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Background
The terminal handling charge (THC) has been an issue for many years now. It was unilaterally imposed by international shipping lines on both export and import containerized cargoes purportedly to recover costs incurred at container terminals. THC was first introduced in 1990 as a separate charge from ocean freight for all container shipments for Hong Kong-Europe trade by a group of carriers known as Far Eastern Freight Conference (FEFC). This was followed by another group of shipping lines, i.e. Australian & New Zealand Eastern Shipping Conference (ANZESC) in the same year.
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Background
In late 1991, Asia North America Eastbound Agreement (ANERA) also imposed THC for all container shipments. Other rate and discussion agreements adopted the THC and extended its imposition across Asia. ANERA (which was now replaced by Transpacific Stabilization Agreement serving US-Asia trade) and Intra-Asia Discussion Agreement (IADA), serving intraAsia trade, continue to charge the THC. Since then, THC has become a conventional charge of shipping lines and has steadily increased over the years. Philippine Shippers Bureau (PSB) had sought a dialogue between shippers and liners (IADA, TSA, and FEFC) in Manila early last year but has never come up with a definite agreement. 3
Background
In the regional scene, Asian shippers, including the Philippines, vigorously demanded for the justification of THC from shipping lines, liner conferences and rate/discussion agreements but no concrete resolution has been reached except for a harmonious and friendly meeting and exchange of views, the most recent of which was the Federation of ASEAN Shippers Councils (FASC)-IADA meeting in April 2004 in Singapore.
What is THC?
THC, according to the Glossary of Shipping Terms, is a charge for handling services performed at the terminal. In general, it means the movement of containers within the terminal and the use of its facilities. Based on the Shippers-Liners dialogue at the local level, IADA proposes that their THC comprised mainly of stevedoring, empty repositioning and container-related services; while TSA defined the limits of their THC starting upon discharge of empty container from vessel through container receiving at the terminal gate until it was loaded onto the vessel and vice-versa.
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Liner Conference/Agreement Sea freight for containerized shipment is under free-inand-out (FIO) term, which means that costs of loading and unloading are for the account of the shipper/consignee.
Note: Based on IADAs presentation during PSB-IADA meeting in March 2004.
Shippers Perspective Sea freight for containerized shipment is under Liner terms under which loading and unloading costs are borne by the carrier and, therefore incorporated in the freight rate. In contrast with liners perspective, FIO term is generally used in chartering arrangement to cover a port-toport freight or sea transport cost, and this chartering term is not applicable in liner containerized shipping.
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Shippers Perspective
THC = on-board stevedoring costs On-board stevedoring is conventionally for the account (i.e. discharge and loading costs) of the carrier and + terminal or cargo handling costs considerably part of the freight + other container-related services under the relevant Liner Terms; while cargo handling Note: Based on TSAs presentation services (or arrastre) for containerized cargo is being during PSB-TSA meeting in paid separately by shippers to March 2004. terminal operator. Hence, stevedoring cannot form part of the THC; otherwise, there is an overlapping of services both charged against shippers/consignees.
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Shippers Perspective
THC = on-board stevedoring costs THC, as per declaration of ASEAN Ports Association in (i.e. discharge and loading costs) their APA Resolution 2002-01, + terminal or cargo handling costs is not a charge on port + other container-related services operational activities. Thus, it should not involve port-related Note: Based on TSAs presentation services. during PSB-TSA meeting in Note: Based on APA Resolution 2002-01 March 2004.
during 28th APA Meeting in October 2002..
Container Terminal
Laden Container
*5,6,7,8
1,2,3,4
Vessel/ Carrier
*13, 14, 15, 16, 17
7, 8, 9
*7 , *9,10
5,6
11,12
Shipper
Empty Container
#9, 10, 11
# 1, 2, 3, 4, 5, 6
*1,2,3,4
# 7, 8
Terminal
Handling
Charge
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Legend: * - FEFC cost components # TSA cost components - IADA cost components Refer to Annex I for the corresponding items for THC cost components.
Stevedoring
(PAID BY SHIPPING LINES TO TERMINAL OPERATOR)
IADA
20 Php3,099
40 Php4,335
Arrastre
(PAID BY SHIPPERS TO TERMINAL OPERATOR)
IADA
Philippine shippers pay both THC and arrastre to the shipping lines and terminal operator, respectively, causing a double burden to them. 14
Shippers Perspective
THC is being charged with no respect on the international commercial terms agreed between buyer and seller. In intra-Asia trade, shipper and consignee are both charged THC at the origin and THC at destination, respectively. In Asia-US/Europe trade, shipper is being charged THC; conversely for US/EuropeAsia trade, consignee is also charged THC regardless of the agreed commercial terms.
THC should be charged only to the party paying the freight in accordance with the international commercial terms (Incoterms). FOB sellers/shippers AND CIF buyers/importers should not be charged THC by the carriers. To illustrate:
Seller
If CFR/CPT Or CIF/CIP
Buyer
Carrier
If FOB Or FCA
Carriers THC imposition against both buyer and seller for one and the same shipment violates the Incoterms. 15
Effects of THC
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*Note: IADA THC is charged in Philippine peso while FEFC and TSA charge in US Dollar denomination.
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Table II-B. Cumulative THC increases in the Philippines, 1996 - 2004 (in %).
20 Dry 40 Dry Cum. Inc. Ave. Inc. p.a. Cum. Inc. Ave. Inc. p.a. IADA 185.0 23.1 194.0 24.3 FEFC 60.0 10.0 72.5 12.0 TSA 48.5 8.0 45.2 7.5 Trade
*Note: The most recent increase of 5% took effect last May 2004 for Intra-Asian trade from Php4,080 to Php4,280 per TEU and Php5,100 to Php5,300 per FEU. 18
*Sourced from www.ppa.gov.ph. **Computed based on THC levels as applied to RP-USA/Europe trade by FEFC & TSA.
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Asia (59%) USA / North America (21%) Europe (17%) Others (3%) Total RP (100%)
*Estimates based on the percentage market share of Philippine trade and container traffic. **Computed based on the current IADA THC of USD78.00 per TEU and FEFC/ TSA-THC USD104.00 perTEU for Intra-Asia andUSA/Europe trade,respectively.
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Asia (62%) USA / North America (18%) Europe (11%) Others (9%) Total RP (100%)
*Estimates based on the percentage market share of Philippine trade and container traffic **Computed based on the current IADA THC of USD78.00 per TEU and FEFC/ TSA-THC USD104.00 perTEU for Intra-Asia andUSA/Europe trade,respectively.
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To demand that a proper consultation among shippers be observed for freight increases, surcharges and other mutual concerns; To ask from carriers the application of a simple ocean tariff structure in which all-in freight covers basic ocean freight, THC and other charges, to be paid for by the party paying the freight; and To work for the establishment and improvement of effective freighting system.
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If FCA/FOB:
If CFR/CPT or CIF/CPT:
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END
Thank you!
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