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By Ravi Ladduwahetty

A professional dispute has been simmering between two premier shipping bodies- the Ceylon Association of Ship's Agents (CASA) and the Sri Lanka Shippers' Council (SLSC) in respect of the Terminal Handling Charge (THC). CASA believes that the THC should be paid to the shipping lines while the Shippers' Council believes that the THC should be incorporated in the freight costs. The Shippers' Council also believes that its members are paying ancillary charges which are embedded in the THC which they are not necessarily liable.

Here, the Chairman of the Sri Lanka Shippers Council Ravindra Ratnapala is in conversation with the Daily News where he speaks on the core issues governing the THC and other allied matters relating to the industry. "I have asked the Ports Authority for the breakdown of the Terminal Handling Charge. If we can resolve this, it will be an achievement for everybody. We will bear the rest of the costs, if we have to. They should be putting that on the freight rate. No ancillary charges should be put on freight rates as separate components. There are certain costs incorporated in the THC which is not applicable to the shipper. That is a cost that the agent has to pay in terms of handling the container", he said.

The Shippers Council Chairman is confident that a four year dispute over which litigation was sought, would be amicably solved within the next 30 days. What I want at the end of the day is for both shippers and the vessel operators to come out winners, he said.

The interview:

Q: As the Chairman of the Sri Lanka Shippers' Council, how do you see Sri Lanka's export business in a competing environment with countries like China getting favoured status ?

A: Answering that is indeed difficult as China is a huge place. I do not think that there is any other product in Sri Lanka that could compete internationally other than tea.

Q: Then, what about apparels ?

A: That also has its won level of competition with emerging manufacturing bases such as Vietnam and Bangladesh. Unless we get our act together with the requisite cost controls, it will be tough with the World Trade Organisation (WTO) Agreements etc and with the Multi Fibre Agreement in 2005.

Q: With the global backdrop which is gradually gearing itself to the removal of tariff barriers and the consequent increase of cross border trade, how do you see the dispute over the Terminal Handling Charge (THC) between the Ceylon Association of Ships' Agents (CASA) and the Sri Lanka Shippers' Council (SLSC) with the dispute and with likely intervention of the Ministry of Commerce and Consumer Affairs ?

A: This dispute would not have been going on for so long if the Ceylon Association of Ships' Agents were willing to look at it in a favourable manner. What I want at the end of the day is for both shippers and the vessel operators to come out winners. We are neither asking for a reduction in the Terminal Handling Charge or for it to be done away with. We are agreeable for it. All what we have asked for is the THC to be included in the freight rate. For what ever the reasons are, they have not done it as they will lose out on that. So long as they are not going to talk to us, we are not giving in.

We are determined to solve this as the Sri Lankan shipper is suffering due to this, particularly the FOB (Free on Board) exporter.

They refused to talk to us and they thought that they were big.

Fortunately, we have a Government and a Commerce Minister who is trying his best to resolve problems. He knows that what we have asked for is not unreasonable. Minister Karunanayake himself comes from freight forwarding background and he is not going to implement it if he thinks that it is detrimental.

That is why he has offered to come up with a solution in the form of legislation by incorporating it in the Consumer Protection Act and we will undoubtedly support it. It will happen soon. Shipping lines have expressed various reservations about it as they say it is a threat.

On the other hand, why cannot Sri Lanka do what the other countries are doing ? If Japan has resolved the THC issue, why can't we ? Hoegh Lines have got Japan to resolve it and now other lines have incorporated ASEAN to resolve it, why can't we ? After all, aren't these are the lines those call Colombo ? We can resolve the dispute amicably.

Q: The Terminal Handling Charge (THC) was established in 1990 at a time when the Government liberalised the shipping industry and freight rates were reduced by over 100 percent. However, with all this encouragement and backdrop, export volumes have not risen correspondingly. Why ? How do you reconcile the two ?

A: Incentives increasing for shipping and freight industries and the decrease in export volumes due to global recession have no bearing on each other. Freight rates are determined by market forces. If freight rates rise, that does not logically mean that exports also have to rise correspondingly. We have to create a demand and our marketing has to be right. Global buyers have to buy our products more.

Q:The Shippers' Council is making a huge hue and cry over the Terminal Handling Charge (THC) at a time when freight rates are going down. Why ?

A: There is no doubt that the THC is mandatory and the CASA Chairman does not have to be convinced is that it is so. There is a cost and we are ready to pay it. We are not asking CASA to reduce it. but asking for its incorporation in the freight rate. I must also remind him that Colombo being a Liner Port which operates on a CY-CY ( Container Yard to Container Yard) basis, there is definitely a cost element in discharging the container to the Port.

However, that cannot be borne by the shipper. When the shipping line accepts cargo from the shipper on a CY-CY basis, where they go on the basis that it would be bringing the container to a particular venue in the port. Therefore, the cargo costs from the point of receipt to the point of delivery is theirs (the agents') which includes the handling when on land. They have to bear that cost even the costs on land, which they can pay and recover.

I have asked the Ports Authority for the breakdown of the Terminal Handling Charge. If we can resolve this, it will be an achievement for everybody. We will bear the rest of the costs, if we have to. They should be putting that on the freight rate. No ancillary charges should be put on freight rates as separate components. There are certain costs incorporated in the THC which is not applicable to the shipper. That is a cost that the agent has to pay in terms of handling the container.

Talking of these ancillary charges, why should the opening of the hatch covers be a part of the Terminal Handling Charge ? That is some thing that has to be done by the ship operator. Why should the shipper be responsible for this ?

I must remind CASA that there are two components to this entire issue. That is the land costs which we consider paying directly to the Colombo Port and not directly to the line. The rest of the costs has to be paid on the freight rate. The CASA Chairman can take it from me that we are not against paying the THC.

Q: CASA Chairman and Managing Director of Aitken Spence Shipping Ltd Rohan Perera told this newspaper in an interview (Daily News- October 4, 2002) that his Association that he would convince the Shippers Council that the payment of the THC was mandatory and that he would convince the Council that it has to be done. Your comments ?

A:Some of the stevedoring charges which the line absorbed prior to the containerisation, is incorporated in the THC today. The CASA Chairman may agree that the THC is relatively low and negligible, but it is high compared to those feeder ports in India and Pakistan such as Mumbai, Cochin, Tuticorin and Karachchi.

Q; He said that the THC was negligible and not affecting competitiveness in the light of the other expenses such as stevedoring charges which are relatively higher. Your comments ?

A: If the THC is separated, it can rise. That is where it can affect competitiveness especially in the garment industry. If the THC is on the freight rate, it can be passed on.

When it is separated, we cannot control it. If the THC is added separate it, we cannot control it and we will be uncompetitive. If it is added to the freight rate, the party concerned will pay it. If we pay it, then we will negotiate it. No line is going to reduce their freight rates which make them uneconomical for carrying cargo. Then, the shipper will decide on which line he will carry his cargo. Market forces will determine the rates

Q: He also said in the same interview that his Association would not mind the shippers paying the THC directly to the port. What is your response ?

A: We will identify what components of the THC we are responsible for and we will pay that.

This is applicable to both the exporter as well as the importer. But, there are costs which are embedded in the THC which have to be borne by the shipping line. Let them charge us that component and we will pay them.

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