ocean groupage scam

If your company is involved in importing using LCL (Less than Container Load) or ocean freight groupage there is a fundamental reality which started over a decade ago and has no signs of abating.

If you want to save on your freight bill this will be one way to save a significant amount over the year.

There has been a factor within the ocean groupage freight industry which has grown over the last decade or so, which is costing importers more and more money. They are not being directed by their freight agents accordingly or possibly importer do not have the confidence that their agents are capable of helping with the logistical decisions. Or, maybe they are just not prepared to do the work to find the most cost effective way of transporting their goods.

To start explaining the problem we need to start at the terms of sale within a contract or purchase within a order from an international supplier or vendor. On an ExWork basis you will be responsible to arrange collection from the manufacturers factory and responsible for payment of all the charges from there on and this is arranged through your freight agent based in the United Kingdom. In the same respects on a CFR basis the manufacturer will prepay the charges from their factory to the origin port, the loading charges and the ocean freight to destination port here in the United Kingdom. Your vendor will give you this price which is generally separate line item on your commercial invoice to the product purchased. All of the above is standard practice and the choice is yours at the time of placing your order with the international supplier.

During price negotiation, your vendor may give an added incentive to place the order with them by covering the cost of the shipping from their warehouse to the arrival UK port. In essence it sounds like a generous deal and swings the deal and the order is placed, the shipment departs on a prepaid basis and the  consignment arrives into the arrival port. In the process you send the documentation to your clearing agent, pays the arrival charges from the unpack agent and a little while later the delivery is made to your warehouse. From the outside there seem to be no problem however let us explain which actually is happening in the background.

Over a decade ago the strength and influence of Chinese NVOCC grew tremendously. These are the container groupage operators, taking all the bits of cargo from freight forwarding companies in China and loaded into the containers. Subsequently appointed a warehouse in the UK to unpack their containers at destination. As one can expect there was a handling charge at destination port for the services of moving the container from port to warehouse and the unpacking the consignments from the container.

goupage the grand scam

What the Chinese NVOCC’s did next was the game changer and has been in effect ever since.

They grew so strong that they started approached the United Kingdom unpack warehousing and asked for a kickback of the proceeds generated from the unpack charges, after all it was their container and they would be able to send it to another warehouse whom would make this kickback payment. The obvious answer from the unpack warehouse point of view is to pay the kickback and bill higher fees for the services carries out. Over time the problem has got worse and worse with the NVOCC offering zero freight charges to the freight agents in China and could do this because they could increase the destination charges to now include the freight amounts as well. Selling this service in China was a simple process and they could even offer a rebate to the freight agents for their cargo and the market happily went this way. In turn the freight agents offered zero freight charge to the shippers who in turn offered zero freight charges to sweeten the deal to obtain the order.

In this roundabout way the UK importers are now paying over the odds for their groupage. More to the point even though the shipping was free of charge, the importers are paying more because they are not being involved in the process and leaving it to their vendors to handle their logistics functions.

Unfortunately there now seems no other way to stop the practice but for UK importers to take back control of their logistical function. Without this deliberate intervention the problem will simply get worse and the longer it continues the more money is being wasted for no reason.

Your freight forwarders in the UK is able to negotiate the ocean freight plus the unpack and release charges with the NVOCC and thus being able to control the overall price and maintain your freight charges at a reasonable level.

As freight agents it is our function to help make logistical decision for our customers and at times this is a guiding direction in their decision making process.

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