Oct 17

How do Terminal Handling Charges (THC) work?

Terminal Handling Charges (THC) Explained

Port cranes on bright day.jpg

Terminal Handling Charge, as the name suggests, is a charge levied by a port terminal for the handling of cargo at a specific terminal within a specific port in a specific country.

Although seemingly innocuous, THC is a critical component in an ocean freight shipment and must be treated with care and respect as it has the potential to make or break a deal.

To understand what exactly is the Terminal Handling Charge, one needs to go deeper into each part.

Table Of Contents

What Is Terminal Handling? A Brief History

Why Is Terminal Handling Charge (THC) Important?

Types Of THC

Freight Rates And THC Methodology

Conclusion

Cranes in port.jpg

What Is Terminal Handling? A Brief History

Stevedoring or the business of loading and unloading of cargoes from a commercial ship is one of the key businesses in the shipping industry.

In the olden days of trading, the owner of the ship paid the stevedores for the loading and unloading operations.

As trading evolved and globalization set in, shipping also evolved and so did stevedoring.

It evolved from a manual, labor intensive work to one handled by people but assisted more by machines. As stevedoring and global commerce developed, so did the methodology of charging for these services.

The fees charged by the stevedores initially to the owner of the ship and subsequently to the owner of the cargo (or both) eventually evolved into Port Handling Charges.

As containerization became popular and shaped the modern world, the various ports (mainly controlled by the State) around the world took on the task of employing either their own personnel or 3rd party operators to provide the service of stevedoring.

The ports also took on the task of invoicing the port users for these charges and this charge is currently called the Terminal Handling Charge.

Cargo Ship Loading Containers-1.jpg

Why Is Terminal Handling Charge (THC) Important?

Well, for starters, in any shipping transaction there are several costs and several parties paying these costs.

It is important to know who pays what charges for a shipment and who pays freight charges for a shipment.

The hero of this article, the THC, is a completely localized charge and is set by the port/terminal at the various locations.

THC is not a constant charge across the many ports on a shipping route even with the same shipping line.

For example, on the Asia/Europe route if the service calls Shanghai, Singapore, Port Kelang, Hamburg, Rotterdam, the THCs might be different at each of these ports.

Even within the same port, THCs can be different at different terminals within the port.

THC can be quite an expensive charge, and the apportioning of this could make or break a deal.

For example, if you take a shipment from Rotterdam to New York for the last week of September 2017, the strictly port-to-port ocean freight cost (excluding any local charges at both ends) works out to a market average rate of USD765/20’.

The current average THC charged for exports out of Rotterdam port is approximately USD235/20’, which works out to around 30% of the port to port ocean freight mentioned above. The THCs are generally valid for a year and some lines have volume-based THCs at the various ports/terminals around the world.

USD235 per 20’ container is a substantial cost which, if missed out at the quotation, negotiation or invoicing state, can cause a significant loss for either the buyer or the seller.

Therefore, it is imperative that you have a goodunderstanding of the freight quotation before you start with a shipment.

Cargo Ship Loading Containers 2.jpg

Types Of THC

In every shipment, irrespective of who pays it, THCs are present at Origin, Destination and at Transhipment port.

Origin THC (OTHC) and Destination THC (DTHC) are paid by the client (seller or buyer) depending on their terms of sale, either directly to the port or to the carrier depending on the port of origin/destination.

Therefore, it is very important that you understand whether this charge is included in your freight quote or not.

Transshipment THC (let’s say at Point B) is always paid by the carrier that arranges the shipment from Point A to Point C via Point B as their ocean freight rate includes this cost.

Different container types also attract different THC quantum because of the handling methods involved.

For example, special equipment and special cargoes like Hazardous, Reefers, and Out of Gauge (OOG) will attract different THC quantum.

This is because the port costs for handling these container types are different to that of normal dry containers.

OOG cargo may require the use of slings and extension spreaders due to the over dimensional nature of the cargo.

Hazardous cargoes require a special area within the CY for the safe storage and monitoring, and hence those costs may also be factored into the THC.

Reefer cargo handling at port requires the containers to be plugged into an electricity source and also needs to be monitored. These costs may be factored into the THC.

Container Ship.jpg

Freight Rates And THC Methodology

The sea freight rates aggregated in our system is shown as the total ocean freight cost (port – port), including bunker adjustment factor (BAF), Currency Adjustment Factor (CAF), Canal surcharges and all other relevant surcharges.

Based on our freight rate aggregation, the total container cost may be built up according to the below surcharge structure.

origin-destination.jpg

THCs may be included or excluded in above calculation based on our THC methodology given below.

abvrivation.jpg

It is important to understand how the carrier charges the THC as depending on the route of shipping; the carriers may choose to include or exclude the THC in the freight.

In certain countries in West Africa, the THC maybe for example shown as a “Liner Out Charge”.

Conclusion

If you are a freight forwarder, you have the onerous task of ensuring that the carrier quotes you the correct charges and that you invoice client the right charges.

Ocean freight audits are an important part of ensuring that you are being charged the right amount by the carriers.

As seen above, the humble yet crucial THC surcharge is one of the key charges that could impact heavily on the overall bottom line of a shipment transaction.

Nov 01

Import Container Rate Market Analysis – October 2016

Source for below data:  Drewry UK October 2016

  1. Review of Spot Rate Trends; Supply and Demand Trends

screen-shot-2016-11-01-at-8-39-14-am

 

 

 

 

 

 

 

 

 

 

screen-shot-2016-11-01-at-8-44-13-am

2.  Review of New Orders of Containers

screen-shot-2016-11-01-at-8-44-29-am

3.  Contract Rate Forecast

screen-shot-2016-11-01-at-8-44-49-am

4.  Contract Rate Trend Review:

screen-shot-2016-11-01-at-8-43-44-am

Sep 06

Some US Ports Are Charging $300-$400 To Release Hanjin Containers

JOC Staff | Sep 03, 2016 12:17PM EDT

Details are emerging on how much US ports and marine terminals are charging shippers to release stranded Hanjin Shipping containers after the world’s seventh-largest container line filed for bankruptcy.

The stranding of Hanjin containers is rippling through not just ports and marine terminals that were served by the ocean carrier and its fellow CKYHE Alliance members. Hanjin also had looser slot-sharing agreements with non-CKYHE members, but it’s unclear to what extent.

On the West Coast, terminal operators in Los Angeles and Long Beach are unloading all of the containers from the vessels. Containers that do not belong to Hanjin are processed according to normal procedures and terminals are holding onto import loads in Hanjin containers and will deliver the containers to truckers only if the beneficial cargo owners pay the terminal cargo-handling charges upfront. The terminals are not accepting Hanjin export loads and empty containers.

At the Northwest Seaport Alliance of Seattle and Tacoma there were no Hanjin vessels in port on Friday, according to spokesperson Tara Mattina. The Hanjin Scarlet is due to arrive at Terminal 46 in Seattle on Saturday, although the schedule may not hold up. As of Friday, the was anchored outside Prince Rupert, British Columbia, where its entry was refused, she said.

Terminal 46 is now accepting import containers, but is not accepting export loads and empties. Olympic Container Terminal in Tacoma is not accepting any Hanjin deliveries for now and the Husky Terminal is not accepting exports or empties, but is unloading imports and is encouraging truckers to bring their own chassis, Mattina said.

In Vancouver, Global Container Terminal said it will no longer receive Hanjin ships. One Hanjin ship is at the port waiting to be moved on.

On the East Coast, the largest terminal in the Port of New York and New Jersey, Maher Terminals, has made no statement on if, or how much, shippers must pay to get Hanjin containers. However, the terminal has told customers that Hanjin import deliveries must be pre-paid and that Hanjin exports won’t be accepted. One motor carrier told JOC.com he was required to pay $395.20 per container to cover stevedoring charges before he could remove a Hanjin box from the terminal.

Maher is the only New York-New Jersey terminal that receives Hanjin ships, and APM Terminals, Port Newark Container Terminal, and Global Container Terminals didn’t disclose how they are handling Hanjin containers.

Philadelphia reported no impact from Hanjin ships or containers. Boston does not receive Hanjin ships and wasn’t available to comment on how it’s handling potential Hanjin containers

Down the coast in Baltimore, Ports America Chesapeake, which operates the Seagirt Terminal in Baltimore didn’t disclose how it’s handling already received Hanjin containers. The terminal did say it will not accept any inbound Hanjin cargo, and they will continue receiving but not delivering Hanjin empty containers. The Maryland Port Administration said a barge loaded with Hanjin containers is sitting in the port.

At the Port of Virginia, Hanjin export containers may be picked-up at the terminals by the original shipper only with authorization from Hanjin. In these occurrences, all terminal service charges shall be waived and the shipper will be responsible for all associated chassis charges and fees. All import containers on terminal by Tuesday with the appropriate documentation will be available per normal policy. Starting Wednesday the charge to release Hanjin import containers will be $325, but all demurrage charges will be waived and shippers must have authorization from Hanjin.

At the Port of Wilmington, North Carolina, a Hanjin ship, Seaspan Efficiency, left late Tuesday and cargo from the vessel is being stored at the port. “North Carolina Ports will deliver all import loads and receive back all empties (originally discharged and currently at the Port of Wilmington), including Hanjin Shipping containers,” said spokesperson Cliff Pyron.

Further south, the South Carolina Ports Authority has has waived the non-vessel delivery fee for export loads out-gated and all import loads discharged on or after September 1 will be placed on hold until such time as all SCPA charges are settled. The South Carolina Ports Authority will collect all port and throughput charges totaling $350 per container from the BCO/responsible party with authorization required from Hanjin. This process will be further refined, but payment is required prior to manual release of hold and outgate.

The Georgia Ports Authority, which oversees the second-largest port on the East Coast, Savannah, wasn’t available to comment, nor was Port Miami. The Port of Jacksonville said it does not have any calls from Hanjin or other CKYHE Alliance members.

Along the Gulf Coast, Houston is holding containers until they receive $100 to cover the Port of Houston Authority’s terminal throughput charges, which are separate from stevedoring costs. The port authority is considering whether to also require guarantees or payment for stevedoring bills for Hanjin boxes that will be discharged from a China Cosco Shipping vessel expected in next week.

Mobile only had three Hanjin containers at the terminal so the operator there, APMT, is checking with the individual customers to see how they would like to proceed. New Orleans, like Jacksonville, has no Hanjin or other CKYHE calls.

Jan 27

SOLAS Container Weighing Rule Update 2016-1-27

Source:  JOC.com

When a container without a signed weight declaration shows up at a marine terminal as of July 1, when a new SOLAS rule takes effect, what happens next? Will the terminal allow the container in, hoping that the weight will arrive in time for the container to be handled and loaded without having to be pulled aside? Or does the terminal avoid the risk, telling the carrier and its customer that containers without the Verified Gross Mass won’t be allowed in under any circumstances?

That and many other unresolved issues are raising anxiety levels among shippers, carriers and terminals as the implementation date is just a few months away.

U.S. exporters say the amendment to the SOLAS convention requiring shippers to provide a signed, certified weight to the ocean carrier and terminal is unworkable. They are asking how a shipper can be held responsible for the weight of a container whose tare weight, or unloaded weight, may be inaccurate, especially if the shipper never sees the container in cases where it’s loaded at a transload facility, possibly thousands of miles away from the exporter’s point of origin.

“It’s a fiasco,” said Peter Friedmann, executive director of the Agriculture Transportation Coalition, a group representing roughly 2,000 shippers. “Everyone who knows about how cargo moves from the origin and onto a ship knows that this thing is absolutely unworkable and will create unbelievable congestion unless minds who are familiar with how cargo moves are allowed to intercede.”

Friedmann said the SOLAS issue was a bigger issue than merging container lines and shipping alliances, noting that virtually all agricultural exports — 75 percent to 80 percent of all U.S. outbound container shipments — would be affected.

Key to the discussion of how the SOLAS rule will be implemented involves what will happen at the terminal gate when containers arrive. If terminals bar entry to containers for which a VGM hasn’t been provided, there could be significant disruption to trade flows. All parties appear to be waiting on the U.S. Coast Guard to issue guidelines, which are expected to be published in February.

Eleven U.S. terminals have told one of the large container lines that they will refuse to admit containers that arrive at the gate unaccompanied by a signed VGM provided by the shipper. Thus it would appear that a number of terminals are adapting, or at least hoping to adapt, the position statedby Maher Terminals at New York-New Jersey in December, which was that after July 1 it won’t admit any container for which a VGM has not already been received via electronic means. That position puts the onus on the carrier to obtain the VGM from the shipper earlier in the process, which could create difficulties for carriers in facilitating the flow of its customers’ cargo and amounted to a stake in the ground that one carrier executive said “doesn’t appear to be consultative.”

The story is likely far from over, as the carrier that was told by the 11 terminals that containers would get turned away said, “we as a carrier will probably ask” the terminals to be flexible. Flexibility in essence means allowing containers into the terminal without the VGM. And given that the carriers are the main customers of the terminals, it remains an open question whether those terminals will be uncompromising in sticking to the position of no-VGM, no entry. Indeed, three other U.S. terminals told the carrier that they would accept containers without the VGM with the understanding that such containers can’t be loaded as that would be a violation of U.S. law under the SOLAS rule.

“What does a terminal operator do when a box shows up and doesn’t have the right information in order to validate the weight? That is where a lot of the discussion takes place,” Ron Widdows, the former APL CEO who is now a consultant and chairman of the World Shipping Council, the trade group representing container lines, told JOC.com in an interview this month. “Is a terminal going to take the box and then seek to get the information? Or are they going to reject the box at the gate for the lack of the information? There seem to be different views on how the terminal operators are going to behave in that regard.”

The terminals’ position stems in part from their fear of congestion stemming from having to pull out and sequester containers for which a VGM has not been received, which would require additional storage space and handling costs that the terminal might have to absorb, and perhaps more importantly, interfere with the increasingly difficult task of handling the surges of containers coming moving on and off mega-ships. Anything that could create exceptions, that is, situations where containers can’t be loaded and where documentation or other issues need to get resolved, is a red flag for terminals. One senior carrier executive suggested that some terminals will take a wait and see approach, possibly allowing in some containers without the VGM, but watching carefully to see the number of exceptions and additional handling that is created.

Also, few terminals so far seem to believe there is a viable business model in conducting weighing on behalf of shippers and charging them a fee, given the requirement to invest in weighing equipment and find space for the weighing process and associated storage. In its announcement in December, Maher said it would not offer weighing services and one senior carrier executive told JOC.com this week that he “is not seeing terminals lining up” to provide weighing services even if it would create an additional revenue steam. One senior terminal executive said his company fears that what starts as a revenue generating service could end up creating no revenue gains as a result of tough negotiations with carriers that could end up with terminals swallowing the associated costs.

A terminal’s refusal to admit a container arriving without a VGM places the burden on the carrier to ensure that its shipper provides the VGM sufficiently in advance to avoid the container being turned away at the gate. The burden is especially heavy given that only some shippers submit documentation electronically, while many others submit documentation via fax or in hard copy form. According to the ocean container portal Inttra, approximately 300,000 container weights will need to be certified each day globally, and roughly half of all booking requests and shipping instruction submissions each day are non-digital currently.

Indeed, sensing an impending disruption to trade once the rule takes effect, some are saying that implementation of the VGM rule needs to serve as a catalyst globally to convert more documentation to electronic form.

“The carriers themselves, and their IT linkages, their EDI connections to their customers, becomes the most efficient means” of conveying the VGM information, Widdows said. “Not all customers interact electronically, you still have customers that send information by fax or a variety of different ways, but the most efficient system is getting that electronic, EDI connectivity to be a much more significant percentage of the business. That is going to ensure a more timely movement of the information and provide some consistency.”

One carrier serving the U.S. market said that all VGMs will need to be sent by shippers to the carrier electronically, thus indicating — if that carrier and others hold to that in practice — that the rule may already be having an effect on converting shipper-carrier interactions to electronic means.

Under the SOLAS rule, the VGM needs to be used for stowage planning and the carrier and terminal operator are barred from loading a container for which a VGM hasn’t been received. Normally there is a two to three day cutoff in advance of vessel loading for containers to arrive at the terminal. But the ocean carrier compiles the load list one day after the cargo in-gate cutoff, so that theoretically leaves a day after a container arrives at the terminal for the VGM to be received. If it’s not received by the time of loading, one carrier said, the terminals would have the ability to assess fees for any re-handling and storage of the container until the VGM is received, thus creating an additional revenue stream.

But for agriculture shippers, the issues in some cases go back further into the supply chain. For example, given that the shipper is legally responsible for providing the verified gross mass, how can the shipper know what the weight is if its cargo is loaded at a transload facility near the port by a third party?

Exporters are asking, for example, what variances to the declared VGM will the U.S. Coast Guard, the agency implementing the rule in the U.S., accept for inspections? Exporters say that the tare weight, or unloaded weight of the container, which is stenciled on the side of every container, can vary significantly from the actual weight of the container. Thus shippers should not have to be responsible for certifying the tare weight of the container under Method 2 of SOLAS, which allows the VGM to be calculated from the contents of the container weighed separately, and added to the tare weight of the container. Export transload facilities, which take cotton, soybeans, grain, or other agricultural commodities that arrive by rail or truck and transfer them to containers, are high volume operations where the containers are picked, packed and sent to the marine terminal in rapid succession. Agricultural shipper representatives said this makes it almost impossible for the VGM to be provided soon enough in the process to avoid disruption at the ports.

Friedmann said the AgTC has raised the issue with the Federal Maritime Commission and with members of Congress, describing why it feels the rule is unworkable but also expressing the fear that other exporting nations may not enforce the rule to the degree the U.S. does, creating a competitive disadvantage for U.S. exporters.

“If you want to see ports gummed up as they were two years ago, with the West Coast labor issue, just wait until the end of June when this new container weight certification goes into place and carriers begin to reject cargo.”

Contact Peter Tirschwell at peter.tirschwell@ihs.com and follow him on Twitter: @petertirschwell.

Jan 23

Container Weighing Rules for 2016: Background

Source:  JOC

Background:

Effective July 1, 2016, any container leaving from any port in the world must be accompanied by a shipping document signed either electronically or in hard copy by the shipper on the bill of lading listing the verified gross mass of a container in order to be loaded onto a ship. The mandate from the International Maritime Organization under the Safety of Life at Sea (SOLAS) convention comes after misdeclared weights contributed to maritime casualties such as the breakup and subsequent beaching of the MSC Napoli on the southern U.K. coast in 2007 and the partial capsizing a feeder ship in the Spanish port of Algeciras in June, 2015.

The weighing must be done in one of two approved ways, called Option 1 and Option 2, on scales calibrated and certified to the national standards of the country where the weighing was performed. Many of finer points of the new regulation have not yet been finalized, such as enforcement, and what happens to a container that arrives at a port without the necessary documentation or if the VGM (verified gross mass) declaration for a container turns out to be false or incorrect.

 

Oct 19

Create a Culture of Supply Chain and Leadership Excellence with the Tools and Training of Transformance Advisors

Screen Shot 2015-10-19 at 11.22.30 AM

If you want to spread the culture of Supply Chain and Leadership Excellence in your organization, consider these classes, workshops and online tools offered by Transformance Advisors.

The Lean workshop is a great source of inspiration. The format allows everyone to participant and gain insights into areas of opportunity for their lean transformation – whether just getting started or making course corrections to an established program.

The Alignment workshop provides a great opportunity to share and debate the challenges with getting everyone committed to the same objectives. It’s a chance for participants to share experiences when alignment was achieved and the challenges, and even disasters, that occur when people are not aligned on common goals.

 The Fresh Connection simulation is the best tool I have seen for gaining an understanding of how decisions by various functional areas are intertwined with other areas and have a direct impact on ROI.

The Hybrid Supply Chain teaches your staff the of components of supply chain, then allows them to practice their new skills with the simulation technology of The Fresh Connection. All of this is taught with convenience and flexibility in mind using the “flipped classroom” model.

Transformance AdvisorsScreen Shot 2015-10-19 at 11.22.38 AM

Jun 22

Filling the Knowledge Gap with Curiosity

Source: http://ideas.time.com/2013/04/15/how-to-stimulate-curiosity/

Curiosity is the engine of intellectual achievement — it’s what drives us to keep learning, keep trying, keep pushing forward. But how does one generate curiosity, in oneself or others? George Loewenstein, a professor of economics and psychology at Carnegie Mellon University, proposed an answer in the classic 1994 paper, “The Psychology of Curiosity.”

Curiosity arises, Loewenstein wrote, “when attention becomes focused on a gap in one’s knowledge. Such information gaps produce the feeling of deprivation labeled curiosity. The curious individual is motivated to obtain the missing information to reduce or eliminate the feeling of deprivation.” Loewenstein’s theory helps explain why curiosity is such a potent motivator: it’s not only a mental state but also an emotion, a powerful feeling that impels us forward until we find the information that will fill in the gap in our knowledge.

Here, three practical ways to use information gaps to stimulate curiosity:

1. Start with the question. Cognitive scientist Daniel Willingham notes that teachers — along with parents, managers, and leaders of all kinds — are often “so eager to get to the answer that we do not devote sufficient time to developing the question,” Willingham writes in his book, Why Don’t Students Like School? Yet it’s the question that stimulates curiosity; being told an answer quells curiosity before it can even get going. Instead of starting with the answer, begin by posing for yourself and others a genuinely interesting question — one that opens an information gap.

(MORE: How to Raise a Group’s IQ)

2. Prime the pump. In his 1994 paper, George Loewenstein noted that curiosity requires some initial knowledge. We’re not curious about something we know absolutely nothing about. But as soon as we know even a little bit, our curiosity is piqued and we want to learn more. In fact, research shows that curiosity increases with knowledge: the more we know, the more we want to know. To get this process started, Loewenstein suggests, “prime the pump” with some intriguing but incomplete information.

3. Bring in communication. Language teachers have long put a similar idea to use in exercises that open an information gap and then require learners to communicate with each other in order to fill it. For example, one student might be given a series of pictures illustrating the beginning of the story, while the student’s partner is given a series of pictures showing how that same story ends. Only by speaking with each other (in the foreign language they are learning, of course) can the students fill in each others’ information gaps.

This technique can be adapted to all kinds of settings: for example, colleagues from different departments could be asked to complete a task together, one that requires the identification of information gaps that the coworkers, with their different areas of expertise, must fill in for each other. Communication solves the problem — and leaves the participants curious to know more.

This article is from the Brilliant Report, a weekly newsletter written by Annie Murphy Paul. 

 

Oct 09

Survey of 1068 Senior Supply Chain Professionals – 2014 SCM

Click HERE to review full report

FOREWORD ………………………………………………………………………………………….4
INTRODUCTION …………………………………………………………………………………..5
SURVEY HIGHLIGHTS ………………………………………………………………………….8
EXECUTIVE SUMMARY …………………………………………………………………….. 10
1: CUSTOMER CENTRICITY ……………………………………………………………… 12
2: DIGITAL DEMAND & OMNICHANNEL ……………………………………….. 14
3: DISTRIBUTION NETWORKS ………………………………………………………… 16
4: MANUFACTURING STRATEGIES …………………………………………………. 18
5: DESIGN FOR PROFITABILITY ……………………………………………………….. 20
6: SOURCING & SUPPLIER MANAGEMENT …………………………………… 22
7: SALES & OPERATIONS PLANNING ……………………………………………… 24
8: RISK MANAGEMENT …………………………………………………………………….. 26
9: SUSTAINABILITY ……………………………………………………………………………. 28
10: TRANSFORMATION & TALENT ………………………………………………….. 30