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PRC MOC disapproves South China THC increases,says liners in violation of Decree 10

03rd May 2007

Shippers in Hong Kong, Shenzhen and Macau are elated over China’s Ministry of Communication’s disapproval of four shipping discussion agreements’ application to collectively raise THC levels in South China that has been declared by the MOC as being in violation of NOTICE ON STRENGTHENING SUPERVISION ON LINER CONFERENCES AND FREIGHT DISCUSSION AGREEMENTS (Decree No. 10 issued by Ministry of Communication, PRC on March 12, 2007).

The MOC has ordered the IADA, IRA, IRSA and ISAA discussion agreements to cease all such collective rate-fixing activities for one year while some of them are to be penalized for their actions.

The collective agreements were filed by the Intra-Asia Discussion Agreement (IADA), the Informal Rate Agreement (IRA), the Informal Red Sea Agreement (IRSA) and the Informal South Asia Agreement (ISAA) to increase THC levels in South China.

Effective Date Existing THC Proposed New THC Increase
IRA (Far East – Middle East) 15/5/2007 20’ RMB 370
40’ RMB 560
20’ RF RMB 410
40’ RF RMB 610
US$141 (RMB 1,100)
US$269 (RMB 2,098)
US$181 (RMB 1,412)
US$344 (RMB 2,683)
+197%
+275%
+244%
+339%
ISAA(Far East – South Asia) 15/5/2007 20’ RMB 370
40’ RMB 560
20’ RF RMB 410
40’ RF RMB 610
US$141 (RMB 1,100)
US$269 (RMB 2,098)
US$181 (RMB 1,412)
US$344 (RMB 2,683)
+197%
+275%
+244%
+339%
IRSA(FarEast – Red Sea) 15/5/2007 20’ RMB 370
40’ RMB 560
20’ RF RMB 410
40’ RF RMB 610
US$141 (RMB 1,100)
US$269 (RMB 2,098)
US$181 (RMB 1,412)
US$344 (RMB 2,683)
+197%
+275%
+244%
+339%
IADA (Intra – Asia) 1/6/2007 20’ RMB 370
40’ RMB 560
20’ RF RMB 410
40’ RF RMB 610
US$136 (RMB 1,061)
US$259 (RMB 2,020)
US$176 (RMB 1,373)
US$334 (RMB 2,605)
+186%
+260%
+234%
+238%

When the carriers first introduced THC in China in 2003, it was already being levied on top of freight rates, and the whole sum has become purely additional revenue for the carriers since all the costs at the terminals are covered by all-in freight rates.

“Carriers are far too greedy in seeking to raise THC levels totally without justification. It is clearly a move to exploit shippers for the carriers’ own benefits. And the amount being considered is very substantial,” said Willy Lin, Chairman of the Hong Kong Shippers’ Council. “Using Shenzhen ports throughput figures—and only calculating for the particular trade lanes (intra-Asia) of said carriers--the lines are asking shippers to fork out RMB3.15 billion more annually.”

“The increases would cause great burden to shippers in the Pearl River Delta at a time when they are already under tremendous pressure from an adverse trade environment and intense competition from the Yangtze River Delta (YRD) economic zone and other regions,” said Toland Lam, Executive Chairman of the Shenzhen Shippers’ Association.

The THC is an unjustifiable cost and the recent action of carriers to further increase their levels in South China will cause significant damage to the importing and exporting businesses in the region. “Shipping lines should clearly not be allowed collective pricing. The lines use the same collective pricing practices and charge unreasonably high rates in the transportation of goods from Macau to Hong Kong for transshipment. Macau shippers have been shouldering this burden for many years now,” said Frank Tang, Chairman of the Macau Shipper’s Association.

Shippers in the region have expressed satisfaction over the MOC’s application of the ‘Maritime Regulation of the People’s Republic of China’ and that it has provided the level of protection promised by the regulation when the MOC promulgated the law.

In light of the improper filing as per the Maritime Regulation of the PRC, the MOC considers that the agreements concluded by ISAA and IRSA in relation to Chinese ports are invalid and their agreements on increasing THC level in South China should be cancelled.

Moreover, they cannot conduct such activities in China within one year and their members cannot consult, establish, and implement any ISAA and IRSA operation and freight agreements. The MOC will penalize ISAA, IRSA and their members accordingly, in line with Article 48 of the Maritime Rule of China.

“Shipping lines have been abusing the market. They continue to ignore the fact that THC is part of the ocean freight rate. They demand that shippers pay the THC upfront or else they won’t release the Bill of Lading. This is nothing more than blackmail,” said Toland Lam of Shenzhen Shippers’ Association.

“The MOC’s findings clearly demonstrate that shipping lines should, once and for all, cease collective pricing practices. It has gone on too long—THC has been increased by double-digit rates since its introduction in 1990 till 1998,” explained Willy Lin of the HKSC. “And now, they are attempting the same practices in China. South China shippers are extremely pleased that the MOC has upheld the spirit of the law which protects shippers’ rights and promotes free market economics.”

For further inquiries, please contact:

Shenzhen Shippers’ Association, Mr. Toland Lam, Executive Chairman
Tel: 86-755-83643303
Fax: 86-755-83643240

The Hong Kong Shippers’ Council, Mr. Sunny Ho, Executive Director
Tel: (852) 2834 0010
Fax: (852) 2891 9787

Macau Shipper’s Association, Mr. Frank Tang, Chairman
Tel: (853) 2835 5433
Fax: (853) 2835 6437

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