Global container shipping lines have flayed the recent decision of the government allowing certain category of importers to pay the terminal handling charges (THC) directly to the terminals, bypassing the carriers, arguing that it would “not help the cause of reducing the logistic costs” of India’s trade.
The Container Shipping Lines Association (CSLA) India, a lobby group for global container carriers operating from/to India that includes Maersk Line, MSC and CMA CGM, said the government was barking up the wrong tree in its bid to cut logistics costs.
“The THC is a free market cost that should be left to the customers to decide upon,” Sunil Vaswani, Executive Director, CSLA (India) said.
“Through a fair process of acquiring quotes from different shipping lines, customers can reserve their right to reject higher costs and choose the best suited ones as per the services they get,” Vaswani stated.
“The government’s intention to reduce cost of logistics is fair but efforts need to be taken on the real pain points. These include high costs in areas such as rail, road and port infrastructure. Efforts should also be directed towards process simplification and digitisation, thereby reducing paper-work and ensuring faster turnaround and less dependence on intermediaries for cargo movement,” Vaswani said.
‘Risks being ignored’
Changing the mechanism for collection of THC will disrupt the way business is carried out in a free market without factoring in the risks and investments involved, he added.
Last week, the Central Board of Indirect Taxes and Customs (CBIC) directed the Custom houses in the country to allow direct port delivery (DPD) clients and authorised economic operators (AEO) to pay the THC directly to the terminals and not to the lines, in case of imports.
Earlier this week, the Custom House in Nhava Sheva near Mumbai issued a trade notice to implement the direction from the CBIC.
Previously, the THC was levied by the terminals from the shipping lines for the services rendered and the lines, in turn, recovered it from the exporters and importers.
Shipping lines, according to the CBIC, were levying “excessive charges as THC” from importers than what the terminals were charging for clearance of containers.
‘Charges are transparent’
Shipping lines have rejected the CBIC’s claim, arguing that the charges recovered by shipping lines are “transparent” and is “put up on their websites in India for all to check”.
They further said that they facilitate several aspects of moving cargo for their customers through the THC.
These cover operational charges borne by the shipping lines such as those imposed by ports namely mandatory user charges and highway toll charges as well as costs for coordination and monitoring of containers. In addition, the lines have to pay port infrastructure and development charges, ground rent and wharfage to the ports/terminals.
The direct payment arrangement would make the workers employed by the lines to monitor and ensure timely movement of containers, redundant.
“This will disrupt the export-import flow leading to delays and even containers missing vessel connection for exports and delivery delay for imports,” the CSLA said.
The earlier practice ensured that the shipping lines were the single point of contact for customers instead of coordinating and engaging with multiple representatives from terminals, customs, transporters and yards who do not have a contractual relationship with customers.
“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. Their workload on documentation processes will increase tremendously leading to additional interfaces and the reconciliation processes with terminals will impact operational efficiency, ultimately resulting in additional logistic costs,” the CSLA said.
Liability issues will also arise due to the missing contractual relationship between the customer and the terminal, the CSLA added.