Shippers in China, Sri Lanka cry foul over conference-imposed THCs

Shippers in China, Sri Lanka cry foul over conference-imposed THCs Four Chinese shipper groups say member ocean carriers of four conferences are already running afoul of a new Chinese government mandate requiring conferences to be transparent in their assessment of non-rate-based charges.
   In this case, the Hong Kong Shippers’ Council and the China, Macau and Shenzen shippers’ associations are alleging that carriers in the Intra-Asia Discussion Agreement (IADA), Informal Rate Agreement (IRA), Informal Red Sea Agreement (IRSA) and the Informal South Asia Agreement (ISAA) have violated the mandate by severely increasing terminal handling charges at South China ports.
   The IRSA, IRA and ISAA have said they will seek the following THC    increases from May 15:
   * $141 per dry TEU, up 197 percent.
   * $269 per dry FEU, up 275 percent.
   * $181 per reefer TEU, up 244 percent.
   * $344 per reefer FEU, up 339 percent.
   The IADA increases are due to come into effect June 1:
   * $136 per dry TEU, up 186 percent.
   * $259 per dry FEU, up 260 percent.
   * $176 per reefer TEU, up 234 percent.
   * $334 per reefer FEU, up 238 percent.
   In March, the Chinese government laid down a landmark decision requiring liner conferences to consult with shipper groups before issuing increased charges outside of negotiated rates — a category in which THCs fall.
   “Before the decision is made, they didn’t inform us to hold consultations according to the ‘notice on strengthening supervision on liner conferences and freight discussion agreements’ issued on March 12,” the China Shippers’ Association said in a letter earlier this month to China’s Ministry of Communications, Ministry of Commerce and Fair Trade Bureau.
   “The increases are totally unjustifiable, and they range from two to nearly four times higher than the current levels of THC,” the Hong Kong Shippers’ Council and Macau and Shenzen shippers’ associations said in a joint statement last week. “When the carriers first introduced THC in China in 2003, it was already being levied on top of freight rates, and the whole sum became purely additional revenue for the carriers since all the costs at the terminals are covered by all-in freight rates.
   “Carriers are far too greedy in seeking to raise levels totally without justification. It is clearly a move to exploit shippers for the carriers’ own benefits. The amount being considered is very substantial. Using Shenzhen ports throughput figures — and only calculating for the particular trade lanes of said carriers — the lines are asking shippers to fork out RMB 3.15 billion ($408 million) more annually.
   “The increases would cause great burden to shippers in the Pearl River Delta at a time when they are already under tremendous pressure from an adverse trade environment and intense competition from the Yangtze River Delta economic zone and other regions. The carrier conferences state that the increases are proposals only and not binding on their members. Obviously, carrier conferences fear of being accused of practicing collective pricing. Consequently, shippers should reject all requirements or requests for THC increases from any or all of the carriers.
   “The THC is an unjustifiable cost and the recent action of carriers to further increase their levels in South China will cause significant damage to the importing and exporting businesses in the region.”
   Meanwhile, Sri Lankan press outlets reported last week that the Sri Lanka Apparel Exporters Association is claiming that shipping lines are arbitrarily imposing THCs at Sri Lankan ports, resulting in an annual loss of $45 million.
   “Since its inception in 1997 THC charges for a 20-foot container has grown from $61 to the present $155,” said Rohan Masakorala, logistical committee member of Sri Lanka’s Joint Apparel Association Forum, in a press conference last week. “The shipping companies do not take responsibility for the charges they impose as we have organized repeated discussions on the matter, but they have failed to clarify the breakdown of the charges or even turn up for the discussions.”