I would like to discuss a cost item which the companies dealing with international trade encounter in international shipment operations for you, my readers.
Formerly, loading/unloading the goods, edging/departing the vessels, and using the cranes with the port services basically based on intense labour force. However, “transportation with containers” has been used widely in international trade, equipment high in technology has been integrated into the transportation procedures, and several services has been provided automatically as a result of the reflection of advancing technology to port and transportation services.
In this sense, the concepts “Terminal Handling Charges – Liner out Charge – Container Service Charge” used for sea, especially “container transportation” have become a part of the commercial life.
This may change in different countries, different ports, and even in different terminals in the same port; and we encounter it as an inevitable cost for shipping the load from the point A to the point B with increasing use of containers.
So, what is the reason for these costs? Have not we already paid a fee for transportation?
Yes, we have. However, the relevant fee is allocated for the vessel transporting the goods by taking the risk on sea. And it is necessary to bear the costs “except from the freight fees” for enabling such terminals/ports, which are products of advanced technology, to be open, enabling the equipment to be operated efficiently and safely, carrying out physical maintenance and renewal operations, updating their software, paying the salaries, covering the energy costs, paying the taxes and other public liabilities, financing the investments, carrying out the handling and loading/unloading operations by providing safety. Therefore, some fees are requested as TCH or with other titles for each international transportation with containers.
These THCs arise in ports of origin of loads (charges payable in the port of origin – OTHC), in the ports of transhipment, and in the destination ports (charges payable in the destination port – DTHC).
THCs may be determined annually in the ports and vary depending on the volume of the load. It should be emphasized that a special importance is attached to refrigerated containers (reefers), load high in volumes (out of gauge cargo – OCG), hazardous solid and liquid materials (hazardous material – HAZMAT). Different regulations and fees may be requested for safe storage and tracking of those loads.
Port authorities invoice these costs for the transportation companies. Transportation companies reflect the costs to the referring/loading parties, sellers, and transporting parties.
Who will bear these costs?
First, I ask for every international tradesperson to make a distinction in the following way: the “sales contract” drawn up by the exporter and the importer on transfer of a good’s title and the “transportation contract” drawn up transportation organization by entitling the relevant “good” which is the subject of the contract as “load” are different legal relations. Of course, it is possible to link these two legal relations as seller and buyer. The condition for it will be transferring the physical and financial liabilities agreed on the delivery conditions of the goods within the sales contract to the transportation bills evidencing the establishment of the transportation contract (especially to the bill of lading) and indicating these conditions in the relevant document by enabling the transporter being informed about it. In case you carried out this procedure, you may bear costs different from the ones agreed by you in the sales contract.
In terms of THC, first, it is expected from the buyers and the sellers to agree on the party to bear THC in ports of origin and destination in their contracts and indicate the issue on their transportation documents. Transportation companies split up the expenses based on the party to bear them. Of course, INCOTERMS can be used and it is used for interpreting which party should bear the costs for the buyer/seller depending on the mode of delivery. However, since there are C and D INCOTERMS gray zones and the main document for international trade is a contract, it is useful to indicate these issues clearly.
What happens in case there is no contract, or the conditions of the sales contract are not transferred to the transportation document?
There is no clear rule about it since there is an operation method subject to the conditions of the transporter. In this case, the Seller/Shipper (the part responsible for it) bears the THCs in the port of origin. And the Buyer responsible for taking over the load bears the THCs in the destination port. In case the buyer does not take over the load despite the notification, seller/ shipper (who is already responsible) bears the THCs. Transportation companies request these expenses by claiming that they make the sellers, who are only “shippers”, to become “transporters” in several places. I will not discuss the rightful party at this point. However, these costs are inevitable due to the reasons I explained above. We need to discuss these issues with your solution partners and customers from the beginning.
- In case you have a business depending on international transportation, please request details related to THC costs in addition to the most affordable freight fees by obtaining the price offer. Please research the price of the costs. Consider the offers completely.
- Follow the information notes publishing the tariffs based on the countries by the big transportation companies.
- Of course, the THC division should be indicated clearly in the sales contract as the best method even it is easy to interpret the party to bear THC based on INCOTERMS, and the records from the transportation contracts drawn up with the transporter and which are compatible with the bill of lading (CMR certificate for land transportations).
- Please conduct a cost planning against the risk of not being taken over by the buyer, and receive an advance payment.
- Please indicate that “the freight fees have been paid. THC storage – demurrage – custom clearance cost and formalities” will be paid by the buyer on the load delivery documents in case you are seller in the trade operations, the transportation organization of which are not carried out by you.