Dollar-based rates cause problems for exporters

Sudibyo M. Wiradji, Contributor, Jakarta

Regular customers of international express courier companies praise the professionalism and reliability of the companies' air delivery services but grumble at the U.S. dollar-denominated freight costs, which they consider too high.

Exporters and buying agents are on the list of regular clients using international express courier services as part of their business worldwide. Most international express courier companies -- FedEdx, TNT, DHL, Cardig Air, UPS -- to name a few, have enabled exporters or buying agents and targeted buyers from different countries to exchange important documents in a punctual and secure manner.

For regular shipments of heavy goods, they rely on sea freight companies because, with the weakening of the rupiah against the dollar, air freight services are very costly.

But when it comes to shipping documents, exporters have little choice, because only through international express air courier service providers and their global networks can they send documents or packages to buyers overseas in a fast and secure manner, says T. Dirgantoro, secretary-general of the Indonesian Exporters Association.

Unlike sea freight, by shipping documents or items through international express air couriers, a customer can easily trace the documents or items. "They (international express courier companies) work professionally," Furniture Makers Association manager Sae-Tanangga Karim, better known as Angga, said.

Asmindo members, most of whom own small or medium-sized businesses, often use the services of air freight companies to ship samples for overseas exhibition or furniture fairs. "The samples reach the destination on time," he added.

Heri Subowo, a member of the Indonesian Handicraft Exporters Association (ASEPHI) who produces and exports handicrafts and furniture, highlighted the benefit of using an international express air courier.

"Their quick processing (in handling delivery) helps expedite our transaction process. For example, we can fill an order (from an overseas buyer) either for further production or for an exhibition overseas immediately," Heri said.

The quick and secure delivery of one air freight company has won him over as a regular customer. "For example, when we take part in an exhibition on a trade mission overseas, we use the courier company as we trust them," he said.

"The quick delivery of product samples allows buyers to assess product quality. We also send important documents, such as invoices and itemized lists," he said.

PT Mitra Adi Perkasa is a regular customer of FedEx for shipping documents to other countries, including Malaysia, Singapore and Hong Kong. "Quick and good service are the reasons we have used this courier for years," said Wita of the company's wholesale department.

Lusi Juliawati, senior manager of rajacraft.com, a buying agent of arts and crafts, says each express air courier company has its own specialty to offer, allowing customers to select which one is the right choice when it comes to shipping goods.

For example, she uses FedEx to send documents, but she usually uses DHL when shipping heavy items, like handicrafts. But for heavier, large volume shipments, like furniture sets, she prefers Cardig Air. "As a buying agent, we often send handicrafts and furniture sets to buyers overseas," she said.

The destination is also taken into consideration when deciding which courier service to use. For local areas -- like getting samples or orders from vendors -- she prefers a local courier service, as it is cheaper and reliable. "We consider Tiki one of the best local courier companies," she said.

Therefore, as each courier company has their own specialty to offer, clients can choose which one best suits their needs.

"We don't spend a cent on shipping products because, based on the deal, the shipping costs are paid by the concerned buyer," she said.

Courier companies usually offer special rates. "The fierce competition in the courier industry has prompted sub-agents of certain courier providers to offer discounted rates. And surprisingly, a particular agent may offer up to 60 percent off the official rate," she said.

Regular customers have accounts and pay a monthly service fee.

"This is easier for us because we don't have to pay a fee every time we use the service," said Hendra, who is in charge of financial matters.

As a regular customer of FedEx, he said the company received a special rate, adding that the percentage of the discount depends on the destination and how regularly a customer shipped goods. "The more frequently we use the service, the higher discount we receive. This is a fair business practice," Hendra commented.

Another source said that one customer had difficulty filing a claim for the loss of a document he sent through a certain international express air courier, because he trusted a particular courier company's agent that offered an incredibly high discount.

"I think, as a customer, one has to be more selective when choosing a sub-agent. One should investigate which one is responsible and trustworthy," he said.

Heri, an exporter, expressed hope that courier companies could establish closer cooperation with the exporter association or exporters, so that Indonesia will be in a better position to face global competition.

With the rupiah remaining weak, freight costs are deemed rather high, especially by exporters wishing to ship items on a large scale. Sea freight charges are between US$3,500 and $4,000 for a 40-foot container. "The cost of air freight is calculated per kilogram and, certainly, it would be very costly if we use air freight to send our goods," Angga said.

"Therefore, we use the service of a courier provider, especially for delivering product samples, only when there is an urgent need," he said.

Since the economic meltdown four years ago, the rupiah has continued to fluctuate, with its value having lost over 60 percent against the dollar. This has caused the rate of products and services on offer in U.S. dollars to increase by 30 percent.

Angga said that it would be advisable for courier companies to set their rates in rupiah. "The dollar-based courier service rate causes clients to suffer losses from the different rate when they have to change rupiah into U.S. dollars," he said.

"With rates in rupiah, exporters could easily predict how much they must spend on courier services," he said, adding that a rupiah rate would allow for the adjustment of prices.

However, others said that the high cost set by international express courier companies is natural, in view of the high costs they have to bear for leasing aircraft that they pay for in U.S. dollars. "However, if possible, they apply a fixed rate for the domestic market to make the cost more competitive," Hendra said, adding: "With a fixed rate, customers would not be affected by the fluctuation of the rupiah and, as a rule, a fixed rate-based cost is cheaper because the fixed rate is lower than the average monthly rate."

Dirgantoro expressed hope that the state-owned post office company could offer courier services comparable to international express air courier companies.