mobile bongdasoNews #70 - 'Unfair' IATA CASS rules put 'severe financial strain' on forwarders

IATA is causing “severe financial strain” for start-up and SME forwarders that could propel them out of business.

mobile bongdaso airline association has been accused of anti-competitive and unfair commercial practices, and could face legal action as forwarders look to complain to national competition authorities.

mobile bongdaso problems stem from an October 2022 change in IATA’s resolutions that means CASS associates are now obliged to provide financial guarantees to be able to access mobile bongdaso payments system.

Companies say not only are mobile bongdaso rules unfair, but mobile bongdaso wrong formula is being applied.

mobile bongdaso Loadstar spoke to several companies around mobile bongdaso world that would not be named through fear of reprisal, as IATA can deny access to CASS to anyone, without giving a reason.

IATA now requires that new CASS associates, and cargo-accredited agents who joined after 2019, provide a deposit equivalent to 70 to 90 days (depending on geography) of their quarterly average monthly airline cargo sales.

For instance, if mobile bongdaso average monthly cargo sales with airlines in Q1 amount to 0,000, IATA will request 2.5 to three times more, totalling m. In mobile bongdaso subsequent quarter, if average sales drop to 0,000, IATA retains mobile bongdaso m, while receiving payments every 15 or 30 days. IATA evaluates sales quarterly, and demands supplementary deposits within tight deadlines.

One forwarder explained: “For every [euro] we grow, if I sell another euro of turnover, I have to keep in my mind that I have to give 20 cents to IATA.

“This is unfair competition, because companies that started [before October] don’t need to do this. All mobile bongdaso big and established companies – besides mobile bongdaso benefit they have from scale – have an advantage over us.”

Another said: “IATA evaluates our figures and every time we increase activity, asks us for more money for mobile bongdaso deposit.

“We are a small company. For us, these are big sums of money. We could have put this money in development, in opening new stations, or put it in mobile bongdaso bank to make interest. Now it’s simply sitting there, doing nothing. It’s a very frustrating situation.”

Christos Spyrou, group CEO of mobile bongdaso Neutral Air Partner network, told mobile bongdaso Loadstar: “We’re witnessing cargo agents of comparable size and revenue competing in mobile bongdaso same market, where one agent operates without any guarantee with IATA, while another is burdened with providing large sums of money in financial security.

“This inequity has prompted many agents to seek assistance through “unfair competition committees” in their respective countries, potentially escalating into significant legal issues under their respective laws.”

Those needing to provide financial guarantees, according to IATA, can use “bank guarantees, non-bank financial guarantees, default insurance programmes, bank deposits into an account held by IATA, or a cargo company guarantee”.

But one forwarder said: “Currently, IATA is requesting a direct cash deposit to IATA, or a swift financial guarantee from a bank directly to IATA; whereas previously they accepted assurances from insurance companies or alternative credit facilities besides banks or cash deposits.”

Another added that using a bank guarantee was simply too expensive.

“A bank guarantee has high costs, you have to pay huge money, so we went with a cash deposit. We would have got interest on our money of 2.8%, but mobile bongdaso cost of mobile bongdaso guarantee was 4%, so it was better for us to keep mobile bongdaso money with IATA – either way, your money is locked in.”

Forwarders also complained that, in addition to IATA’s deposit, airlines have asked for their own deposit. A spokesperson for IATA told mobile bongdaso Loadstar: “As part of their commercial activities, some airlines may impose additional requirements. We are not involved in any such activities.”

However, mobile bongdaso relevant Resolution 851, outlining CASS associate rules, states: “Individual airlines participating in CASS shall not request a separate, bilateral duplicate financial security from such associate covering those same CASS Export settlements. Any member that does … shall notify IATA and will be excluded from participation in mobile bongdaso industry financial security.”

mobile bongdaso methodology imposed by IATA on mobile bongdaso financial guarantees has also been questioned.

mobile bongdaso security must cover mobile bongdaso “amount at risk, based on average air cargo sales/settlements during mobile bongdaso period of days’ sales at risk”.

‘Days at risk’ means mobile bongdaso number of days from mobile bongdaso billing period to mobile bongdaso remittance date, plus a margin of up to 10 days to a maximum of 70 days. IATA calculates mobile bongdaso ‘amount at risk’ by dividing mobile bongdaso associate’s total annual air cargo sales by 360, and multiplying that by mobile bongdaso days at risk.

One source explained: “This defines ‘days at risk’ incorrectly… assuming every transaction is tendered to an airline on mobile bongdaso first of mobile bongdaso month.

“These guys are so stupid. Their formula determines mobile bongdaso average daily sales, I agree. But mobile bongdaso average daily sale on mobile bongdaso first of mobile bongdaso month is at risk for 70 days, but on mobile bongdaso second day it’s 69, third 68 and so on, until mobile bongdaso average daily sale on mobile bongdaso last day is only 40. mobile bongdaso billing period is first of month to last, with settlement based on mobile bongdaso last day of mobile bongdaso billing period.

“This is what various competition commissions have been presented with. mobile bongdaso wrong formula has mobile bongdaso effect of increasing mobile bongdaso financial security provided and mobile bongdaso cost to do so places unnecessary additional burdens on mobile bongdaso freight forwarder.”

IATA told mobile bongdaso Loadstar: “CASS operates under published rules and resolutions, and in accordance with all legal requirements for all markets in which it is present. While IATA operates mobile bongdaso CASS system, it is important to note that mobile bongdaso rules by which IATA operates CASS are driven by mobile bongdaso market as agreed by airlines at mobile bongdaso cargo conference…

“Effective risk management is essential for mobile bongdaso success of CASS. In 2023, CASS handled .7bn. Our aim is to ensure that all participants in mobile bongdaso system accurately receive mobile bongdaso money due to them and [to] maintain a target to keep unrecovered debt to 0.01% or less.

“Guarantees are a critical part of risk management.

“CASS is not facing any legal challenges on financial security requirements.

However, several forwarders said they had been advised to talk to lawyers regarding mobile bongdaso new rules. One said: “This a ‘hot potato’ that IATA can’t see.”

Mr Spyrou added: “SME cargo agents that have invested in airfreight products over mobile bongdaso last five years are dealing with some significant challenges in mobile bongdaso industry … It’s concerning to see how this could create an imbalance in competition among cargo agents.

“This is a major concern for SME cargo agents, and we’re receiving complaints from numerous members.

“In essence, new IATA CASS associates and cargo agents are experiencing severe financial strain, posing an existential threat to their operations.”

Source: https://theloadstar.com/unfair-iata-cass-rules-put-severe-financial-strain-on-forwarders/

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