When goods are shipped from one site to another, the terminal authorities charge a specific fee for handling the import/export of such shipments. The consignor and the consignee pay these terminal handling charges (THCs).
What are Terminal Handling Charges ?
Authorities at the port terminals charge a specific amount for their services when goods reach their site. These expenses are known as THCs. The services include loading and unloading, storage, movement, and maintenance of the shipment.
Every port has multiple terminals that handle different types of cargo. Moreover, the local laws and requirements significantly differ at various locations. As a result, the THCs aren’t uniform.
What do Terminal Handling Charges Include?
THCs may include different services at different ports, like loading and unloading the goods at the port, transporting them to the end destination, and storage, to name a few. Here is a list of other such services:
- Maintenance
- Berthing
- Labor
- Terminal facilities.
While some terminal charges may only comprise the services until a container is off-loaded at the port, others may also include its transport to the warehouse.
For example, person A (the consignor) ships the container from India to the US. Person A takes the responsibility that the container will reach person B (the consignee) at person B's warehouse in the US.
In such a case, THCs will include loading and unloading, berthing, labor, terminal facilities charges, and the transportation cost to person B's warehouse.
However, THC will also have the storage charges if person A instructs the container to be stored at the terminal for a few hours or days.
Who Pays Terminal Handling Charges?
In most cases, the consignor (exporter) pays the THCs up to the unloading of goods. Exporters pay these charges to the shipping company officials, who then forward them to the terminal authorities when the goods are loaded. The bill of lading (BOL) is generated at the port of origin. The consignee (importer) pays the terminal charges to the carrier before picking up the goods at the destination port. The carriers make this payment to the terminal authorities.
The consignor and the consignee decide upon the payment responsibilities before shipping the goods. Therefore, the consignor may pay the entire sum of charges if that is mutually agreed upon and laid out in the contract. Otherwise, it will be divided between the consignor and the consignee.
For example, person A (the shipper) and person B (the consignee) sign a contract stating that person A will only pay the charges at the port of origin. In that case, person B has to make the payment at the destination port or when the delivery reaches person B's warehouse, as per the contract.
Understanding Terminal Handling Charges with Examples
Lotus X Cosmetics Company, India, received an order to ship 30 containers to Lily Y Cosmetics, Egypt.
Case 1: THCs paid by both – the consignor and the consignee
Lotus X sends the containers to the Mumbai port for shipment. At the port, the terminal authorities will unload the containers from the trucks, transfer them to the vessel, store them with care, and oversee their maintenance until the vessel is ready to leave the port. For this, they will use cranes, labor, and storage space. As a result, the BOL will include the charges for all of these services which the consignee must pay.
When the vessel reaches the port of Cairo, Egypt, the terminal authorities will use cranes to unload the containers. They will then transfer them to the Lily Y Cosmetics' vehicle. Before the carrier hands over this delivery, they will charge Lily Y Company officials for services, including unloading and transferring goods by crane, labor, maintenance, and storage, if the officials don’t collect them on the same day.
Case 2: THC paid by the consignor
The scenario will be different if Lotus X Cosmetics and Lily Y Cosmetics decide that the former will bear all the freight charges until the goods arrive at Lily Y warehouse. In such a case, Lotus X will pay for both the BOLs and the delivery of goods along with the additional charge of transport from the port to the warehouse.
Note: If Lotus X wishes to opt for transshipment instead of direct shipment, the freight charges will differ. That is because the carrier will have to pay the THCs at the transshipment port to the terminal authorities. However, it will affect the final payment amount as the carrier officials will pay for it themselves.
How can you Calculate Terminal Handling Charges?
The terminal authorities usually charge the shipper according to the dimensions of the container and have a fixed rate for a 20/40 and 40-feet-cube container. When transporting a full container load (FCL), the shipper can calculate the THCs by checking the rates of the port they are exporting the goods from.
Shippers must note that every shipment may not be large enough to be shipped in a full container. In such a case, it is referred to as a less than container load (LCL).
LCL comprises of multiple small shipments in one large container. The shipment consolidators responsible for the collection charge from various shippers and earn profits.
If the shipper wants to transport LCL, they can calculate the THCs according to the weight of the shipment in units of tons or cubic meters (CBM).
Note: THC differs from port to port and may also vary among different terminals of the same port.
Types of Terminal Handling Charges
THCs are levied at three ports: the port of origin, the destination port, and the transshipment port (if any). Therefore, there are three types of THCs:
Origin Terminal Handling Charges (OTHC): The terminal authorities collect these charges from the shipper before giving them the BOL at the port of origin. These charges include loading, maintenance, and storage of the shipment, among other services.
Destination Terminal Handling Charges (DTHC): The carrier collects DTHC from the consignee at the destination port before handing over the goods. These charges include unloading, maintenance, storage, and transport (if any).
Transshipment Terminal Handling Charges (TTHC): The carrier or the shipping company officials pay TTHC at the transshipment ports. These include unloading the shipment from one vessel, storage, and loading it onto another vessel. The carrier officials pay the TTHC as they include it in their total freight rates.
Difference between Wharfage and Terminal Handling Charges
Wharfage refers to the charge levied upon the shipper for the use of the pier, also known as the wharf. However, it is a part of the THCs, and the consigner doesn’t need to pay it separately.
Another difference between wharfage and THC is its calculation. THC is charged according to the size of the container. However, wharfage is charged as per the weight or volume of the LCL, which is calculated in units of tons or cubic meters.
