From left: SLANA Executive Member Saliya Senanayake, NVOCC Treasurer Mohamed Thahir, NVOCC Chairman Capt. A. V. Rajendra, NVOCC Vice Chairman Prasad Jinadasa and NVOCC Secretary Minnaz Riyal
By Supun Dias
The Sri Lanka Association of NVOCC Agents (SLANA), which was formed to advance and protect the interests of Non Vessel Owning Container Carriers (NVOCC’s) pointed out that the decision to abolish the Terminal Handling Charge (THC) has made ship operators to show subdued interest towards the Colombo port and as a result are now exploring their options at Indian ports.
The decision to abolish the THC was taken by the Rajapaksa administration with the intention of promoting productivity and competitiveness of imports and exports. However, to the contrary, the ship agents claim that this decision is not helping them to do business in Sri Lanka.
“The Finance Minister of the former government was misled by individuals and organizations with vested interests who only thought of their gains and not about the benefits that should come to the country,” SLANA Chairman Capt.A.V. Rajendra said.
“THCs and other surcharges are assessed virtually in all major trade lanes in the world, including the Asian region. By mandating how business partners structure their financial arrangements, Sri Lanka is isolating itself from major commercial centers that attract business by protecting freedom of contract,” he told the media in Colombo.
“With the advent of containerization, it has become necessary for container terminals worldwide to compute and recover costs they incur in handling containers through their terminals. This, commonly referred to as THC, came to be recovered from the trade worldwide in both the developed and developing countries. Today, with the rare exceptions like Bangladesh and now Sri Lanka, THC is charged and collected as part of cost recovery globally,” he added.
THC is a direct recovery of the port stevedoring charge levied by the Sri Lanka Ports Authority, South Asia Gateway Terminals (SAGT) and China International Container Terminal (CICT) which is US $ 151 per 20 feet container and US $ 234 per 40 feet container at the time of the abolishment.
Since THC is a cost recovery, shipping lines will have to recover it one way or another, or their margins will suffer or it becomes unprofitable and untenable to provide the service.
Shipping lines can increase their freight charges to recover the full amount of THC. If they are successful, the foreign trading partners of Sri Lanka importers and exporters will have to pay more to trade with Sri Lanka.
“When this happens, these foreign traders will either re-negotiate their prices with Sri Lanka parties or re-contract with traders from another country. In the former case, the savings in THC is returned as other charges rendering a net zero-sum effect. The latter case will result in Sri Lanka losing a trading opportunity,” the ship agents said.
They pointed out that once the free trade agreements, which are currently being negotiated, are signed, it is the NVOCCs that would go to the markets and provide the services.
Therefore, they said an Association was formed to showcase the important role played by the ship agents in promoting trade, which is not to be seen in the picture.
SLANA plans on taking up the THC matter and other pressing concerns with the government shortly.