International shipowners agree to cut THC
Zakki P. Hakim, The Jakarta Post, Jakarta
Global firms grouped under the Overseas Shipowner Representatives Association (OSRA) has agreed to cut the much-debated Terminal Handling Charge (THC) to between US$120 to $130 per 20-foot container (TEUs), according to a minister.
Minister of Transportation Hatta Radjasa said on Monday the shipping firms had finally agreed to cut the charge in Indonesian ports, following the government's commitment to reduce costs charged to importers and exporters, and eventually ease the high cost economy.
"They see that we are serious in removing the illegal costs in our ports," Hatta said of the reasons behind the international shipping lines' willingness to cut the THC despite the nation's relatively weak bargaining power.
Indonesia has little to bargain with as shipping activities in the country heavily depend on foreign shipping lines, leaving local traders with little option but to comply.
The minister said further meetings with stakeholders were still needed to determine the details and date of implementation of the new rate.
By definition, THC is a kind of surcharge a shipping line imposes on its customers, over an above the overall ocean freight rates, to help cover extra operational costs in terminals.
The local private sector has said that the surcharge was illegal as all costs should be included in ocean freight rates, while shipping lines claim that they need the surcharge to cover numerous "invisible" costs in Indonesian ports.
Local business associations said that the THC makes Indonesian goods less competitive on the international market.
Currently, shipping lines impose a THC of $150 for a 20-foot container and $230 for a 40-foot.
Earlier this year, a government's special team for improving trade relations recommended to the government to assist exporters and importers to negotiate with international shipping lines on the issue.
The special team, which consists of various stakeholder representatives in the shipping industry, recommended that THC should be limited to $120 per TEU.
THC was introduced in Europe in the 1980s on the request of European shippers.
Over time, the practice was also implemented in Asian ports including in China, Japan, Hong Kong, South Korea, Taiwan, Singapore, Malaysia, Thailand, the Philippines and Indonesia.
However, THC was imposed on practically all shipping customers across the globe during the Gulf War in early 1990s.
The argument was that shipping routes to Europe through the Middle East faced far higher risks, therefore aside from the freight rate, shipowners charged the additional fee known as THC.
The Gulf War is now over, but the conferences of shipowners have maintained the THC.