Vested interests scuttle fresh bid to settle fees row

PUBLISHED : Friday, 23 April, 2004, 12:00am
UPDATED : Friday, 23 April, 2004, 12:00am

Every time a settlement to the long-running dispute over terminal handling charges (THC) appears to draw nearer, the ugly face of self interest surfaces to scuttle all progress.

Much to its credit, China's State Council last year intervened in the increasingly fractious affair, if only once again to bring the two sides to the table to find a solution.

The THC is a fee the shipping lines pass on to the exporters to recover the basket of costs they incur when calling at a port. It is not meant to generate profit.

The council in August last year entrusted the Ministry of Communications to hold a hearing into whether the unilateral way in which shipping lines applied the levy was contrary to Chinese laws on pricing and maritime practices.

The two-day hearing prompted the ministry to hand-pick a 'panel of experts' to dissect the evidence and come up with a finding on the legal issues and suggestions for a way to settle the dispute.

A deadline of October 31 was set, later delayed to the end of the year.

The New Year passed with no new deadline set. A ministry spokesman said vaguely last week he hoped a decision on the THC could be reached by 'mid-year'.

One insider's version of what conspired to derail the latest process is a tale that could only happen in the shipping industry, cloaked as it is by the dual veils of anti-trust immunity and zealously guarded commercial contracts.

Some time back, the experts returned their report to the ministry. It found the THC to be anti-competitive, contrary to China's pricing and maritime laws and against the United Nations Code on Liner Conduct. Being aware that the carriers were fully entitled to recover the costs of calling at a port to pick up the cargo, they did not suggest the THC be outlawed.

Instead, they suggested the THC should be negotiated by the buyer and seller of the goods being exported as a part of the sales contract, allowing its level to fluctuate with the demand for the products, and, therefore, with the demand for transport services.

At present, there are no negotiations to fix the level of the THC and it is part of the transport contract. It is set at an arbitrary level by the carriers, who are under no legal obligation to disclose how that level was reached, or whether, in fact, it is only cost recovery.

Exporters claim the lines are making a tidy profit from the THC and there is growing evidence to suggest they are correct.

Officials from the Ministry of Communications rejected the findings of their hand-picked panel, largely comprised of independent academics and experts on commercial and maritime law.

Only a cynic would suggest this may have been because the ministry's prized assets include the mainland's two biggest container shipping lines.

It then proceeded to pen its own report finding that the THC contravened no laws and should be kept in the transport contract; it then had the temerity to submit the report to the council as the product of a consultative process.

State Council members, in their wisdom, rejected the ministry's report and ordered the officials back to the table with the Ministry of Commerce, which represents the interests of the exporters, for further discussions.

The process, apparently, is back to square one.

No one, not even the exporters, begrudge the lines the right to recover their costs. But until it is proven that the THC is not being used to turn a profit, there will continue to be ill will.

In February, the Transpacific Stabilisation Agreement, a group comprising most of the major carriers moving cargo between North America and Asia, raised a brief glimmer hope by revealing the components of the THC.

The mini-euphoria lasted until the disclosure revealed they had included in the list the cost of repositioning their empty containers to the marketplace.

The cost of repositioning empties, a US$19 billion burden to the carriers last year by one estimate, is already factored into the freight rates charged for moving a box from origin to destination.

The move was viewed darkly by Hong Kong's exporters and seen as further proof of a lack of sincerity from shipping lines that claim to want to enter into meaningful dialogue to end the dispute.