The following JoC Online news story reports on a resolution by the Cargo Committee of the International Air Transport Association (IATA), to change the cargo conversion rate for volumetric freight. If adopted, air rates on low-density cargo, such as apparel and house-wares, could increase by 20 percent. (The JoC Online story incorrectly identified the potentially impacted cargo type as ”high density.”)
IATA is the trade association that represents the interests of approximately 280 airlines worldwide. The IATA Cargo Committee is one of the four permanent committees of IATA that advises the Board of Governors, the Director General and other relevant IATA bodies on all air cargo industry issues.
The Cargo Committee’s recommendations are not final. IATA resolutions that impact pricing must be reviewed on country-by-country basis. In the U.S., the Department of Transportation (DOT) is responsible for hearing and ruling on such rate requests.
If this resolution were to be adopted, it would only serve as a shortsighted, short-term fix. We understand our colleagues in the air sector are experiencing unprecedented financial challenges. However, such a move would place additional hurdles in front of shippers working to manage their supply chains more vigilantly these days, to reduce cost and exposure to the threat of terrorism.
We are all part of a broader national and global economy. If shippers are forced to look for other supply chain options to help balance the impact of such a unilateral rate increase, the air carrier industry stands to lose even more base-load revenue over the long term.
BDP will be working with our air carrier partners and the Government Affairs Group of the Air Forwarders Association, to help defeat or modify this IATA resolution, in the interest of our customers
We will keep you apprised of progress on this issue. If you have any questions, please do not hesitate to contact Jim Seiple (jseiple@bdpnet.com) or me ( dhofman@bdpnet.com).
Thank you.
Diane Hofman
Vice President – Corporate Operations
Forwarders blast IATA rate plan
Updated 3:49 p.m. ET, Fri Jul 12, 2002
By William Armbruster
JoC ONLINE
Freight forwarders are outraged over a plan by the International Air Transport Association that would effectively raise rates by 20 percent on high-density cargo like apparel, shoes and toys.
The plan, approved by IATA's Cargo Tariff Coordinating Committee in late May, will change the conversion rate for volumetric freight from 6,000 to 5,000 cubic centimeters per kilo as of Oct. 1. Forwarders are particularly upset by the timing of the increase.
"What we find objectionable is the manner in which it's been done and their failure to inform the public immediately," said William Gottlieb, chairman of the Air Freight Institute of the International Federation of Freight Forwarders Associations.
Gottlieb said he only learned of the proposed rate change in late June. The decision "will affect tens of thousands, if not hundreds of thousands of shippers," he wrote in a July 3 letter to Giovanni Bisignani, IATA's director general. "Many of those shippers have gone to great efforts to design their packaging to conform with the current weight/volume ratios. Transport costs could rise by 20 percent."
Many shippers go through an annual shutdown for a week or more during the summer. Now they have to consider re-engineering their packaging but have very little lead-time to make those changes, he added.
The proposed change is subject to government approvals and could put shippers at a competitive disadvantage if their governments approve it while authorities in other nations reject the increase.
Gottlieb, who is also president of Montreal-based David Kirsch Forwarders Ltd., asked Bisignani to reconvene the Cargo Tariff Coordinating Conference to reconsider the resolution. Bisignani responded on July 10 that he could not reconvene the conference, but that he would ask IATA staff to discuss Gottlieb's complaint with airline representatives.
IATA officials were not available for comment Friday.
Gottlieb said IATA should postpone the change in the volume calculations until next April at the earliest to give shippers time to shrink their packaging to conform to the new standards. "I appreciate that the airline industry is in poor financial health and that they have to look for means to improve their financial situation," Gottlieb said. But, he added, "This is a backdoor way to do it."
Brian Clancy, a consultant with MergeGlobal Inc., said large multinational forwarders could get around the increase by negotiating lower overall rates with the carriers. Gottlieb, however, said forwarders typically try to maximize their revenue by consolidating heavy cargo with freight that takes up a lot of space but doesn't weigh much.
