Govt asked to help lower port fees

Zakki P. Hakim, The Jakarta Post, Jakarta

The government should assist the local private sector in negotiating with international shipping lines for a significant cut in the much-debated Terminal Handling Charge (THC), a special government team for improving trade facilitation has recommended.

The team also suggested that shipping lines include THC as a component in their overall ocean freight rates.

The recommendations are a response to complaints from local exporters and importers, who claim that shipping lines had imposed an "illegal" THC rate on Indonesia that was far higher than other countries in the region.

Local associations said the practice made the country's goods less competitive in the global market.

A report from the Ministry of Transportation, however, showed that conferences of foreign shipowners had the final say in determining the THC rate for Indonesia.

"The government can only facilitate negotiations between the foreign shipowners and local exporters and importers," it says.

The team recommended that the THC should be limited to US$120 per 20-foot container equivalent units (TEUs), or a 30 percent margin on the actual official container handling charge (CHC) of $93 in the port of Tanjung Priok.

The Indonesian Exporters Association (GPEI)'s secretary- general Toto Dirgantoro said such negotiations would be more effective if Indonesia became a member of the conferences.

He said Indonesia could become a member if the country bought at least five vessels each with a capacity to transport 2,000 20- foot containers.

By becoming a shipowner and joining the "cartel", it would be easier for Indonesia to have a say in determining the THC rate for the country, said Toto, who is also a member of the team (not the team's head as reported earlier).

THC is imposed by shipping lines on their customers to cover extra operational costs in terminals outside the overall ocean freight rates.

The local private sector has claimed that the surcharge was illegal as all costs should be included in the ocean freight rates. Shipping lines, however, claim they need the surcharge to cover numerous "invisible" costs in Indonesian ports.

The transportation ministry issued a ministerial circular dated Oct. 10, 2002, suggesting that all kinds of additional costs should be included in the ocean freight rate.

Currently, shipping lines imposed a THC tariff of $150 for a 20-foot container and $230 for a 40-foot.

According to the Indonesian National Shippers Council (INSC), the imposition of THC cost local exporters and importers losses of $825 million annually.

Toto, who is also the INSC deputy chairman for ports and custom's services, said the government should try and persuade all shipping lines to include the THC into their overall ocean freight rates.

"Several shipping lines have agreed to include THC in their ocean freight rates after the transportation ministry summoned them for a meeting to remind them about the circular," he said.

THC was first introduced in Europe in the 1980s at the request of European shippers as a means of leveling freight costs among ports on the continent.

Over time, the practice has also been implemented in Asian ports, including China, Japan, Hong Kong, South Korea, Taiwan, Singapore, Malaysia, Thailand, the Philippines and Indonesia.

Comparison of Terminal Handling Charges (THC) in Asian countries:

Countries THC*
Thailand 65
China/Shanghai 66
Malaysia 78
The Philippines 78
Singapore 101
Indonesia 150

* Note: THC for 20-feet container in US$

Source: Indonesia National Shippers Council (INSC)