Recovering costs?

PUBLISHED : Monday, 22 September, 2003, 12:00am
UPDATED : Monday, 22 September, 2003, 12:00am

I refer to the Below Deck column headlined 'Defence of terminal handling charges exposed by smoking gun' (September 9).

The column said: '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.' It was part of a three-pronged assault which saw Malaysia revile the unilateral way in which carriers 'recover' their land-side costs. China is investigating whether the THC is legal under its law.

The THC is what the shipping lines charge shippers, mostly exporters, for the basket of costs they incur while calling at a port to pick up their goods. Part of this service is performed by terminal operators, who charge the lines a fee for this service. The lines claim that they charge the shippers on a cost-recovery basis.

The THC in Hong Kong is $2,855 per 40ft container (for goods crossing the Pacific), the highest in the world. High-cost Japan's equivalent THC is $2,600 per 40ft; most other Asian nations are markedly cheaper.

According to a recent shippers' survey, the THC makes up between 0.5 and 4 per cent of an exporter/manufacturer's selling cost. This may seem small, but considering the average profit margin for a manufacturer is 3 per cent, it is a significant cost.

If you are an exporter/manufacturer and sell your goods on a free-on-board basis, you have no choice but to pay this ridiculously high THC in Hong Kong. Shippers have long suspected that the lines charge them double what the terminal operators charge the lines. But we have been unable to prove it, because the operators and lines refuse to disclose any information, citing the 'commercial sensitivity' of their contracts. But now this overcharge has been proved in Manila.

The high THC charge in Hong Kong is killing the small and medium-size exporter. The Hong Kong government would do well to legislate a competition law which makes the present THC cartel illegal.

The proper and fair way to conduct business is to go back to the pre-1991 days when the THC was included in the freight charge. Why is this fair? Because freight charges are market-driven and negotiable.

ALEX WOO, Tsim Sha Tsui