IATA on the hook
The International Air Transport Association (IATA) took its typical share of bruises over the course of the two days, with much discussion of the Cargo Account Settlement Systems (CASS) – IATA’s system for billing and settling of accounts between airlines and freight forwarders – and the requirement for freight forwarders to provide bank guarantees.
February 1, 2012
IATA on the hook
The International Air Transport Association (IATA) took its typical share of bruises over the course of the two days, with much discussion of the Cargo Account Settlement Systems (CASS) – IATA’s system for billing and settling of accounts between airlines and freight forwarders – and the requirement for freight forwarders to provide bank guarantees. Chairman of the Hong Kong Association of Freight Forwarding and Logistics (HAFFA), Paul Tsui raised the issue of IATA’s imposition of the requirement for annual financial reviews of freight forwarders. This was imposed he said, without any consultation and is a requirement that did not exist previously. Noting that should a forwarder fail the financial ‘health check’ the forwarder would be subject to stricter bank guarantees, but if the health check showed the forwarder to be ‘healthier’ than IATA requirements there was no mechanism for the bank guarantee to be lowered. “It should be a two-way street,” Tsui argued. This puts small forwarders – which in the case of HAFFA, 70 per cent are in this category – in a very difficult position he said, noting that “if the forwarder has not passed the health check, IATA will increase the bank guarantee and at the same time the airline will also increase the bank guarantee with the forwarder and we will be punished twice and that will not be helpful for the industry,” he said. Tsui said he has conveyed HAFFA’s concerns to IATA that this is not mutually beneficial for business between forwarders and carriers. The issue of IATA’s financial health check and bank guarantees was echoed across much of the Asia-Pacific region and responding on behalf of FIATA, Sarosh Nagarvala, FIATA treasurer and chairman of the association’s Air Freight Institute (AFI) urged forwarders to “stand their ground” in dealing with IATA. “We are, as forwarders, the customers of the airlines,” he said. “In which other business does the customer give a guarantee to the supplier?” he asked. Noting that forwarders in the region face the same market forces and economic pressures as the carriers he said, “the time has come to throw all these bonds and bankers guarantees out the window. “For too long we’ve been hammered into the ground by these unreasonable situations. Slavery has gone out a long time ago and do not let them hammer you into the ground all the time, you’ve got to stand your ground,” he urged. But he cautioned that in order for FIATA to assist, a proper report including the background to the issue, the problem and possible solutions had to be forwarded to the AFI if it was to assist.