Sri Lanka Shippers’ Council responds to article on ‘terminal handling charge’

The Sri Lanka Shippers’ Council (SLSC) notes with concern the article published in the Daily Mirror of 4th September 2025, titled “Why Sri Lanka must realign its terminal handling charge policy to secure maritime future” by Business Journalist Nishel Fernando.

The article attempts to advocate for the reintroduction of a separate Terminal Handling Charge (THC), making several assertions that are factually incorrect and misleading to the public, exporters, importers, and policymakers.

Misrepresentation of the Policy Reform Process

One of the main claims in the article is that the abolition of the THC was a “radical change” implemented without prior consultation and introduced “abruptly” through the national budget by way of a “surprise gazette.” The author further asserts that the process was viewed as “highly unprofessional” by the international maritime community.

This is a serious misrepresentation of the facts. There was no abolition of the THC by the government gazette. What instead transpired was the halting of freight unbundling andthe prevention of non-transparentcharges being imposed on parties outside the transport contract. Far from being an abrupt decision, this was the result of a transparent, consultative, and consistent policy process spanning seventeen years, culminating in the government’s decision, taken after engaging with ICC Paris on Incoterms, to end an anti-competitive practice.  Every successive government has upheld this policy, while a small group of lobbies has lost its unlawful revenue stream. 

 The article also misstates the timeline. The law is not ‘10 years old’:  the last gazette was issued, following an earlier one in 2017, both of which reinforced the law first introduced in 2014, following two budget proposals and parliamentary approval. 

Background to the THC

The push for reform began in 1997, when the Sri Lanka Shippers’ Council challenged the imposition of a “Freight Surcharge (FSC)” on non-contracting parties by local shipping agents and shipping lines. This charge was later rebranded as Terminal Handling Charges. The Council pointed out that the FSC should rightfully be collected from the party paying the freight; however, service providers continued the practice and introduced new surcharges, significantly impacting primarily the apparel sector among other industries, adding costs to manufacturers.

From that point forward, the SLSC consistently advocated for all-inclusive freight rates with the government. In 1998, the Fair Trading Commission ruled in favour of the shippers, but the absence of legal provisions meant the decision could not be enforced against these anti-competitive practices. Over time, nearly 40 different surcharges were added on top of the THC. By 2012, the separation of freight charges and passing them on to non-contracting parties had become the norm among many service providers, despite the clear lack of a contractual basis.

Despite repeated challenges, the Sri Lanka Shippers’ Council remained steadfast in its commitment to securing a fair, transparent, and competitive environment for exporters, importers, and consumers. 

A fundamental rights case was filed before the Supreme Court, which was granted leave to proceed. However, the Court noted that Sri Lanka lacked adequate laws to curb anti-competitive practices in shipping and called for a proper regulatory mechanism to be established through consensus. 

Service providers refused to compromise, but after 17 years of consultations and submissions from all sectors, the government finally announced a budget proposal stipulating that all charges should only be collected from the contracting party with the carrier, from the point of pickup to final delivery. This is in line with international best practices with all new editions of Incoterms, such as FCA and CPT, for container cargo.

National Policy Reform and International Recognition

The breakthrough came with the 2014 National Budget, presented by His Excellency the President in his capacity as Minister of Finance. Detailed under Paragraph 35.1: Shipping Economy, the budget introduced far-reaching reforms for the shipping industry, designed to strengthen the export sector, particularly SMEs, while supporting manufacturing and protecting consumers.

The Budget Proposal stated:

“In order to promote the shipping economy in a more structured manner, I also propose to set up a fully-fledged Merchant Shipping Authority by introducing timely amendments to the Merchant Shipping Act. In order to prevent monopoly pricing in the shipping trade, no shipping line will be permitted to levy terminal handling and other charges in addition to freight and specified international charges for container cargo. Relevant prohibition will be made effective through amendments to the Finance Act, effective from January 2014.”

This policy was formally enacted through Gazette Extraordinary No. 1842/16 of 27 December 2013, and most recently reinforced through Gazette No. 2334/26 of May 2023, under regulations made pursuant to Section 10 of the Licensing of Shipping Agents, Freight Forwarders, Non-Vessel Operating Common Carriers and Container Operators Act No. 10 of 1972, read with Article 44(2) of the Constitution.

The reforms were widely recognised by the international shipping community, including the Asian Shippers’ Council and the Global Shippers’ Forum, as a landmark in promoting fairness, transparency, and competitiveness.

Misrepresentation of Incoterms

It is disappointing that the article in question seeks to misrepresent, knowingly or otherwise, the Paris-based ICC’s Incoterms. Since 2010, all editions of Incoterms have made clear that FOB, CIF, and CFR are not to be used for containerized cargo. 

Their continued use violates best practices now properly regulated under Sri Lankan law, where FCA, CPT, or CIP are the correct terms for containerized trade. Many, including the author, appear not to have updated themselves accordingly.

The SLSC also rejects claims of foreign exchange losses due to this policy. On the contrary, Sri Lanka’s adoption of correct practices has strengthened both exports and imports. The Central Bank of Sri Lanka’s 1996 definition of freight, used for calculating agency commissions, aligns with current law, where customs duties are calculated on the total landed cost. 

This system increases government revenue through all-inclusive rates, whereas unbundled freight charges previously deprived the state of dutiable revenue by obscuring transparency and distorting market forces.

Conclusion

The history of this reform demonstrates that the inclusion of Terminal Handling Charges and other surcharges into all-inclusive freight in Sri Lanka was not abrupt, but the culmination of a 17-year transparent and consultative policy process. To suggest otherwise, as the Daily Mirror article does, is misleading and undermines the credibility of the SLSC’s sustained advocacy.

The SLSC reaffirms that bringing THC into the full freight rate marked a turning point in Sri Lanka’s shipping policy, enhancing competitiveness, safeguarding exporters and consumers, and aligning national practice with global best standards. The largest apparel buyers have also since shifted to terms such as FCA in recognition of the soundness of this policy.

The SLSC remains committed to protecting the interests of Sri Lankan exporters and importers and ensuring that shipping and trade policies continue to serve the broader national economy.