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THE ISSUE OF INCREASING THC LEVEL IN SOUTH CHINA

April 2007

Report to : The Ministry of Communication (MOC)
From: China Shippers’ Association (CSA)

Before the decision is made, they didn’t inform us to hold consultations according to the “NOTICE ON STRENGTHENING SUPERVISION ON LINER CONFERENCES AND FREIGHT DISCUSSION AGREEMENTS” issued on March 12, 2007.

The liner organizations stressed the following reasons for collecting and increasing THC level :

• THC can be collected after it is filed with the MOC. Collecting THC has become a reality in China.
• It is an international practice to separate THC from the freight. Sellers pay THC at the port of loading and buyers pay THC at the port of discharge.
• The sellers and buyers have to negotiate who will pay THC.
• Under CIF trade terms, sellers pay THC at the port or loading and the ocean freight, buyers pay THC at the port of discharge; Under FOB terms, sellers has to pay THC at the port of loading, and the buyers has to pay the ocean freight and the destination THC.

CSA considers that the above view points are very unreasonable and ridiculous, violating the THC Investigation Conclusion that “The terminal handling charges is in nature a component of international container transport freight”, and violating “The Filing regulation of International Container liner freight” set by the MOC in 1996 which stating that the freight should be filed with the MOC in accordance with CY to CY clause.

According to the THC Investigation Conclusion, liners should stop collecting THC from the shippers separately from the freight. However, the liners just defy the THC Investigation Conclusion and in return increase the THC level. This is an abominable act.

Therefore, CSA reiterate its position as follows :

• The liners have seriously destroyed the international container liner transportation practice of “CY to CY” freight clause. CY-CY freight clause has been existed for several decades in container liner transportation, THC is included in CY-CY freight. Collecting THC separately from the CY-CY freight is not an international practice.
• THC Investigation Conclusion clearly states out: “THC is in nature a component of international container transport freight”. From the legal point of view, THC can not be separate from the freight. It is not meant that the liners can collect THC after it is filed with the MOC. The THC Investigation Conclusion spells out that “penalty will be imposed on the members of liner conferences and freight discussion agreements who had reached the collective freight agreements but failed to fulfill the required filing procedures” aims at the liners’ unfilled collective action, it doesn’t mean that THC should be filed in the future, only collective rates or temporary surcharges are belong to the scope of filing.
• All shipper organizations in the world firmly oppose the separation of THC from the freight. How can the liners organizations say that collecting THC is an international practice? According to international trade practice, sellers and buyer only Have to negotiate the price terms (FOB or CIF) that include freight or not, THC is not the item for negotiation between the sellers and buyers. No matter it is FOB or CIF, the freight payer should pay CY-CY freight that include THC.
• Under FOB term, Sellers only have to be responsible for the cargo risk before the cargo is on board. FOB buyer has to pay CY-CY freight that include THC at the port of loading and the port of discharge as well as ocean freight. It doesn’t mean that the freight payers do not have to pay the charges from CY to the ship.
• Container liner freight should be “all in CY-CY freight”. Temporary surcharges, such as bunker, war, port congestion are allowed, but it should be temporary in nature according to “the United Nations Convention on A Code of Conduct for Liner Conferences, 1974”. However, THC is a long-term & fixed charge, it is not temporary in nature.
• Under FOB term, buyer has to pay CY-CY freight. In order to attract the buyers, liners proffer more benefit to the FOB buyer, and in return separate THC from the CY-CY fright and shift it to the FOB seller. This is unfair and not in morality, and it is an abominable act of destroying the international container liner transportation practice.
• CSA firmly oppose the liners to collect THC from the non-freight payer shippers, and hope the government will stop the liners destroying the international container shipping market order and harming the interests of the shippers.

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