Terminal Handling Charge:
Shippers’ Perspective
By Philippine Shippers’ Bureau
Philippine Shippers’ Bureau
2
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.
3
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 intra-Asia 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.
4
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.
5
Contradictory Views on THC
between Liners and Shippers
6
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.”
7
Liner Conference/Agreement
• Sea freight for containerized shipment is under “free-in-and-out” (FIO) term, which means that costs of loading and unloading are for the account of the shipper/consignee.
Note: Based on IADA’s 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 liner’s
perspective, “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.
8
Liner 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 TSA’s presentation
during 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) for
containerized cargo is being
paid separately by shippers to
terminal operator. Hence,
stevedoring cannot form part
of the THC; otherwise, there
is an overlapping of services
both charged against
shippers/consignees.
9
Liner 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 TSA’s presentation
during 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..
10
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 of ship’s 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
11
B. ARRASTRE Services
(paid by shippers to terminal operator)
Based on the PPA tariff, arrastre includes the ff. services:
• Receive/Load cargoes from/ to ship’s tackle with the use of a dock (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 any damage caused by the contractor;
• Delivery/Transfer cargo onto or receive from truck’s tail of consignee’s/shipper’s transportation or ship’s tackle;
• Secure cargo from pilferage or losses while under the cargo handler’s custody; and
• Provide manpower, equipment and such other necessary cargo handling gears for receiving, storing, delivery, transfer and shifting of cargo.
I. Basic Cargo Handling Services
12
Figure I. Container Work Flow in the Terminal.
Shipper
Container Terminal
Laden
Container
Empty
Container
*5,6,7,8 *9,10
S H I
P S I
D E
S H I
P S I
D E
*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
13
THC (PAID BY SHIPPERS TO LINES)
20’ 40’
IADA Php4,280 Php5,300
(US$ 77.81) (US$96.36)
TSA/FEFC Php5,720 Php7,590
(US$104) (US$138)
Stevedoring
(PAID BY SHIPPING LINES TO
TERMINAL OPERATOR)
20’ 40’
Php3,099 Php4,335
*Note: Based on PPA Tariff Rate
for non-self-sustaining vessel.
Philippine THC is quite high as compared
to stevedoring rate.
II. Comparison between THC & Stevedoring
Note: IADA THC is charged in Philippine peso while FEFC & TSA charge in US$.
14
THC (PAID BY SHIPPERS TO LINES)
20’ 40’
IADA Php4,280 Php5,300
(US$ 77.81) (US$96.36)
TSA/FEFC Php5,720 Php7,590
(US$104) (US$138)
Arrastre
(PAID BY SHIPPERS TO
TERMINAL OPERATOR)
20’ 40’
IMPORT Php2,587 Php5,936
EXPORT Php2,112 Php4,851
Note: Based on PPA Tariff Rate.
III. Comparison between THC & Arrastre
Philippine shippers pay both THC and arrastre to the
shipping lines and terminal operator, respectively, causing a
double burden to them.
Note: IADA THC is charged in Philippine peso while FEFC & TSA charge in US$.
15
Liner Conference/Rate Agreement
• 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/Europe-Asia trade, consignee is also charged 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 the
carriers. To illustrate:
Seller Buyer
Carrier If CFR/CPT
Or CIF/CIP
If FOB
Or FCA
Carrier’s THC imposition against both buyer and seller
for one and the same shipment violates the Incoterms.
16
Effects of THC
17
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: IADA THC is charged in Philippine peso while FEFC and
TSA charge in US Dollar denomination.
Table II-A. Current Level of THC in
the Philippines.
18
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 May 2004 for
Intra-Asian trade from Php4,080 to Php4,280 per TEU and Php5,100
to Php5,300 per FEU.
19
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 0.75 134.10 2000 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).
20
Table III-B. Estimated cost of THC to Philippine exporters (2003).
Containerized EXPORT Philippine’s
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 43.68
USA / 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.
21
Containerized IMPORT Philippine’s 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 46.02
USA / 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 THC to Philippine importers (2003).
22
• THC accounts for 30%-50% of the shipping cost of RP-ASEAN & East Asian container trade.
• THC has cost Philippine shippers approximately 130 to 200 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 trade where THC is being imposed at both ends.
• Shippers point out that THC is an integral part of the ocean freight and therefore should not be paid separately by them.
Effects of THC Imposition
23
Shippers’ Position and
Action Plan
24
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.
25
Discussion Points/Shippers’ Concerns
Cargo Handling Operator’s
Services?
Shipping Line’s’
THC Services?
26
Discussion Points/Shippers’ Concerns
Buyer’s Obligations if the term is?
FCA/FOB
CFR/CPT, CIF/CIP
Seller’s Obligations if the term is?
FCA/FOB
CFR/CPT, CIF/CIP
Carrier’s Services &Obligations?
If FCA/FOB:
If CFR/CPT or CIF/CPT:
27
END
Thank you!