Terminal handling charges and Incoterms

THC, or terminal handling charges is a term used to refer to the collection of costs and fees related to using the port terminal facility. Terminal handling charges are usually relevant only to ocean, rail and air ports. The costs included in THC can include a fee to enter and use the terminal, costs for maintenance and use of equipment in the terminal, costs of engaging labor and services like stevedoring. This is not an exhaustive list of THC charges. In this article we will look at THC and what the Incoterms have to say about them.

When are terminal handling charges incurred?

In ocean only transport, THC is incurred twice.

  1. First instance: When cargo is removed from the arriving vehicle at the port to a holding area. Then when cargo is moved from the holding area to the vessel or airplane
  2. Second instance: When cargo is removed from the vessel or airline and then to holding area. Then when cargo is moved from the holding area to the collecting vehicle

In most land ports, cargo is not moved from the transportation vehicle and hence THC charges do not apply. However, similar charges may incur if any handling work has to take place in the land ports.

Incoterms and THC

The Incoterms do not specifically always address THC costs allocation. In cases of EXW and DDP terms, the liability of THC is clear. However, the liability for terminal handling charges can be doubtful in some C terms, especially when the port is delivery location. In some situations the liability for THC charges can also be difficult to determine. For example, in DPU (buyer’s warehouse) terms when additional THC charges are incurred because repacking and sorting activities had to be conducted due to the buyer not preparing import licenses for parts of a shipment, the seller may insist that the buyer pay THC costs arising due to his/her lack of preparedness.

A final note

Regardless of how closely both buyer and seller intend to adhere to the text of the Incoterms in their original form, it is best to define THC charge allocations clearly within the sales contract. This will prevent any misunderstanding if any out of the norm situation occur with shipments. Simple details like whether the contract for carriage includes standard and extended THC fees can make make life easier for both seller and buyer in such situations.

Leave a Reply