Canadian $ close to par

loaders

Site Supporter
#1
With our dollar surging ever closer to par with the US dollar, those of us that do a portion of our billings in US $ are faced with a dilema. My question is, does anyone have or use a currency surcharge, or some other mechanism that increases/decreases the US $ amount billed as the Canadian dollar rises or sinks vs it's US counterpart? I am familiar with dollar futures and hedge contracts, but is there something a little simplier that can be shown on the invoice? I have found that US shippers have a great deal of difficulty understanding that there are other currencies in use around the world besides the "greenback". From what I have been reading, it would appear that the Canadian dollar will achieve par and then some, in the very near future, just as it did in 2008. Just curious as to what others may be doing to protect themselves in this climate.
 

lowmiler88

Site Supporter
#2
At one point we had a good portion of our business in US dollars but about 5 years ago we decided to change as many to Canadian dollars as possible. It took a lot of work but if you talk to the right people in the companies you deal with you can make it work. The problem with our US dollar companies now is you can't even discuss raising rates with them because they will tender the business. I believe it will be that way for another six months, that being said you do need to protect your acceptable margin and maybe a price increase is the only way to go hopefully the company respects the work you do for them and will entertain the possibility.
 

theman

Well-Known Member
#3
Funny that this comes up today ...

I actually bill a lot in US funds ... the last time this happened a few years ago I introduced currency surcharges ... arranged some weekly adjustments and others where they were on other systems did a quarterly thing. I thought of doing it again last fall when the currency started crashing again but there was no way ... too slack out there.

Obviously, if it gets to the point where there is no money in it anymore ... there is no choice, we have to try to get rate adjustments. Some of my customers are telling me supply is getting tight and if they are looking for a solution, then I introduce the rate increase. Have done one in the past few days, we'll see how it goes but my feeling is it will be widespread.

I'm not trying it on outbound yet though. Just on inbound where there is a sense that we may be in for a market correction.
 

Pablo

Site Supporter
#4
Currency surcharge is the way to go

Currency surcharge is the way to go. We implemented this about 5 years ago. Sure it was hard at first to get in place. They will fight about it, say you should get forward contracts etc., but the simple fact of the matter is, the US currency is worth less and your customers have to get used to paying more. And BTW if they are selling to a Canadian company in Canadian Dollars, they just got a huge price increase, so they should be sharing that with you who's moving the freight.

Basically, we published a table and we adjust it every week. We initially gave customers the option of billing in CAN dollars or going with the table.

Once it was implemented it just fluctuates every week and no one even questions it now. BTW we started 5 years ago so the currency surcharge is like 30%!
 
#5
Agreed Currency Fluctuation surcharge is the way to go. This is a tool that the Ocean Freight Forwarding industry has used for years and now adopted domestically by many carriers/brokers facings a similar crisis.
If required, please send private post with contcat info and I will forward copy of SC formula and chart accordingly.
 
#6
Question on surcharges...

Question about a dollar surcharge...

If you people implement a surcharge now, don't you think that the Americans will remember that and when (not if) their dollar gets strong, will they impose an "Under-charge" (is that a word?) Remember when you were making 50 cents on the dollar last year?

I think you are playing with fire with this and we will all get burnt in the end if you go ahead with this...

Let the market look after the markets and price your equipment where you need to be to make the points you want. Quit screwing around with surcharges...

My humble opinion only...
 

loaders

Site Supporter
#7
Manitoba Moose, you're right about pricing when it comes to spot market quoting on a load by load basis. The reason for my post, was the problem we have when "locking-in" rates for a set period of time, or for the duration of a contract. Like yourself, I agree it would be easier to get rid of all types of surcharges and price transportation based on the actual costs as they are today. Unfortunately, none of us can see into the future and predict where the exchange rate will be 3, 6, 12 months from now. This presents a problem when you quote a rate that will hold firm.
 
#8
What about a carrier telling a shipper what they can do for them?
What about a "Prices subject to change" clause?
What about carriers quit being a bunch of lost sheeps and following the shippers every dumb request?
An example of this is last year, we recieved a RFQ from Agco in Hesston, KS. In that RFQ, it states that we MUST GUARANTEE THE LOWEST PRICE we can offer for 2 YEARS. Needless to say we did not quote and would never quote for 2 years, especially in this really tough economy.
Of course, someone out there will give them what they want but, what if everyone started saying "No thank you. I can't make any money at that and will have to pass"?
I will apologize to anyone and everyone for poor service, deficiencies, screw ups, etc. But I will never apologize for making a profit. Without a profit, we can't provide service levels for you, our customer...
Again, just my humble opinion...
 

theman

Well-Known Member
#9
I agree that the surcharge is NOT the way to go. The market should set the rates -- realistically shippers know that but hey, they're going to try ... just like when it's on our side, we're going to try to get extra out as well.
 
#10
The customer billing/receivable is one side of the issue and if a carrier can negotiate an exchange adjustment on the billing to avoid exchange losses.....then good for him/her. But the (US) customers may not "buy" into this and the carrier may risk losing the customer or eating the exchange loss (what's worse?).
The other side to look at is the cost aspect....can some of these be related to the billing currency? For example, can the carrier mitigate some of the exchange exposure by paying the drivers or owner/operators in the currency the load is billed in? How about the fuel purchases? No, there's no simple answer, but all aspects should be looked at......not just the billing side.
 

PackRat

Site Supporter
#11
Just to add to this thread, an example of interest is the big common carriers (ABF, CCX, YRC) they have been billing the Canadian customers in US funds and then converting at the BOC rate since the beginning of time. The last time the CDN dollare exceeded the US they kept the process the same and for the first time in a long time CDN billed customers saw a reduction in their US billed invoices. The lesson demonstrated (I believe) is that if you have a formula in place you can't change it just because you don't like the swing of the pendulum. Customers know they have been paying more (potentially) when the US $ was stronger so it is the carrier's turn to be fair about the exchange. As well, implementing a new formula with existing customers has the same potential response...."you didn't seem to mind when the CDN $ was low...."
my cent and a half....(exchange....)LOL
 

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