When it comes to the freight and shipping industry, there isn’t much we don’t know. Every week, we keep on top of news and technology allows the whole world to stay in the loop with a simple internet connection. However, South China THC (Terminal Handling Charges) changes are going completely under the radar and it’s allowing forwarders to make significant sums of money.
Back in the early 2000s, Hong Kong and the rest of the South China region were sitting pretty at the top of the ‘world’s busiest ports’ lists. However, they soon lost the crown in 2005 and have been slipping down the list ever since. Over the last couple of years, THCs in South China have risen dramatically with Hong Kong, in particular, charging over double the amount for Transpacific Eastbound Shipments than most other top ports around the world.
As you would expect, those locked into contracts or forced to use ports in South China have had to pay significantly more money per transaction than they’re used to and this is only helping freight forwarders. Of course, forwarders are in charge of ensuring all shipments reach their destination as intended. With most freight forwarders nowadays, they have more of a managerial role by billing the customers before then distributing this money to all suppliers. Whenever the THCs rise, this means the forwarders earn more money which is why more forwarders are heading to South China as time goes on.
Changes – Over the past twelve months, the Chinese government spotted this activity and started an investigation into the whole industry with many customers calling for dramatic changes. As of earlier this year, dozens of companies have now promised to lower their terminal handling charges within China. When the promised changes take place, this will bring the cost for customers back down to a respectable level and millions of dollars will be saved in total.
Currently, in charge of the investigation, the National Development and Reform Commission and the Ministry of Transport have both been in regular contact with shipping companies about THC changes. Now, Orient Overseas Container Line (OOCL) has written a letter to give their promise of lowering the charges which add to the growing list of companies doing the same.
Initial Complaints – According to the Commission, a number of trading companies reported malpractice in South China which led to the launch of the investigation. Although the complaints were about surcharges as a whole, terminal handling charges account for a huge portion of these surcharges; most others didn’t change during this same time period.
In total, it’s believed that a dozen container shipping lines have now promised to reduce terminal handling charges by ‘up to 22%’. In addition to OOCL, this includes Maersk Line, Mediterranean Shipping Company, and even COSCO Shipping which is actually owned by the state in China.
Future – If these reductions come into effect as expected, prices should return back to a lower level for all customers but how did this happen in the first place? For over two years, freight forwarders have been making a fortune thanks to these South China THC changes without anybody really realizing. Although we can’t answer this question, we know one thing for certain; the Commission and relevant bodies alongside them will certainly be keeping a keener eye on the industry in the future!
