The Hindu Business Line : Will it navigate around THC issue?

Though the biggest problem confronting Asian shippers exporting their goods on FOB basis, the Terminal Handling Charge issue may not be on the priority list of the Disputes Forum for various reasons.

Reports have it that the Shipping Ministry has constituted a Disputes Redressal Forum to handle the grievances of shippers. This is being viewed by many as a first step towards the enactment of the Shipping Trade Practices Act, which, when in force, will bring transparency in practices by various agencies in the maritime sector.

Along with the decision to constitute the Disputes Redressal Forum, the Government, it is learnt, has also taken a few other decisions. Thus, all the logistics service providers in the maritime sector will be required to make available on a public domain not only their tariffs but also the cost structure of each tariff item so as to make them transparent.

The chairman of each port will act as a facilitator and coordinator to ensure that the service providers in his port jurisdiction abide by the government decision and publish their tariffs with details of disaggregated cost structures. On the question of service tax leviable on the inland haulage charges it has been decided that the Shipping Ministry will hold discussion with the authorities concerned and initiate action to resolve the legal issues, if any.

So far so good. It may be noted that the Shipping Ministry has been engaged for more than a year in formulating the Draft Shipping Trade Practices Act after discussions with the various stakeholders.

Enforcement powers

However, it is not clear if the proposed Forum will be vested with such powers as to enforce any decision taken by it.

The next important question is: Will THC (terminal handling charge), the most controversial issue, come for discussion at the Forum? In fact, Mr Rohan Masakorala, Convenor of the Associations of Shippers Councils of Bangladesh, India, Pakistan and Sri Lanka (ASCOBIPS) in Asian Shippers Council, has already drawn the attention of the Western India Shippers Association (WISA) emphasising the need for incorporating the THC in the Forum's agenda pointing out that the issue is the biggest problem facing the Asian shippers exporting their goods on FOB (free-on-board) basis. But if the current situation is any indication, the THC issue will not be on the priority list of the Forum for various reasons. First, it is sub-judice. The shipowners, led by the Container Shipping Line Association (CSLA) and the Mumbai/Nhava Sheva Shipping Agents Association MANSA), have already filed a writ petition in the Bombay High Court challenging the jurisdiction of the Tariff Authority for Major Ports (TAMP) which had urged the Mumbai Port Trust (MbPT) to issue orders asking shipowners to reduce the THC. The MbPT's action followed the notification by TAMP that there was scope for considerable reduction in stevedoring and transportation charges, the two key components of the THC.

THC Components

TAMP had issued the notification in response to the request by WISA as far back as 2001 to examine the components of the THC and announce its decision. Accordingly, TAMP gave the view that its jurisdiction was limited to examining only two charges — stevedoring and transportation — and therefore could not take any position on other THC components — administration, Customs and documentation charges. TAMP accepted the shippers' contention that onboard stevedoring charges cannnot be part of THC.

The second reason why THC is unlikely to come up for discussion at the level of the Forum is this: A section of the shippers points out that the other charges such as for inland haulage, nomination and consolidation too are increasingly becoming important and therefore every effort should be made to contain them before these too assume Frankensteinian proportions. Instead of wasting effort on the THC, which is sub-judice, it is better the Forum concentrates on these other charges.

Finally, the Centre has been either unable or unwilling to resolve the THC issue despite its own admission that there are elements of inequity and arbitrariness in it. The THC was introduced in 1982-83 and accepted by the two Ministerial Committees as well as shippers. The shipping lines, both under the conference system and outside of it, reportedly quoted from an UNCTAD report to emphasise that the THC should not be part of the basic ocean freight, so much so that the Centre disbanded and closed two Freight Investigation Bureaus it had constituted in the 1970s to have examined the rationale of freight hike proposals by the shipping lines. The government's argument was that the FIBs were no longer needed as the containerisation was gradually picking up, and with it the hold of the conference operators was dwindling while the non-conference players were becoming more important.

Dissenting nations

It may be interesting to note that at least two countries in Asia — Indonesia and China — have come out strongly against the THC. The Indonesian Government is believed to have issued a directive to the ports to deny berthing facilities to shipping lines refusing to abide by the government directive on the THC. The Chinese Government has concluded an investigation into the issue stating that THC is an integral part of freight and all costs must be included in it.

New Delhi's hesitation is understandable. The Government would not like to antagonise foreign shipping lines dominating the country's sea-borne trade; the share of the Indian bottoms being only about five per cent in containers and overall around 13 per cent.

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