Terminal Handling Charge Shippers Perspective 2005
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Transcript of Terminal Handling Charge Shippers Perspective 2005
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Terminal Handling Charge:
Shippers Perspective
By Philippine Shippers Bureau
Philippine
Shippers
Bureau
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Background
The terminal handling charge (THC) has been an issuefor many years now. It was unilaterally imposed byinternational shipping lines on both export and importcontainerized 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 HongKong-Europe trade by a group of carriers known as Far
Eastern Freight Conference (FEFC). This was followedby another group of shipping lines, i.e. Australian & NewZealand Eastern Shipping Conference (ANZESC) in thesame 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 THCand extended its imposition across Asia.
ANERA (which was now replaced by TranspacificStabilization Agreement serving US-Asia trade) andIntra-Asia Discussion Agreement (IADA), serving intra-Asia trade, continue to charge the THC. Since then, THChas 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) inManila early last year but has never come up with a
definite agreement.
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Background
In the regional scene, Asian shippers, including thePhilippines, 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 friendlymeeting and exchange of views, the most recent of which
was the Federation of ASEAN Shippers Councils
(FASC)-IADA meeting in April 2004 in Singapore.
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Contradictory Views on THC
between Liners and Shippers
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What is THC?
THC, according to the Glossary of Shipping Terms, is acharge 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 vesselthrough container receiving at the terminal gate until it was
loaded onto the vessel and vice-versa.
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L iner Conference/Agreement
Sea freight for containerizedshipment is under free-in-and-out (FIO) term, whichmeans that costs of loadingand unloading are for theaccount of theshipper/consignee.
Note: Based on IADAspresentation during PSB-IADAmeeting in March 2004.
Shippers Perspective
Sea freight for containerized
shipment is under Linerterms under which loading
and unloading costs are borne
by the carrier and, therefore
incorporated in the freight rate.
In contrast with linersperspective, FIO term is
generally used in chartering
arrangement to cover a port-to-
port freight or sea transport
cost, and this chartering term is
not applicable in liner
containerized shipping.
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L iner Conference/Rate Agreement
THC = on-board stevedoring costs
(i.e. discharge and loading costs)+ terminal or cargo handling costs
+ other container-related services
Note: Based on TSAs presentationduring PSB-TSA meeting in
March 2004.
Shippers Perspective
On-board stevedoring is
conventionally for the account
of the carrier and
considerably part of the freight
under the relevant Liner
Terms; while cargo handling
services (or arrastre) forcontainerized cargo is being
paid separately by shippers to
terminal operator. Hence,
stevedoring cannot form part
of the THC; otherwise, thereis an overlapping of services
both charged against
shippers/consignees.
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L iner Conference/Rate Agreement
THC = on-board stevedoring costs
(i.e. discharge and loading costs)+ terminal or cargo handling costs
+ other container-related services
Note: Based on TSAs presentationduring PSB-TSA meeting in
March 2004.
Shippers Perspective
THC, as per declaration of
ASEAN Ports Association in
their APA Resolution 2002-01,
is not a charge on port
operational activities. Thus, it
should not involve port-related
services.
Note: Based on APA Resolution 2002-01
during 28th APA Meeting in October
2002..
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A. STEVEDORING Services
(paid by shipping lines to terminal operator)
Based on the PPA Tariff, it means all work performed on-
board vessel, that is the process or act of loading and
unloading cargo, stowing inside hatches, compartments and
on-deck or open cargo spaces on board vessel. Other services
included in stevedoring are:
Rigging/Unrigging ofships gear
Opening and closing of hatches
Snatching, centering to the hatch opening, passing of cargo
and trimming
Provision of standard stevedoring gears and equipment as
required by the cargo type
I. Basic Cargo Handling Services
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B. ARRASTRE Services
(paid by shippers to terminal operator)Based on the PPA tariff, arrastre includes the ff. services:
Receive/Load cargoes from/ to ships tackle with the use of adock (arrastre) gang and cargohandling equipment;
Check cargo by marks and quantity and acknowledge and sign
tally sheets; Sort, pile, stow and classify cargoes in sheds/open storage/
warehouse, if not taken/deliver direct from/to truck;
Check and recoup bad order and damaged cargoes, if anydamage caused by the contractor;
Delivery/Transfer cargo onto or receive from trucks tail ofconsignees/shippers transportation orships tackle;
Secure cargo from pilferage or losses while under the cargohandlers custody; and
Provide manpower, equipment and such other necessary cargohandling gears for receiving, storing, delivery, transfer and
shifting of cargo.
I. Basic Cargo Handling Services
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Figure I. Container Work Flow in the Terminal.
Shipper
ContainerTerminal
Laden
Container
Empty
Container
*5,6,7,8*9,10
S
HI
PS
I
D
E
SH
I
PS
IDE
*7 ,
11,12
Vessel/Carrier
*13, 14, 15, 16, 17
*1,2,3,4
Legend: * - FEFC cost components# TSA cost components - IADA cost components
7, 8, 9
#9, 10, 11
5,6
1,2,3,4
#7, 8# 1, 2, 3, 4, 5, 6
Refer to Annex I for the corresponding items for THC cost components.
Arrastre services Stevedoring services
T e r m i n a l H a n d l i n g C h a r g e
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THC(PAID BY SH IPPERS TO LINES)
20 40
IADA Php4,280 Php5,300
(US$ 77.81) (US$96.36)
TSA/FEFC Php5,720 Php7,590
(US$104) (US$138)
Stevedoring
(PAID BY SH IPPING LI NES TO
TERMINAL OPERATOR)
20 40
Php3,099 Php4,335
*Note: Based on PPA Tariff Rate
for non-self-sustaining vessel.
Phil ippine THC is quite high as compared
to stevedoring rate.
II. Comparison between THC & Stevedoring
Note: IADA THC is charged in Philippinepeso while FEFC & TSA charge in US$.
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THC(PAID BY SH IPPERS TO LINES)
20 40
IADA Php4,280 Php5,300
(US$ 77.81) (US$96.36)
TSA/FEFC Php5,720 Php7,590
(US$104) (US$138)
Arrastre
(PAI D BY SH IPPERS TO
TERMINAL OPERATOR)
20 40
IMPORT Php2,587 Php5,936
EXPORT Php2,112 Php4,851
Note: Based on PPA Tariff Rate.
III. Comparison between THC & Arrastre
Phi lippine shippers pay both THC and arrastre to the
shipping lines and terminal operator, respectively, causing a
double burden to them.
Note: IADA THC is charged in Philippinepeso while FEFC & TSA charge in US$.
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L iner Conference/Rate Agreement
THC is being charged with norespect on the internationalcommercial terms agreed
between buyer and seller. In intra-Asia trade, shipper and
consignee are both chargedTHC at the origin and THC atdestination, respectively.
In Asia-US/Europe trade,shipper is being charged THC;conversely for US/Europe-Asia trade, consignee is alsocharged THC regardless of the
agreed commercial terms.
Shippers Perspective
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 thecarriers. To illustrate:
Seller Buyer
CarrierIf CFR/CPTOr CIF/CIP
If FOB
Or FCA
Carriers THC imposition against both buyer and seller
for one and the same shipment violates the I ncoterms.
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Effects of THC
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Trade 20 Dry 40 Dry
IADA USD 78
(Php4,280*)
USD 96
(Php5,300*)
FEFC USD 104 USD 138
TSA USD 104 USD 138
* Note: I ADA THC is charged in Phi li ppine peso whi le FEFC and
TSA charge in US Dol lar denomination.
Table II-A. Current Level of THC in
the Philippines.
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Table II-B. Cumulative THC increases
in the Philippines, 1996 - 2004 (in %).
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
20 Dry 40 DryTrade
* Note: The most recent increase of 5% took effect last M ay 2004 for
I ntr a-Asian trade from Php4,080 to Php4,280 per TEU and Php5,100
to Php5,300 per FEU.
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Container Traffic*
(in million TEU)Year
Philippine
THC Level**
(in USD per
TEU) Export Import
Total Cost of THC
(in million USD)
1999 90 0.74 0.75 134.102000 90 0.80 0.81 144.90
2001 104 0.81 0.82 169.52
2002 104 0.89 0.90 186.16
2003 104 0.95 0.96 198.64
*Sourced from www.ppa.gov.ph.
**Computed based on THC levels as applied to RP-USA/Europe trade by
FEFC & TSA.
Table III-A. Estimated Cost of THC
to Philippine shippers (1999-2003).
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Table III-B. Estimated cost of THCto Philippine exporters (2003).
Containerized EXPORTPhilippines
Major Market* No. of
TEUs
(in million)
Applicable
THC per
TEU (in
USD)
Estimated cost
to shippers**
(in million
USD)
Asia (59%) 0.56 78.00 43.68USA / North America
(21%)
0.20 104.00 20.80
Europe (17%) 0.16 104.00 16.64
Others (3%) 0.03 104.00 3.12
Total RP (100%) 0.95 n.a. 84.24*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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Containerized IMPORTPhilippines Major
Market* No. of
TEUs
(in million)
Applicable
THC per TEU
(in USD)
Estimated cost
to shippers**
(in million
USD)
Asia (62%) 0.59 78.00 46.02USA / North America
(18%)
0.17 104.00 17.68
Europe (11%) 0.11 104.00 11.44
Others (9%) 0.09 104.00 9.36
Total RP (100%) 0.96 n.a. 84.50*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.
Table III-C. Estimated cost of THCto Philippine importers (2003).
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THC accounts for 30%-50% of the shipping cost of RP-ASEAN & East Asian container trade.
THC has cost Philippine shippers approximately 130 to200 million US dollar per year. It has increased at an
annual average rate of 8% (TSA), 10%-12% (FEFC) &24% (IADA), the latest of which was in May 2004 at 5%with no formal announcement and notice among shippers.
THC adversely affects the cost-competitiveness of
international shippers particularly in the intra-Asian tradewhere THC is being imposed at both ends.
Shippers point out that THC is an integral part of theocean freight and therefore should not be paid separately
by them.
Effects of THC Imposition
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Shippers Position and
Action Plan
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Shippers Position & Action Plan
To continue the efforts for an open dialogue with the
carriers directly or through a government intervention;
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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Discussion Points/Shippers Concerns
Cargo Handling Operators
Services?
Shipping Lines
THC Services?
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Discussion Points/Shippers Concerns
Buyers Obligations if the term is?
FCA/FOB
CFR/CPT, CIF/CIP
Sellers Obligations if the term is?
FCA/FOB
CFR/CPT, CIF/CIP
Carriers Services &Obligations?
If FCA/FOB:
If CFR/CPT or CIF/CPT:
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END
Thank you!