PPA Guidelines on Port Management Transfer to LGUs

Policy, purpose, and intent

PPA is mandated to manage, operate, maintain, and develop ports under its territorial or administrative jurisdiction (Policy Statement).
In special or exceptional cases, PPA may transfer temporarily the management and operation of certain PPA-administered ports to the LGU where located or to a government corporation (GC) created by that LGU, subject to the Order’s conditions (Policy Statement).
The Order clarifies and updates guidelines to strengthen implementation of a Memorandum of Agreement (MOA) between PPA and the concerned LGU/GC (Purpose).
The Order prescribes revised administrative procedures for the temporary transfer of the management, operation, maintenance, and development of covered ports (Purpose).
The Order allows LGU participation while maintaining PPA’s statutory responsibility for ports as vital transport linkages and services (Purpose).
The Order harmonizes LGU empowerment under Republic Act No. 7160 with PPA’s statutory jurisdiction over government ports under Presidential Decree No. 857, as amended (Purpose).

Coverage and eligible ports

The Order covers ports under PPA’s administrative jurisdiction that generally cater only to domestic vessels and cargoes and are not categorized by PPA as vital or priority ports, and are not among ports programmed for development into international standards (Section 3).
Eligible ports for transfer are limited to ports that either:
- Cater only to domestic vessels and cargoes with an annual cargo throughout of not more than 50,000 metric tons over a 3-year period and are not vital/priority or programmed for international-standard development; or
- Are within the municipality and jurisdiction of the LGU (Section 7).
Ports qualified for transfer must be the subject of a MOA between PPA and the concerned LGU/GC, and the MOA must conform to the guidelines (Section 6(c)).

Key definitions established

A GC is a government-owned or controlled corporation or unit organized/created by the LGU tasked by its charter with a program for economic development of a specific territory, where port operation is directly or indirectly necessary, incidental, or conducive to achieving corporate goals (Section 5(a)).
Government Ports are public ports constructed, owned, and maintained by the national government and under PPA’s administrative jurisdiction (Section 5(b)).
LGU refers to a municipal or city government unit as defined in the Local Government Code of the Philippines of 1991 (Section 5(c)).
Supervision Fee is the amount paid by the LGU or GC to PPA equal to 10% of its collection from all domestic Wharfage, Storage and Usage Fees (Section 5(d)).
MOA is the Memorandum of Agreement entered into by PPA and the LGU or GC concerned; a proforma MOA is attached in the form used for MOA purposes (Section 5(e)).
Port Charges or Dues are Usage Fees, Wharfage Dues, and Storage Fees assessed against vessels and cargoes engaged in domestic trade (Section 5(f)).
The PPA Port System refers to the ports over which PPA exercises jurisdiction and responsibility across functional areas including planning/design, financing/loan servicing, rehabilitation/new construction/repair/maintenance dredging, port administration/management/operations, regulation, revenue collection, and related activities necessary and vital for regional development and maintaining gateways to other international ports and markets (Section 5(g)).
PPA Takeover is PPA’s resumption of management, operation, maintenance, and development of a port from an LGU or GC for cause to protect and promote public interest (Section 5(h).

General guidelines for transfer

Where both the LGU and a GC signify intent to operate and manage a port, preference is given to the LGU where the port is situated (Section 6(a)).
A GC may be considered for the award if endorsed by the LGU through an appropriate resolution of the Sangguniang Bayan/Sangguniang Panlungsod (Section 6(a)).
PPA may act on applications for transfer only if the application is complete with all documentary requirements and is approved and supported by a Sangguniang Resolution (Section 6(b)).
The LGU or GC’s authority to manage, operate, maintain, and develop a government port is for a term of three (3) years (Section 6(d)).
Cargo handling and other port-related services contracted out to third parties must not exceed the MOA term, and the LGU/GC must secure prior approval from PPA in all cases of contracting out (Section 6(e)).
The LGU/GC retains sole and primary responsibility for development, repair, and maintenance of the port under the MOA (Section 6(f)).
All port development plans by the LGU/GC must receive prior approval from PPA and must conform to the overall master plan for all ports nationwide (Section 6(g)).
Ports must be properly delineated by exact port-zone location through an approved resolution of the Sangguniang Bayan or Sangguniang Panlungsod, unless already covered by law or presidential issuances (Section 6(h)).

Operational and capitalization requirements

The LGU/GC must maintain minimum capitalization ranging from Php250,000.00 to Php 500,000.00 and working capital ranging from Php50,000.00 to Php100,000.00 (Section 8(a)).
The LGU/GC must have all cargo-handling equipment, tools, gears, and personnel necessary to operate the port (Section 8(b)).
The management and supervisory officers must have at least three (3) years relevant technical and management experience in cargo handling and/or port operations (Section 8(c)).
The LGU/GC must maintain well-trained and skilled workers of every category in port operations (Section 8(c)).
The LGU/GC’s organizational structure must include a Port Operation Section exclusively handling port operations activities to ensure efficient port services (Section 8(d)).

Powers, duties, fees, and securities

The LGU/GC may operate cargo handling and other related services within the port and may undertake port-related economic activities therein (Section 9(a)).
The LGU/GC is allowed to collect domestic port charges, cargo-handling fees, and other dues prescribed by PPA for port use and services rendered; all port revenues accrue to the LGU/GC, and the LGU/GC issues the corresponding receipts for collections (Section 9(b)).
The LGU/GC must pay PPA a quarterly Supervision Fee equivalent to 10% of the total revenue from domestic port charges (whether collected or not) (Section 9(c)).
The Supervision Fee must be delivered to PPA on or before the 10th day after the end of every quarter to the supervising PMO concerned or through its authorized depository bank (Section 9(c).
The remaining 90% of domestic port charges collection is treated as income of the LGU/GC (Section 9(c)).
The LGU/GC must post a Performance Security payable to PPA to guarantee payment of the quarterly Supervision Fee, in the amount of ONE HUNDRED THOUSAND (Php100,000.00) PESOS, secured from the GSIS or any reputable surety or insurance company (Section 9(d)).

Cancellation and grounds for termination

PPA may suspend, cancel, or terminate the MOA extra-judicially, without prejudice to other remedies, on the following grounds (Section 10):
- Failure of the LGU/GC to account and/or remit the Supervision Fee due (Section 10(a)).
- Failure to undertake development, repairs, and/or maintenance of port structures and facilities covered by the MOA (Section 10(b)).
- Change of control from sale, assignment, transfer, or disposition of interests in the MOA without prior PPA approval (Section 10(c)).
- If LGU/GC officials or employees, through free access to port premises and vessels, engage in smuggling or knowingly fail to prevent smuggling and other illegal activities (Section 10(d)).
- Refusal to make available to PPA or the Commission on Audit (COA) its books of accounts and records regarding port management, operations, maintenance, and development (Section 10(e)).
- Imposition and/or collection of fees, dues, or charges other than those allowed or authorized by PPA (Section 10(f)).
- Violation of DILG Memorandum Circular No. 2006-70, dated 26 June 2006, requiring LGUs to refrain from enforcing ordinances authorizing additional fees/taxes/charges on inter-province transport of goods and passengers and regulatory fees from passengers in local ports (Section 10(g)).
- Violation or non-performance of other MOA and Order terms (Section 10(h)).
- Any violation attributable to third parties to whom the LGU/GC contracted out MOA performance (Section 10(i)).

PPA takeover and turnover framework

PPA must take over management and operation of the port from the LGU/GC if PPA deems it necessary to protect public interest (Section 11).
Takeover is warranted in these instances:
- Emergency conditions such as strike, lockout, stoppage of work, and similar causes continuing without let-up for over one (1) week (Section 11(a)).
- Violation of MOA terms or PPA rules and regulations (Section 11(b)).
- Cancellation, suspension, or termination of the MOA (Section 11(c)).
- When directed by a court of law (Section 11(d)).
- Other cases or violations where PPA deems takeover warranted to protect and/or promote public interest (Section 11(e)).

Procedures for port turnover

The interested LGU or GC must coordinate with the concerned Port Management Office (PMO), study pertinent PPA regulations, gather port information/data, and submit a request or letter of intent (Section 12(a)).
The PMO concerned must submit its recommendation through the Port District Office (PDO) with the following documentary requirements (Section 12(b)):
- A letter-request from the interested LGU for transfer within its jurisdiction (Section 12(b)(1)).
- Approved port delineation or a Sangguniang Bayan Resolution describing the exact location of the port zone using longitude and latitude coverage (Section 12(b)(2)).
- A PMO report justifying and certifying that the port may be transferred to the LGU/GC as defined in the Order (Section 12(b)(3)).
- PMO and PDO recommendations on the transfer (Section 12(b)(4)).
The concerned District Manager must indorse the matter to Head Office (Attn: AGM for Operations) with justifications (Section 12(c)).
After approval in principle by the General Manager, a directive issues to the District Manager to convene a Transition Committee (TC) via a PDO Special Order; the TC comprises:
- Chairperson: Port Manager of the concerned PMO where the port is located
- Vice-Chairperson: Mayor of the LGU or President/General Manager of the GC or Authorized Representative
- Members: Manager, Port Services Division; Manager, Engineering Services Division; Manager, Resource and Management Division (Section 12(d)).
A Technical Working Group (TWG) must be formed by the Port Manager concerned to assist the TC (Section 12(d)).
The TC must ensure compilation of port data, assist LGU/GC in organizing and training staff, conduct readiness assessment within 3 to 6 months after formation, and submit an evaluation report to the General Manager through the District Manager and AGM for Operations with specific items, including TC certification on trainings conducted and LGU readiness and TC endorsement for turnover using a draft MOA format in the annex (Section 12(d)).
After satisfactory assessment by the PDO concerned, the District Manager must indorse the turnover and forward TC and PDO evaluation reports to Head Office (Attn: AGM for Operations) (Section 12(e)).
The Office of the AGM for Operations may recommend approval of the MOA by the General Manager; if the proposed MOA does not comply with pro-forma conditions or deviates from the Order, the MOA or recommendation must be indorsed to the Board for consideration (Section 12(f)).
The General Manager may schedule an appropriate turnover ceremony after approval of the MOA (Section 12(g)).

Tariffs, documents, signs, and compliance

Only PPA-prescribed tariff may be charged in ports transferred to the LGU/GC (Section 13(a)).
PPA retains authority to impose, fix, prescribe, increase, or decrease port charges for the port and services in the transferred port (Section 13(b)).
The LGU/GC must comply with DILG Memorandum Circular No. 2006-70 on disallowing fees, charges, and taxes on inter-province transport of goods and passengers (Section 13(c)).
If there is no existing PPA restructured cargo handling tariff for the port, PPA must prescribe the tariff before transfer and actual management/operation by the LGU/GC (Section 13(d)).
The LGU/GC must use standard letter stationery for all transactions relating to management, operations, maintenance, and development of the transferred port, using the annex standards (Section 14).
The LGU must prepare and post a standard signboard at the gate of the port/terminal office following annex standards for design, size of signboard and lettering, and use of the LGU/GC seal, and compliance must be made immediately upon turnover (Section 14).
During the MOA term, the LGU/GC must strictly comply with all applicable laws, policies, guidelines, and regulations promulgated by the government and PPA (Section 15).

Audit, inspection, manpower, and renewal

PPA must exercise visitorial powers over the LGU/GC and conduct periodic performance audits over administration and operations of transferred ports (Section 16(a)).
Performance audit must adopt pertinent provisions of PPA’s Performance Standards and Rating System (PSRS) and its subsequent amendments (Section 16(a)).
The LGU/GC must make available at all times during office hours, for inspection/examination/audit, all books of accounts and records pertaining to management, operations, maintenance, and development of the port (Section 16(b)).
PPA and COA inspections/examinations/audits must be exercised by officials within their respective statutory limits and duties (Section 16(b)).
The LGU/GC, through the Sangguniang Bayan or Sangguniang Panlungsod, is responsible for organizing its manpower requirements (Section 17(a)).
As a precondition to actual takeover, personnel tasked to manage and operate the port must undergo appropriate training with PPA, with training cost borne by the LGU/GC (Section 17(b)).
Port organization must include positions indicated in annexes to ensure port operations, port engineering and maintenance, and billing/collections are efficiently carried out; port workers hired by the LGU/GC are not considered PPA employees (Section 17(c)).
MOAs may be renewed subject to a “Very Satisfactory” rating resulting from performance review and evaluation and approval by the General Manager or the PPA Board, and renewal is subject to General Manager requirements where conditions deviate from the Order (Section 18).

Dispute resolution, reservations, separability, repeal

Parties to the MOA must submit disputes and disagreements arising from MOA implementation or interpretation to arbitration under Republic Act No. 9285 before the Department of Justice (Sections 19-20).
Arbitration venue is Metro Manila (Section 20).
PPA reserves the right to cancel any existing MOA and require immediate return of the port to the LGU/GC when national government thrusts, programs, and priorities necessitate return or when grounds in Section 10 exist (Section 21).
If any provision of the Order or its application is declared invalid, the remaining provisions and applications remain effective (Section 22).
The Order revokes and substitutes PPA Administrative Order No. 02-98 dated 05 August 1998, PPA Memorandum Circular No. 13-99 dated 08 March 1999, PPA Memorandum Circular No. 40-99 dated 17 September 1999, and PPA unnumbered Memorandum dated 09 February 2000 re: Coordination with Concerned Government Officials.
All other PPA policies, rules and regulations or parts inconsistent with the Order are deemed repealed or modified accordingly (Section 23).