The Sunday Leader

Cost Inflation, Inability To Offer Rebates, Reasons

  • NCCSL To Ask GoSL To Reintroduce THC

National Chamber of Commerce of Sri Lanka will shortly propose to the Government to reintroduce THC collection locally so as to reduce the prices of imported goods and also to offer THC rebates as a carrot, to lure carriers to Colombo.

The Shipping Committee of the National Chamber of Commerce of Sri Lanka (NCCSL) will ask the Government of Sri Lanka (GoSL) to reintroduce the terminal handling charge (THC) related to ocean freight, to be collected locally.

That was scrapped from this year as per a Budget 2014 proposal, with THC now collected from liners.

An NCCSL spokesman told this reporter that the reason why they shall be asking GoSL to reintroduce the THC levy back again at the local level were to reduce costs and to use THC rebates as a carrot to attract liners.

THCs include port levies, which, prior to this year were recovered locally, from the importer by the ship agent (SA)/freight forwarder (FF), but, which since from this year, has by law to be included in to the sea freight charges and be paid to the liner, which in turn will pay the port the THC cost.

Applicable THC charges are US$ ($) 151 for a   20 foot container and $ 248 for a 40 foot one.

“As Customs import duties are calculated on the CIF value and when THC is also included into the freight (F) costs as is the case currently, then the applicable duty payable is also inflated,” the spokesman said.

With those inflated costs ultimately being passed on to the end user, namely the consumer, who has to now bear the burden of higher prices because the THC levy is currently incorporated into the freight component, the source said.

However, when THC was collected locally, it, Ipso facto meant that the freight cost component was bereft of any THC levy, with the latter being a standalone charge then, a status quo which NCCSL wants GoSL to restore.

The other advantage is that when THC is collected locally, the Colombo Port operators may offer rebates to carriers as a carrot for them to use the Colombo Port, the sources said. It’s a venture that has never been experimented with, the spokesman said.

But now with THC collected from the liner, that carrot is missing, he said.

“Therefore we shall be asking GoSL to once more restore the collection of THC locally, the source said.

He further said that was where there was abuse, which was in relation to less than container load (LCL) cargo, that resulted in the THC levy being collected locally being scrapped,.

This abuse was at the SA and/or FF level, the source said.

But now with GoSL placing a cap of Rs. 9,500 on a delivery order (D/O or consignment), that abuse is mitigated, he said.

The other abuse was ad hoc charges levied by SAs and/or FFs. These may be relieved though competition and by building awareness among the exporter. The chief victim of this was SME garment exporters, where the buyers, and not the exporters decide on the liners, he said.

A lesson that may be learnt from local importers such as garment manufacturers which import the required raw material is to form cartels, so as to demand the best freight rates from carriers, the source said.

Another line of abuse was “no freight charged” cargo, particularly in relation to LCL cargo from India, where previously importers were charged exorbitant fees on D/Os.

“But this has been removed with caps placed on D/O charges as mentioned aforesaid,” the spokesman said.

He further said that they will be submitting their proposals to the Directorate of Merchant Shipping which regulates SAs and FFs and the Ports Ministry which regulates ports and/or The Finance Ministry, which is responsible for formulating applicable charges in relation to levies such as the THC, shortly.

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