‘Importers must take a stand against Chinese kickbacks’

Vocal industry concern appears to be having little impact on the growing incidence of the China import service fee (CISF) which surfaces with clockwork regularity in correspondence forwarded to FTW. The following email received from a forwarder recently illustrates the point: “We are in receipt of your invoice totalling R 11 322.50. Kindly advise what the US$ 337.50 Chinese Import Service Fee as well as US$ 140.63 System Charge and US$ 100.00 Doc Charge as well as a R 116.95 ‘collect fee’ are for? “This is over and above your already very high unpack and release fees.” The CISF, which is most prevalent on the routes from China and India, involves a kickback paid to the overseas exporter by his appointed forwarder or groupage operator. “The general feeling seems to be don’t rock the boat because there’s so much trade with China,” an industry source told FTW. “Three weeks ago we had a full container shipped as LCL 37 cubic metres. The breakbulk charge alone was R21 000 just to unpack what was part of an LCL shipment. “And that excludes the extra charge. “You will very often find where an importer is buying on a CIF basis – which the Chinese exporter seems to insist on when the order is placed – that they ship it in a 40 foot container as part of a groupage box. The local breakbulk agent will set his rates for unpack of cargo if he’s done the forwarding at R300 per cubic metre – but if he’s representing an unknown foreign agent to whom he has to make payments, the rate will be R850 to recover the kickback he has to pay.” And in the end it’s the consumer who has to cough up. The only way to avoid the fee is to refuse to buy CIF. But since the Chinese exporter generally insists on CIF this is not always possible, particularly for smaller players who tend to be typical groupage customers, where the practice is most prevalent. While FTW sources have described the fee as ‘scandalous’ there seems to be no way out other than to insist on buying FOB or ex works. The bottom line, according to another source, is that the Chinese are undercutting their competitors by manipulating the costs. “They’ll sell you an umbrella for $1 and add onto their price through the kickback, undercutting another supplier in another part of the world who is selling a similar umbrella for $1.50. The Chinese exporter will supplement his price by adding the import service fee or some other degroup charge.” He advises importers to ensure that their freight forwarders do not pay kickbacks and to avoid buying CIF. “Something needs to be done about it,” says Dave Watts, maritime consultant to the SA Association of Freight Forwarders in KZN. “But it really ought to be lobbied by the people who are being impacted rather than an organisation like Saaff.” And if it’s a CFR or CIF shipment, he points out that there can be no other charges however you couch them. “If there are other charges being transferred back to the shipper they are dutiable.” Watts believes that there needs to be government intervention with the likes of the Reserve Bank declaring payment of these fees illegal. But until that happens, or until importers take a proactive stand against the practice, it seems that the CISF is here to stay.