Govt faces tough talks on ship fees

Govt faces tough talks on ship fees

Rendi A. Witular, The Jakarta Post/Jakarta

Tough negotiations between the government and foreign shipping
lines on shipping costs have delayed a decision on the matter by
the Ministry of Transportation.

With the country having very little bargaining power over
international shipping lines, it remains unclear whether foreign
lines will agree to the government's proposal to cut shipping
costs.

"We are still negotiating with the shipping lines, especially
those listed overseas. The hurdle in reaching a deal is because
these lines feel their profit will decline," said Coordinating
Minister for the Economy Aburizal Bakrie on Friday.

Aburizal said he was unhappy with the negotiations on reducing
the terminal handling charge (THC), in which port operators and
related shipping associations have refused to lower the charge to
US$100 per 20-foot container.

Exporters currently have to pay a THC of $150 for a 20-foot
container and $230 for a 40-foot container. On average, the THC
accounts for about 10 percent of total shipping costs.

The government was supposed to announce a final decision on
the THC on Friday, but now a decision has been postponed until
the end of this month.

"The government does not want the THC to exceed $100 per
container. I hope there will be no more negotiating over the
rate," Aburizal said.

Aburizal coordinates the government's interdepartmental team
that was set up to reduce the high-cost economy at ports,
including issues related with the THC.

The transportation ministry, port operators and shipping
associations have put forward several pricing options to
determine the THC by reducing the container handling charge
(CHC).

Minister of Transportation Hatta Radjasa has proposed that
port operators impose a CHC of no more than US$62 per 20-foot
container. However, the latest figure agreed upon by exporters
and shipowners was a CHC of $79 per 20-foot container.

Currently, the CHC is set at $93.

The CHC is the main component for foreign shipping companies
in determining the THC, a cost that importers and exporters must
bear, in addition to actual shipment costs.

A lower CHC would allow shipping companies to reduce their THC
significantly.

For 20-foot containers, the THC consists of $93 for the CHC
and the remaining $53 to $60 for the costs imposed by foreign
shipping lines.

In the future, foreign shipping companies will no longer be
able to impose a THC exceeding 50 percent of the CHC, under a
planned regulation from the transportation ministry.