Exporters also allowed to pay handling charges directly to terminals bypassing lines

The Centre has allowed exporters also to pay terminal handling charges (THC) directly to the terminals, bypassing the shipping lines, to cut logistics costs and promote ease of doing business.

To start with, Jawaharlal Nehru Custom House, which serves Jawaharlal Nehru Port Trust (JNPT), India’s biggest container gateway, issued a public notice to implement the new rule with effect from February 5.

Prior to this, the Government had allowed importers with authorised economic operator (AEO) status and those availing themselves of direct port delivery (DPD) facility for containerised cargo to pay THC directly to the terminal operators instead of going through the shipping lines.

The plan is expected to be rolled out in other ports as well.

Terminal Handling Charges (THC) are levied by port terminals on the shipping lines which, in turn, recover them from the exporters and importers.

Like in the case of imports, exporters have represented to the Customs Department that the lines were collecting THC, which are at variance with what the shipping lines were collecting, to pay the port terminals, resulting in lack of transparency in these charges.

“In order to bring transparency and to augment the ‘ease of doing business’ and to reduce the logistics costs, it has been decided that the exporters having AEO status may be permitted to pay THC directly to the terminal operators instead of paying through the lines,” Sanjay Mahendru, Commissioner of Customs, Nhava Sheva -II, wrote in a January 28 public notice.

Protesting against the move

Authorised economic operators are engaged in international trade and approved by the Customs as compliant with supply-chain security standards prescribed by the World Customs Organisation.

The Container Shipping Lines Association (CSLA) India, a lobby group for global container carriers operating from/to India — that includes Maersk Line, MSC and CMA CGM — has protested against Government’s move to change the mode of paying THC.

Shipping lines have also rejected allegations that they were collecting “excessive charges as THC”, arguing that the charges recovered by shipping lines are “transparent” and are “put up on their websites in India for all to check”.

Hurdles for customers

“The THC is a free market cost that should be left to the customers to decide upon,” Sunil Vaswani, Executive Director, CSLA (India) said.

“Through a fair process of acquiring quotes from different shipping lines, customers can reserve their rights to reject higher costs and choose the best suited ones as per the services they get,” Vaswani stated.

Changing the mechanism for collecting THC will disrupt the way business is carried out in a free market, without factoring in the risks and investments involved, he added.

The earlier practice ensured that the shipping lines were the single point of contact for customers instead of coordinating and engaging with multiple representatives from terminals, Customs, transporters and yards, who do not have a contractual relationship with customers.

“By moving the THC from being collected by shipping lines to port terminals, the customers will face major difficulties owing to the complexities of dealing with various intermediaries which are not their contractual partners. Their workload on documentation processes will increase tremendously leading to additional interfaces and the reconciliation processes with terminals will lead to an impact on operational efficiency, ultimately resulting in additional logistic costs,” CSLA said.

Liability issues will also arise due to the missing contractual relationship between the customer and the terminal, CSLA added.

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