As the year-end approaches, the freight forwarding industry appears to be entering another wave of crisis periods. This article examines recent industry irregularities and provides risk warnings and coping strategies to help sellers navigate the logistics challenges safely.
The Allure of Low Prices and Hidden Dangers
"U.S. trucking service, as low as $1.98/kg, all-inclusive, approximately 40-day delivery." Such tempting offers may conceal significant risks. The industry joke that "forwarders not only offer low prices but also pay deposits to prevent sellers from running away" reflects the current distorted ecosystem of cross-border e-commerce logistics.
Case Study 1: Unexpected "Loan" Requests
A freight forwarding company in Fuyang recently notified clients that six containers were detained due to customs inspections, with each container requiring $30,000 in processing fees. The cash-strapped company demanded clients share the costs at $14/kg as a "loan," providing their bank account details. This practice effectively transfers all risk to sellers.
Established in 2021 with zero paid-in capital, this company's weak financial position raises serious concerns about its operational capabilities and risk management.
Case Study 2: Forwarders Evading Rental Payments
In Shenzhen, Guotong International Logistics faced eviction after months of unpaid rent. While the notice claimed mutual agreement, the tone suggested deeper operational issues. Though unclear if client cargo was affected, such situations could lead to significant losses for sellers.
Root Causes of Forwarder Failures
- Cutthroat Competition: Many forwarders operate below cost to gain market share, ultimately becoming unsustainable.
- Cash Flow Problems: Forwarders must advance shipping and customs fees; liquidity issues can trigger collapses.
- Poor Management: Lack of standardized systems leads to operational chaos and financial vulnerabilities.
- External Factors: Global economic instability and trade policy changes exacerbate industry risks.
Risk Mitigation Strategies for Sellers
- Reputation Matters: Partner with established forwarders having strong track records.
- Verify Credentials: Check for proper licensing through official channels.
- Financial Health: Prioritize companies with solid capital reserves.
- Contract Scrutiny: Carefully review terms regarding pricing, timelines, and liability.
- Risk Diversification: Avoid single-provider dependency.
- Cargo Insurance: Protect shipments against transit risks.
- Shipment Tracking: Monitor cargo movements proactively.
Industry expert Mr. Sun recommends selecting forwarders where: the owner serves as legal representative and majority shareholder; registered capital exceeds $1.4 million; the principal owns property and vehicles; and the company maintains at least 30 employees with social security contributions. These criteria help identify stable, legitimate operators.
Conclusion: Safety Over Short-Term Savings
In cross-border logistics, the lowest price rarely represents the best value. Sellers must evaluate forwarders holistically—balancing cost with reliability, credentials, and financial stability—to ensure supply chain security and sustainable business growth.