Importers: Beware of ‘Fake’ Import Charges
Importers to New Zealand need to beware of a legal ‘loophole’ that leaves you exposed to unexpected and unwarranted charges on your imported goods.
When you buy goods overseas under cost and freight rate (CFR) terms (see our Incoterms page for more about this), this should mean the seller covers the costs of freight to you in New Zealand.
But in some recent cases, importers have been hit with extra charges when their goods arrive, leaving them out of pocket.
Inflated import charges and fictitious fees
In one case earlier this year, an importer brought goods into New Zealand on CFR terms, but was then charged wildly inflated port service charges, as well as fictitious fees such as ‘Forestry’ and ‘Port Security’ when the goods arrived.
A less experienced importer might have assumed these to be official fees, and simply paid them.
But in this case, the importer made a complaint against the freight forwarder on the basis that they hadn’t stuck to the CFR terms they’d agreed, and that the extra charges were neither official nor justified.
Surprisingly, the NZ Commerce Commission decided to take no action.
Despite the fact that the importer and seller had agreed on CFR terms, the commission said they couldn’t find any evidence of a contract or written agreement that set out the terms of trade.
So Incoterms don’t constitute a contract?
According to the Commerce Commission, Incoterms inform the sales contract between seller and importer. But Incoterms alone do not constitute a contract or written agreement, and are not legally binding.
Shady freight forwarders in China and other countries are using this legal loophole to their advantage, leaving New Zealand importers open to being ripped off.
How does the scam work? First the overseas freight forwarder will secure business by offering a very low freight rate to exporters in the country of origin.
The exporter offers the goods to a New Zealand importer on the basis that freight is included in the price of the goods.
The freight forwarder then fleeces the New Zealand importer by adding extra freight costs and charges when the goods arrive, which the importer can do very little about.
How can you protect yourself from unfair import charges?
1. Choose a reputable freight forwarder
Don’t leave it to your supplier to choose a freight forwarder. Make sure you choose a reputable forwarder like Easy Freight, who will tell you exactly what you’ll need to pay to import the goods, and won’t add any surprise charges.
2. Select your Incoterms wisely
Selecting shipping terms that put you in control of the freight and import charges is a good idea.
Instead of CFR terms, you might want to choose FOB (free on board) instead, which means the supplier is only responsible for getting the goods to the vessel, and you take care of the rest.
3. Get a written contract in place
Incoterms are not a substitute for a contract. Only a written sales contract which sets out things like the price you’ll pay for the goods, and who is responsible for shipping costs and import charges, can give you that security and peace of mind.
Have you experienced anything like this in the past? What was the outcome?
If you’d like that peace of mind, simply use the enquiry form on our website to get your free quote.