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.