Issue 405, June 6, 2003
On May 29, the U.S. Justice Department urged the U.S. Department of Transportation to reject IATA Resolution 502, scheduled to take effect October 3. In its comments, the Justice Department said the IATA proposal violated U.S. antitrust laws. Justice called the Resolution a "price-fixing agreement" and said individual airlines should set and negotiate rate changes on an individual basis, not as part of a single group.

This is a very positive and encouraging development, as the United States is one of the signatory nations to the IATA resolution. While it is premature to say the Justice Department's comments will persuade IATA to withdraw the resolution, we believe it is an important step towards reaching an acceptable compromise between airlines, freight forwarders and shippers on this important issue.

As you know, the proposed resolution calls for a significant change in the standard for calculating the dimensional weight of low-density cargoes moving by air. Resolution 502, if enacted in its proposed form, would amount to a 20% rate increase imposed by the airlines on their forwarding customers and, ultimately, on to you.

Many of you have contacted DHL Danzas Air & Ocean voicing concerns about the impact of Resolution 502. You have said--and we have agreed--that a rate increase of this magnitude cannot be justified in this challenging competitive environment.

You have also raised questions about the process employed by the IATA Cargo Tariff Co-Ordinating Conference in approving this resolution, namely that it acted unilaterally and without input from shippers and forwarders. We share your concerns here as well.

The comments by the Justice Department are consistent with our position, and we believe the agency's input will create an atmosphere conducive to a favorable and equitable solution. Nonetheless, we will continue to act pro-actively to ensure that signatory nations and their representatives are aware of our views.

On May 27, the nine members of FreightForward Europe (FFE), of which we are a member, submitted a position paper on Resolution 502. Among the points raised in the FFE paper:

	A dramatic change in the tariff system cannot be implemented without input from forwarder stakeholders representing the interests of airfreight users (i.e., shippers and consignees).
	A change in the ratio from 1:6 to 1:5 will effectively convert much "weighted" cargo to "volumetric" cargo, and result in a wider range of shipments subject to the 20% rate increase.
	The decision to impose a rate adjustment across all IATA-member airlines violates the spirit of free-market competition. It also leaves little flexibility for individual carriers and forwarders to achieve a compromise solution.
	The resolution would require a change in the packing procedures governing high-valued, fragile commodities that often move by air, thus increasing the risk of theft and/or damage.

FFE has been prepared to mediate an end to this dispute. Until now, however, carriers have been unwilling to reciprocate because many nations in Europe, Asia and Latin America, as well as the United States, refuse to ratify the Resolution.

As a result, FFE has placed an urgent request with nations' ratifying bodies not to act on the Resolution as it is currently constructed. We took this step because we believe it is the best and perhaps the only way to get the parties to the negotiating table. It is our hope the comments from the Justice Department will pave the way for open and productive negotiations.

Rest assured that DHL Danzas Air & Ocean will continue to make Resolution 502 a top priority, and we will make every effort to keep you fully and frequently informed. In the meantime, we continue to welcome all questions and comments from you and your representatives.

Sincerely,

Gary Schultheis
Vice President Airfreight North America
DHL Danzas Air & Ocean

Please note that due to the complex nature of the subject matter, DHL Danzas Air & Ocean cannot be responsible for actions taken by the reader in reliance on the information contained herein without prior consultation with DHL Danzas Air & Ocean.