Terminal Handling Charges

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Competition European Commission COMPETITION REPORTS Terminal handling charges during and aſter the liner conference era October 2009

Transcript of Terminal Handling Charges

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CompetitionEuropean Commission

COMPETIT ION REPORTS

Terminal handling charges during and

after the liner conference era

October 2009

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European Commission

Terminal handling charges during and after the liner

conference era

October 2009

COMPETITION REPORTS

Brussels, 2009

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DISCLAIMER: Raven Trading Limited and its representatives carrying out contracted work shall not have any liability for any errors in the information. The information is an estimate and subject to varying degrees of uncertainty. No warranties or representations of any kind can be given with respect to the accuracy of said information. Any use of the information provided is at the discretion of the Client and any decision reached is the sole responsibility of the Client. This report was produced by Ben Hackett, on behalf of Raven Trading Limited, for the European Commission and represents its author’s views on the subject matter. This report does not necessarily reflect the European Commission’s views and cannot be regarded as stating an official position of the European Commission. The European Commission do not guarantee the accuracy of the data included in this report and do not accept responsibility for any use thereof.

Terminal handling charges during and after the liner conference era 5 October 2009 This electronic publication is available on the Competition website:

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Terminal handling charges during and after the liner conference era

Contents

Executive Summary 1

Introduction 3

Defining Terminal Handling Charges 3 Background 3 Defining THCs 4

History of THC Changes 7

THCs and Freight Rates 8

Terminal Handling Charges by Carrier and Terminals 10

Analysis of Terminal Handling Charges 14

Terminal Handling Charges By Port, Trade and Carrier 17

Post Conference THC Rates 19 Carriers Response to the Post Conference System 19 Impact of the Repeal on THC Levels 20 Database Updating 27 Post October 2008 Conclusions 28

Appendix A: Pre October 18, 2008 THC Charges by Port for Ten Largest Shipping Operators 29

Appendix B: Post October 18, 2008 THC Charges by Port for Ten Largest Shipping Operators 35

Appendix C: Data Sources 41

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Contents

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Tables

Table 1: CENSA THC Formula Cost Elements ..........................................................................................5 Table 2: Split of THC Charges between Shipper and Ship Operator .......................................................6 Table 3: Hong Kong Terminal Handling Charges History .......................................................................8 Table 4: Far Eastern Freight Conference Table 5: India Pakistan Bangladesh Ceylon Conference ..12 Table 6: Europe Mediterranean Trade Agreement Table 7: East Coast South America (No Conference existed on this trade) 12 Table 8: Transatlantic Conference Table 9: Europe Middle East Rate Agreement ...........................13 Table 10: Europe Canary Islands Conference Table 11: South Africa Conference (No Conference existed on this trade) 13 Table 12: Europe West Africa Trade Agreement ..................................................................................13 Table 13: European Port Terminal Handling Charges by Trade Route (August- September 2008)......15 Table 14: Africa & Americas Port Terminal Handling Charges by Trade Route (September 2008)......16 Table 15: Asian Port Terminal Handling Charges by Trade Route (September 2008) ..........................17 Table 16: THC Rates at Southampton for Ten Largest Carriers During Conferences............................18 Table 17: THC Rates at Rotterdam for Ten Largest Carriers During Conferences ................................18 Table 18: THC Rates at Genoa for Ten Largest Carriers During Conferences .......................................18 Table 19: THC Rates at Singapore, Shanghai, and Tokyo for Ten Largest Carriers During Conferences..............................................................................................................................................................19

Table 20: Average Charges and Range of Charges for Combined Containers: Europe Post April 200921 Table 21: Range of Rates by Container Size: Europe ............................................................................22 Table 22: Average Rates and Percent Increase for Combined Containers: Europe..............................23 Table 23: Average Rates and Range of Rates for Combined Containers: Asia .....................................24 Table 24: Range of Rates by Container Size: Asia .................................................................................25 Table 25: Average Rates and Percent Increase by Container Size: Asia ...............................................26 Table 26: Average Rates and Range of Rates for Combined Containers: North/South America .........27 Table 27: Range of Rates by Container Size: North and South America...............................................27 Table 28: Average Rates and Percent Increase for Combined Containers: North and South America 27

Charts

Chart 1: Freight Rates for Asia/Europe/Asia...………………………………………………………………………………………….9 Chart 2: Freight Rates for Transatlantic……………………………………………………………………….………………………..…9 Chart 3: Supply versus Demand, 2012……………………………………………………………………………….………………….10

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Executive Summary

1. Regulation (EC) No 1419/2006 was adopted by the Council of the European Union on 25 September 2006. This repealed the Council Regulation (EEC) No 4056/86 which had notably allowed “block exemption” from EC competition rules for liner shipping conferences. This took effect on 18 October 2008.

2. The European Commission is seeking to establish the impact of the end of the liner

conference block exemption on the various elements of the price of the transport services. This study addresses the charges related to the handling of containers in ports and terminals, that is, the Terminal Handling Charge (THC) applied by all container carriers in most ports.

3. The purpose of the study is to identify the THCs that were applied prior to October 18th,

and to compare these with those applicable after the repeal of the liner conference block exemption. It is also the intent of this study to compare the level of THCs across different trades and different carriers. This, in order to be better able to assess the changes in the level of the charges after October 18th, both by carrier and by trade.

4. A common formula for assessing the terminal handling charges to be charged was developed

in 1989 by the Council of European and Japanese National Shipping Association (CENSA) which was initially agreed by the European Shippers’ Council. It structured the formula on an 80/20 basis, with the carriers being responsible for the 20 percent.

5. The survey of the terminal handling charges at 44 ports prior to the elimination of the liner

block exemption highlighted a broad and consistent homogeneity in most ports around the world with exceptions in Africa and South America. The conference carriers all applied the same charge per port, by trade, irrespective of their own costs which may have been higher or lower. Non conference carriers appeared to have followed the conference lead and applied the same charges.

6. Terminal handling charges varied within a port by trade route, irrespective of which terminal

was being used.

7. The validity of the terminal handling charges addressed in this study relates to the period July-September, 2008, and April-June 2009.

8. Container lift charges are negotiated between individual carriers and terminal operators. The

commercial pricing is dependent upon volume throughput and longevity of the contract. In return the terminal operator provides guarantees with regard to vessel docking and number of box moves per hour. As far as can be ascertained, contracts are based on a per lift basis, irrespective of box size. Rates per move do vary based on whether the box is full or empty or destined for transshipment (i.e. moving only from ship to stack to ship, without exiting the gate).

9. Terminal handling charges, as a ratio to the freight rates, is variable over time depending on

the state of freight rates and “all –in” charges. During high freight rates they are an insignificant part of the pricing mix, but during a freight rate collapse, such as in 2009, they are a higher percentage of the total transportation bill. Terminal handling charges are usually a negotiable item, at least for large customers.

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10. Following the abolition of the conferences, terminal handling charges underwent significant simplification and were structured on a country basis rather than a port basis. Terminal handling charges that had remained virtually unchanged for nearly 15 years in Europe changed almost overnight.

11. Significant differences in pricing between the carriers appeared following the elimination of

the carriers and the subsequent increase in competition. This competition has led many carriers to begin posting current terminal handling charges on their websites (primarily for Europe, although in some cases for Asia as well).

12. Current charges are supposedly based solely on cost recovery, although this may not always

be the case due to variance in charges that do not correlate with volume throughput. The new charges appear to be “cost plus”, that is, cover all container related costs from vessel cell to gate and in some cases the costs also make allowances for the return of empty containers. Individual lines appear to have different interpretations of what could, or should, be included in THCs, as rates attempt to recover cost of moving empty containers in some instances.

13. Charges vary by container size in Asia and the Americas, while in Europe charges are per

container. This may not be directly correlated to the terminal cost structure in all the ports.

14. Changes to terminal handling charges were geographically related: with only a few exceptions, charges in Europe and Australia increased or were newly introduced, while Asia excluding China underwent only slight increases. Charges in China typically decreased, with the exception of Shenzen which had significant rate increases. In the Americas the charges appear to have decreased in Canada, increased in the U.S. and with little change in Santos.

15. The increased use of annual freight contracts with individual shippers has created “all-in”

rates that incorporate the terminal handling charges into the total cost, making the charges largely irrelevant.

16. Terminal handling charges appear to be negotiable between shippers and carriers particularly

with “all-in” freight rates that obscure the level of individual charges. The level of THCs are likely to change annually in the future as cost recovery needs shift and larger shippers negotiating powers evolve. Larger carriers are certainly able to negotiate with terminal operators to achieve a better contract deal than small carriers, particularly if they were also willing to sign up for a long term contract.

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Introduction

17. Regulation (EC) No 1419/2006 was adopted by the Council of the European Union on 25 September 2006. This repealed the Council Regulation (EEC) No 4056/86 which had notably allowed “block exemption” from EC competition rules for liner shipping conferences. This took effect on 18 October 2008.

18. The European Commission is seeking to establish the impact of the end of the liner

conference block exemption on the various elements of the price of the transport services. This study addresses the charges related to the handling of containers in ports and terminals, that is, the Terminal Handling Charge (THC) applied by all container carriers in most ports.

19. The purpose of the study is to identify the THCs that were applied prior to October 18th, and

to compare these with those applicable after the repeal of the liner conference block exemption. It is also the intent to assess the changes in the level of the charges after October 18th, both by carrier and by trade.

20. The structure of the database has been developed to allow for regular updates across ports,

trade routes and by carrier. 21. This report is in two parts, the first providing background to the THCs and, via direct market

research, tabulating the pre 18 October 2008 terminal charges. The second part consists of the post 18 October charges and a comparison of the two sets of figures.

Defining Terminal Handling Charges

Background

22. Terminal handling charges, or THCs as they are better known, are part of the evolution of the container trade in the liner shipping industry. It took over 20 years after the arrival of the regular container services in Europe for THCs to appear in any consistent manner. Prior to that, the industry continued to work within the norms of the traditional break bulk shipping environment.

23. The traditional method of charging for cargo handling was for the shipper to effectively

deliver cargo alongside the ship. All the charges to and from alongside the ship were for the shippers account. The cost of slinging cargo aboard the ship were for the shipping company’s account. The latter was a negotiated rate between the shipping line and the stevedore or in those days, the port authority.

24. The evolution from break bulk shipping to containerisation was a slow time in coming. Not

before 1990 did THCs appear in any formal way. The realization by ports/stevedores and shipping lines that the handling of containers had decidedly altered cargo handling in fundamental ways that no longer could be defined under the traditional charging mechanism took a while to formulate. With the new mode of transportation, ports/stevedores formulated their charges from the port gate to delivery of the container onto the ship. The equilibrium of responsibility had changed. The cost of the container handling was negotiated between the carrier and the port authority or stevedoring terminal operator. The fee is based

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on commercial negotiations and is usually based on volumes. Most contracts are multi year, with break clauses. They commit the carrier to a minimum guaranteed volume and in exchange the carrier is usually provided with guaranteed time slots for vessel berthing and numbers of containers handled per hour. In virtually all cases, the terms of the contract are based on container moves, irrespective of size or type. There is usually a price differentiation between full and empty containers as well as a special allowance for transshipment boxes.

25. Contract terms between the carrier and the terminal operator are confidential. There is an

increasing trend for carriers and terminal operating companies to enter into joint ventures for the development of new facilities, the rationale being efficient terminal management and volume commitments that will make the venture profitable.

26. Terminal handling charges (THC) are effectively charges collected by shipping lines to

recover from the shippers the cost of paying the container terminals for the loading or unloading of the containers and other related costs borne by the shipping lines at the port of shipment or destination. For containers shipped on an FOB (Free-On-Board) terms, which specifies which party (buyer or seller) pays for which shipment and loading costs, and/or where responsibility for the goods is transferred. The shippers at the origin port of shipment are responsible for paying the THC at the port of loading. This is defined as the Origin THC. The consignees, or buyers of the cargo are responsible for paying the freight rate and the THC (or equivalent) on the discharge port of destination, known as the destination charge. This is consistent with the Incoterms (International Chamber of Shipping) definition. Since 1990, most shipping lines have introduced separate charges for the freight rate and THC.

27. Consequently, the Council of European and Japanese National Shipowners Association

(CENSA) entered into discussions with the European Shippers’ Council and the conferences, to reach an acceptable formula for the distribution of cargo (container) handling costs at terminals. The European Shippers’ Council initially accepted that they should pay for certain activities performed and services provided either by the port or terminal operator for the movement of containers from the dock gate to the ships’ hold and vice versa. However in 1991 they withdrew their agreement. CENSA, on the other hand continued to adhere to the formula, at least at face value in claiming that the share of costs was apportioned according to the rules. The ESC also considered that it was part of the UNCTAD Liner Code of Conduct. This was not the view of various shippers councils.

Defining THCs

28. THCs are defined, by shipping lines, as ancillary charges. They are not seen as surcharges. They represent the additional increase in costs that are associated with the operation of moving containers, i.e. they are ancillary to the service provided by the lines.

29. To be clear, before containerisation the shipper paid a share (or all) of the costs of loading

and stowing his cargo onboard a ship. Usually, the terminal operator (stevedore) was paid for accepting the cargo on the quay and moving it under the ship’s tackle. On the introduction of containerisation this procedure was no longer followed, and it became apparent that the terminal operator was charging the carrier instead for all costs involved in transferring cargo from the terminal gate to onboard the ship and vice-versa.

30. The shipping lines had originally incorporated the stevedoring charges into the sea freight,

but the European Shippers Council (ESC) in the late 1980s had requested that charges be disaggregated so as to provide more transparency. The conference response was a general

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movement towards the three and the five-part tariff. The three part tariff related to port costs at both ends of the trade, plus the ocean freight. The five part tariff included pricing for inland transportation at either end of the trade. The final formula that was agreed became known as the 80/20 split.

31. The following cost elements are taken from the CENSA formula (dated 2.8.89) for

calculating THCs. The first 17 elements relate to general purpose containers of which items 1 to 11 and 15 are the 80 percent accountable to the cargo owner and items 12 to 14 for the liner company.

Table 1: CENSA THC Formula Cost Elements

Current Proposed 01 Delivering empty container and receiving full container at the

terminal, and all clerical work and reporting associated with delivering and receiving

01 Delivering empty container and receiving full container at the terminal gate

02 Inspection and reporting condition of container and completion of interchange receipt

02 Container inspection

03 Inspection and reporting of seals and wiring including removal of invalid labels and resealing as appropriate

03 Seals and wiring inspection

04 Movement of container on / from chassis, barge or railcar 04 07

Placing/removing container on delivery vehicle

05 Internal transport of container from/to/from stack 05 06 09

Move to/from stack

06 Handling container out of/into/out of stack 07 Reporting of chassis, barge and railcar activities into/out of

the terminal

08 Storage of full container within the time limits defined in the conference tariff

08 Container storage within terminal

09 Take laden box out of stack 10 Internal transport of container from stacking area to ship’s

side under hook 10 11

Move from stack to ship’s side and v.v.

11 Move of container from ship’s side under hook to ship’s rail 12 Move of container from ship’s rail into ship’s cell (including

ship’s hold or deck) 12 Move from ship’s side to cell and v.v.

13 including unsecuring and securing, and movement of hatch-covers from bay to bay or to quayside or vice-versa

13 Opening and closing of hatch-covers

14 Lashing of container 14 Lashing of container 15 Wharfage charges and quay dues, etc. where related to cargo 15 Wharfage 16 Physical and clerical terminal planning plus reporting of

container activities into vessel, including damage reporting and inspection of seals, wiring and labels.

16 Planning

17 Overtime or public holiday extra working costs 17 Overtime The following elements are additional to GP containers and

can either be incorporated into the GP costs to produce an average THC, or can be used to justify a higher THC for temperature-controlled cargo.

18 Pre-trip container inspection 18 19

Container inspection and connection of power

19 Connecting of container cables, clip-on units and/or generating sets

19

20 Electric power supply, liquid nitrogen, etc. 20 Coolant / power supply 21 Monitoring of temperatures 22 Administration including reporting of defective units and

reporting equipment into/out of terminal 21 22

Administration

23 Temperature-controlled container costs in excess of GP items 8,9,10,11 and 12

23 TC handling costs

24 Temperature-controlled container costs in excess of GP items 13 and 18

24 TC hatch-cover costs

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Terminal Cost Elements for non-standard ISO containers The following element is additional to GP containers and can either be incorporated into the GP costs to produce an average THC, or can be used to justify a higher THC for special containers

25 For loading overheight or other non-standard containers involving the use of special spreaders or equipment

25 Out of guage container handling costs

Terminal Cost Elements for dangerous cargo The following element is additional to GP containers and can either be incorporated into the GP costs to produce an average THC, or can be used to justify a higher THC for containers carrying dangerous cargo

26 Additional physical and administrative costs associated with the handling of dangerous goods (IMO) at terminals

26 Dangerous cargo handling costs

NOTE Physical and administrative costs associated with the handling of non-ISO containers or uncontainerisable cargo will be charged separately to a THC

Items 16 and 17 – to be equally divided 32. The structure of the seventeen items is defined more clearly in the table below, which shows

the 80/20 split between shipper and ship operator. The formula is clear in that the carriers’ responsibility for cost remains aligned to the old break bulk mode of transportation, that is, lifting the cargo from alongside ship to the hold. For all intents and purposes, this formula has not changed in the intervening years despite numerous discussions between shippers and carriers as to where the responsibilities lie. Carriers, for example, would somehow like to incorporate the increasing costs associated with empty containers into the THC, thereby passing the cost on to the shipper. Within the THC there are a number of free days storage provided which is variable depending upon the carrier and the port, however when the cargo receiver goes over the free days then a “demurrage” fee is raised. This is effectively a storage fee. Typically, carriers are also charged a fee by the terminal operator when they go outside the agreed limits of their contracted free storage days but this is a commercial issue and can be negotiated.

Table 2: Split of THC Charges between Shipper and Ship Operator

Source: PortStrategy, July 2005. copyright © Mercator Media 2008

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History of THC Changes

33. The introduction of terminal handling charges in late 1989 was spearheaded by the conferences. The concept, as itemized above, was that conference carriers had terminal costs associated with the handling of containers from the arrival at the terminal gate to the delivery into the vessel cell in the hold or on deck. During the early years there were a number of consortia that operated on a joint cost basis as well as alliances or joint services that negotiated their own stevedoring rates. Added to this were the carriers that operated on their own. Irrespective of the method of negotiations for stevedoring services, the conferences appeared to come up with a formula for THCs that was intended to be an average across the board, and which, according to them, was an under-recovery of the full costs of cargo handling being charged to the lines. The costs were however not verified by an independent auditor.

34. The rationale was that the carriers wanted to maintain full control of the new handling

methodology for containers. Pricing depended upon the format of the port terminal operator and the volume of containers and negotiating skills of the carriers and consortia. In some countries the pricing by the terminal operator was fixed, often linked to union rules, such as in the United States. In Asia some Governments enforce the pricing rules, such as in China.

35. Carriers would enter into multiyear agreements, usually tied to productivity and guaranteed

slots for vessel berthing in order to minimize the time spent in ports. During the last 18 years there has been a revolution in terminal ownership with the rise of landlord ports with private terminal operators employing their own stevedores. In the UK, the ports were fully privatized. Carriers also realized that terminal operations could be highly profitable and they began investing in the landside operations. This included, for example, P&O Ports, APM Terminals and Terminal Link (CMA CGM). Added to this also is the arrival of large, global terminal operators such as Hutchison Port Holdings, SSA Marine, DP World and ICTSI. These global operators could structure their pricing completely differently than local, national or regional operators.

36. The technology of container handling and terminal management through means such as

automation resulted in increases in productivity (defined as the number of container moves per hour that could be achieved). This, alongside the continuous expansion of container vessel size, ensured that productivity has continuously improved over time.

37. The competition between terminal operators and ports, especially in Europe, resulted in a

periodic shifting of carriers to different terminals or ports in order to maintain cost control, achievement of higher productivity and guaranteed berthing and services. The result of this is that THCs have remained very stable since their introduction with few increases despite the changes in the sea freight rates and surcharges over time. This is probably due to lower costs achieved through higher levels of productivity and better contract terms from terminal operators.

38. According to information received, prior to their demise, from the Far East Freight

Conference (FEFC), the India, Pakistan, Bangladesh and Ceylon Conference (IPBCC), and the Europe Middle East Rate Agreement (EMERA), the last THC increases were1:

a. UK 1990

1 No relevant data was available from TACA at the time

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b. North West Continent and EU Mediterranean 1992, i. except Gothenburg – 1993

39. A study commissioned by the Economic Services Bureau of the Hong Kong Government in

1998 did indicate significant increases in charges in Hong Kong. However, the document makes clear that part of this increase expressed in Hong Kong dollars was due to exchange rates differences. The Government document also notes that Hong Kong rates are higher than their regional counterparts because the operations are not subsidized. The following extracted table highlights the increases in costs that were recorded:

Table 3: Hong Kong Terminal Handling Charges History

40. In summary, there is no evidence that terminal handling charges have been increased

significantly since the advent of the CENSA formula, nor is there evidence that reduced costs through productivity gains have been passed on either, but it is not clear that carriers’ costs on a per container basis have move either up or down. There is no transparency between the commercial stevedoring cost and the pricing of the terminal handling charges.

THCs and Freight Rates

41. Terminal handling charges are not considered a surcharge but are treated as an ancillary charge, similar to documentation fees. Carriers do not treat the THC as a charge that shows variation or is related to variable operational issues. This explains the relative stability in the charges over the past 20 years as opposed to currency and fuel (bunker) charges which can vary on a monthly basis. Where operational issues have arisen linked to terminal operations, carriers applied “congestion” surcharges on a temporary basis. No discussion with clients appears to have been undertaken when these charges are applied.

42. Given the virtual stability of the THCs, albeit at varying levels according to trade routes, the

ratio of the THC to the sea freight rate has been variable depending on freight rates. The table below illustrates the freight rates on the Asia-Europe route over 13 years. There are significant fluctuations in the freight rates with the result that the THC ratio fluctuates similarly over time. It should be noted however that the level of THCs on average will have been in the 10 – 15 percent range on the Asia to North Europe route on a destination basis.

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Chart 1: Freight Rates for Asia/Europe/Asia

Source: Containerisation International Freight Facts

43. A similar situation emerges on the Transatlantic trade, as illustrated in the graph below.

Terminal handling charges were relatively stable over the time period, yet freight rates moved up and down over the 13 plus year time period, again creating a THC to freight rate ratio that varies according to the movement of freight rates.

Chart 2: Freight Rates for Transatlantic

Source: Containerisation International Freight Facts

44. Freight rates are driven by the relationship of supply and demand for shipping and the

available capacity, combined with the state of the global economy. In the illustration below there is a clear relationship between demand and supply which translates into freight rate volatility. The 1991 and 2001-2 recessions with their consequent drop in cargo demand coinciding with excess shipping capacity supply resulted in declining freight rates. Equally, the end of the recession saw sharp increases in freight rates.

45. Increasingly shippers are negotiating “All-In” rates and insisting that this includes the three

elements of basic sea freight, surcharges and terminal handling charges.

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Source: Drewry’s Annual Container Market Review 2007-2008, supplemented by AXS Liner 2008 onwards

46. In the current recession of 2008-9(?) we can identify a repeat of this, only worse. Freight

rates have collapsed with spot rates from Asia to North Europe reported as low as US$100 or less, with only surcharges and ancillary charges being applied. In this case, the THC will be a relatively high proportion of the all-in rate. The conclusion that can be drawn from this is that THCs are not an appropriate measure of relative freight rate movements, and based on industry information, large shippers are in a position to negotiate THCs as part of their overall contract.

Terminal Handling Charges by Carrier and Terminals

47. The Consultants carried out a market research survey of the 44 ports identified by the DG Competition in the Invitation to Tender. Every effort was made to collect the relevant terminal handling charges for all the ports. This was done by both conference and non-conference. Due to the variance of terminal handling charges at the same ports and terminals it was decided to collect the data on a trade lane basis.

48. The conference terminal handling charges were relatively straightforward to collect, with the

cooperation of the conference secretariats. More difficult was the collection of the data for the non-conference carriers, each of whom had to be contacted individually, with the exception of one carrier that provided the information on its internet website. Where no conferences existed, such as in the Europe to East Coast South America trade, it became increasingly difficult to collect the data. Difficulties encountered were 1) non cooperation and, 2) lack of knowledge outside the immediate geographic region. There was an overall lack of transparency for information which should be available to the general public as the charges are a fixed tariff price.

49. A database was developed that identifies trade routes and associated carriers providing

advertised services. These were then identified as Conference and Non-Conference. All charges are in the currency charged, usually local currencies. In the summary tables these are rounded to the nearest whole number. It became very clear at the outset of the research that THCs varied within a port by trade route and probably by individual terminal, although the latter was not further researched. It was also clear that many of the lines were frustrated by the variance in their ancillary charges within a single port. One of the carriers discovered that

Chart 3: Supply versus Demand, 2012

0%

2%

4%

6%

8%

10% 12% 14% 16% 18%

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009(E) 2011(E)

SUPPLY Growth rate (%) DEMAND Growth rate (%)

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they had over 13 different charges for the same port. There was also a lack of clarity as to what level of recovery the THC was aimed. Due to the fact that the formal conference THC was an average rate, some carriers were in fact over recovering whilst others were under recovering.

50. In virtually all cases, the Non-Conference carriers aligned themselves with the published

Conference THC. There were some minor exceptions to this.

51. The THCs at transshipment ports such as at Algeciras, Malta, Gioia Tauro, and Las Palmas were unclear, as in most cases there was no shipper involved and the cargo was shifted from vessel to dock and back to another vessel for the operational convenience of the carrier.

52. In the cases where ports are the final destination after a transshipment move, such as in the

Baltic and the Black Sea, there was often no terminal handling charge applicable or the port in question did not apply standard container handling fees. In these cases carriers normally include an extra charge within the sea freight that covers the additional terminal costs incurred. There were exceptions to this as well with some carriers advertising proper terminal handling charges, particularly for the Baltic ports.

53. Twelve European based trade routes were investigated. The carriers active on these routes

are itemized below, categorized by conference and non-conference status. The analysis of the terminal handling charges, by port can therefore be assessed by carrier, by trade and by port. The conferences taken into consideration were:

List of Conferences that also link to trade routes

• Far Eastern Freight Conference (FEFC) • India Pakistan Bangladesh Ceylon Conference (IPBCC) • Europe Mediterranean Trade Agreement (EMTA) • Europe Middle East Rate Agreement (EMERA) • Mediterranean Arabia Conference (MARCO) • Europe West Africa Trade Agreement (EWATA) • Europe Canary Islands Conference (ECIC) • Transatlantic Conference (TACA)

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Table 4: Far Eastern Freight Conference Table 5: India Pakistan Bangladesh Ceylon Conference

Table 6: Europe Mediterranean Trade Agreement Table 7: East Coast South America (No Conference

existed on this trade)

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Table 8: Transatlantic Conference Table 9: Europe Middle East Rate Agreement

Table 10: Europe Canary Islands Conference Table 11: South Africa Conference (No Conference existed on this trade)

Table 12: Europe West Africa Trade Agreement

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Analysis of Terminal Handling Charges

54. Prior to 18 October 2008 the level of terminal handling charges varied across the various trade routes within individual ports, but they were consistent across individual conference members and insofar as it was possible to ascertain, the non-conference carriers levied the same charges at ports with the same differentiation by trade route. There were some exceptions, but these were limited to ports where cargo was transshipped, such as Baltic ports and to ports where no formal terminal handling charge formula exist. The full database of terminal handling charges by port and carrier is supplied in the form of an Excel file.

55. The table below illustrates the variance in the level of terminal handling charges across trade

routes by ports within Europe. The Far East-Europe, Europe-Middle East and the North Atlantic trades did not differentiate between container size. The India – Europe trade was similar in North European ports, but in the Mediterranean ports the rates diverged. The trades to and from Europe to the Mediterranean and Southern Africa advertised charges based on container size. In all cases the terminal handling charges are consistent within countries by trade route.

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Table 13: European Port Terminal Handling Charges by Trade Route (August- September 2008)

56. There appears to be little rationale in the level of charges given the variance within ports by trade route, assuming that most carriers will be using the same terminals within a port, although this is not always the case.

57. Outside of Europe and Asia, as is illustrated in the table below, we see a somewhat

different picture with some variance in rates. Other than the two North American ports, the remainder are non-conference. It would appear that without a Conference reference point the carriers have applied their own THCs. This is evident in all three trades.

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Table 14: Africa & Americas Port Terminal Handling Charges by Trade Route (September 2008)

58. The Asian ports however show a return to a consistent level of charges, whether carriers are

conference members or not. Part of this is due to the political pressures from the national governments who express their views on the level of charges. The market research was carried out against the services linked to the European trades. It may be that the THC levels for other trades may vary from those reported below. We know, for example, that in the Transpacific trade the THC is not always charged as it forms part of the “all –in” contract rate. Certainly in the U.S. West Coast there is no charge levied. Approximately 95 percent of this trade operates under contract.

59. The rates, by port, are illustrated below. The THC for Nhava Sheva is for the JPNT

terminal. The structure of the charging elements differs from Europe and Asia and the THC must be seen as indicative only. It is the charge reported by the Conference in a somewhat complicated charging sheet.

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Table 15: Asian Port Terminal Handling Charges by Trade Route (September 2008)

60. As noted above, the Asian port terminal handling charges are consistent in differentiating

between container size with different 20 foot and 40 foot rates. The charges do not appear to differ based on conference versus non conference.

Terminal Handling Charges By Port, Trade and Carrier

61. For comparative purposes, the data has also been analyzed on a port by carrier basis which highlights the differentiation that occurred across different trade routes. The full database contains all the carriers serving a particular trade. A selection of ports is discussed below.

62. The table below, for Southampton, focuses on the top 10 carriers. With the exception of the

intra European trade between North Europe and the Mediterranean, the rates within a trade route are consistent, but they vary across trade routes. Pricing with any single country is the same on a per trade route basis.

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Table 16: THC Rates at Southampton for Ten Largest Carriers During Conferences

63. The European North Range Ports (Le Havre-Hamburg range) all exhibit similar patterns in

the level of charges applied by the shipping lines. Whilst the actual rates vary across the ports, the same consistency of a charges by trade route apply, irrespective of whether the carrier is a conference member or not. Rotterdam illustrates this clearly. Hamburg and Bremerhaven replicate this, only with a different charge, although the THCs for both these ports are the same per trade route.

Table 17: THC Rates at Rotterdam for Ten Largest Carriers During Conferences

64. A similar picture emerges in the Mediterranean ports, with the exception of the

transshipment ports which are not specifically shipper related. As in Northern Europe, charges are consistent within a country but vary by trade route. The table below, of Genoa, is illustrative.

Table 18: THC Rates at Genoa for Ten Largest Carriers During Conferences

65. In Asia the THCs are consistent across the carriers, but they do differentiate by container size.

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Table 19: THC Rates at Singapore, Shanghai, and Tokyo for Ten Largest Carriers During Conferences

Post Conference THC Rates

Carriers Response to the Post Conference System

66. In response to the abolition of the conferences, carriers introduced new terminal handling

charges across most of their terminals. The major factors of change where: a. The abolition of trade route related terminal handling charges b. Terminal handling charges more closely aligned with costs c. Introduction of “country” terminal handling charges as a means of simplification d. Publication of charges on carriers websites by a significant number of carriers.

67. One of the first responses of the carriers to the abolition of the conferences was to address

their surcharges and ancillary charges and to establish new, independent charges. The terminal handling charges that had remained virtually unchanged for nearly 15 years in Europe changed almost overnight. Carriers abandoned the differential pricing by trade route and terminals within a port and switched to a single charge by country, irrespective as to which terminal was called at by services on differing trade routes. As far as could be established, many of the carriers analysed their terminal costs and compared these with the charges that had been charged. The new THCs were more closely aligned with actual costs as a result of this assessment with a view to achieving a full cost recovery.

68. Individual lines appear to have different interpretation of what could, or should be included

in THCs. This is based on comments that some carriers wished to recover some of the costs of empty container movements via their THCs. In any case, the new charges were seemingly based on commercial principals. These in turn were based on the negotiated handling charges applied by a terminal and charged to the carrier. The level of the costs are commercially confidential but they are volume and time based. That is, the larger carriers would certainly be able to negotiate a better deal than a small carrier, particularly if they were also willing to sign up for a long term contract. It is also the case that early supporters of a new terminal will benefit from preferential rates.

69. Based on market evidence, the terminal operators had been increasing their charges over

time, but at the same time they were also passing on productivity gains. For a carrier, part of the negotiations also depended upon minimum productivity levels and guaranteed berths and working hours. As such, part of the terminal costs could be passed on to the fixed vessel costs as an element of time saving.

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70. In the case of joint services such as vessel sharing agreements and slot charters, each carrier,

whether a vessel operator or not, negotiated their own terminal costs. Issues such as congestion were not part of terminal handling costs. They are treated as a separate surcharge when the need arises.

71. Since the abolition of the conferences more information has become available on the carriers

websites, although this is far from universal. Nevertheless, many of the top carriers as well as some of the smaller ones do publish their THCs on their websites, or provide them in the form of a press release or notice to shippers. This has made them more transparent to shippers although there is now a variation across the carriers as to what their official charges are. The THCs must be taken as a market price indication only. For shippers that negotiate annual contracts that are normally based on an “all-in” format which includes the sea freight as well as surcharges and fixed ancillary charges such as the THC, the latter may well be discounted. Certainly it is fair to say that THCs are negotiable, at least for the larger customers.

72. What has not changed since the abolition of the conferences is the Terminal-Carrier client

relationship. To date, terminal handling remains within the domain of this relationship. Two of the world’s major terminal operators responded to the question whether it might be forseeable in the future that shippers rather than carriers be the contracting client. Neither company favoured this approach as it would mean a totally different approach to the commercial relationships. It is the carriers that make the port and terminal decisions and that control the volumes. To change to a shipper related contracting system was seen as diffusing the contract administration and the pricing. Both did however suggest that in this type of situation, the larger shippers with significant volumes would benefit due to their size. It is therefore not expected that the terminal operators will approach shippers from a pricing point of view. It can be expected that terminals will reach out to shippers to provide related logistics services either at the terminal or inland that would encourage them to nominate one port over another. We can see this in the investments being made at places such as Duisport in Germany by both carriers and terminal operators in the Antwerp-Rotterdam range.

Impact of the Repeal on THC Levels

73. The impact of the repeal of the block exemption has been clearly felt in regards to the

terminal handling charges. As noted above, they have been simplified to create a single charge on a country basis and across all trades in Europe. This has been done by all the carriers. Outside of Europe the structure did not change much as most charges were based on a country basis in any case, with the exception of China. Also, the container size differential has been kept outside of Europe. The actual charges however did change to some extent as the conference 80/20 rule was dropped in favour of market cost recovery.

European THCs

74. The terminal handling charges in the European ports virtually all increased from their conference levels. All charges are based on a container, irrespective of whether it is a 20 or 40 foot box. This is in fact in line with the cost structure as charged by the terminal operators. The table below compares the pre and post October 18, 2008 THCs. The new rates are based primarily on data collected between April and the end of June, 2009.

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75. The range of the charges in the pre-October data set refer to the different charges applied to different trade routes, whereas the range in the post October data refers to the variation in charges by different carriers, highlighting a mix of commercial strategy and probably different levels of costs.

76. The post October price differentiations are fairly substantial across the carriers in all of the

ports. THCs are now a matter for individual company consideration, rather than part of a collective agreement.

Table 20: Average Charges and Range of Charges for Combined Containers: Europe Post April 2009

*For many lines there is no THC charge in Piraeus. It is treated as Free In/Free Out, that is part of the freight rate.

77. The carriers took the opportunity of change to introduce terminal handling charges in ports where they had not been charged before such as in Klaipeda (where the THC was part of the ocean freight for both the shipper and the carrier) and in Pireaus and Istanbul where some carriers had a free in/free-out policy before.

78. In the table below, the terminal handling charges by container size in the pre October 2008

period highlight that there was at least one conference that differentiated by the size of the box, even if its own costs were based on a container move. In the post conference era, this size differentiation disappeared and all carriers, across all their trades switched to a single terminal handling charge irrespective of the box size. The exception is in Goteborg where the Shipping Corporation of India appears to charge an extra SEK50 for a 40 foot box. No other carrier that reported data had such a differentiation.

Pre-October 2008 Post-October 2008 Port

Average Rate Range Average Rate Range

Southampton £ 96 £ 69-114 £ 111 £ 80-140

Felixstowe £ 96 £ 69-114 £ 112 £ 96-140

Antwerp € 119 € 89-174 € 144 € 88-170

Zeebrugge € 115 € 89-140 € 144 € 88-170

Rotterdam € 143 € 120-170 € 171 € 129-200

Bremerhaven € 163 € 152-191 € 193 € 138-210

Hamburg € 163 € 152-191 € 195 € 170-210

Goteborg Kr 1,053 Kr 740-1,400 Kr 1,128 Kr 550-1,240

Klaipeda € 69 € 50-88 € 88 € 50-147

ST. Petersburg $ 207 $ 200-220 $ 257 $ 200-370

Algeciras € 131 € 119-140 € 170 € 130-255

Valencia € 132 € 119-144 € 167 € 125-255

Barcelona € 134 € 119-153 € 163 € 80-255

Le Havre € 135 € 122-176 € 178 € 150-240

Genoa € 143 € 132-155 € 148 € 111-180

La Spezia € 143 € 132-155 € 148 € 111-180

Gioia Tauro € 151 € 132-165 € 144 € 111-180

Piraeus (Import)* € 188 € 112-264 € 112 € 112-112

Istanbul $ 97 $ 85-108 $ 135 $ 50-219

Constanza (Import) $ 110 - $ 159 $ 40-382

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Table 21: Range of Rates by Container Size: Europe

Port Size Pre-October 2008 Post-October 2008

20ft £ 44-114 £ 80-140 Southampton

40ft £ 60-146 £ 80-140 20ft £ 44-114 £ 96-140

Felixstowe 40ft £ 60-146 £ 96-140 20ft € 79-174 € 88-170

Antwerp 40ft € 89-174 € 88-170 20ft € 79-140 € 88-170

Zeebrugge 40ft € 89-158 € 88-170 20ft € 113-156 € 129-200

Rotterdam 40ft € 120-226 € 129-200 20ft € 127-170 € 138-210

Bremerhaven 40ft € 152-254 € 138-210 20ft € 127-170 € 170-210

Hamburg 40ft € 152-254 € 170-210 20ft Kr. 740-1,400 Kr.1,000-1,240

Goteborg 40ft Kr.740-1,400 Kr.1,050-1,240 20ft € 50-85 € 50-147

Klaipeda 40ft € 50-90 € 50-147 20ft US$ 200-220 US $ 200-370

ST. Petersburg 40ft US$ 200-220 US$ 200-370 20ft € 111-140 € 120-255

Algeciras 40ft € 126-144 € 140-255 20ft € 111-140 € 120-255

Valencia 40ft € 126-174 € 125-255 20ft € 111-140 € 120-255

Barcelona 40ft € 126-180 € 125-255 20ft € 117-143 € 150-225

Le Havre 40ft € 122-234 € 150-255 20ft € 119-155 € 111-180

Genoa 40ft € 132-155 € 111-180

20ft € 119-155 € 111-180 La Spezia

40ft € 132-155 € 111-180 20ft € 132-165 € 111-180

Gioia Tauro 40ft € 132-165 € 111-180

20ft € 92-220 € 112 Piraeus (Import)

40ft € 132-308 € 112

20ft $ 85-108 $ 100-219 Istanbul

40ft $ 85-108 $ 219 20ft $ 90 $ 30-345

Constanza (Import) 40ft $ 130 $ 50-418

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79. In North Europe the increase in the THC charges ranged from 7 percent in Goteborg to 25 percent in Zeebrugge and 27 percent in Klaipeda. The average increase across the northern European ports has been 20 percent. The three hub ports on the Continent North Range increased 20-21 percent.

Table 22: Average Rates and Percent Increase for Combined Containers: Europe

Port Pre-October 2008 Post -October 2008 Percent Change

Southampton £ 96 £ 111 16%

Felixstowe £ 96 £ 112 17%

Antwerp € 119 € 144 21%

Zeebrugge € 115 € 144 25%

Rotterdam € 143 € 171 20%

Bremerhaven € 163 € 193 18%

Hamburg € 163 € 195 20%

Goteborg Kr 1,053 Kr 1,128 7%

Klaipeda € 69 € 88 27%

ST. Petersburg US$ 207 US$ 257 25%

Algeciras € 131 € 170 30%

Valencia € 132 € 167 27%

Barcelona € 134 € 163 21%

Le Havre € 135 € 178 32%

Genoa € 143 € 148 3%

La Spezia € 143 € 148 3%

Gioia Tauro € 151 € 144 -5%

Piraeus (Import) € 188 € 112 -40%

Istanbul $ 97 $ 135 39%

Constanza (Import) $ 110 $ 159 44%

80. The Mediterranean terminals in Spain and France had higher percentage increases than their northern counterparts, although perhaps in a policy to align more closely with charges in the north. Italy had the lowest increase and remained most competitive vis-à-vis other ports.

81. The conclusion that can be drawn from the post October 2008 level of terminal handling

charges is that the carriers appeared to have abandoned the old CENSA 80/20 Rule in a post conference world and that based on their individual cost analysis they have both simplified and increased the rates being charged. However, when comparing the individual carriers there is little relationship to size or market share in the level of their charges. For example in Hamburg APL are charging €210 whereas Hyundai (HMM) charge €170. In Rotterdam Hapag Lloyd and MOL are at the top end with €200 and COSCO is the cheapest at €140. It can therefore be assumed the new charges are based on commercial considerations being made up of a mix of cost recovery and market positioning. The larger lines appear to be at the higher end of the scale overall.

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Asia/Australia

82. The average level of charges in the Far East and India did not alter much, but this hides the introduction of individual charges by the carriers. Whereas there was no differentiation in pricing pre October 2008, the post October figures shows evidence of price differentiation as can be seen in the table below. The minimum and maximum charges are quite significant in most of the ports, but this is primarily due to the fact that the price differentiation between 20 and 40 foot containers remains.

83. The THCs being charged in China have changed mainly in a downward direction, with the

exception of Shenzen where the average rate trebled. It may well be that Government pressure caused these changes in China.

Table 23: Average Rates and Range of Rates for Combined Containers: Asia

Pre-October 2008 Post-October 2008 Port

Average Rate Range Average Rate Range

Dubai AED 635 - AED 673 AED 560-825

Bangkok ฿ 3,250 - ฿ 3,269 ฿ 3,150-3,400

Singapore SGD 226 - SGD 224 SGD 170-235

Shenzen RMB 403 - RMB 1,120 RMB 465-1,850

Ningbo RMB 584 - RMB 641 RMB 465-1,403

Shanghai RMB 964 - RMB 681 RMB 465-1,403

Qingdao RMB1,344 - RMB 681 RMB 465-1,403

Quangzhou RMB1,724 - RMB 741 RMB 465-1,427

Tianjin RMB2,104 - RMB 648 RMB 440-1,297

Hong Kong HK$ 2,611 - HK$ 2,347 HK$ 1,700-2,500

Kaoshiung NT$ 5,925 - NT$ 6,120 NT$ 4,200-6,400

Pusan ₩ 118,000 - ₩ 123,257 ₩ 117,500-180,000

Yokohama ¥ 34,737 - ¥ 32,163 ¥ 13,750-40,000

Tokyo ¥ 34,737 - ¥ 31,739 ¥ 13,750-40,000

Nhava Sheva/J. Nehru Rs. 5,578 - Rs. 5,777 Rs. 3,900-9,195

Sydney A$ 207 - A$ 318 A$ 223-413

84. The THC charges by container size are highlighted in the table below. China, Taiwan and Hong Kong stand out in the pre October 2008 period as having differential charges levied by the various lines. The other countries had rates consistent with conference tariffs. In the post October period we observed that all ports now had a range of charges and in China, this range was actually wider than it had been under the previous regime.

85. The differentiation in container size has been maintained as noted above, as has the price

differential relationship. There does not appear to be any indication that this differential will disappear and come into line with the norm in Europe.

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Table 24: Range of Rates by Container Size: Asia

Port Size Pre-October 2008 Post-October 2008

20ft AED 513 AED 450-703 Dubai

40ft AED 756 AED 670-946

20ft ฿ 2,600 ฿ 2,500-2,700 Bangkok

40ft ฿ 3,900 ฿ 3,800-4,200

20ft SGD 182 SGD 170-190 Singapore

40ft SGD 270 SGD 170-280

20ft RMB 300-370 RMB 370-1,400 Shenzen

40ft RMB 450-560 RMB 560-2,300

20ft RMB 370-750 RMB 370-1,297 Ningbo

40ft RMB 560-940 RMB 560-1,849

20ft RMB 750-1,130 RMB 370-1,297 Shanghai

40ft RMB 940-1,320 RMB 560-1,849

20ft RMB 1,130-1,510 RMB 370-1,297 Qingdao

40ft RMB 1,320-1,700 RMB 560-1,849

20ft RMB 1,510-1,890 RMB 370-1,297 Quangzhou

40ft RMB 1,700-2,080 RMB 560-1,849

20ft RMB 1,890-2,270 RMB 370-1,297 Tianjin

40ft RMB 2,080-2,460 RMB 440-1,300

20ft HK$ 2,065-2,595 HK$ 1,400-2,100 Hong Kong

40ft HK$ 2,750-2,813 HK$ 2,000-2,900

20ft NT$ 5,200-5,600 NT$ 3,700-5,800 Kaoshiung

40ft NT$ 6,600-7,000 NT$ 4,700-7,000

20ft ₩ 100,000 ₩ 100,000-150,000 Pusan

40ft ₩ 136,000 ₩ 135,000-210,000

20ft ¥ 28,491 ¥ 11,000-32,000 Yokohama

40ft ¥ 40,982 ¥ 16,500-48,000

20ft ¥ 28,491 ¥ 11,000-32,000 Tokyo

40ft ¥ 40,982 ¥ 16,500-48,000

20ft Rs. 4,235 Rs. 3,465-6,950 Nhava Sheva/J. Nehru

40ft Rs. 6,920 Rs. 3,900-11,440

20ft $ 195-226 $ 222-400 Sydney

40ft A$ 195-226 A$ 224-456

86. The percentage increase in the level of charges highlighted in the table below is dramatically

different from the conference era. With the exception of China and Australia, there have been only marginal single digit increases or decreases in the charges, ranging from an 8 percent increase in Nhava Sheva (which must have one of the most confused set of tariff rules of all ports outside of India), to minus 9 percent in Tokyo.

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Table 25: Average Rates and Percent Increase by Container Size: Asia

Port Size Pre-October 2008 Post-October 2008 Percent Change

20ft AED 513.00 AED 566.44 10% Dubai

40ft AED 756.00 AED 780.33 3%

20ft ฿ 2,600 ฿ 2,601 0% Bangkok

40ft ฿ 3,900 ฿ 3,938 1%

20ft SGD 182 SGD 183 0% Singapore

40ft SGD 270 SGD 264 -2%

20ft RMB 322 RMB 875 172% Shenzen

40ft RMB 485 RMB 1,463 202%

20ft RMB 489 RMB 544 11% Ningbo

40ft RMB 679 RMB 787 16%

20ft RMB 869 RMB 544 -37% Shanghai

40ft RMB 1,059 RMB 819 -23%

20ft RMB 1,249 RMB 544 -56% Qingdao

40ft RMB 1,439 RMB 819 -43%

20ft RMB 1,629 RMB 651 -60% Quangzhou

40ft RMB 1,819 RMB 1,005 -45%

20ft RMB 2,009 RMB 545 -73% Tianjin

40ft RMB 2,199 RMB 751 -66%

20ft HK$ 2,430 HK$ 1,994 -18% Hong Kong

40ft HK$ 2,793 HK$ 2,700 -3%

20ft NT$ 5,225 NT$ 5,447 4% Kaoshiung

40ft NT$ 6,625 NT$ 6,794 3%

20ft ₩ 100,000 ₩ 104,011 4% Pusan

40ft ₩ 136,000 ₩ 142,503 5%

20ft ¥ 28,491 ¥ 26,336 -8% Yokohama

40ft ¥ 40,982 ¥ 37,991 -7%

20ft ¥ 28,491 ¥ 25,990 -9% Tokyo

40ft ¥ 40,982 ¥ 37,488 -9%

20ft Rs. 4,235 Rs. 4,588 8% Nhava Sheva/J. Nehru

40ft Rs. 6,920 Rs. 6,966 1%

20ft $ 207 $ 300 45% Sydney

40ft A$ 207 $ 335 62%

87. Turning to China, there have been some dramatic changes as was apparent in the earlier table

highlight the range of charges. The rates in Tianjin dropped by 73 percent and 66 percent respectively for 20/40 foot containers, whereas in Shenzen they went up by 172 and 202 percent respectively. Similarly in Sydney there is evidence indicating a dramatic increase. Whether this reflects the shift to cost recovery or commercial opportunity is not known.

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North and South America

88. The table below highlights the impact of the conference era where the pre October 2008 did not have any variation across the carriers, but the post October period does show that there is variation in the level of fees charged.

Table 26: Average Rates and Range of Rates for Combined Containers: North/South America

Pre-October 2008 Post-October 2008 Port

Average Rate Range Average Rate Range

Montreal $ 460 - $ 414 $ 330-550

NYNJ $ 460 - $ 507 $ 390-803

Santos R$ 430 - R$ 426 R$ 278-516

89. The growth of annual contracts between carriers and shippers has made it more difficult to

identify terminal handling charges separately but the container size differential has remained firmly in place, as it has in Asia. The charges appear to have softened in favour of the shippers as indicated by the range of fees by different carriers.

Table 27: Range of Rates by Container Size: North and South America

Port Size Pre-October 2008 Post-October 2008

20ft $ 420 $ 220-500 Montreal

40ft $ 500 $ 333-600

20ft $ 420 $ 390-535 NYNJ

40ft $ 500 $ 390-1,070

20ft R$ 390-445 R$ 401-555 Santos

40ft R$ 390-495 R$ 401-516

90. The table below indicates a mixed result, with the average THC down by ten percent in

Montreal and up by 10 percent in New York. Santos is basically unchanged.

Table 28: Average Rates and Percent Increase for Combined Containers: North and South America

Port Pre-October 2008 Post-October 2008 Percent Change

Montreal $ 460 $ 414 -10%

NYNJ $ 460 $ 507 10%

Santos R$ 430 R$ 426 -1%

Database Updating

91. The primary source of information regarding the terminal handling charges are the carrier

websites. These contain either a web page dedicated to the charges or alternatively announcements via the press releases or notice to shippers. The European data is the main one available whereas information regarding Asia or the Americas is less commonly available. The alternative to the website is to contact the carriers direct, but in many cases only local information is readily available. As a result contact with a number of geographic regions is required but responses are not guaranteed. The only other alternative source is industry contacts either within the carriers or shippers.

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92. Carriers introduced new terminal handling charges immediately upon the termination of the conferences or slightly earlier. Since then there have been further changes effective January, April and July 2009. One would expect future changes to coincide with changes in terminal costs to carriers, which normally occur on an annual basis. Other changes might be driven for commercial reasons as cost structures may alter.

Post October 2008 Conclusions

93. The repeal of the block exemption for conferences caused a major change in the pricing strategy of terminal handling costs by the shipping lines, both those formerly within the conference as well as the non-conference lines. The following key changes could be observed:

a. The terminal handling charges were significantly simplified as trade route specific charges

were dropped; b. In Europe the terminal handling charges are structured on a country basis, not on a port

basis; c. Carriers dropped the UNCTAD Liner Code 80/20 rule and appeared to go for cost

recovery, although this could be disputed based on the level of charges which do not appear to be related to volume throughput, based on a carriers market share of capacity;

d. There is a clear range of charges with significant differences between the carriers indicating that THCs are now set by individual players rather than collectively as was the case during the conference era;

e. It appears that many of the carriers carried out internal exercises to determine what the terminal handling costs were for box movements. This was used to help set the new charges, but it cannot be ascertained to what level these reflect actual costs. In addition, the setting of country based THCs does suggest that there is an element of “averaging” across ports in cases where more than one port of call exists.

f. In Europe the charges are per container, not size related, but in Asia, and in the Americas they have remained linked to the box size. This may not be directly correlated to the terminal cost structure in all the ports;

g. The terminal handling charges in Europe increased virtually across the board, with only few minor exceptions. New charges were introduced where none had consistently existed before;

h. In Asia, outside of China, terminal handling charges did not increase significantly. In China they mostly decreased with the exception of Shenzen were they increased significantly. Australian charges also increased.

i. In the Americas the charges appear to have decreased in Canada, increased in the U.S. and with little change in Santos.

j. The increasing occurrence of annual freight contracts with individual shippers has created “all-in” rates that incorporate the terminal handling charges making them irrelevant;

k. Terminal handling charges are negotiable between large shippers and carriers; l. Terminal handling charges are likely to change annually in the future as carriers will

attempt to mirror their own terminal costs by passing on the increases ; m. For many of the carriers, the current terminal handling charges can be found on their

website, primarily for Europe and in some instances for Asia.

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Appendix A: Pre October 18, 2008 THC Charges by Port for Ten Largest Shipping Operators

The following tables present the collected THC charges by port for the ten largest shipping operators (based on TEU capacity of existing fleet and orderbook), as detailed by AXS-Alphaliner in February 2009. THC data was collected during the period July through September, 2008.

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Appendix B: Post October 18, 2008 THC Charges by Port for Ten Largest Shipping Operators

THC data was collected during the period April-June, 2009.

Southampton 20ft 40ft 1 Maersk/SAF £120 £120 2 MSC £110 £110 3 CMA CGM £110 £110 4 Evergreen £110 £110 5 Hapag Lloyd £120 £120 6 COSCO £110 £110 7 APL £110 £110 8 China Shipping £115 £115 9 NYK £110 £110 10 MOL £110 £110

Antwerp 20ft 40ft 1 Maersk/SAF € 155 € 155 2 MSC € 150 € 150 3 CMA CGM € 150 € 150 4 Evergreen € 140 € 140 5 Hapag Lloyd € 160 € 160 6 COSCO € 115 € 115 7 APL € 170 € 170 8 China Shipping € 150 € 150 9 NYK € 150 € 150 10 MOL € 160 € 160

Rotterdam 20ft 40ft 1 Maersk/SAF € 185 € 185 2 MSC € 175 € 175 3 CMA CGM € 160 € 160 4 Evergreen € 160 € 160 5 Hapag Lloyd € 200 € 200 6 COSCO € 140 € 140 7 APL € 190 € 190 8 China Shipping € 170 € 170 9 NYK € 160 € 160 10 MOL € 200 € 200

Felixstowe 20ft 40ft 1 Maersk/SAF £120 £120 2 MSC £110 £110 3 CMA CGM £110 £110 4 Evergreen £110 £110 5 Hapag Lloyd £120 £120 6 COSCO £110 £110 7 APL £110 £110 8 China Shipping £115 £115 9 NYK £110 £110 10 MOL £110 £110

Zeebrugge 20ft 40ft 1 Maersk/SAF € 155 € 155 2 MSC 3 CMA CGM € 150 € 150 4 Evergreen € 140 € 140 5 Hapag Lloyd € 160 € 160 6 COSCO € 115 € 115 7 APL € 170 € 170 8 China Shipping € 150 € 150 9 NYK € 150 € 150 10 MOL € 160 € 160

Bremerhaven 20ft 40ft 1 Maersk/SAF € 190 € 190 2 MSC € 180 € 180 3 CMA CGM € 185 € 185 4 Evergreen € 200 € 200 5 Hapag Lloyd € 210 € 210 6 COSCO € 180 € 180 7 APL € 210 € 210 8 China Shipping € 200 € 200 9 NYK € 200 € 200 10 MOL € 210 € 210

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Hamburg 20ft 40ft 1 Maersk/SAF € 190 € 190 2 MSC € 180 € 180 3 CMA CGM € 185 € 185 4 Evergreen € 200 € 200 5 Hapag Lloyd € 210 € 210 6 COSCO € 180 € 180 7 APL € 210 € 210 8 China Shipping € 200 € 200 9 NYK € 200 € 200 10 MOL € 210 € 210

Klaipeda 20ft 40ft 1 Maersk/SAF € 60 € 60 2 MSC 3 CMA CGM € 91 € 91 4 Evergreen 5 Hapag Lloyd € 75 € 75 6 COSCO € 70 € 70 7 APL € 100 € 100 8 China Shipping € 120 € 120 9 NYK € 50 € 50 10 MOL € 145 € 145

Algeciras 20ft 40ft 1 Maersk/SAF € 155 € 155 2 MSC 3 CMA CGM € 170 € 170 4 Evergreen € 160 € 160 5 Hapag Lloyd € 120 € 140 6 COSCO 7 APL € 255 € 255 8 China Shipping € 150 € 150 9 NYK € 210 € 210 10 MOL

Goteborg 20ft 40ft 1 Maersk/SAF SEK 1,240 SEK 1,240 2 MSC SEK 1,050 SEK 1,050 3 CMA CGM SEK 1,050 SEK 1,050 4 Evergreen 5 Hapag Lloyd SEK 1,125 SEK 1,125 6 COSCO SEK 1,150 SEK 1,150 7 APL SEK 1,125 SEK 1,125 8 China Shipping SEK 1,130 SEK 1,130 9 NYK SEK 1,200 SEK 1,200 10 MOL SEK 1,125 SEK 1,125

ST. Petersburg 20ft 40ft 1 Maersk/SAF $ 290 $ 290 2 MSC 3 CMA CGM $ 370 $ 370 4 Evergreen $ 250 $ 250 5 Hapag Lloyd $ 220 $ 220 6 COSCO $ 200 $ 200 7 APL $ 300 $ 300 8 China Shipping $ 300 $ 300 9 NYK $ 250 $ 250 10 MOL $ 220 $ 220

Valencia 20ft 40ft 1 Maersk/SAF € 155 € 155 2 MSC 3 CMA CGM € 170 € 170 4 Evergreen € 160 € 160 5 Hapag Lloyd € 120 € 140 6 COSCO € 125 € 125 7 APL € 255 € 255 8 China Shipping € 150 € 150 9 NYK € 210 € 210 10 MOL € 160 € 160

Le Havre 20ft 40ft 1 Maersk/SAF € 195 € 195 2 MSC € 150 € 150 3 CMA CGM € 160 € 160 4 Evergreen € 170 € 170 5 Hapag Lloyd € 175 € 175 6 COSCO € 152 € 152 7 APL € 225 € 255 8 China Shipping € 170 € 170 9 NYK € 190 € 190 10 MOL € 215 € 215

Barcelona 20ft 40ft 1 Maersk/SAF € 155 € 155 2 MSC 3 CMA CGM € 170 € 170 4 Evergreen € 160 5 Hapag Lloyd € 120 € 140 6 COSCO € 125 € 125 7 APL € 255 € 255 8 China Shipping € 150 € 150 9 NYK € 210 € 210 10 MOL € 160 € 160

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Gioia Tauro 20ft 40ft 1 Maersk/SAF € 125 € 125 2 MSC 3 CMA CGM € 111 € 111 4 Evergreen 5 Hapag Lloyd € 180 € 180 6 COSCO € 132 € 132 7 APL € 165 € 165 8 China Shipping € 150 € 150 9 NYK € 160 € 160 10 MOL € 165 € 165

Istanbul 20ft 40ft 1 Maersk/SAF 2 MSC 3 CMA CGM Free in Free in 4 Evergreen 5 Hapag Lloyd $ 219 $ 219 6 COSCO 7 APL $ 100 8 China Shipping FIO FIO 9 NYK 10 MOL Free in Free in

Durban 20ft 40ft 1 Maersk/SAF 2 MSC 3 CMA CGM 4 Evergreen 5 Hapag Lloyd R 855 R 1,264 6 COSCO 7 APL 8 China Shipping 9 NYK 10 MOL

La Spezia 20ft 40ft 1 Maersk/SAF € 125 € 125 2 MSC € 0 € 0 3 CMA CGM € 111 € 111 4 Evergreen € 155 € 155 5 Hapag Lloyd € 180 € 180 6 COSCO € 132 € 132 7 APL € 165 € 165 8 China Shipping € 150 € 150 9 NYK € 160 € 160 10 MOL € 165 € 165

Genoa 20ft 40ft 1 Maersk/SAF € 125 € 125 2 MSC € 0 € 0 3 CMA CGM € 111 € 111 4 Evergreen € 155 € 155 5 Hapag Lloyd € 180 € 180 6 COSCO € 132 € 132 7 APL € 165 € 165 8 China Shipping € 150 € 150 9 NYK € 160 € 160 10 MOL € 165 € 165

Piraeus 20ft 40ft 1 Maersk/SAF 2 MSC 3 CMA CGM Free in Free in 4 Evergreen 5 Hapag Lloyd € 112 € 112 6 COSCO 7 APL 8 China Shipping FIO FIO 9 NYK 10 MOL

Constanza 20ft 40ft 1 Maersk/SAF $ 200 $ 245 2 MSC 3 CMA CGM $ 75 $ 130 4 Evergreen 5 Hapag Lloyd $ 345 $ 418 6 COSCO 7 APL $ 90 $ 130 8 China Shipping $ 130 $ 130 9 NYK 10 MOL $ 40 $ 90

Dubai 20ft 40ft 1 Maersk/SAF 2 MSC 3 CMA CGM 4 Evergreen 5 Hapag Lloyd AED 513 AED 756 6 COSCO 7 APL AED 513 AED 756 8 China Shipping 9 NYK AED 450 AED 670 10 MOL

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Bangkok 20ft 40ft 1 Maersk/SAF ฿2,560 ฿3,900 2 MSC 3 CMA CGM ฿2,600 ฿3,900

4 Evergreen ฿2,600 ฿3,900

5 Hapag Lloyd ฿2,600 ฿3,900 6 COSCO 7 APL ฿2,600 ฿3,900 8 China Shipping 9 NYK ฿2,600 ฿4,200

10 MOL ฿2,600 ฿3,900

Shenzen 20ft 40ft 1 Maersk/SAF RMB 958 RMB 1,849 2 MSC 3 CMA CGM RMB 1,297 RMB 0 4 Evergreen RMB 370 RMB 560 5 Hapag Lloyd RMB 965 RMB 1,842 6 COSCO 7 APL RMB 476 RMB 750 8 China Shipping 9 NYK RMB 1,400 RMB 2,300 10 MOL RMB 965 RMB 1,842

Shanghai 20ft 40ft 1 Maersk/SAF RMB 475 RMB 750 2 MSC At cost At cost 3 CMA CGM RMB 1,297 RMB 1,297 4 Evergreen RMB 370 RMB 560 5 Hapag Lloyd RMB 460 RMB 720 6 COSCO RMB 374 RMB 564 7 APL RMB 476 RMB 750 8 China Shipping 9 NYK RMB 880 RMB 1,300 10 MOL RMB 480 RMB 720

Singapore 20ft 40ft 1 Maersk/SAF SGD 190 SGD 270 2 MSC 3 CMA CGM SGD 182 SGD 270 4 Evergreen SGD 182 SGD 270 5 Hapag Lloyd SGD 182 SGD 270 6 COSCO 7 APL SGD 182 SGD 270 8 China Shipping 9 NYK SGD 170 SGD 170 10 MOL SGD 182 SGD 270

Ningbo 20ft 40ft 1 Maersk/SAF RMB 475 RMB 750 2 MSC 3 CMA CGM RMB 1,297 RMB 0 4 Evergreen RMB 370 RMB 560 5 Hapag Lloyd RMB 460 RMB 720 6 COSCO 7 APL RMB 476 RMB 750 8 China Shipping 9 NYK RMB 880 RMB 1,300 10 MOL RMB 480 RMB 720

Qingdao 20ft 40ft 1 Maersk/SAF RMB 475 RMB 750 2 MSC 3 CMA CGM RMB 1,297 RMB 1,297 4 Evergreen RMB 370 RMB 560 5 Hapag Lloyd RMB 460 RMB 720 6 COSCO 7 APL RMB 476 RMB 750 8 China Shipping 9 NYK RMB 880 RMB 1,300 10 MOL RMB 480 RMB 720

Tianjin 20ft 40ft 1 Maersk/SAF RMB 475 RMB 750 2 MSC RMB 0 RMB 0 3 CMA CGM RMB 1,297 RMB 1,297 4 Evergreen RMB 370 RMB 560 5 Hapag Lloyd RMB 460 RMB 720 6 COSCO RMB 0 RMB 0 7 APL RMB 476 RMB 750 8 China Shipping RMB 0 RMB 0 9 NYK RMB 880 RMB 1,300 10 MOL RMB 480 RMB 720

Quangzhou 20ft 40ft 1 Maersk/SAF RMB 475 RMB 750 2 MSC 3 CMA CGM RMB 1,297 RMB 1,297 4 Evergreen RMB 370 RMB 560 5 Hapag Lloyd RMB 460 RMB 720 6 COSCO 7 APL RMB 476 RMB 750 8 China Shipping 9 NYK RMB 880 RMB 1,300 10 MOL RMB 480 RMB 720

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Hong Kong 20ft 40ft 1 Maersk/SAF HK$2,050 HK$2,750 2 MSC 3 CMA CGM HK$2,065 HK$2,750 4 Evergreen HK$2,065 HK$2,750 5 Hapag Lloyd HK$2,065 HK$2,750 6 COSCO 7 APL HK$1,800 HK$2,650 8 China Shipping 9 NYK HK$1,400 HK$2,000 10 MOL HK$2,065 HK$2,750

Pusan 20ft 40ft 1 Maersk/SAF �100,000 �135,000 2 MSC 3 CMA CGM �101,000 �137,000 4 Evergreen �100,000 �136,000 5 Hapag Lloyd �101,000 �137,000 6 COSCO 7 APL �101,000 �137,000 8 China Shipping 9 NYK �150,000 �210,000 10 MOL �100,000 �136,000

Tokyo 20ft 40ft 1 Maersk/SAF ¥21,000 ¥29,000 2 MSC 3 CMA CGM ¥21,000 ¥29,000 4 Evergreen ¥28,490 ¥40,982 5 Hapag Lloyd ¥28,491 ¥40,982 6 COSCO 7 APL ¥11,000 ¥16,500 8 China Shipping 9 NYK ¥32,000 ¥48,000 10 MOL ¥28,491 ¥40,982

Sydney 20ft 40ft 1 Maersk/SAF AUS$354 AUS$456 2 MSC 3 CMA CGM AUS$292 AUS$373 4 Evergreen 5 Hapag Lloyd AUS$303 AUS$391 6 COSCO 7 APL AUS$251 AUS$251 8 China Shipping 9 NYK AUS$400 AUS$400 10 MOL

Kaoshiung

20ft 40ft 1 Maersk/SAF NT$5,800 NT$7,000 2 MSC NT$0 NT$0 3 CMA CGM NT$5,600 NT$7,000 4 Evergreen NT$5,600 NT$7,000 5 Hapag Lloyd NT$5,600 NT$7,000 6 COSCO NT$0 NT$0 7 APL NT$5,600 NT$7,000 8 China Shipping NT$0 NT$0 9 NYK NT$3,700 NT$4,700 10 MOL NT$5,600 NT$7,000

Yokohama 20ft 40ft 1 Maersk/SAF ¥21,000 ¥29,000 2 MSC 3 CMA CGM ¥21,000 ¥29,000 4 Evergreen ¥28,490 ¥40,982 5 Hapag Lloyd ¥28,491 ¥40,982 6 COSCO 7 APL ¥11,000 ¥16,500 8 China Shipping 9 NYK ¥32,000 ¥48,000 10 MOL ¥28,491 ¥40,982

Nhava Sheva /J. Nehru 20ft 40ft 1 Maersk/SAF Rs. 4,410 Rs. 6,440 2 MSC 3 CMA CGM Rs. 3,894 Rs. 5,978 4 Evergreen 5 Hapag Lloyd Rs. 4,575 Rs. 6,985 6 COSCO 7 APL Rs. 3,900 Rs. 3,900 8 China Shipping 9 NYK Rs. 4,200 Rs. 6,300 10 MOL Rs. 6,950 Rs. 11,440

Montreal 20ft 40ft 1 Maersk/SAF $412 $412 2 MSC 3 CMA CGM 4 Evergreen $500 $600 5 Hapag Lloyd $400 $550 6 COSCO 7 APL $220 $440 8 China Shipping 9 NYK $333 $333 10 MOL

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NYNJ 20ft 40ft 1 Maersk/SAF $390 $390 2 MSC 3 CMA CGM 4 Evergreen 5 Hapag Lloyd $420 $500 6 COSCO 7 APL $535 $1,070 8 China Shipping 9 NYK $450 $450 10 MOL

Santos 20ft 40ft 1 Maersk/SAF R$ 430 R$ 430 2 MSC 3 CMA CGM R$ 401 R$ 401 4 Evergreen 5 Hapag Lloyd R$ 420 R$ 500 6 COSCO 7 APL 8 China Shipping 9 NYK 10 MOL

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Appendix C: Data Sources

Shipping Lines

APL www.apl.com China Shipping www.cscl.com.ci CMA-CGM www.cma-cgm.com COSCO www.cosco.com CSAV www.csav.cl Evergreen www.evergreen-line.com Hamburg Sϋd www.hamburgsud.com Hanjin Shipping www.hanjin.com Hapag Lloyd www.hapag-lloyd.com Hyundai Merchant Marine www.hmm21.com K Line www.kline.com / www.klineurope.com Maersk Line www.maersk.com MISC www.misc.com.my MOL Mitsui OSK Line www.mol.co.jp MSC -Mediterranean Shipping www.mscgva.com NYK Line www2.nykline.com OOC L Orient Overseas Container Line www.oocl.com Safmarine www.safmarine.com SCI Shiping Corporation of India www.shipindia.com UASC United Arab Shipping Company www.uasc.net Yang Ming www.yangming.com.tw ZIM Integrated Shipping Services www.zim.co.il

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Other

CAP Analysis Ancillary Charges and Surcharges, Report for the ELAA, July 2003

CAS Conference Secretariat n.a. China Shipping Agent www.chinashipping.de/sales.aspx Containerisation International Yearbook, 2008 EMERA European Middle East Rate Agreement Tariff

n.a.

EMTA Europe ~Mediterranean Trade Agreement

n.a.

Europe West Africa Trade Agareement n.a. Far East Freight Conference n.a. IPBCC Tariff Nov. 2007 n.a. K Line Agent www.kline.com.hk/newws/newsfile Port Strategy: Port Tariffs and THCs: The Pepetual Controversy 1/7/2005

www.portstrategy.com

South African Port Handling Charges www.fullships.com UASC Agent www.europacific.si Various telephone interviews with Lines agents in Europe, Asia, Australia

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European Commission Terminal handling charges during and after the liner conference era5 October 2009 Luxembourg, Publications Office of the European Union, 2009 2009 — 52 pp.— 21 x 29.7 cm ISBN 978-92-79-14547-6 (pdf) doi 10.2763/34537 (pdf)

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after the liner conference era

http://ec.europa.eu/competition/publications/

KD

-80-09-152-EN

-N10.2763/34537