Closed tomorrow! Another freight forwarder goes bankrupt, logistics industry in turmoil

Tomorrow we will enter 2024. The new year represents a new beginning for many people, but it means an end for some companies. Not long ago, a logistics company issued an announcement stating that the company will cease operations on January 1, 2024.

2023 is an extremely difficult year for cross-border e-commerce sellers, and logistics companies in the same ecological chain are also having a hard time. The cross-border logistics circle seems to be surrounded by these two things: "closing business" and "paying money to redeem goods", and the closer it is to the end of the year, the more such things there are.

We will be closed tomorrow. Another freight forwarder can't hold on any longer.

A few days ago, a seller said that when he opened his account early in the morning, Amazon orders were cut in half. Last year, the traffic in his category did not drop until mid-January, but this year it dropped 20 days earlier. 2023 is very difficult for cross-border e-commerce sellers. Orders were calm in the first nine months, and the peak season in the fourth quarter was not prosperous. The only hope of most sellers is to "stay alive."

The closely related logistics industry has also entered a cold winter, with continuous explosions and freight forwarding companies either closing down or running away. During the recent peak season promotion, a seller once lamented: "Our performance this year is average. Now it's not easy for anyone, and freight forwarders are even more competitive. A freight forwarder I know had 100 employees last year, but it was closed this year."

Previously, sellers said their expectation for 2023 was to "stay alive", and so did freight forwarders, but some companies still failed to realize this wish.

Near the end of the year, a freight forwarder issued a notice of closure.

The freight forwarder stated in the notice that it was unable to operate normally due to the economic downturn and the particularity of the industry. After efforts from all parties, it was still unable to change the predicament in the short term. After careful consideration, it decided to cease operations from January 1, 2024.

At the same time, the freight forwarder said that employees need to go home and wait for notice, and only 50% of the November salary can be paid temporarily, and the remaining part will be notified based on the company's payment situation. If employees go through the resignation procedures before January 1, they can get their wages settled.

The notice shows that the freight forwarding company has four subsidiaries, so it is conceivable that many workers are affected.

After seeing this notice, many cross-border workers were angry. According to the labor law, if a company goes bankrupt, it needs to give workers certain compensation, but from the notice, the freight forwarder is trying to circumvent it. That is, if employees resign before January 1 next year, they can get their wages settled, otherwise they can only get half of their November wages. This is obviously telling employees to choose between two options.

In addition to being angry, more people felt a chill, because this was the second closure announcement issued by the cross-border logistics circle this month.

On December 14, Shenzhen Yunchuang International Freight Forwarding Co., Ltd. issued an announcement that due to the huge impact of external conditions and internal capital turnover factors, after the company's shareholders have made various efforts, they are still unable to obtain financial support and reverse the company's predicament. As a last resort, the company's shareholders meeting decided to close the business on December 14, 2023.

In fact, long before these two freight forwarders announced their closure, some freight forwarders had already pressed the "stop button".

In September this year, a freight forwarding company in Shenzhen told its customers in a closure notice that the company would cease operations completely! The company would dispatch the goods that had been loaded in containers in a timely manner and take full responsibility for them, but it would no longer be responsible for the goods that had not been loaded in containers or were being delivered.

This year has been a challenging one for freight forwarding companies. Some companies have stopped moving forward, but some feel they can still hold on a little longer. Therefore, in addition to closing down, some companies have chosen to cut off some of their long-term loss-making businesses in order to survive.

For example, in August this year, Shaolong Supply Chain (Shenzhen) Co., Ltd., which has been in operation for ten years, announced in a notice that it would completely suspend the receipt of goods for international express export business channels at 2:00 p.m. on August 26.

In the same month, Yien.com received a similar tip-off. A seller said that she received a notice that more than 100 boxes of goods she had shipped through a freight forwarder in Guangzhou were detained more than a month after they were sent out. In subsequent communications, she learned that the company was planning to cut off this business.

Many of these freight forwarders that have ceased operations or are in trouble are established companies that have been in business for many years, but they still cannot withstand the market trend and end up in a miserable situation. In this process, the best outcome is for the freight forwarder to reach an agreement with the cargo owner (seller/freight forwarder peer) on compensation and then leave the market in a dignified manner without any disputes. However, nowadays, freight forwarders often either run away or transfer the losses to the cargo owner.

Shenzhen freight forwarder's capital chain broke, and the cargo owner was asked to pay to redeem the cargo

Shortly after the freight forwarder mentioned above announced that it would cease operations on January 1 next year, another freight forwarder in Shenzhen also issued an announcement. The content can be simply summarized into three points: "broken capital chain", "containers seized", and "shippers need to raise money to redeem goods".

In the announcement, Shenzhen Guansutong International Freight Forwarding Co., Ltd. stated that due to the huge impact of external conditions and internal capital turnover factors, it is necessary to negotiate with customers in advance to handle the advance payment of sea freight container fees.

The announcement showed that the company was preparing to solve the cabinet problem internally in the early stage, and had taken a series of measures such as loans and mortgages, but was rejected due to loan issues. In the end, the capital chain was broken, the goods were also piled up in the port, and a large amount of demurrage was incurred, and the customers' goods could not be signed for in time.

Recently, the company has been negotiating with customers to deal with this matter. However, affected by Mexico's policies, there are still 9 containers shipped by sea from July 26 to October 10 that have not arrived at the overseas warehouse. The customs clearance company now requires it to pay 1.68 million yuan in advance for non-arrival fees. If this money is not paid, the goods in the warehouse will also be affected.

Guansutong said that it has settled the warehouse fees, but due to the company's current financial difficulties, it is no longer able to advance funds. However, if the goods continue to be stranded in the port, it will continue to incur costs, so it has made a fund-raising plan. The funds raised will be used to solve the subsequent customs clearance and delivery operations and other costs.

Qichacha shows that Guansutong was established in August 2022, which means it collapsed just over a year after its establishment.

As soon as the announcement came out, many people immediately became upset.

Some people complained that 1.68 million yuan had to be raised through crowdfunding, and yet another person with no money came to start a company. Some people said that freight forwarding companies are becoming more and more shameless, they keep silent when they make money, but when something goes wrong, they just issue a simple announcement, and the losses are all paid by the customers, while they completely shirk their own responsibilities.

Some even pointed out that Guansutong's announcement copy was plagiarized from other freight forwarding companies. After comparison, Yien.com found that part of its announcement was indeed similar to the closure announcement issued by Yunchuang International.

The issue of millions of dollars in funding was thrown out with just one announcement, and even the announcement copy was written so perfunctorily that many people were angry and shouted, "I've seen it all."

In the past two years, paying money to redeem goods has become common in the cross-border circle. In April 2021, dozens of containers of Fengbang Logistics were detained, and the cargo owner paid for them at a price of 22 yuan/KG. In June 2022, Quanyi Supply Chain was unable to solve the problem on its own due to a broken capital chain, so it asked customers to raise 4 million yuan to withdraw the goods stranded at the port. Since then, it seems to have become a routine for cargo owners to pay money to redeem goods when freight forwarders have problems.

Similar incidents have occurred repeatedly this year. For example, in September this year, the Eurasian Express issued a notice announcing the suspension of cargo acceptance, and it was later revealed that nearly 100 containers were detained, and the cargo owners needed to raise tens of millions of yuan to fill the funding gap.

And the Kuaijie explosion incident that made a lot of noise in June this year. According to the news at that time, Kuaijie's capital chain was broken, and it owed 40 million yuan, which was no longer able to be solved. The owner of more than 100 containers was detained and needed to redeem the goods at 2,000 yuan per cubic meter.

It is unacceptable to let the cargo owner pay for the trouble. "We have already paid all the freight, why should we pay him?" said a cargo owner involved in such incidents.

Behind these explosive incidents, logistics companies are experiencing a roller coaster ride and a major reshuffle in the industry is taking place.

Competition intensifies, logistics professionals are struggling

Customs data show that in the first three quarters of this year, my country's cross-border e-commerce imports and exports totaled 1.7 trillion yuan, up 14.4%; of which exports totaled 1.3 trillion yuan, up 17.7%. In recent years, our country's cross-border e-commerce has maintained a rapid development momentum, growing nearly 10 times in five years.

Due to the rapid development of the cross-border e-commerce industry, the closely related cross-border logistics industry has also attracted a large number of entrepreneurs to enter. Qichacha searched for the keyword "international freight forwarding" and obtained 162,955 results for companies with a registration status of "existing", of which 51,904 were in Shenzhen alone.

The freight forwarding industry does not have many technical barriers and the entry threshold is relatively low. Therefore, with more and more competitors and services becoming more homogenized, in order to grab customers, the only options are to compete on price and payment terms.

As the internal competition intensifies, the phenomenon of receiving goods at low prices has become more and more common. In this process, some freight forwarders even sent out such news: "Free delivery to nine major FBA warehouses in the West Coast of the United States, no money and rebates." This "purely free" and "pure public welfare" behavior may just be a gimmick for freight forwarders to attract traffic, but it is undeniable that the competition among freight forwarders has become fierce.

Many freight forwarders are well aware of the risks of exchanging market share for low prices, but are still forced to move forward: "I don't want to lower prices, but if I don't, my customers will be snatched away. In order to retain customers, I have to do it even at a loss."

Another unavoidable problem is the payment period. The payment period is getting longer and longer, from the initial weekly settlement to the current quarterly settlement, and even half-yearly settlement. Because freight forwarders need to advance payments to upstream shipping companies and airlines, the financial pressure on freight forwarding companies is increasing.

Low prices and long payment terms may lead to impressive performance and sales in the short term, but they also pose numerous hidden dangers. Once a problem occurs in a certain link, the freight forwarder, who is under heavy financial pressure, will be left with no choice but to go bankrupt. As a result, freight forwarding companies have asked cargo owners to raise money to redeem the cargo, and some even run away directly.

Shortly after the Guansutong scandal broke, a freight forwarder revealed that he had sent a batch of empty cargo to a logistics company in Shenzhen. The cargo had been signed for in early December, but the other party had been dragging its feet on paying the freight. When they found their office, they discovered that it was empty.

Freight forwarders frequently go bankrupt, and some people are repeatedly scammed. A seller was angry recently that his same batch of goods went bankrupt for the second time, and he was scammed again and again. "Every year, there are logistics companies that run away with the money. After collecting the money, they escape, and then change their vests and return to the market. It's so abominable. Is there no one to punish them?"

Freight forwarding companies do not have heavy assets, and shareholders bear limited liability according to registered capital, so once a financial crisis occurs, cargo owners usually have nowhere to claim compensation and can only accept the loss or redeem the goods themselves. Therefore, it is important to take precautions.

So how can sellers or freight forwarders avoid this? International logistics lawyer Hu Shihao gave five suggestions:

1. Conduct background checks and assess the risk-bearing capacity of the freight forwarder to be entrusted. From a legal perspective, check its equity structure and registered capital.

2. Sign a written contract to clarify obligations and liability for loss compensation. With the high incidence of risks in the freight forwarding and logistics industry, the traditional transaction model without signing a contract has become increasingly insecure, and everyone should move towards formalization and written form;

3. Design contract clauses in a targeted manner, mainly including clauses requiring the actual controller of the company to provide a guarantee and clauses requiring the breaching party to bear the legal fees;

4. Clearly require that containers not be combined with sensitive goods to avoid being implicated in the same batch of goods and being seized by customs;

5. Adopt a multi-supplier model to share risks, increase the controllability of risks, and do not put all your eggs in one basket.

Major events in the cross-border e-commerce logistics circle in 2023

2023 is about to pass, and logistics people will soon usher in the new year. En.com has compiled some major events in the cross-border logistics circle this year.

1. Listing of Santai Shares

On September 28, Shenzhen Santai E-Commerce Co., Ltd. (hereinafter referred to as Santai Co., Ltd., 301558.SZ) officially landed on the Shenzhen Stock Exchange's Growth Enterprise Market. The stock opened at 20.20 yuan and closed at 18.95 yuan on the first day of listing, an increase of 158.53%, with a total market value of 14.949 billion yuan.

San Tai Co., Ltd. is a company with a dual identity, being both a seller and a logistics company. San Tai Co., Ltd.'s logistics and warehousing mainly include four businesses: international dedicated lines, international postal services, commercial express delivery and warehousing services, among which international dedicated lines are the main source of revenue and growth.

In the first half of this year, most sellers did not perform well, but San Tai Co., Ltd. achieved revenue of 847 million yuan, a year-on-year increase of 4%; net profit was 81.4831 million yuan, a year-on-year increase of 18.85%. The prospectus shows that this is mainly due to the increase in the company's cross-border e-commerce logistics business revenue from January to June 2023 compared with the same period last year.

2. AliExpress Cainiao launches “Global Five-Day Delivery”

On September 26, AliExpress and Cainiao officially announced the launch of the "Global 5-Day Delivery" international express product, with the first batch landing in five countries: the United Kingdom, Spain, the Netherlands, Belgium and South Korea.

At the press conference, Yi Yun, general manager of AliExpress's logistics supply chain, said that consumers in the above-mentioned countries can receive packages from China within 5 working days by placing an order for products with the "5-day delivery" logo on AliExpress's Choice channel.

Cainiao's sudden acceleration dealt a heavy blow to freight forwarding and logistics companies that were still haggling over prices and payment terms.

3. The Red Sea crisis broke out and freight rates rose

In December, the Yemeni Houthi armed forces launched a series of attacks on "Israeli-related" ships in the Red Sea on the grounds of "supporting Palestine". Several cargo ships were attacked in the Red Sea, the Bab el-Mandeb Strait and nearby waters.

Affected by this, many international shipping giants have suspended sailing in the Red Sea, including Maersk, MSC, CMA CGM, Hapag-Lloyd, ONE, Hyundai Merchant Marine, Wan Hai Lines, COSCO Shipping, OOCL, Yang Ming Marine Transport and Evergreen.

The Red Sea is the only way to pass through the Suez Canal. If this route is blocked, shipping companies can only go around the Cape of Good Hope. This directly pushes up shipping prices. It is reported that in the first half of December, the freight rate for the Far East to Israel route was only more than 1,000 US dollars/FEU, but it immediately rose to more than 6,000 US dollars/FEU in the second half of the month.

4. Panama Canal is restricted due to drought, and shipping companies pay a high price to "jump the queue"

The Panama Canal is an important global trade channel, which is related to about 5% of the world's trade volume. Now, the canal is experiencing a severe drought that is rare in 70 years.

April to November is the rainy season for the Panama Canal. However, during this year's rainy season, affected by the El Nino phenomenon, rainfall in the canal decreased by 41% year-on-year. This directly led to a reduction in the supply of fresh water required for the operation of the locks, and the Panama Canal Authority has repeatedly reduced the number of ships passing through the locks on a single day.

Last month, a Japanese energy company paid a huge "queue-jumping fee" of US$3.975 million for a liquefied petroleum gas tanker, winning the priority right of passage on the 15th. On the 25th, the Panama Canal Authority once again put the "queue-jumping right" up for public auction.

According to the rules set by the Canal Authority, any ship that arrived in Panama waters before the 17th and did not have a number can participate in the bidding, and the winning ship will be scheduled to transit on the 27th. In the end, a cargo ship won the bid at a price of $1.1 million, while its starting price was $55,000.

Due to the blockage of the Panama Canal, freight rates on the Atlantic route have risen significantly.