The Sri Lanka Association of Vessel Operators (SLAVO) represents the interests of major container shipping lines operating in Colombo and is dedicated to raise the standard of international shipping and maintain it at the high level it has been for years.
By canvassing for the adoption of global best practices, the SLAVO aims to improve the industry’s reputation regionally, while also ensuring the sustainability of the shipping lines.
It actively carries out consultations on matters concerning the industry, while holding frequent dialogues with the key governmental agencies with the aim of resolving issues faced by the shipping lines, while also fully supporting the government’s efforts of building on Sri Lanka’s potential of becoming a top-notch maritime hub.
As part of these efforts, the SLAVO has voiced concerns with regards to the regulation in Sri Lanka, which stipulates that the terminal handling charge (THC) must be collected as part of an all-inclusive freight rate.
The THC refers to the charges collected by shipping lines from the shippers and consignees, towards the costs incurred at container terminals for loading and unloading container costs borne by the shipping lines at the port of shipment or destination. Thereby, it is fundamentally a land-based cost (applicable locally) and is not a component that should be included as part of the freight.
The SLAVO’s goal therefore is to bring to light the error in judgment, with regards to the legislation brought about by the gazette in this basic aspect.
The SLAVO states, “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 and has come to be recovered from the trade worldwide in both the developed and developing countries. Today, with the rare exceptions like Bangladesh and Sri Lanka, the THC is charged and collected as part of cost recovery globally.”
The decision to abolish THC has prompted vessel operators to display subdued interest in the Colombo Port resulting in the exploration of other options. Furthermore, this decision would also hamper Sri Lanka’s prospects of maintaining itself as a maritime hub. As such, if the country is to build on its maritime hub status, it cannot afford to lose the interest of the vessel operators who could potentially eye Colombo as the major regional hub as well.
The THCs and other surcharges are collected virtually in all major trade lanes in the world, including the Asian region. And by mandating how business partners structure their financial arrangements, Sri Lanka is isolating itself from major commercial centres that attract business by protecting freedom of contract.
Sri Lanka has a major imbalance in the container trade, with the import volume being double that of exports. The SLAVO also points out that the majority of imports are carried in 20’ containers, while the demand for exports is predominantly for 40’ containers. This practically doubles the costs incurred by shipping lines and considering these factors, it is mandatory for shipping lines be allowed to collect the THC for imports at least.
Furthermore, as it is a local cost recovery, same should be allowed to be collected locally. Case in point, repositioning an empty container out of Sri Lanka to a destination in the Far East incurs a minimum cost of US $ 300 per TEU for a shipping line, in terms of handling and transport costs. These are costs absorbed by shipping lines, when serving Sri Lanka, which the industry and the authorities frequently overlook.
The SLAVO reiterates its commitment to the government’s plan on elevating Sri Lanka’s ‘maritime hub’ status to the next level and is keen to see Sri Lankan shipping lines continue to play a major role in ensuring adequate connectivity at competitive freight rates.
The shipping lines have been committed to support the country’s exports by not applying the THC for exports and hence have been asking the authorities to allow the lines to collect the THC for imports to ensure their continued support and commitment to the local trade of Sri Lanka.