Ship agents refute exporters’ claim of Rs. 7 b loss over THC

The country’s ship agents last week refuted claims by exporters that the latter were suffering a Rs. 7 billion loss owing to the long standing contentious Terminal Handling Charge (THC).

“It is a surprising that the Shippers’ Council claims that the exporters lose Rs. 7 billion in a year. Shippers Council had never quantified this value in their discussion with Shipping Associations such as Ceylon Association of Ship’s Agents (CASA) /or Sri Lanka Vessel Operators (SLAVO) said a Senior CASA Member,” shipping industry sources told the Daily FT.

A senior member of CASA said that to understand what THC was there must be proper knowledge of freight.  “Freight is the charge levied by the shipping line to transport cargo by sea from one port to another port and THC on the other hand is the loading and/or discharging cost charged by the shore-based terminal operators such as JCT & SAGT.  The liability of the shipping line for loading commences and for discharge ends when the cargo passes the ship’s rail and thereafter the liability passes onto the terminal operator, as such loading and/or unloading charge is the responsibility of the exporter and the importer,” he explained.

The terminal operators charge the cost of loading and/or discharging to the shipping line as it is easy to recover and to collect payment in advance from a single party than from a number of others. If you see the concept, the vessels discharging bulk commodities such as fertiliser, cement, sugar and flour, stevedoring/or the discharging costs are paid by the importer who imports in bulk and not by the shipping line, so it is easy for the port to collect from one /or two parties than a number of customers.

“Exporters should understand what the terminology FOB means,” said another industry analyst. “Is it to have the cargo delivered to the stack in the terminal /or deliver it “Free On Board” the vessel,” he queried.

Shipping Agency sources say that they have no problem if the exporters pay the SLPA directly for loading of their cargo onboard to fulfill their contractual obligation of the ‘Free On Board” (FOB). The shipping line through its agents are only facilitating the collection of loading charges levied by terminal operator and as far as they are concerned, THC is a cost recovery to pay the port or the terminal operator,” they pointed out.

The THC is not imposed at the insistence of the local shipping agent. The THC is levied on the instructions of the respective shipping lines and is considered a recovery of the costs paid by them to load containers in Colombo said a shipping agent.

Sources pointed out that the question that is not addressed is — why the THC in Colombo is higher than the regional ports?

Domestic handling charge at the Port of Colombo is almost four times higher than transshipment handling charge. If the Port of Colombo considers a competitive container handling cost for domestic containers, then the THC in Colombo could be significantly reduced said a shipping source.  There is no profit in THC for the shipping line as the THC is totally dispersed to the terminals.

In countries were where freights and /levies are monitored by governmental authorities the levy of THC is permitted as it is accepted that the THC does not constitute as an element of freight and is a cost recovery only, as it is part of the exporters’ cost. Bringing your containers to the terminal is not enough but it has to be loaded “free on board’, so the exporter has to cost this in his cost matrix said shipping sources.

Shipping sources say that the Government may have been misled by the interested parties but exporters should be mindful that during the time when “war risk” was applicable to Colombo, the exporters struggled to get their containers shipped out of Sri Lanka.  Shipping lines that call in Colombo load 70% transshipment volumes out of Colombo and of the balance 30% exports, only about 12% are shipped on FOB. By trying to protect this “elite” 12%, the freight, space and availability of sailing may boomerang on the CIF and SME exports,” said shipping sources.

They urged its trade associations to address this matter and clarify the position to the Government and the authorities immediately.

Export lobbies have persistently objected to the THC and the latest debate is expected to result in more exchange of opinions.  

Govt. to bring laws to counter anti-competitive practices in shipping

THE issue of THC as well as anti competitive practices figured in President Mahinda Rajapaksa’s 2011 Budget presentation last week in Parliament. Following is what he said.

“Sri Lanka’s export industry is often hampered by anti competitive practices of shipping lines. As a result, Sri Lankan exporters are often subject to various charges imposed by shipping lines. Most of these collections from FOB exporters are not legally backed by international shipping rules.

These charges not only result in anti competitive practices but also cause a serious drain of foreign exchange and tax evasions. These charges are also imposed on imports. Consequently Sri Lanka’s trade oriented SME centric economy is in a disadvantaged position. Therefore, I propose to introduce  new legislation within first 100 days of 2011, towards countering anti competitive practices in shipping and trade.”