Container lines active in Indian trades say the latest government regulatory actions around terminal handling charges (THC) could have a disruptive effect on the competitive dynamics of global container supply chains.
“The government’s overall intentions of reducing the cost of logistics are welcomed by trade. However, changing the way terminal handling charges are collected and displacing them to elsewhere is not helping the cause,” the Container Shipping Lines Association of India (CSLA) said in a statement to JOC.com.
The statement comes in light of an Indian customs advisory allowing shippers to settle THC directly with terminal operators instead of the traditional carrier-shipper mode, and a broader standard operating procedure (SOP) in the works intended to separate THC from ocean freight.
CSLA, the umbrella body of foreign carriers in India, said the composition of THC is multifaceted — comprising a variety of services that typically warrants the deployment of additional resources on and off the terminal sites, by which the group seemingly argues the current scrutiny is taking place in isolation.
“These cover various operational charges that could include different costs that are borne by the shipping lines such as charges imposed by port, namely mandatory user charges, highway toll charges, etc., and costs for coordination and monitoring of containers,” the group said. “In addition to these costs, there are also port infrastructure and development charges, ground rents, wharfage, etc. that are also to be paid by the shipping lines.”
CSLA noted the proposed transition — potentially rendering those extra resources as redundant — will prove to be costly for the trade in multiple ways. “The direct payment will mean that this [additional] manpower has to go away, and that will disrupt the export-import flow, leading to delays and even containers missing vessel connection for exports, and delivery delays for imports,” it said.
In addition to heavy cost implications, the group stated having a single point of contact between a carrier and its customers under the current procedure increases speed, flexibility, and visibility in logistics services. “By moving the THC from being collected by shipping lines to port terminals, the customers will face major difficulties owing to the complexities of dealing with various intermediaries which are not their contractual partners,” CSLA said.
Potential liability issues for cargo owners
The group said the possibility of cargo owners facing liability issues will likely grow in a decentralized, multi-party service environment. Further, it said the concept of THC was introduced in the 1990s to leverage the benefits of transparency into shore-side costs as cargo interests had previously been caught up in an overly disadvantageous position while dealing with terminal service providers directly.
“It is noteworthy that the shipping lines are currently taking care of a lot of transactions in line with established, time-tested practices followed around the world through contracts between shipping lines and their customers,” Sunil Vaswani, executive director of CSLA, told JOC.com. “By moving the way THC is collected will necessarily disrupt the way business is carried out in a free market without factoring in the risks and investments involved. Needless to say, the shipping lines are taking efforts toward making logistics cost-effective and easy for our customers.”
The association highlighted that rail, road, and port infrastructure inadequacies remain the real pain points where greater government attention needs to be paid, along with further digitization of logistics services.
Meanwhile, in parallel with the THC crackdown, more shipping ancillary costs have come into the crosshairs of Indian regulators. Following a reefer exporter group approach, officials at the Ministry of Commerce have begun investigating the grounds for low-sulfur fuel (LSF) surcharges that carriers are now levying in response to the Jan. 1 start of the International Maritime Organization’s low-sulfur mandate. According to industry sources, officials will hold a stakeholder session Jan. 29 to address the latest shipper concern.
Bency Mathew can be contacted at firstname.lastname@example.org.