
from the Philippines

Prepared By

Center for Research and Communication

Transport and Logistics Institute

Commissioned by

Export Development Council and

Philippine Chamber of Commerce and Industry

With assistance from

The Asia Foundation and

United States Agency for International Development

August 2007

Philippine
Chamber of
Commerce and
CENTER FOR RESEARCH AND Industry
COMMUNICATION
 Report

Purpose

Validate the cost of exporting a container
from the Philippines

Compare the costs to select Asian countries

Identify areas for cost reduction

Scope and Methodology

Key Findings and Recommendations

Exporting from Manila (Ex-Manila)

Exporting from Cebu (Ex-Cebu)

Summary
 Cost of Exporting:
Ex-Manila

Philippine
Chamber of Lowering the Cost of Exporting
Commerce and
CENTER FOR RESEARCH
AND COMMUNICATION
Industry from the Philippines
 Transport Chain – Manila to Japan
Manila
• Trucking

Manila PORT, THC & NON- • THC

PORT RELATED COSTS • Cargo Handling

$341 • Documentation
(Minimum Cost)
• Others

• Repositioning of Container
ADDITIONAL
• Telex Fee
$85 COST • Courier Fee

(case to case) • Others

Manila – Japan
OCEAN FREIGHT
$200

Japan
TOTAL $626
Philippine
Chamber of Lowering the Cost of Exporting
Commerce and
CENTER FOR RESEARCH
AND COMMUNICATION
Industry from the Philippines
 Ex-Manila Minimum Costs
Basic Cost Items $/20’ container*

Terminal Handling Charge 96

Cargo handling/Arrastre 52

Wharfage 6

Customs Processing & Scanning ** 45

Documentation: Bill of Lading & 42

Documentary Stamps
Trucking*** 100
TOTAL $ 341
SOURCE: CRC Study (2007)

* Exchange rate used is Php 46.00 per $1.00

** Includes $25/20-foot container scanning fee
*** Trucking costs may go as high as $130. SOURCE: CRC Study (2007)
 Ex-Manila Additional Costs
A Philippine exporter MAY incur these costs, as additional
charges. The costs are NOT applied to ALL exports.

Additional Cost Items $/20’ container

Courier Fee 40
Telex Release 35
Chassis Rental 10
TOTAL $ 85
SOURCE: CRC Study (2007)

The cost of exporting Ex-Manila (excluding ocean

freight) ranges from $ 343 to $428
 Finding: Philippines cost are at the high end
compared to selected SEA Capital Cities (ex-
Manila)
Item Phils Thai Indo Viet

Terminal Handling Charge* 96 74 95 60

Cargo Handling 52** 37 34 79

Port charges/Wharfage 6 22 0.0 1.60

Customs & Security Fee 45 37 23 50

Documentation 42 16 20 13

Trucking 100 126 100 138

TOTAL 341 312 272 341

* Terminal Handling Cost within Inter-Asia trade; $104.00 (20-foot container) for US and
Europe trade.
** Figure reflects only the cost of arrastre. Stevedoring cost is embedded in the THC.
Ex-Manila Sources of Cost Reduction
Recommendation Agency Proposed
Reduction
Reduce Scanning Fee to $5.00/20-foot BOC $20
container
Reduce Cargo Handling and Terminal PPA/AISL/PSB $30
Handling Charge to level of Thailand
Maintain reduced wharfage fee PPA $5
permanently
Reduce Bill of Lading Fee to level of AISL $15
Thailand

TOTAL $70
SOURCE: CRC Study (2007)
 Cost of Exporting:
Ex-Cebu

Philippine
Chamber of Lowering the Cost of Exporting
Commerce and
CENTER FOR RESEARCH
AND COMMUNICATION
Industry from the Philippines
 Cebu Factory – Cebu Transport Chain
Port (Cebu – Japan)
• Trucking
DOMESTIC • Domestic Shipping
$437 TRANSSHIPMENT • Cargo Handling
• Others

N. Harbor
• Trucking
Manila PORT, THC & NON- • THC

PORT RELATED COSTS • Cargo Handling

$341 • Documentation
(Minimum Cost)
• Others
• Repositioning of Container
ADDITIONAL
• Telex Fee
$285 COST • Courier Fee

(case to case) • Others

Manila – Japan
OCEAN FREIGHT
Japan $200

TOTAL $1,263
Philippine
Chamber of Lowering the Cost of Exporting
Commerce and
CENTER FOR RESEARCH
AND COMMUNICATION
Industry from the Philippines
 Domestic Transshipment
Cost Payee $/20’ container
Freight Domestic Shipping 225
(includes stevedoring Company
cost)
Bunker Surcharge Domestic Shipping 61
Company
VAT BIR 34
Arrastre Cebu and Manila North 34
Harbor Cargo Handlers
Wharfage PPA and Cebu Port 8
Authority
Brokerage Fee Brokerage Company 34
Trucking Trucking Company 39
Weighing charge – foreign Terminal Operator 2
port (MICT/South Harbor)
TOTAL DOMESTIC 437
TRANSSHIPMENT COST
SOURCE: CRC Study (2007)
 Ex-Cebu and other ports
Additional Costs
Additional Cost Items $/20’ container
Courier Fee 40
Telex Release 35
Chassis Rental 10
Repositioning of Empty Container* 200
TOTAL $ 285
SOURCE: CRC Study (2007)

* Dependent on Terms of Trade

• FOB Cebu and exports from other ports are not charged repositioning
cost
• FOB Manila with cargoes from Cebu and other ports are charged the cost
of container repositioning
 Findings Ex-Cebu

Current Ro-Ro policy is limited to “self-driven cargoes”
• Examples: Trucks, cars and buses are self-driven
• Containers on chassis must be accompanied by their prime
movers (trucks)
• Implication: Inefficient use of trucking assets results in
higher costs

Estimated cost of $76 for cargo handling and wharfage

• Arrastre (ports of origin & destination) 34
• Stevedoring (embedded in freight) 34
• Wharfage (ports of origin and destination) 8

Costs can be eliminated with Chassis Roll-on Roll-off

(Cha-Ro) as a RoRo service (containers allowed to be
shipped without its prime mover)

Recommendation
• Amend EO 170 to allow Cha-Ro
 Ex-Cebu Sources of Cost Reduction

Recommendation Agency Proposed Status

Reduction
Reduce domestic DOTC $76 Pending
transshipment by
allowing Cha-Ro
Revise terms of trade Exporters and $200 Information
re: Ex-Cebu Shippers campaign needed

TOTAL $276
SOURCE: CRC Study (2007)
 Summary

The cost of exporting a 20-foot container
from the Philippines is at the high-end but
comparable with its ASEAN neighbors

There is room for further cost reduction

• Cargo Handling and Terminal Handling Charges
• Scanning Fee
• Wharfage
• Documentation fees
• Domestic Transshipment
• Terms of Trade
 Summary: Reducing Costs
Recommendation Current Proposed Status
Cost Reduction
Reduce Cargo Handling and $147 $30 Pending
Terminal Handling Charge
to level of Thailand
Reduce Scanning Fee to $25 $20 Done
$5.00/20-foot container
Maintain reduced wharfage $6 $5 Until Dec 2007
fee permanently
Reduce Bill of Lading Fee to $30 $15 Pending
level of Thailand
Total Ex-Manila $208 $70 $25
Domestic Transshipment $437 $76 Pending
with Cha-Ro
Terms of Trade $200 $200 Pending
Total Ex-Cebu $845 $346
SOURCE: CRC Study (2007)
 Memorandum Order:
Crafting of Omnibus
Maritime Code

Philippine
Chamber of Lowering the Cost of Exporting
Commerce and
CENTER FOR RESEARCH
AND COMMUNICATION
Industry from the Philippines
 Memorandum Order 244
(March 22, 2007)

Mandates DOTC, through the MARINA, to

• Formulate and craft a proposed law that shall

address the needs and problems confronting
the local maritime industry

• The MARINA shall coordinate with

government agencies through the cooperation
of the private maritime sector, other
interested maritime and seaman’s group and
the international shipping community
 Memorandum Order 244
(March 22, 2007)

Mandates DOTC, through the MARINA, to

• The proposed law should include improving an

streamlining government rules and
procedures on

Hiring and deployment of seafarers and other

related workers of the maritime industry with the
end objectives of (a) eradicating red tape and (b)
ensuring that only qualified workers are hired and
employed locally and abroad.

Encouraging direct foreign investments in the

maritime industry by coming up with a rationalized
rules and regulations on foreign investments and
providing a schedule of incentives.
 Memorandum Order 244
(March 22, 2007)

This September, DOTC is organizing a series of

consultative workshops on

• Maritime Administration

Domestic shipping Sept 11

International shipping Sept 10
• Maritime Manpower Sept 17-18
• Maritime pollution and environment No date
• Port and Ship Safety and Security No date
• Shipbuilding and Ship Repair Sept 12
• Maritime Safety Sept 13
• Trade in services Sept 20
• Review of draft legislation no date
 Policy Concerns
(EDC NCTL Letter to DOTC, June 2007)

Domestic Shipping Sector

• DOMESTIC SHIPPING DEVELOPMENT ACT OF

2004

• Mandates MARINA to implement the provisions on

“effective competition” as a condition for the right of
domestic shipping operators to fix their own rates
(Section 8 of Chapter III of R.A. 9295, consistent with
Section 13 of Chapter IV).

• Chapter III. Sec. 8. Deregulation of the Domestic

Shipping Industry. – In order to encourage
investments in the Domestic Shipping Industry by
existing domestic operators and attract new investment
from new operators and investors, domestic ship
operators are hereby authorized to establish their own
domestic shipping rates: Provided, That the
effective competition is fostered and public
interest is served.
 Policy Concerns

The MARINA shall monitor all shipping operations
and exercise regulatory intervention where it is
established, after due process, so that public
interest be protected and safeguarded.

Chapter IV. Sec. 13. Monopolized Routes. –

The MARINA shall have the authority to draw up
such rules and regulations necessary for service
in monopolized routes to determine the fairness
of passenger and cargo rates needed to sustain
the service taking into consideration the economic
and beneficial effect which the service shall have
to the port, province, island or region it proposes
to serve, the volume of passengers and cargo
available, the level and quality of service offered
by the ship operator, and the available port
facilities and terminal handling services.
 Policy Concerns

At present, MARINA does not have the rules and

regulations in place to carry out the mandates of
Chapter IV. Section 13.

A study done by Dr. Myrna Austria of PIDS in

2002 (State of Competition in the Inter-Island
Shipping Industry) provides valuable information
on the status of monopolized routes in the
country.

Finally, in order to attract foreign investments in

the domestic shipping industry, there is a need
to review the 60-40 equity rule.
 Policy Concerns

SHIP MORTGAGE LAW

There is a need to revisit the existing

Ship Mortgage Law. As it is, the existing
legislation is unacceptable to foreign
financial intermediaries which constrain
access to foreign funds for the acquisition
of ships by Filipino shipowners.
 Policy Concerns

CUSTOMS BROKERS ACT

There is a need to introduce amendment/s to the

Customs Brokers’ Act (RA 9280) specifically
granting the sole right to the brokers (a) to
represent importers and exporters before any
government agency and private entities in cases
related to valuation and classification of imported
articles and rendering of other professional services
in matters relating to customs and tariff laws, its
procedures and practices; and (b) to sign all the
import and export entry declarations.
 Policy Concerns

Overseas Shipping Sector

• PHILIPPINE OVERSEAS SHIPPING DEVELOPMENT ACT.

As presently stipulated in the Philippine Overseas
Shipping Act, as amended, foreign equity in overseas
shipping is limited to 40% maximum. In order to attract
Philippine registry of foreign shipping lines, there is a
need to increase foreign equity participation as
recommended by the Trade in Services Group -
Transport Services (TSGTS).

• Sec. 2. Declaration of Policy. - It is hereby declared the

policy of the Government of the Philippines to:

(a) Develop and maintain a Philippine Merchant Marine

composed of well-equipped, safe and modern vessels most
suited for Philippines requirements and conditions,
manned by qualified Filipino officers and crew, and owned
and operated under the Philippine flag by citizens of the
Philippines or by associations or corporations organized
under the laws of the Philippines, at least sixty percent
(60%) of the capital of which is owned by citizens of the
Philippines;
 Policy Concerns

TARIFF AND CUSTOMS CODE

To reduce the cost of domestic transshipping

foreign cargoes, “consortium” shipping by
foreign lines within the Philippines is hereby
recommended to be allowed (without violating
the “cabotage” principle) by deleting the term
“same” in Section 1009 of TCCP:

• Sec. 1009. Clearance of foreign vessels to and from

Coastwise Ports: Passengers or articles arriving from
abroad upon a foreign vessel may be carried by the
SAME vessel through any port of entry to the port of
destination in the Philippines;…
 Policy Concerns

Ports and Terminal Handling

• PPA CHARTER. Under PD 857, the Philippine Ports

Authority (PPA) is given the power to develop, maintain,
own, operate, regulate and share from cargo handling
revenues. In many cases, “conflict of interest” arises in
the practice of these powers. There is therefore a need
to

Separate the regulatory and developmental functions of

PPA; Transform PPA purely a regulatory agency

Delete the provision that allows PPA to share from cargo
handling revenues

Increase private sector representation in PPA’s board;
other stakeholders like the Department of Agriculture
must be included in the Board.
 Policy Concerns

Ro-Ro Shipping

• RORO LAW. At present, the legal framework for the

RRTS relies solely on Executive Order No. 170 and its
annexes, namely E.O. 170-A and E.O. 170-B. There is
a need to institutionalize, through legislation, the
development of the Road-RORO Terminal System
(RRTS). In addition to the existing provisions of EO
170, 170-A and 170-B, the following new provisions
are recommended:

Declare all roads that are part and will be part of the
Road-Ro-Ro Terminal System (RRTS) as national roads –
The main goal of the RRTS is to create a seamless
infrastructure network that efficiently connects the
nautical highways with the road network. DPWH should
be the main driver of the Road-RORO system. This will
also prohibit the collection by LGUs of illegal “toll fees”
from vehicles (cars, buses, cargo trucks, etc.) passing
through their localities.
 Policy Concerns

Ro-Ro Shipping

Allow Chasis-Ro-Ro (Cha-Ro) operations by redefining
RORO cargoes as “self-powered” rolling cargoes. Based on
Section 1 of E.O. 170, Ro-Ro Operations is defined as
follows:
• Sec. 1. Definition of terms – As used in this Executive
Order:

Roll-on / Roll-off or Ro-Ro Operations shall refer to the

method of loading and discharging of self-powered
vehicles, such as cars, and trucks, on their own wheels
by their owners or drivers between vessel and shore via
a ramp;

Standardization on Ro-Ro terminals and ships. There

should be a standard design for all Ro-Ro ports/terminals
and ships in order to promote flexibility and avoid
terminal-ship mismatch, taking into consideration safety
and security.
 Stakeholder Analysis

Direct Target (Policy Maker)

• The President for having issued MO 244

• This means that the issue is included in her radar
screen
• The President to certify as “urgent” the Omnibus
Shipping Bill (this increases the probability of the
bill being enacted into law0

Indirect Target (Influencer)

• DOTC, MARINA
• Mandated by the President to craft the Omnibus
Maritime Bill
 Next Steps
DOTC

Participate actively in the consultative workshops

Submit position papers

CONGRESS

Participate actively in committee public hearings

Submit position papers

Talking heads

Don’t go to the comfort room during public hearings

Thank you.