Philippine

Shippers’
Bureau

Terminal Handling Charge:

Shippers’ Perspective

By Philippine Shippers’ Bureau

 Background
• The terminal handling charge (THC) has been an issue
for many years now. It was unilaterally imposed by
international shipping lines on both export and import
containerized cargoes purportedly to recover costs
incurred at container terminals.
• THC was first introduced in 1990 as a separate charge
from ocean freight for all container shipments for Hong
Kong-Europe trade by a group of carriers known as Far
Eastern Freight Conference (FEFC). This was followed
by another group of shipping lines, i.e. Australian & New
Zealand Eastern Shipping Conference (ANZESC) in the
same year.
2
 Background
• In late 1991, Asia North America Eastbound Agreement
(ANERA) also imposed THC for all container shipments.
Other rate and discussion agreements adopted the THC
and extended its imposition across Asia.
• ANERA (which was now replaced by Transpacific
Stabilization Agreement serving US-Asia trade) and
Intra-Asia Discussion Agreement (IADA), serving intra-
Asia trade, continue to charge the THC. Since then, THC
has become a conventional charge of shipping lines and
has steadily increased over the years.
• Philippine Shippers’ Bureau (PSB) had sought a dialogue
between shippers and liners (IADA, TSA, and FEFC) in
Manila early last year but has never come up with a
definite agreement. 3
 Background
• In the regional scene, Asian shippers, including the
Philippines, vigorously demanded for the justification of
THC from shipping lines, liner conferences and
rate/discussion agreements but no concrete resolution has
been reached except for a “harmonious and friendly”
meeting and exchange of views, the most recent of which
was the Federation of ASEAN Shippers’ Councils
(FASC)-IADA meeting in April 2004 in Singapore.

4
Contradictory Views on THC
between Liners and Shippers

5
 What is THC?
• THC, according to the Glossary of Shipping Terms, is a
charge for handling services performed at the terminal. In
general, it means the movement of containers within the
terminal and the use of its facilities.
• Based on the Shippers-Liners dialogue at the local level,
IADA proposes that their THC comprised mainly of
stevedoring, empty repositioning and container-related
services; while TSA defined the limits of their THC
“starting upon discharge of empty container from vessel
through container receiving at the terminal gate until it was
loaded onto the vessel and vice-versa.”

6
 Liner Conference/Agreement
• Sea freight for containerized
shipment is under “free-in-
and-out” (FIO) term, which
means that costs of loading
and unloading are for the
account of the
shipper/consignee.
Note: Based on IADA’s
presentation during PSB-IADA
meeting in March 2004.
Shippers’ Perspective
• Sea freight for containerized
shipment is under “Liner
terms” under which loading
and unloading costs are borne
by the carrier and, therefore
incorporated in the freight rate.
• In contrast with liner’s
perspective, “FIO” term is
generally used in chartering
arrangement to cover a port-to-
port freight or sea transport
cost, and this chartering term is
not applicable in liner
containerized shipping.
7
 Liner Conference/Rate Agreement Shippers’ Perspective
• THC = on-board stevedoring costs • On-board stevedoring is
(i.e. discharge and loading costs) conventionally for the account
+ terminal or cargo handling costs of the carrier and
considerably part of the freight
+ other container-related services under the relevant Liner
Terms; while cargo handling
Note: Based on TSA’s presentation services (or arrastre) for
during PSB-TSA meeting in containerized cargo is being
March 2004. paid separately by shippers to
terminal operator. Hence,
stevedoring cannot form part
of the THC; otherwise, there
is an overlapping of services
both charged against
shippers/consignees.
8
 Liner Conference/Rate Agreement
• THC = on-board stevedoring costs • THC, as per declaration of
(i.e. discharge and loading costs)
+ terminal or cargo handling costs
+ other container-related services
Note: Based on TSA’s presentation
during PSB-TSA meeting in
March 2004.
Shippers’ Perspective
ASEAN Ports Association in
their APA Resolution 2002-01,
is not a charge on port
operational activities. Thus, it
should not involve port-related
services.
Note: Based on APA Resolution 2002-01
during 28th APA Meeting in October
2002..
9
 I. Basic Cargo Handling Services
A. STEVEDORING Services
(paid by shipping lines to terminal operator)
Based on the PPA Tariff, it means all work performed on-
board vessel, that is the process or act of loading and
unloading cargo, stowing inside hatches, compartments and
on-deck or open cargo spaces on board vessel. Other services
included in stevedoring are:
• Rigging/Unrigging of ship’s gear
• Opening and closing of hatches
• Snatching, centering to the hatch opening, passing of cargo
and trimming
• Provision of standard stevedoring gears and equipment as
required by the cargo type 10
I. Basic Cargo Handling Services
B. ARRASTRE Services
(paid by shippers to terminal operator)
Based on the PPA tariff, arrastre includes the ff. services:
• Receive/Load cargoes from/ to ship’s tackle with the use of a
dock (arrastre) gang and cargohandling equipment;
• Check cargo by marks and quantity and acknowledge and sign
tally sheets;
• Sort, pile, stow and classify cargoes in sheds/open storage/
warehouse, if not taken/deliver direct from/to truck;
• Check and recoup bad order and damaged cargoes, if any
damage caused by the contractor;
• Delivery/Transfer cargo onto or receive from truck’s tail of
consignee’s/shipper’s transportation or ship’s tackle;
• Secure cargo from pilferage or losses while under the cargo
handler’s custody; and
• Provide manpower, equipment and such other necessary cargo
handling gears for receiving, storing, delivery, transfer and
11
shifting of cargo.
 Figure I. Container Work Flow in the Terminal.
Arrastre services Stevedoring services
S
Container H
Vessel/
Terminal I Carrier
P
Laden S *13, 14, 15, 16, 17
Container *7 , I ● 7, 8, 9
*5,6,7,8 D
*9,10 11,12 #9, 10, 11
E
Shipper ●1,2,3,4
● 5,6
# 1, 2, 3, 4, 5, 6 # 7, 8
*1,2,3,4 S
H
Empty I
Container P
S
I
D
E
Terminal Handling Charge

Legend: * - FEFC cost components # TSA cost components ● - IADA cost components
12
Refer to Annex I for the corresponding items for THC cost components.
II. Comparison between THC & Stevedoring
THC Stevedoring
(PAID BY SHIPPERS TO LINES) (PAID BY SHIPPING LINES TO
TERMINAL OPERATOR)
20’ 40’ 20’ 40’
IADA Php4,280 Php5,300 Php3,099 Php4,335
(US$ 77.81) (US$96.36)

TSA/FEFC Php5,720 Php7,590 *Note: Based on PPA Tariff Rate

(US$104) (US$138) for non-self-sustaining vessel.

Note: IADA THC is charged in Philippine

peso while FEFC & TSA charge in US$.

Philippine THC is quite high as compared

to stevedoring rate. 13
 III. Comparison between THC & Arrastre
THC Arrastre
(PAID BY SHIPPERS TO LINES) (PAID BY SHIPPERS TO
TERMINAL OPERATOR)
20’ 40’ 20’ 40’
IADA Php4,280 Php5,300 IMPORT Php2,587 Php5,936
(US$ 77.81) (US$96.36) EXPORT Php2,112 Php4,851
TSA/FEFC Php5,720 Php7,590
(US$104) (US$138) Note: Based on PPA Tariff Rate.

Note: IADA THC is charged in Philippine

peso while FEFC & TSA charge in US$.

Philippine shippers pay both THC and arrastre to the

shipping lines and terminal operator, respectively, causing a
double burden to them. 14
 Liner Conference/Rate Agreement
• THC is being charged with no
respect on the international
commercial terms agreed
between buyer and seller.
• In intra-Asia trade, shipper and
consignee are both charged
THC at the origin and THC at
destination, respectively.
• In Asia-US/Europe trade,
shipper is being charged THC;
conversely for US/Europe-
Asia trade, consignee is also
charged THC regardless of the
agreed commercial terms.
Shippers’ Perspective
• THC should be charged only
to the party paying the freight
in accordance with the
international commercial terms
(Incoterms).
• FOB sellers/shippers AND
CIF buyers/importers should
not be charged THC by the
carriers. To illustrate:
Seller Buyer
If CFR/CPT
Carrier If FOB
Or CIF/CIP Or FCA

Carrier’s THC imposition against both buyer and seller

for one and the same shipment violates the Incoterms. 15
Effects of THC

16
Table II-A. Current Level of THC in
the Philippines.
Trade 20’ Dry 40’ Dry
IADA USD 78 USD 96
(Php4,280*) (Php5,300*)
FEFC USD 104 USD 138
TSA USD 104 USD 138
*Note: IADA THC is charged in Philippine peso while FEFC and
TSA charge in US Dollar denomination.
17
Table II-B. Cumulative THC increases
in the Philippines, 1996 - 2004 (in %).
Trade 20’ Dry 40’ Dry
Cum. Inc. Ave. Inc. p.a. Cum. Inc. Ave. Inc. p.a.
IADA 185.0 23.1 194.0 24.3
FEFC 60.0 10.0 72.5 12.0
TSA 48.5 8.0 45.2 7.5
*Note: The most recent increase of 5% took effect last May 2004 for
Intra-Asian trade from Php4,080 to Php4,280 per TEU and Php5,100
to Php5,300 per FEU. 18
Table III-A. Estimated Cost of THC
to Philippine shippers (1999-2003).
Philippine Container Traffic* Total Cost of THC
Year THC Level** (in million TEU) (in million USD)
(in USD per
TEU) Export Import
1999 90 0.74 0.75 134.10
2000 90 0.80 0.81 144.90
2001 104 0.81 0.82 169.52
2002 104 0.89 0.90 186.16
2003 104 0.95 0.96 198.64
*Sourced from www.ppa.gov.ph.
**Computed based on THC levels as applied to RP-USA/Europe trade by
FEFC & TSA.

19
 Table III-B. Estimated cost of THC
to Philippine exporters (2003).
Philippine’s Containerized EXPORT
Major Market* No. of Applicable Estimated cost
TEUs THC per to shippers**
(in million) TEU (in (in million
USD) USD)
Asia (59%) 0.56 78.00 43.68
USA / North America 0.20 104.00 20.80
(21%)
Europe (17%) 0.16 104.00 16.64
Others (3%) 0.03 104.00 3.12
Total RP (100%) 0.95 n.a. 84.24
*Estimates based on the percentage market share of Philippine trade and
container traffic.
**Computed based on the current IADA THC of USD78.00 per TEU and FEFC/
TSA-THC USD104.00 perTEU for Intra-Asia andUSA/Europe trade,respectively.

20
 Table III-C. Estimated cost of THC
to Philippine importers (2003).
Philippine’s Major Containerized IMPORT
Market* No. of Applicable Estimated cost
TEUs THC per TEU to shippers**
(in million) (in USD) (in million
USD)
Asia (62%) 0.59 78.00 46.02
USA / North America 0.17 104.00 17.68
(18%)
Europe (11%) 0.11 104.00 11.44
Others (9%) 0.09 104.00 9.36
Total RP (100%) 0.96 n.a. 84.50
*Estimates based on the percentage market share of Philippine trade and
container traffic
**Computed based on the current IADA THC of USD78.00 per TEU and FEFC/
TSA-THC USD104.00 perTEU for Intra-Asia andUSA/Europe trade,respectively.
21
 Effects of THC Imposition
• THC accounts for 30%-50% of the shipping cost of RP-
ASEAN & East Asian container trade.
• THC has cost Philippine shippers approximately 130 to
200 million US dollar per year. It has increased at an
annual average rate of 8% (TSA), 10%-12% (FEFC) &
24% (IADA), the latest of which was in May 2004 at 5%
with no formal announcement and notice among shippers.
• THC adversely affects the cost-competitiveness of
international shippers particularly in the intra-Asian trade
where THC is being imposed at both ends.
• Shippers point out that THC is an integral part of the
ocean freight and therefore should not be paid separately
by them.
22
Shippers’ Position and
Action Plan

23
 Shippers’ Position & Action Plan
• To continue the efforts for an open dialogue with the
carriers directly or through a government intervention;
• To demand that a proper consultation among shippers be
observed for freight increases, surcharges and other
mutual concerns;
• To ask from carriers the application of a simple ocean
tariff structure in which “all-in freight” covers basic
ocean freight, THC and other charges, to be paid for by
the party paying the freight; and
• To work for the establishment and improvement of
effective freighting system.
24
 Discussion Points/Shippers’ Concerns
Cargo Handling Operator’s Shipping Line’s’
Services? THC Services?

25
 Discussion Points/Shippers’ Concerns
Buyer’s Obligations if the term is? Carrier’s Services &Obligations?
FCA/FOB If FCA/FOB:

CFR/CPT, CIF/CIP

Seller’s Obligations if the term is? If CFR/CPT or CIF/CPT:

FCA/FOB

CFR/CPT, CIF/CIP

26
 END
Thank you!

27