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Freight Forwarder Services 101

Freight forwarder services are companies that make it easier for you to sell and ship raw materials and finished goods overseas.

They may own their own ships, trucks, and aircraft or they may contract with other international shipping companies (like DHL, Fedex, shipping companies, etc) and provide warehouse space for storing goods before they are shipped.

Another key benefit is that they understand both U.S. export regulations and the importing rules of foreign countries, and handle all the paperwork to comply with both.

Within the US, the two main regulatory bodies that oversee freight forwarders are the International Air Transport Association to handle air cargo and the Federal Maritime Commission for sea cargo.

Freight forwarders can specialize in a number of different specialties, for example:

  • Oversized or irregularly shaped cargo requiring a flatbed, wide load, or other specialty equipment
  • Rush or overnight shipping
  • Domestic trucking
  • Refrigerated and highly perishable cargo such as fresh seafood
  • Medical materials
  • Hazardous / dangerous cargo
  • Industrial machinery such as oil drilling equipment
  • Shipment to and from a specific geography such as Alaska.

How to Select a Freight Forwarder

Location, Location, Location: It’s critical to pick strategically located freight forwarder services because fewer total miles traveled (both your goods getting to the forwarder and then on to their final destination) is the most important factor for keeping costs down. For example, if your forwarder will be only moving merchandise within the lower 48 states, for example, then go with a provider based in a central state. If your forwarder will be primarily exporting goods by sea, then look for forwarders co-located with a major seaport. Use this directory of freight forwarders in the US to help you narrow candidates by state.

Customer Service & Business Processes: Consider how your company will interface with the freight forwarder. Do you need to speak to a live human being to arrange your shipments, or will dealing through a web portal / online apps suffice? In my view, if you’re dealing with high value shipments it’s critical to be be able get someone on the phone (someone who is empowered to help – not a powerless customer service rep) if there is an issue with the shipment in transit, clearing customs, etc. While many companies boast about the customer service, the proof is often in the pudding and it may be worth testing out 2-3 companies to see how they perform in the real world before committing.

Specialty: If you are shipping fresh caught Alaskan salmon to a Manhattan restaurant, then it’s critical your service have a rush, refrigerated cargo facility. If you’re shipping natural gas fracking equipment from Houston to Pennsylvania, you are going to need a specialized service that can handle oversized cargo. If you are an e-commerce store owner looking to ship products overseas, you are going to want a service with an API that can sync to your shopping cart to track orders automatically.

Price: A critical factor, but one that should be examined only after the last three. Of course, everyone wants to get their shipping costs down as much as possible, but choosing a shipper on the basis of only what you pay, and not the value you receive is a recipe for disaster. If you chose a bottom-of-the-barrel provider who skimps on service, how many hours of your time will you need to waste chasing down a rep on the phone? And so on. So it’s critical to understand the value you need to get first, before looking at price to have the best chance at getting your overall shipping costs down.

Key Terms

If you’re involved in the import-export business you will no doubt encounter the jargon. Here are a few of the most important terms and a brief explanation of each:

Air Waybill: An air carrier-issued receipt for goods being transported and documents the contract of carriage. Unlike a bill of lading, an air waybill is non-negotiable, meaning it does not represent a title or value of the underlying merchandise. A typical air waybill is composed 11 digits in three parts: A 3-digit airline code; a 7-digit serial number of the bill; and a final check digit that is the remainder of dividing the serial number by 7.

Automated Export System (AES): A computerized system that the US government requires exporters to declare their international shipments. The data required is called EEI (Electronic Export Information) and is used by the Census Bureau and other federal agencies who oversee import-export. Typically a freight forwarder will handle the necessary AES filings for clients, but be sure to ask your company what its policies are. With a few exceptions, export shipments with a value of greater than $2,500 are required to be registered in the AES.

Bill of Lading: A document generated by the carrier that provides details of a shipment’s contents, its origin and destination, along with title to the goods. Also abbreviated as a B/L or BoL, the Bill of Lading is a key document in international trade because it can be used to transfer the title to the recipient after the goods have been delivered.

Commercial Invoice: Trade document that serves as a customs declaration by the exporter. The commercial invoice typically includes the buyer, seller, list of goods, Harmonized System Codes for the goods, and signature.

Drayage: Movement of cargo over very short distances, typically from a ship to a warehouse or between nearby terminals.

Harmonized System Codes: An internationally- agreed list of codes covering all types of goods. The codes are used to simplify tariff collection by various countries around the world by creating a standard system. Items may be classified by either form or function. The U.S. Harmonized Tariff Schedule can be found here: http://hts.usitc.gov.

Hot Shot Trucking: A term describing expecided, point-to-point trucking service used for urgent loads. Read our Hot Shot Trucking Guide here.

Freight Factoring: A financial service that allows logistics providers to get paid upfront for their accounts receivable in exchange for a small fee. Read our Complete Freight Factoring Guide Here. 

NVOCC: This stands for Non Vessel-Owning Common Carrier, a commonly used term for a freight forwarder, meaning a company that processes freight but does so on common carriers.

Port-Centric Logistics: A supply chain concept where, instead of transferring these containers to their final destination by intermodal transport, they are unloaded and palletized at the port or delivered directly from port. In some cases, this practice can defer customs fees and reduce 3rd party storage costs, particularly when there are many port options available and/or an industrial cluster near the port.

Reefer: Slang for refrigerated, or the ability to carry refrigerated cargo using specialized intermodal shipping containers. Read our Reefer Trucking Guide.

Shipper’s Export Declaration: A form in which the exporter declares to the US Census Bureau key information about a shipment, including ultimate consignee (and any intermediary consignees), Harmonized System Codes, destination, etc. An example of a Declaration is here. These forms have now been replaced by the Automated Export System / AESDirect.

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