Thursday 13th Dec, 2018

INDUSTRY OPINION: Italian bugs reveal bigger stink in Aus importing costs

Image: Shutterstock
Image: Shutterstock

AUSTRALIAN fumigators are making a motza off Australian importers for this quarter, charging every Less than Container Load (LCL) importer to fumigate its goods individually, when the entire container could be fumigated for almost the same fee and then the fee be pro-rated.

Is this an oversight? DAWR needs to look at its procedures to ensure that importers are not suffering thousands in fees for the sake of a poor process.

This issue came to my attention after a notice last, issued by the Department of Agriculture and Water Resources (DAWR), about a new Biosecurity risk from Italy in the form of the Brown Marmorated Stink Bug.

The notice stipulates that from now until April, every container from Italy must undergo fumigation with Methyl Bromide upon arrival in Australia.

Now this treatment is part of strict Biosecurity measures that are critical to Australian agriculture. Importers know and factor-in that from time to time they may face additional fees for necessary extra biosecurity measures.

What may come as a surprise however, is the enormous profits being collected by fumigation companies for importers of Less than a Container Load (LCL) shipments.

Full Container Load (FCL) imports also need to be fumigated and the importer is charged accordingly.

But when importers of smaller volumes of goods share a container with several other importers of smaller goods, then surely the container should still be fumigated as a whole FCL and then the container unpacked and each importer levied with a pro-rated cost?

This is not what currently happens. The current procedure for LCL importers is that container is unpacked and every importer’s parcel is fumigated and charged individually.

A DAWR assessment fee is applied to each consignment and each importer signs an agreement with the fumigator to fumigate their LCL shipment.

An average FCL fumigation costs about $600-$800 per container. A 20-foot container can hold 27-28 cubic metres of cargo, and a 40-foot container can hold 55-60 cubic metres of cargo.

For an LCL shipment, the importers are charged fumigation fees per cubic metre for the size of their parcel. There is a minimum charge too. My rough calculations suggest:

  • Fumigation depots could earn upwards of $6000 to $12,000 for just one container when the charges per importer are added up;
  • DAWR also receives extra processing costs. If the whole container was fumigated the DAWR fees would be about $30 to $90 but, because each LCL shipment is being processed individually, DAWR reaps these processing fees for every LCL instead of once for the container.

Again, that’s 10 or 20 times the processing fees, depending on the number of importers sharing the container.

As a freight forwarder who calculates the cost of importing fees for my clients, this stood out to me immediately. Why has the DAWR not noticed this oversight and made changes to protect the importers and their budgets?

Here’s a suggested improvement to the process: As LCL cargo is handled by a freight forwarder and that same freight forwarder charges port charges for deconsolidating the cargo in Australia, the Agriculture Minister has powers within the Biosecurity Act 2015 Section 445 to order that the containers remain with seals intact and sent directly for fumigation upon arrival into Australia.

The freight forwarder would receive an invoice for the $600-$800 fumigation fee which could then be proportioned across the enclosed LCL importers.

After fumigation the goods could be deconsolidated and collected.   We all know an importer receives a ‘shopping list of port charges’ whenever a shipment arrives into Australia – but for the sake of Australian business growth, could we not expect the system to protect them from up to $11,000 in excessive charges? All it takes is a small adjustment in the interest of Australian business.

The Agriculture Minister has the power to act.

* Peter McRae is an internationally recognised and accredited customs broker with 17 years Australian industry experience. He is the founder of customs brokerage Platinum Freight Management.

Send this to friend