International shipowners agree to cut THC
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.