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Surcharges: Fair or foul?

Surcharges: Fair or foul?

By Hpanchal on October 31, 2011

“If you actually peel the onion on either a fuel surcharge or a security surcharge and look behind it, I think you would find that there are not dollar-for-dollar cost recovery mechanisms, and in fact, there’s probably a very loose correlation between the actual costs that are associated with the fuel and security and the actual surcharge,” Rossman says. “Whether they’re actually tied to, in a very specific way, those initial cost increases — not so much.”

Back in the Netherlands, van Doesburg is weighing his options about how to continue his fight against surcharges. The security surcharge is relatively easy — just wrap it into the base rate. For fuel, IATA could step in and mandate a surcharge system that measures the market rate and comes up with an appropriate fee to charge.

With his blessing, two shippers in the high-tech and pharmaceutical industry have started to slowly take things into their own hands, telling their freight forwarders that instead of paying surcharges, they will simply pay a flat fee that encompasses everything. Their fuel fee is based on the current marketplace and their own calculations. The security fee is a flat €0.15 per kilogram.

So far, the shippers and their freight forwarders are working well together, and the experiment seems to be working. “The system has another advantage; illegal price fixing is not anymore possible because nobody determines the price of the fuel surcharge,” van Doesburg says. “Just the market price determines the surcharge.”

No price fixing and a market-based fuel surcharge sounds good to forwarders and shippers, but how carriers will react to this new way of doing business is anyone’s guess.

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Comments

Submitted by Mike on

Another option is for shippers to hedge their exposure to the fuel surcharge, something several shippers are already doing today.

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