Importers need to be aware of the “full picture” when agreeing to terms (Inco Terms) on purchases that could leave you exposed to unexpected and unwarranted charges on your imported goods.
When purchasing product overseas under the “CFR” (Cost and Freight) terms this means the seller covers the costs of freight to your local Port/Airport only, in your country (or, final destination if Cross-Trade).
However, in a large majority of cases, importers have been hit with extra & usually unexpected higher charges when their goods arrive through the local receiving agent. These are often over-inflated import charges and fictitious fees, which can be charged due to no contract or quote being in place with the Importer.
A less experienced importer might have assumed these to be official fees, and simply paid them. But in one case, the importer made a complaint to the Commerce Commission against the Freight Forwarder on the basis that they hadn’t stuck to the CFR terms they’d agreed, and that the extra charges were neither official nor justified.
However, the Commerce Commission decided not to take any action. Even though the importer and seller had agreed on CFR terms, the commission said they couldn’t find any evidence of a contract or written agreement that set out the terms of trade.
The contract with the overseas supplier only covered the agreement to get the goods to the local Port or Airport – there was no agreement of what the local charges would be on arrival.
Opportunistic Freight Forwarders are using this legal loophole to take advantage of these situations, leaving importers open to being ripped off.
How does the scam work?
First the origin Freight Forwarder will secure business by offering a very low and attractive freight rate to the exporter in the country of origin. The exporter offers the goods to the importer on the basis that freight is included in the price of the goods. The receiving destination agent then fleeces the importer by adding extra Import & Handling costs and charges when the goods arrive, which the importer or their representative Freight Forwarder can do very little about. It’s basically, pay up or your shipment won’t be released.
How can you protect yourself from unfair import charges?
1. Choose a reputable Freight Forwarder
Don’t leave it to your supplier to choose a freight forwarder. Make sure you choose a reputable Forwarder, who will tell you exactly what you’ll need to pay to import the goods, and won’t add any surprise charges.
2. Select your Incoterms wisely
Selecting shipping terms that put you in control of the freight and import charges is a good idea. Instead of CFR terms, you might want to choose FOB (Free on Board), or EXW (Ex-Works) instead, which means the supplier is only responsible for getting the goods to the vessel/CFS at Origin, or, you handle everything ex their door, and you take care of the rest.
These decisions also gives you the control & knowledge of what services are being used, as well as transit times, and the ability to track your shipment thought your own Freight Forwarder. Your Freight Forwarder is then also accountable to ensure you are receiving the service & price they quoted you.
To avoid any unexpected charges and service issues, let S.A.L. Global Logistics manage your shipments.
You will be fully aware of the pricing & service being offered, and be kept updated of the status of the shipment along its entire journey by our dedicated & professional staff – no hidden surprises!!
N.B. for a full breakdown of Inco Terms, and what they cover. See our Inco Terms table at: https://www.salglobal.com.au/resources/