Price Fixing Alive and Well in the Freight Forwarding Industry

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Though we tend to hear of stories involving price fixing on the part of metal producers, a recent story reported in Logistics Today highlights a related industry that undoubtedly impacts a range of metal buying organizations.   According to the story, six international freight forwarders pleaded guilty to a number of conspiracies involving price fixing related to global air cargo shipments. The six companies, EGL Inc of Houston, Kuhne & Nagel International AG of Switzerland, Geologistics International Management of Bermuda, Schenker AG of Germany and BAX Global of Toledo OH agreed to pay fines in excess of $50m. BAX Global will pay the highest fine of the six firms   – $19m+.

What did the charges include? Not surprisingly, the charges involved a range of taxes, “hidden fees or what we call the details of total landed cost models. These “fees remind me of what telecom providers often do unless savvy organizations hire outside consultants to unlock some of the hidden fees (e.g. a friend who does telecom sourcing said some companies still pay a tax that covers costs from the War of 1812!) By the way, drop us a line if you’d like to know the names of firms who do telecom sourcing.

In terms of the specific fees involved in the case, Logistics Today reports several:

  • An Air Automated Manifest System (AAMS) fee applied to companies in the US buying and shipping by air cargo from abroad
  • A similar fee on shipments to the US from Germany as well as from Switzerland
  • A New Export System (NES) fee on shipments to the US from the UK via air cargo
  • CAF (Currency Adjustment Factor) for shipments from China to the US (again air shipments)
  • Peak Season Surcharges (PSS) for shipments to the US from Hong Kong

Certainly most sourcing organizations could not have picked up on the “conspiracy or price fixing elements of this case. However, we have often seen companies readily pay freight bills with often a lack of understanding as to the specific charges levied. But organizations who source smaller metals with high dollar values (and hence buy via air freight) from overseas (e.g. titanium) might want to pay careful attention to the case.

We include several pieces here on developing total landed cost models buried deep in the MetalMiner archives which may prove helpful to metal buying organizations:

Calculating Inventory Carry Costs in Total Landed Cost Models

Best Practices Global Sourcing

Importing From China Could Cost You More

–Lisa Reisman

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