Industries worried over 57% hike in freight forwarding charges

Infographic: TBS

A whopping 57% increase in freight forwarding charge will cause an additional burden on importers in the country to the tune of Tk546 crore annually, traders say.

While local consumers will actually bear the brunt of the hiked charge, exporters fear losing competitive edge as passing the extra cost on foreign buyers will not be easy for them given the slowing trend in export demand, according to businesspeople.

The Bangladesh Freight Forwarders Association (BAFFA) hiked forwarding charges by Tk2,000 to Tk5,500 for each import bill – effective from 1 September – citing the recent increase in fuel prices.

Defending the increase, the freight forwarders' association argued that the charge, dubbed as Destination Service Charge, remained unchanged since 2014. 

Over the years, their cost of business went up because of increases in utility and fuel bills, while the latest hike in fuel oil prices left no option for them but to increase the fee, the association maintains.

The sudden decision comes as a fresh blow to industries that export finished goods after importing raw materials, such as the readymade garments (RMG) sector, putting them at risk of losing market share because of a rise in production cost, they added.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has demanded that the decision to increase forwarding charges be withdrawn. The trade body has already written to Chattogram Port, the National Board of Revenue, the Ministry of Shipping, the BAFFA president, and the Commissioner of the Chattogram customs house in this regard.

The BGMEA said the shipping ministry in 2010 last fixed the Destination Service Charge for each import bill, or bill of lading (BL), at Tk2,000. But freight-forwarders on its own raised the charge to Tk3,500 in 2013, the trade body said, accusing freight forwarders of overcharging the apparel exporters by Tk1,890 crore in the eight years since 2013. 

And now a 57% increase in forwarding charges will result in an additional annual expenditure of approximately Tk546 crore for importers, the letter further says.

Mahbubul Alam, president of the Chattogram Chamber of Commerce and Industry, expressed his concerns over the increase in forwarding charges, saying this decision to increase the charges without having discussions with the stakeholders is unethical and will have an adverse impact on commodity prices, affecting consumers who are already reeling under the impact of the soaring cost of living.

Traders in the readymade garment sector said freight forwarders have hiked charges in a situation when export orders for garments are lower than usual.

They mentioned that there is already instability in the apparel sector because of inflation in Europe and America and the Russia-Ukraine war. In this context, an increase in freight forwarding charges has put additional pressure on this sector. As a result, sustaining the business has become difficult.

Shamsul Azam, director of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) told The Business Standard that the cost of production has further increased in the wake of the increase in freight forwarding charges.

"We are lagging behind our competitors. Buyers have to spend $10,000 to $12,000 in freight charges to import one TEU of goods from Bangladesh. But the cost is in the range of between $5,000 and $6,000 when they import from our competing countries, including Cambodia and Vietnam."

He noted, "We are already lagging behind our competitors due to the increase in freight charges, ICD charges, and other business expenses. Now the hike in forwarding charges has made us very concerned."

Syed Nazrul Islam, first vice president of the BGMEA, told TBS that the demand for clothing in the international market is decreasing day by day amid the global economic downturn, as a result of which international buyers are also every now and then suspending import orders to Bangladeshi suppliers.

"In such a situation, the increase in freight forwarding charges will cause Bangladesh to lose its competitive edge in the global apparel market, leaving an adverse impact on the national economy," he said.

Md Faizur Rahman, commissioner of Chattogram customs house, said the matter of hiking or reducing freight forwarding charges does not fall under the jurisdiction of the customs department.

Earlier, the Bangladesh Inland Container Depots Association (BICDA) hiked container handling charges following the recent hike in fuel oil prices.

After the increase in oil prices on 6 August, the association increased the charges by 35% for handling imported goods, 24% for handling empty containers, and 25% for handling export goods. Later, when diesel price was slashed by Tk5 a litre, the handling charge for export products was reduced from 25% to 21.5%, the handling charge for import products was slashed to 30%, and empty containers to 20.5%.