Jun 4, 2015

IATA, FIATA project shift of APAC to new forwarder system in 3Q 2016

The International Air Transport Association (IATA) and the International Federation of Freight Forwarders Associations (FIATA) are slated to reach a formal agreement within this month about the shift to the IATA/FIATA forwarder system. The new system will first be rolled out as a pilot project in Canada in the fourth quarter of this year. The Asia Pacific region, including Japan, will shift to the new system in the third quarter of 2016, with the switch to the new system to be completed in 2017. IATA-accredited cargo agencies under the conventional cargo agency system will become "forwarders" and they will stand on equal footing with the airlines. If deliberations on such matters as the smoothening of operations by the two entities as a single unit were to advance, it is expected to lead to shorter lead times in air transport, but it may also cause a conflict of interest.

IATA's Cargo Agency Conference (CAC) has officially decided to switch to the new system at the meeting that was held in Shanghai in March this year. It will publish a handbook that sums up the regulations on IATA/FIATA Air Cargo Program (IFACP) and IATA and FIATA are scheduled to formally agree on the shift to the new system within this month. The IATA/FIATA Governance Board (IFGB) that will control and run the new system will be formed in the third quarter of this year.

The organizations that will be in charge per country/region are slated to be formed under the wings of IFGB. It is unknown at the moment if an independent organization will be set up for Japan. Should such organizational body be established, it is believed that IATA Japan will be the center of activities on the airlines side, while Japan Aircargo Forwarders Association (JAFA), a regular member of FIATA, will be at the core of the forwarders.

Under the new system, the major focus is how it will benefit shippers who use air cargo transport services. As its target, the IATA has been reducing by a maximum of 48 hours the average number of transport hours when using air cargo transport since last year in a bid to break free from the nearly six-day transport time that has been the norm for several decades now.

Under the cargo agency system, operations between airports are deliberated upon among member carriers of the IATA. This is primarily attributable to the fact that the scope of work of cargo agencies accredited by IATA goes as far as the sale of space on behalf of airline companies, up to the delivery of cargoes. Air cargo transport today, however, has forwarders coordinating door-to-door transport, with the service handling more than 80% of the air cargoes worldwide. By adapting the conventional system to the actual state of things and shifting to the new system, airlines and forwarders will be able to discuss air cargo transport. One of the merits of the new system is the promotion of eCargo, as well as the expected acceleration of computerization in cargo operations.
Meanwhile, forwarders will get to join meetings about the new system on even ground with the airlines, and this is could bring about a conflict of interest on each side.

For instance, there are generally numerous areas inside airports where damages arise on cargoes that use air cargo transport. Operation between airports has thus far been done among airlines. But with the new system, forwarders will get to participate, and the operation of door-to-door services, including operation between airports, can now be discussed. Forwarders consider operation between airports to have many "black box" parts, so it is possible that airlines will be asked to divulge the details of their works and operations. Even shippers sometimes point to airport operation as a "black box," but it is expected that there will be a sense of resistance from airlines when it comes to disclosing the characteristics of operations, expertise and other matters.

It also seems that there will be deliberations about the Cargo Account Settlement System (CASS), the freight rate settlement mechanism between the airlines and agencies. CASS is under the control of IATA's CAC, as it has always been. As local organizations under the CAC, there are the ALWG between forwarders and airlines, and the LCAG-Cargo by airlines. With LCAG-Cargo, discussions about operation have been conducted, centering on the CASS. This latter system will be kept even after the shift to the new system, but in the end, it would be necessary to have consensus building on the organizational unit under the IFGB and other new systems.

Among the matters discussed in LCAG-Cargo, issues about the settlement frequency through CASS were broached and there were talks about this matter being deliberated upon in the organization under the new system. At present, settlement using CASS is, for instance, divided into the first half of the month and second half of the month. The airlines send the appropriate data, and the settlement amount is computed through the CASS and then the agencies pay the corresponding amount. A source from an airline company opined that, "Forwarders probably want the rules on settlement frequency and other matters to be loose, but airlines want to be more strict about them."

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