Shoe Shippers Criticize Reclassification that Allow Rate Increases Up to 50%
This story appears in the March 15 print edition of Transport Topics.
Shippers of shoes are protesting price increases of up to 50% for less-than-truckload shipments after an industry standards body changed the classification of 2 billion pairs of shoes, allowing carriers to raise rates.
“In a recession, that kind of increase can have a huge impact on the price of shoes,” said Nate Herman, senior director of international trade for the American Apparel and Footwear Association, which wants the old rate basis restored. “It couldn’t have come at a worse time. Any price increase during this kind of market is just plain bad.”
Herman said his group’s members had cited rate increases of up to 50% for shipping, which may be as much as 20% of the retail price for shoes.
The LTL increases were triggered by the National Motor Freight Traffic Association’s decision to raise its classification of shoes.
More than 800 LTL carriers and brokers use NMFTA to assign freight to one of 18 groups, or classes, based on a shipment’s density, dimensions, liability and stowability. The carriers then set their own prices.
The NMFTA defended its decision to raise the classification, which occurred in January, by saying its survey found that footwear now belongs in a higher classification based on 6.28 pounds per cubic foot.
The footwear group claimed it wasn’t aware of the earlier proceeding until it was too late to submit its own data, and it maintains that its own survey, based on 47 million pairs of shoes, found a density of about 8 pounds per cubic foot. A higher density justifies a lower rate class under the NMFTA’s criteria.
The freight classification group postponed action of the shoe shippers’ request at a meeting last month and will take up the issue again in June.
“For the smaller footwear firms, the increase affects all their shipments,” Herman said. “Larger firms that have contracts aren’t affected as much.”
He said members have reported rate increases ranging from 10% to 50%, based on the classification change with the highest increase shown on Freightquote.com, an Internet LTL shipping site.
Tim Barton, chief executive officer of Freightquote, said his company’s Web site doesn’t actually raise rates, but rather serves as a place where carriers offer their own prices.
Herman estimated that on average the total cost of shoe shipping can be as much as 20% of the retail price, including both the international container shipments and the domestic LTL move to retailers.
Americans bought 2.2 billion pair of shoes in 2008, according to the trade group. That makes footwear a $100 billion industry if the average price of shoes is $45.
Joel Ringer, chairman of the NMFTA committee that assigns classifications, told TT that “all classification changes that are made can have a significant impact if you are affected by them.”
“Product characteristics change all the time,” he said, citing products such as coffee and tea that now are sold in pods that weren’t used before. In the case of those beverages, NMFTA assigned classifications to those new products at its February meeting.
It did the same for other popular products such as snack foods, which now are sold in new shapes that didn’t match any classification.
