LCL Import Charges
By ERICH H. LINGAD, President


I was recently invited by an Ateneo Entrepreneurial Management Class to speak about shipping in general and explain the charges involved in importing and exporting. I presented the following charges for LCL (Less than a Container Load):


1.) (PISFA) Forwarders LCL charges

2.) Warehouse Operators' charges per CMO 24-2001

3.) Brokerage Charges as per Customs Administrative Order 1-2001

The students were stunned with these charges and discouraged from engaging in the import business. What they had in mind was the Balikbayan Box charge of USD60 from Los Angeles to Manila (inclusive of all charges). I had to explain that these boxes should only contain personal effects and not commercial goods subject to taxes and duties.


It was difficult to justify all the local charges to the students. The LCL industry is really prohibitive for importation of goods in small quantities. Importers know that once the cargo is more than 10 cbm, it is better to ship using FCL (Full Container Load) directly through shipping lines, thus eliminating the need for forwarders.


But how did the current LCL charges come about? If you would recall, local charges skyrocketed partly because of the practice of forwarders giving rebates to entice agents to consign boxes to them. The one who gave the highest rebate naturally got the business. Currently, rebate to agents range from USD25 to USD40. Note that non-PISFA members could give higher rebates since they don't have to follow minimum charges set by PISFA.
They could bill the end-customer/consignee a higher rate. Since PISFA forwarders are only allowed to bill the end-customer so much, they allowed warehouse operators to start billing the customers as well. In the past, warehouse operators would bill forwarders for their services and not charge end-customers separately. Now, warehouse operators no longer charge forwarders but bill the end-customer directly. And, they even give forwarders rebates of as high as P1,000 per cbm. (Some even pay in dollars.)


In some instances, forwarders pressure their warehouse operators to find ways to give them higher rebates. Sometimes, the warehouse operator resorts to misdeclaring the size of the shipment (i.e. by indicating a larger size than actual) so they can collect more from the customer.


Ideally, since the end-customer nominates the forwarder to be used, the customer should only deal with and be billed by the forwarder. Since the forwarder nominates the warehouse, the warehouse operator should bill the forwarder, not the customer directly. In the US, warehouse operators only charge storage and forklift fee. All other charges are billed by the forwarder.


In the past, no government agency regulated freight forwarders. Warehouse operators have also been unregulated and none received sanctions for overcharging.


The question we now face is: "Are we going to allow this to continue?"
PISFA and ACOP recently met to address this issue. The two associations also met with the Philippine Shipper's Bureau (PSB) to seek guidance. It was agreed that PISFA and ACOP would sign a Memorandum of Agreement (MOA) and designate PSB and BOC as the government body to ensure that the rates in the MOA are followed. All forwarders (whether PISFA or not) and warehouse operators (whether ACOP or not) will be required to follow the standard charges or face sanctions such as substantial fines and the cancellation of accreditation/license. To eliminate rebates and excessive charges, the US practice will be adopted, in which customers only pay the forwarder's charges and warehouse storage charges.


PISFA will again meet with ACOP on June 17 to finalize the draft, which it will present to BOC and PSB for approval. Target MOA signing is July.
It is about time we act on this matter. Besides, only overseas agents benefit from the high rebates given by local forwarders. At the same time, we are affected by the high costs of imported goods. We seek the assistance of everyone in the industry to be vigilant and support our goals, as we will all benefit from this at the end of the day.
And, maybe the next time someone presents the LCL charges to the public, it will be easier to explain and justify these and promote the LCL business.