Traders to see lower shipping costs

Traders to see lower shipping costs

Rendi A. Witular, The Jakarta Post, Jakarta

The government will soon issue a regulation requiring state port
operators PT Pelindo I to IV to lower their container handling
charge (CHC) in order to ease the burden of shipping costs on
local exporters and importers.

Under the new regulation, Pelindo will only be able to impose
a CHC of not more than US$62 for handling an empty 20-foot
container, lower than the current rate of $93, Minister of
Transportation Hatta Radjasa told The Jakarta Post on Tuesday.

"A ministerial decree to lower the CHC will be issued this
week. This is part of incentives for the business community
provided by the government in the wake of the increase in fuel
prices," said Hatta.

The CHC is the main component for foreign shipping companies
in deciding the amount of the terminal handling charge (THC),
which represents a burden to exporters and importers quite apart
from actual shipment costs.

With lower CHC, shipping companies will be able to reduce
their THC significantly, amounting currently to 50 percent of the
CHC.

At present, exporters have to pay THC of $150 for a 20-foot
container and $230 for a 40-foot container, which on average
makes up about 10 percent of the total shipping costs they have
to bear.

By definition, THC is a kind of surcharge a shipping line
imposes on its customers, over and above the overall ocean
freight rates, to help cover extra operational costs in terminals
such as paying illegal fees to port operators and security
officers.

For 20-foot containers, the THC component costs includes $90
for the CHC and the remaining $60 for the costs imposed by
foreign shipping lines.

"In the future, foreign shipping companies can no longer
impose a THC exceeding 50 percent of the CHC. After we issue the
regulation, we expect the THC will be reduced from $150 to only
$90," Hatta asserted.

The minister said foreign shipping companies that refused to
lower their THC after the implementation of the new regulation
would face severe sanctions from his ministry. The sanctions
would include revocation of their licenses to operate in
Indonesia.

However, it remains unclear whether shipping companies will
comply with the new decree as Indonesia has very little
bargaining power over shipping in a country heavily dependent on
foreign lines.

Over the past two years, local businesses have been
intensifying calls for the reduction or abolition of THC imposed
by shipping firms grouped under the Overseas Shipowner
Representatives Association (OSRA).

Local companies claim that the THC is a burden on their
shipping costs since it is the highest compared to similar
charges imposed in other Southeast Asian countries.

The THC issue is among factors causing Indonesia's high-cost
economy that the government has been working to reduce, aside
from illegal levies and other harbor charges, such as bills of
lading (B/L) fees.