Gill Nadel, Goldfarb Seligman, Israel
Last August, the Knesset’s Economics Committee approved new regulations, requiring international forwarders to provide full disclosure in their dealings with private consumers. The purpose of the regulations is to prevent disputes between the international forwarders and their clients caused by unexpected costs of forwarding. the regulations came into effect in recent January
The backdrop for these regulations is international forwarders providing potential clients with an offering price for forwarding a product to Israel which is ofttimes not final, and subject to change.
These changes are due to (among other costs) additional import costs, such as physical examination fees, taxes, storage fees (if the product is delayed at customs), porterage fees, port charges and more, which cannot always be accounted for in advance.
In the explanatory remarks of the regulations, it says:
“One of the problems that arose regarding forwarding companies is the consumer’s ambiguity as to which payments may be demanded of him by the forwarder. Due to the lack of transparency by the forwarding companies regarding their rates, and the cases in which they charge those rates, we suggest the following regulations.”
The regulations require international forwarding companies, forwarding goods from foreign manufacturers to private Israeli consumers, to publish the costs relevant to forwarding prior to the actual forwarding. This includes publicizing service fees and import duties, and clearly displaying upon the invoice additional governmental tolls, such as storage fees (if the product is delayed at customs), and any other costs that the consumer may be charged with due to a delay in customs.
The new regulations seek to apply disclosure obligations on all forwarding companies. Therefore, all such companies will be required to publish on their websites the complete list of their pricing components, including the monetary rate of each component and the circumstances in which the consumer would be charged for it. The regulations require the forwarding companies to detail each charge separately in the invoice, forbidding the undetailed listing of a lump sum.
Additionally, the committee decided that prior to executing the transaction, the forwarding companies are obligated to inform the customer of the total cost of forwarding a package to Israel, as well as advise them of the fact that additional costs may apply.
The wording of the regulation, as initially published, is as follows:
“A forwarder will inform the consumer of all pricing components, their monetary rate and circumstances of application. All of the above will appear on the forwarder’s website.”
“The price” is defined in the regulations as follows:
“The price”- the total sum charged by the forwarder to the consumer for services rendered, as well as additional costs, including service fees, import duty, government tolls, storage fees in case the product is delayed at customs, and any other costs that the consumer may be charged with due to a delay in customs.”
A “forwarder” is defined as follows:
“A practitioner whose partial or entire practice consists of forwarding goods from outside of the territory of the State of Israel to within it.”
In the explanatory remarks of the regulations, it is written that:
“It should be noted that at the time of the transaction the consumer does not know whether some fees will apply, such as storage fees in case the product is delayed at customs, or service fees to the forwarder due to the delay. The purpose of the regulation is to inform the consumer of all payment components he will be charged with, or may be charged with, due to delays in customs.”
It is also mentioned in the explanatory notes of the regulations that these regulations were put into effect as part of a broader effort to ease personal import, set into motion in accordance with the recommendations of the Import Competition and Ease of Restrictions Committee, adopted by government resolution 1564.
The wording of the regulations regarding the forwarder’s disclosure obligation to the consumer was debated in the Knesset’s Economics Committee, and was subsequently amended, requiring the forwarder to provide the consumer with:
“The price of the forwarding goods service. Which taxes and fees apply to goods thus forwarded.Storage fees and any other costs the consumer may be charged with due to a delay in customs.Where a detailed list of the aforementioned taxes and fees can be found.”
Comments:
According to clause 4 of the Consumer Protection Law, 1981, a supplier is obligated to inform the consumer of all essential details of a transaction, including the nature of the service provided. Thus, it is our opinion that the transparency obligation existed prior to the establishment of the new regulations, in one form or another. It could well be that the regulations simply specify which details are deemed essential, in order to prevent a dispute on the matter.
Attention should be paid to the fact that the regulations do not relate to transactions between international forwarders and commercial importers, and strictly deal with relations between international forwarders and consumers. The regulations apply only to a consumer as defined by the Consumer Protection Law: “One who purchases property or receives a service from a supplier for a principally personal, domestic or familial use”.
It should be noted that disputes may arise between international forwarders and commercial importers regarding the price offering and which components were or were not included, but the current regulations do not apply to these cases. It is probable the legislators assumed that a commercial importer is not a weak party requiring the defense of the law.
The wording of the law limits these regulations to transactions between an Israeli consumer and an Israeli forwarder. Therefore, other transactions, such as ordering items online from foreign websites which forward the merchandise to Israel themselves (i.e. Ebay, Amazon), are excluded from these regulations.
The definition of “forwarder” as spelled out in the regulations is a bit broad in our opinion, and may include other freighting entities, such as shipping companies, customs agents and more.