In a highly competitive market, importers increasingly have an expectation on customs brokers to act as pseudo bankers to finance freight, duty, GST and import processing fees.
This explains why many importers are not too fussed about advocating to government to offer duty deferral as those that use third party service providers commonly already receive up to 90 day credit terms to cover disbursements.
Is it a sound business practice for customs brokers and freight forwarders to continue to offer credit in the current economic environment?
Let's have a look at some facts.
CPA Australia reports over the last 12 months provide a sobering reminder of the fragility of the Australian economy and the challenges many businesses face with nearly one third of all ASX listed companies, including more than half of the bottom 500, facing serious financial uncertainty.
The other known risk is whereby a small number of traders have been known to hop from one customs broker to another leaving a path of bad debt behind them.
The result is that we have seen the crippling impact on a number of our members who have been stung by default payments.
Is there any relief in sight?
We have been advocating for duty deferral to be extended beyond the Australian Trusted Trader (ATT) program and to be made widely available. As a part of "entity based risk assessment" methodology, there has also been suggestion that importers outside of this ATT may be required to pay direct EFT payments of taxes to assist government agencies in reducing the risk of identity fraud or "piggy-back" shipments.
Whilst the above reforms would go a long way to alleviating the issues for customs brokers, the reality is that we still do not have a definitive policy position on these issues and any change would require significant industry engagement, systems and legislative changes.
So what is the immediate solution?
We have introduced to members a solution that provides insurance safeguards against receivables as well as tools to best meet the all-important "due diligence" task ... and the uptake has been overwhelming!
The encouraging news is that this now provides an opportunity for others to join the Freight & Trade Alliance (FTA) Trade Credit Insurance program to take advantage of significantly reduced premiums generated by our collective bulk buying power.
So who manages our program?
FTA's Insurance Advisor is James Cotis of Logical Financial Management who is part of the largest insurance broker network in Australasia, the Steadfast Group. James and his team have established a Trade Credit Insurance program with Coface, a worldwide leader in credit insurance.
We encourage industry to find out more about trade credit insurance as a means to safeguard risk. For those businesses that already have an existing policy, we invite you to compare our program. You will be pleasantly surprised in the savings that you can make by joining your peers in the Alliance!
To find out more about the FTA Trade Credit Insurance program – please contact James Cotis at jcotis@FTAlliance.com.au or Paul Zalai at pzalai@FTAlliance.com.au
Paul Zalai – FTA