Dollar-based rates often cause problems for exporters

Dollar-based rates often 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.