Terminal Handling Charges – Meaning, Types, Example and History

Terminal Handling Charges or THC is a term that you would come across in international trade. Shipping terminals or port authorities charge THC for the services they provide to facilitate the shipment process, such as storage, positioning of cargo equipment handling, and maintenance. THC usually includes charges for handling the cargo, unloading it, crane service, and stacking the cargo.

Terminal Handling Charges are unavoidable as they are crucial for the proper functioning of the ports and terminals. However, the parties can minimize these costs through proper planning. For instance, they can avoid demurrage and detention charges by going for Shipper-Owned Container (SOC).

Another name for THC is the Container Service Charge (CSC). And in some West African countries, THC is also called Liner Out Charge.

History of Terminal Handling Charges

In earlier days, the owner of the ship used to pay the stevedores (port workers) for loading and unloading of the cargo from the vessel. With the evolution of the business, increased volumes at the port, and modernization of port infrastructure, stevedoring process, and handling also made progress.

From manual, labor-intensive work earlier, machines (cranes, forklifts, and more) now perform much of the stevedoring work. The payment system has also evolved over time. Initially, it was the owner of the ship who made the payment to the stevedores. Now, the cargo owner makes the payment, and these payments are now known as Terminal Handling Charges.

Terminal Handling Charges – What It Includes?

Terminal Handling Charges are usually not negotiable, but different ports can have different THC charges. Even THC charges can be different within the same port. Different terminals within a port can have different THC charges.

THC charges can also differ for different types of cargo. For instance, Hazardous, Reefers and Out of Gauge (OOG) cargos will attract a higher THC. These charges have a direct relationship and vary with the time and effort required in handling these cargoes. By simple logic, the time and efforts would be more with hazardous and such types of cargoes than handling normal containers.  

Mainly, the THC charges of a port or a terminal depend on their local charges. These local charges could be for the maintenance of terminal equipment, storing and monitoring the cargo, unloading the cargo at the destination port, loading the cargo onto the consignee’s vehicle, and more.

Who Pays THC?

Generally, the terminal operator bills the shipping company or carrier for the THC. The shipping company, in turn, passes on these charges to the buyer or seller, depending on the terms of the contract. Or, either of the parties or their representative has to pay the THC at the port, once at the departure port, and once at the destination port.

Generally, carriers collect the THC from the shipper at the time of issuing the BoL (bill of lading). And carriers collect the Import Terminal Handling Charges when releasing the Delivery Order to the consignee. It is the responsibility of the freight forwarders to ensure that the carrier quotes the right THC charges.

THC charges could be big and thus, may represent a significant portion of the total shipping cost. Thus, it is crucial that buyers and sellers have full information on the THC charges involved before signing the contract. The freight forwarders do not add their margin to the THC since these are flat fees, and one can easily verify them.

Sometimes, Terminal Handling Charges may result in confusion between the buyer and seller because of the carrier. Some carriers include THC in their freight rates. The Incoterms rules note that if THC is the obligation of the seller, then the buyer should not pay for it. Most of the confusion primarily prevails in respect of Terminal Handling Charges levied at the destination port.

Types of Terminal Handling Charges

Every shipment may involve at least two or a maximum of three types of THC during its entire journey. And these instances are – at the point of Origin or exporting country port, at the destination port in the importing country, and it could also be at the Transhipment Port.

The THC charges at the origin port (Origin THC or OTHC) and destination port (Destination THC  or DTHC) are the responsibility of the buyer or seller, depending on their sale contract. Either buyer or seller or their representatives pay the THC charges to the port or to the carrier. Or the carrier pays these charges and includes them in the freight cost.

Then there is Transshipment THC, which is always the responsibility of the carrier. Carriers then include the THC cost in their ocean freight cost. Transshipment is basically the third port where the carrier may stop in between the departure and destination port. There could be zero, one, or more Transshipment ports in a shipment.

THC Example

The example below will help clear out the THC charges in the shipment process.

Suppose Company A is a pharmaceutical company that wants to ship 20 containers of medicine from Cape Town, South Africa, to New York. Company A transports all the containers to the Cape Town port for shipment by Carrier C.

Once the cargo arrives at the port, port workers use the cranes to lift those containers and stack them ready for dispatch. Owing to the nature of the cargo, they require reefer containers, which carry extra charges. Moreover, port technicians need to regularly monitor these containers to ensure a set temperature. The same process is when the cargo arrives at the destination port.

So, in this example, the THC will include the following cost:

  • Charges to unload the cargo from Company A trucks.
  • Charges for storing the cargo at the destination port.
  • Cost for reefer containers, as well as monitoring charges.
  • Loading Charges for putting the cargo onto the vessel.
  • Cost of unloading the cargo from the vessel at the destination port.
  • Charges for monitoring the reefers.
  • Charges of Unloading, storing, shifting, and loading back at the Transshipment Port if any.
  • Finally, the cost of loading the cargo (by crane or a heavy-duty forklift) onto the buyer’s trucks from the destination port.

THC and Wharfage

Wharfage is the charge that usually applies to less-than-container loads (LCL) or cargo that does not need a container. Normally, THC includes a wharfage charge. But, in the case of an LCL shipment, if there is no THC charge, then the invoice will show the wharfage charge.

Port authorities calculate THC charges on the basis of the THC charges schedule. But, they calculate the wharfage charge on the basis of the weight or volume of the cargo.

Final Words

Terminal Handling Charges are an important part of the shipping process and are unavoidable. Depending upon the charges levied at the Port of Origin and Destination, the total THC could be a significant part of the total shipping cost. Thus, it is crucial that parties make every effort to minimize these costs, such as selecting the terminal close to their location, using SOC containers, and more.

Sanjay Borad

Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.

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