The Cabinet of Ministers introduced a new service last year – one-time access to a berth by an operator. This agreement replaced the servitude agreement, which did not suit everyone. At the end of 2015, the Ministry of Infrastructure determined the cost of this special service and announced the tariffs for it. Operators handling grain have the right to apply the coefficient of 0.7 to the approved tariffs if the capacity of their cargo handling equipment is more than 500 tons per hour.
However, this has been interpreted in different ways. Operators argue that the coefficient applies to the design capacity of transshipment equipment while the Ukrainian Port Authority argues that it applies to their actual volumes of transshipment. In a column for the Ports of Ukraine publication, we examined the issue to see on whose side the law is.
The director of the LeGran.TT law firm, Tatiana Titarenko, explains why the Ukrainian Port Authority’s decision to grant operators discounts on transshipment of grain based on the actual capacity of their transshipment equipment violates an order from the Ministry of Infrastructure.
The authorities’ attempt to replace servitude with the special service that involves granting port operators one-time access to berths has created new difficulties on the market. This alternative was introduced by the government resolution No. 483 dated July 7, 2015. For its part, the Ministry of Infrastructure approved the tariffs with its order No. 541 of December 18, which came into force on January 1, 2016. The drawbacks of the new mechanism began to show in 2016.
According to the authors of this special service, one of its advantages is that it enabled operators to plan their expenditures efficiently. In practice, the opposite was true. The reason is banal: the vague wording of the Ministry of Infrastructure’s order creates grounds for misinterpretation and, as a result, disputes between the Ukrainian Port Authority and private businesses.
The final paragraph of the Ministry of Infrastructure’s order No. 541 reads: “In cases in which grain cargoes are being handled in specialized terminals with the use of cargo handling machines (with a loading capacity of at least 500 tons per hour), the coefficient of 0.7 applies to the tariffs for bulk ‘grain cargo (including seeds).’” That is, an operator that uses a modern complex with an output of more than 500 tons per hour for handling agricultural products is entitled to a 30% discount.
However, the Ukrainian Port Authority interprets this somewhat differently. The Ukrainian Port Authority cites the recommendations of the Ukrainian Research and Design Institute (UKRNIIMF), which does not have the right to issue mandatory legal clarifications of regulatory acts. According to the conclusions of UKRNIIMF experts, only those operators whose actual capacity exceeds 500 tons per hour are eligible for this discount. Meanwhile, whether an operator’s capacity actually reaches the desired level can be determined only based on a Statement of Facts (SOF), which is a document that the representative of a shipowner and the representative of a port operator sign after completion of loading or unloading operations.
Thus, neither stevedores nor cargo owners can plan their expenditures because they can see the final amount of payment for the Ukrainian Port Authority’s services only after completion of the operations. In this case, this alternative to servitude does not achieve its main goal. However, why did UKRNIIMF interpret the order in this way and hoe accurate are its conclusions?
Let us examine the order itself. The document establishes at least three clear criteria for obtaining discounts. The first criterion involves the type of cargo (grain or seeds). The second involves the method of handling the cargo (in bulk). The third involves the place of transshipment (a specialized marine terminal). The fourth involves the capacity of the cargo handling equipment (which requires additional clarification).
This requires an understanding of the terminology. Design or technical capacity refers to the technical capabilities of a machine and its maximum operating volume per hour under optimal conditions, and it is determined by structural factors and operating conditions. The technical capacity of an equipment is indicated in its technical specifications, and it is the main criterion for comparison with similar equipment.
The operating capacity or actual capacity is something different. The operating capacity is the volume of cargo that is processed under specific conditions, taking into account technological breaks, periods of servicing, labor, and many other factors. This value is a priori not constant, unlike technical capacity.
If the order No. 541 had provided for granting discounts based on the actual capacity of equipment, then it would definitely have stipulated the following:
- The formula for calculating the actual capacity
- The documents on which such calculations are to be based
- The individuals responsible for performing and verifying these calculations
As we can see, none of the above-listed items is included in the Infrastructure Ministry’s order. Thus, the capacity stipulated in it implies a constant value that can be confirmed only by a machine’s technical specifications. This means that the order is referring to estimated capacity. In this case, operators can predict their costs based on the technical specifications of their equipment.
The State Regulatory Service reached the same conclusion and said the following in response to our request: “The main criterion for determining capacity should be the constant technical characteristics of cargo handling machines specified by the manufacturer of the machines and not the actual capacity during transshipment of goods, which is situational. In addition, the regulatory act does not stipulate additional methods for determining the actual capacity of cargo handling machines.”
Thus, the granting of discounts is regulated by the Ministry of Infrastructure’s order and, therefore, any broader interpretation of the law is not acceptable, regardless of the status of the subject that levies the fee for this service. The obvious conclusion: if you do not know what to do, act in accordance with the law and strictly as prescribed in the regulatory act rather than reinvent the wheel. After all, reinventing the wheel could eventually lead to negative consequences in terms of both the antimonopoly legislation and the regulatory impact and one of the main objectives of the document – enabling operators to efficiently plan their costs – will not be achieved.