Defence of terminal handling charges exposed by smoking gun

PUBLISHED : Tuesday, 09 September, 2003, 12:00am
UPDATED : Tuesday, 09 September, 2003, 12:00am

The shipping lines' already teetering defence of the terminal handling charges (THC) they levy, took another battering last week when it was claimed that carriers recover double their costs at some ports in the Philippines.

The revelations from Manila were the most damaging of a three-pronged Asian assault on the legitimacy of THC, which carriers claim are set at levels that allow them to recover the cost of calling at the world's ports.

In Malaysia, the national shippers' council pressed for the establishment of a National Logistics Council to review the 'high-handed', unilateral and non-consultative way in which the carriers 'recover' land-side costs.

In Beijing, a delegation led by the Ministry of Communications began what is expected to be a lengthy investigation into whether the unilateral way in which THC are levied is legal under Chinese law.

Both initiatives are in their preliminary stages, but they appear to indicate that carrier claims of the THC being a 'cost-recovery mechanism' have worn pretty thin.

Global exporters have always viewed with suspicion carrier claims that the THC are not used to generate profit, but in the Philippines last week they appeared to have found their smoking gun.

A disclosure by the Philippine Shippers Bureau (PSB) - through the Department of Trade and Industry - of the components which comprise the THC appeared to indicate exporters were being double-billed.

The PSB said member carriers of the Intra-Asia Discussion Agreement (Iada) charged Philippine exporters for stevedoring, wharfage and storage services - costs which they already paid to other cargo handlers.

PSB director Pedro Vicente Mendoza said the disclosure revealed his country's shippers were, on average, being charged more than double the level justifiable for pure cost recovery.

As a shipper, Mr Mendoza may not be seen as an objective source, even though his other hat is paid for by the Department of Trade and Industry.

But the first public disclosure of the THC's elements in Asia did not look good for the carriers, especially given what is at stake: in China alone this year it is estimated the amount collected could reach US$2 billion.

Given the battering they are taking, the carriers have decided to change tack in Asia, or at least their public face. Despite the valiant efforts of the recently dethroned Iada chairman Kenichi Kuroya to lead some of his more conservative colleagues into the modern era of shipping, some of the intra-Asia trade's top executives would prefer to remain in the dark ages.

With Iada rudderless - it has neglected to appoint a successor to Mr Kuroya - it is thought the members of the Transpacific Stabilisation Agreement (with some high-paid spin doctors) would be better suited to put a new coat of paint on the badly listing Good Ship THC.

Adroit public relations skills certainly will be needed, as well as a big brush.

Below Deck has some words of advice for the new crew: scuttle the cost-recovery rhetoric.

It has become inflammatory, and was never a position carriers could defend without listing the elements of the THC in each and every port they call at.

Those elements will have to be revealed anyway, if you want to get paid for them. The honeymoon of trust, if there ever was one in a commercial environment, has collapsed under the weight of constant abuse.

The region's shippers' councils are no longer prepared to let the carriers use the 'commercial sensitivity' of contracts with the terminal operators as an excuse for a lack of billing transparency.

Prepare your importers to absorb at least part of the THC cost; you will have to tread delicately to do this, but perhaps it will make you better at communicating and consulting with your customers.

And be prepared to absorb some of the burden - such as the vessel-based terminals costs - yourselves. This will be a hard pill to swallow, but it will go a long way to re-establishing an element of co-operation on the THC issue.

Yes, it will nibble away at carriers' profits. But with all trade lanes going full guns and industry profitability on a strong upswing, there has never been a better time to restore relations.