The idea of Terminal Handling Charges (THC) payment facility is to reduce the cost for exporters so they can be more competitive and grow in the international market. John Joseph, Member (Tax Policy), Central Board of Indirect Taxes and Customs (CBIC), explains why CBIC has directed custom houses to allow DPE, DPD and AEO clients to pay THC directly to terminal operators.
CBIC has introduced direct payment of Terminal Handling Charges (THC) to terminal operators in order to reduce transaction costs. Please give details.
CBIC has notified THC payment facility to Direct Port Entry (DPE) or Authorised Economic Operators (AEO) export customers, preceded by Direct Port Delivery (DPD) or AEO import customers. By issuing two separate public notices to all Custom Commissionerates, that included a number of major ports, CBIC directed custom houses to allow DPE, DPD and AEO clients/importers/exporters to pay THC directly to terminals bypassing shipping lines.
What was the objective of this decision?
The idea is to reduce the cost for exporters so that they can be more competitive in the international market. As a usual practice, THCs are levied by port terminals to shipping lines who in turn collect these charges from the exporters or importers. We have got to know from many exporters and importers that shipping lines are collecting THCs which are at variance with what the shipping lines have paid as THC to port terminals. This practice results in lack of transparency.
At this moment, the terminals can deal with DPE/DPD/AEO customers with ease, which later will be extended to all customers. Currently, there are more than 2000 DPE/DPD/AEO clients in the country who are operating 80 per cent of cargo across India. I would like to make it clear that the direct payment of THC to terminal operators is optional; whoever wants to save money and reduce logistics cost may opt for this option. We are just facilitating the process of cargo operation with ease and reduced cost. The international market is reeling under slowdown and Indian products are facing challenges to be competitive in terms of huge logistics cost and price. It is up to exporters and importers whether they would like to save money and maintain their cash flow in this challenging time.
Annually, about `5,000 crore can be saved by paying THC directly to terminal operators. It is found that shipping lines or NVOCCs charge extra amount from exporters and importers which is more than (at least `5,000 to 10,000 more per container) what they actually pay to terminal operators. Presently, the country’s ports handle more than 10 million TEUs per annum. According to the CBIC estimate, saving the extra money paid to shipping lines will reduce the cost significantly for the importers and exporters.
Under the new mechanism, DPE/DPD/AEO who already opened PD (Personal Deposit) accounts with terminal operators may directly pay THCs directly to the respective terminals. The eligible exporters/importers who do not have PD accounts may open the same and pay directly. The CBIC notice also requested port/terminal operators to raise invoices for THC directly to eligible and willing exporters/importers.