The Hindu Business Line : Terminate handling charges

Many in the shipping industry feel that shipping lines should stop collecting terminal handling charges, which account for 20-25 per cent of the freight, and have sought government intervention in the matter.

Collecting terminal handling charges (THC) is a major issue in global maritime trade. Countries such as China, Indonesia and Australia have taken action against shipping lines collecting THC — from shippers (manufacturers, importers, exporters and retailers) — for moving boxes between container terminals (on the shore) and ships.

Many in the Indian shipping industry too feel that shipping lines should stop collecting the THC, which accounts for 20-25 per cent of the freight, and have sought government intervention in the matter. The THC is affecting the competitiveness of Indian ports, according to shipping industry sources.

China's Ministry of Communications recently told shipping liner conferences that an amendment is required to state clearly that the notice on international carriers collecting a standardised THC from China shippers — issued by the liner conferences in 2001 — is non-binding on its members.

Simplify ocean tariff

Another significant development was a joint declaration of global shippers made in September 2005 at Jakarta which included an action plan to be pursued by the shippers' councils of the region. It was decided to bring the THC issue to the International Chamber of Commerce to draw up guidelines and move the Word Trade Organisation through the respective governments to formulate suitable policy guidelines. The meeting demanded that carriers apply a simple ocean tariff structure, which includes the basic ocean freight, the THC and other surcharges, said Mr S. R. L. Narasimhan, Secretary, Western India Shippers Association (WISA).

The Indonesian government a few months ago said that any shipping line that does not bring about a reduction in its THC, as notified by the Indonesian Government, should be denied berthing rights, he said.

Affects competitiveness

According to a source in a major shipping line, the THC is required to recover costs of container handling at terminals. By separating the shore-side charges from ocean freight rates and making THC a separate cost item helps the lines prevent irrational price-cutting or excessive competition among the lines. THC affects the competitiveness of the trade (both imports and exports) because the charge has to be factored into the overall transaction costs. The THC is one of the ever-increasing number of surcharges and ancillaries levied and recovered by the shipping lines, said Mr Narasimhan.

The IPBC (India-Pakistan-Bangladesh-Ceylon) Conference sets the THC rates in the Indian Ocean region. The Table indicates the THC rates notified by the IPBC for JNPT and NSICT, effective May 16, 2006, in respect of the CFS-stuffed export containers.

Though IBPC rates are supposed to be applicable only to its constituent members, it has become a universal practice for non-conference members to follow the conference notified THC and other surcharges, said Mr Narasimhan.

No regulatory framework

Mr Narasimhan said there is no regulatory framework in place in India to look at the THC. If and when the proposed draft Shipping Trade Practices Act, 2006, is put in place, an enabling framework would be created for the Government to monitor and take corrective actions for any abuse or misuse.

Although two high-level committees — in 1983-85 and 1989 — had gone into the question of THC, all they could do was to make the shipping lines/conferences spell out the cost units comprising the THC, he said.

Decades ago, cargo through seaports was in break-bulk and was brought alongside the ship at the shippers' expense and loaded on the vessel. Loading and discharging costs were borne by the shipping line, while moving cargo from alongside the ship was the responsibility of the consignee. However, containerisation changed all this. The point of delivery changed from alongside the ship, to a stack in the yard at the port rented by the shipping line. This meant that shippers had no say in the loading or discharging of their cargo, according to the Sri Lanka Shippers Council Web site.