Question

1. What are some of the roles and functions of an international freight forwarder?
2. How does a NVOCC differ from a traditional vessel-operating ocean carrier?
3. Describe the organizational structure, and role of a shipping conference.

Answer 1

It would be much more better explaining how international transportation functions in today’s complex global economy, before jumping into the definition of freight forwarders.

In international trade goods are being transported from exporting companies to importing companies with different modes of transport such as sea, land, air and rail transportation.

If an international carriage can be completed with the utilization of only one mode of transport, this kind of carriage is called single mode transportation.

If an international carriage can be completed with the utilization of more than one mode of transport, this kind of carriage is called multimodal transportation.

Single Mode of Transport vs Multimodal Transport

Now we are approaching to the point where the benefits of freight forwarders more apparent.

Single mode of transportation can be completed by the carriers who own and operate the transportation means such as sea carriers who own the vessels and operate them under their commercial names.

Similarly land carriers own and operate truck fleets.

Single mode sea transportation can be completed by a sea carrier. Single mode land transportation can be completed by a land carrier. However, multimodal transportation is not easy to be completed by a single carrier’s abilities.

As an example let us assume that an exporter located in Wuhan, China has to transfer the goods to Zurich, Switzerland. First of all exporter need to carry the goods to Shanghai Port with a local transportation, later on the goods must be carried to Genoa Port, Italy with a container vessel and finally goods will be carried to importer’s warehouse in Zurich, Switzerland with land transportation.

On this example multimodal shipment must be effected and neither sea carrier nor the local land carriers could handle such an organization.

The main function of the freight forwarders arise at this point. They enter the carriage transaction on behalf of the exporters or importers and sign a carriage of contract for each leg of the journey with corresponding carriers. They will offer their clients a turnkey solution which is known as door-to-door shipments.

Freight forwarders generally issue a “Freight Forwarder Bill of Lading” or “Fiata Multimodal Bill of Lading”.

Main roles and functions of freight forwarders in international transportation:

• Freight forwarders can make shipments, which are covering more than one modes of transport under a single bill of lading.
• Freight forwarders can offer door-to-door shipments under their responsibilities.
• Freight forwarders can decrease transportation costs by offering more competitive freight quotes.
• Freight forwarders can increase the efficiency of carriers, exporter and importers by giving professional services during the transportation.
• Freight forwarders can load “Less Container Loads” of goods by consolidating them into “Full Container Loads”.
• Freight forwarders can offer storage, handling, packing or distribution services to their clients.
• Freight forwarders can offer custom breakage services to their clients.

The essence of freight forwarding is to ensure that the cargo is picked up from the seller and delivered to the buyer at the required place, at the right price and in the same condition that it is picked up from origin using the most suitable resources and routing possible..

As per the WTO, global trade in 2017 was worth USD.16/- trillion.. As per 2017 estimates by UNCTAD, out of the world seaborne trade of 10.7 billion tons, containerised shipments accounted for about 17.1% which is around 1830 million tons.. This was carried in around 148 million containers, covering 9535 billion ton miles.. Staggering isn’t it..??

If you are an importer, exporter or shipper (yes they are different) imagine having to go through the activities of arranging trade finance, documentation, negotiating freight contracts, monitoring the movement of the cargo, transportation, customs clearances, port inspections and all other activities by themselves for the above volume..

Daunting huh..!! That is where a Freight Forwarder comes in..

A well established and experienced freight forwarder is expected to have below capabilities (either owned or outsourced)

• experienced in all modes of transportation – road, rail, air and sea
• able to provide cost effective and efficient cargo shipping solutions based on the customer’s requirement
• able to arrange storage for the cargo (usually all big forwarders have their own warehouses)
• able to arrange the distribution or “forwarding” of the cargo as per the instructions of their client
• have the capability to negotiate freight rates with a carrier – either NVOCC or Ocean carrier
• able to book cargo with the shipping line as per the requirement of the client or under their own contract
• process all relevant shipping documents such as certificates of origin, customs and port documentation, bills of lading and associated shipping/negotiating documentation (Eur1, Certificate of Origin, etc)
• issue their own approved house bill of lading (HBL)
• arrange transportation of the cargo from/to the customers premises and port
• have thorough knowledge of over border cargo movement
• able to arrange customs clearance

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