24 October 2010

Forwarding Rip-offs

Six international forwarders have agreed to plead guilty in the US of conspiring to fix prices for international air freight shipments. Collectively, they have agreed to pay fines of over USD 50 million.

We reported earlier that the New Zealand Commerce Commission filed proceedings in the High Court in Auckland against a number of prominent local forwarders, alleging price collusion. The forwarders involved are Schenkers, BAX Group, Kuehne & Nagel, Panalpina, EGL and Geologistics. These are the same companies that have agreed to plead guilty in the US.

The Importers Institute continues to receive evidence from importers ripped off by the forwarders' China scam. This is how it works: an importer buys goods from China at a price that includes freight; the freight costs are set by shipping companies and are much the same for all forwarders. The actual freight cost is, say, $5,000 and the exporter adds that to his price. He then finds a local forwarder that charges him $4,000.

When the goods arrive, the importer gets a bill from the local agent of the Chinese forwarder inflated by $2,000 with fees like 'China surcharge', 'security fees' and wildly inflated 'port service charges'. The local agent remits $1,500 to the forwarder in China, who thus recovers his 'loss' of $1,000 on the lower quote that got him the job. The exporter pockets $1,000 and the scam forwarders get $500 each to line their pockets.

The importer loses by paying $2,000 more than the going rate. The other big losers are the forwarders who missed out by quoting an honest freight rate. You would expect that the local forwarders association, an outfit called CBAFF, would be keen to denounce this scam, since it affects its honest members and brings the name of their trade into serious disrepute. But, no: their stock reply is that they never comment on what their members charge.

We asked importers to send us copies of invoices with dubious destination charges. In addition to the earlier example from POTA Global Management (a division of P&O Australia) we have now received copies of invoices from Abba Logistics that include imaginary charges such as 'port security fees', 'carrier security fee', 'handling fee' and others, on top of inflated 'port service charges'. Do keep those invoice copies coming, and we will expose the forwarders involved.