firstname.lastname@example.org The deeper you dig into the terminal handling charge (THC) debate, the bigger the shovel you need. Why THC levels are set higher in Hong Kong than anywhere else is a mystery and, with neither terminal operators nor shipping lines having a vested interest in clarifying matters, it is likely to remain so. This is why an independent body should assure THCs at the port are not usury and economically detrimental to all but a few. Alas, rather than intervene, the government has chosen to hide behind the same stale laissez-faire rationale it chose recently to go against in the real-estate sector. Why? For the uninitiated, THCs are the misleadingly named fees shipping lines charge shippers for the costs carriers incur while calling at Hong Kong terminals. The carriers claim it is a cost-recovery mechanism, never used to generate profit. Shippers know better, but are hard-pressed to prove it due to convenient cries from terminal operators and shipping lines of 'commercial sensitivity' regarding their mutual contracts. Cracks appear from time to time in the liner-operator alliance, such as a few months ago when Hong Kong's terminal bosses claimed their fees had dropped 15 per cent to 25 per cent in real terms since the handover. Apparently tired of shouldering the blame for the high THC levels, Hutchison said it would try to convince Wharf to undertake an audit to prove the point. Shippers, who did not see a corresponding drop in the THC since the handover, thought they had finally found their smoking gun and cried foul. If terminal costs had dropped, why had the lines not dropped the THC?, they rightfully asked. The lines feigned surprise at the terminal operators' reduction claims and promised an investigation (buying time to browbeat their loose-lipped partners, no doubt). To no one's surprise, carriers found no evidence of an aggregate decline in terminal costs in Hong Kong. 'Empirically speaking, the average cost for [intra-Asia] lines has actually increased,' Ken-ichi Kuroya, chairman of the Intra-Asia Discussion Agreement, wrote to the Hong Kong Shippers Council. Equally predictable, Hutchison said it failed to convince Wharf to partake in the audit. A Hutchison spokesman said: '[Wharf] feels it isn't relevant anymore, because most people understand the issue now.' Apparently, someone forget to tell Wharf that version of events. A Wharf executive said: '[An audit] would be meaningless. I don't see the point. The press and Legco continue to confuse the THC with other costs. I'm just tired of engaging in this discussion in public. It is for the shipping lines to deal with.' To an extent, he is right. Media coverage has been confused, at best, and ill-informed councillors have added to the problem. Even recent independent analysis - such as CLSA's assessment of South China THCs in its report entitled Hong Kong Strategy - appears flawed. One of the report's summations: 'The shippers argue that since Shenzhen and Hong Kong port operators are essentially the same interests, they are keeping Shenzhen THC deliberately high.' The lines, not the operators, set the THC. It is a kind of sloppiness which allows the terminal operators to dismiss as confused what is otherwise a valuable and much-needed independent voice. In July, the Consumer Council rightly suggested the Port and Maritime Board (PMB) should act as a THC watchdog, to assess when they were being set at levels damaging our regional competitiveness. But the PMB declined, saying it was for the market to settle. Elsewhere in Southeast Asia, there have been recent suggestions of shipping lines using the THC to generate revenue. Press reports in Malaysia and Indonesia indicate THC levels are being set as much as 30 per cent above cost recovery. It follows that the practice will also happen here, perhaps at lower levels. A port executive, while sympathetic to the mounting costs carriers face from growing trade imbalances, told Below Deck the gig may be up for the lines. The port executive said: 'They should change their story and say we have so many additional costs that we must recover from somewhere. But they don't. They continue to claim [the THC] is not used to generate revenue.' Conversely, terminal operators in Hong Kong continue to enjoy inflated profit margins, even as the economy worsens. Below Deck would not want to be the scourge of the rampant capitalism which has been the backbone of Hong Kong's rise to stardom. But the THC debate has gone on long enough to indicate the port's service providers have no intention of coming clean on the issue. The government does not have to intervene in the market and set the THC levels. But it should at least know the THC levels are being set so as not to be detrimental to the economy. It is hard to assess that from a distance.