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What Is a Freight Forwarder?

For those individuals who need to ship large items and/or commodities internationally, the term “freight forwarder” may be something of a mystery, along with what a freight forwarder does. Below, we’ll define what a freight forwarder is and examine how a freight forwarder can help your business.

A. Services

A freight forwarder can help with a number of transport services, including:

1. Air Freight

Shipping items by airplane is known as air freight. It’s a common means of transport for many different types of cargo. When time is of the essence, or the cargo is of high value or perishable, air freight is a fast and effective way to move it over long distances. Shipping products internationally or to a place that would otherwise be unreachable often necessitates the use of air freight.

When shipping goods by air freight, the help of a freight forwarder is crucial. A freight forwarder can assist with:

  • Documentation and customs services
  • Carrier selection
  • Freight consolidation
  • Logistics coordination
  • Cargo tracking and insurance
  • Customs clearance
  • Expertise and advice

2. Ocean Freight

The term “ocean freight” is used to describe the shipment of cargo by ships. When it comes to international commerce, ocean freight is an especially cost-effective method for transporting large quantities of commodities (or generally any shipment that weighs more than 330 lbs/150 kg) over great distances, especially between continents. Ocean freight is particularly applicable when shipments are less time-sensitive.

When shipping goods across the ocean, a freight forwarder can play an important role. Specifically, a freight forwarder can help with:

  • Booking and carrier selection
  • Documentation and customs services
  • Freight consolidation
  • Logistics coordination
  • Cargo tracking and insurance
  • Customs clearance
  • Packaging and labeling
  • Expertise and advice

3. Rail Freight

Freight that’s carried by rail is known as rail freight. Long-distance domestic or international shipments, as well as those involving large quantities of commodities, are often best transported by rail freight.

The services of a competent freight forwarder can be useful in simplifying the process of transporting freight by rail. A freight forwarder can assist with the rail freight process by helping with:

  • Carrier selection
  • Documentation and customs services
  • Freight consolidation
  • Logistics coordination
  • Cargo tracking and insurance
  • Customs clearance
  • Packaging and labeling
  • Expertise and advice

4. Trucking

The transit of products or cargo by trucks across land is known as trucking transportation. As an easily accessible and versatile shipping option, trucking transportation is widely used for both local and international cargo.

Freight forwarders provide comprehensive logistics solutions, which usually integrate some form of trucking transportation, specifically including:

  • Carrier selection
  • Transportation planning
  • Load optimization
  • Documentation and customs services
  • Logistics coordination
  • Tracking and communications
  • Customs clearance
  • Expertise and advice

5. Warehousing and Distribution

Logistics and supply chain management rely heavily on warehouses and distributors. Goods are stored in a warehouse, and the process of distribution means getting them to their ultimate destinations as quickly and easily as possible.

A freight forwarder’s services can be useful in warehousing and distribution, since they can help with things like:

  • Warehousing facilities
  • Inventory management
  • Order fulfillment
  • Value-added services
  • Transportation coordination
  • Customs compliance
  • Order tracking and reporting
  • Reverse logistics

6. Customs Services

Importing and exporting products across international boundaries mandates a series of protocols and procedures known as customs services. These services include everything from completing paperwork to filing customs declarations to making tax and duty payments in accordance with local laws.

A freight forwarder’s customs services can be quite helpful. Specifically, a freight forwarder can assist with:

  • Documentation preparation
  • Customs declarations
  • Tariff classification
  • Customs compliance
  • Duty and tax assessment
  • Customs brokerage
  • Trade compliance and consulting
  • Regulatory updates

7. Insurance

Cargo insurance, also known as freight insurance, is a variety of insurance that protects the value of commodities in transit. It covers the cost of replacing products if they’re lost, damaged, or stolen during transport.

A freight forwarder can provide the following types of assistance with cargo insurance:

  • Insurance guidance
  • Insurance arrangements
  • Insurance claims assistance
  • Risk assessment
  • Insurance certificates
  • Coverage extensions
  • Knowledge of insurance requirements

8. Cargo Technology and Tracking

The terms technology and tracking refer to the use of electronic means to keep tabs on and coordinate cargo deliveries in transit. Real-time visibility, supply chain optimization, and effective logistics operations are made possible by technology, including tracking systems, communication platforms, and data management tools.

In terms of cargo and logistics technology and tracking, a freight forwarder can help with:

  • Tracking solutions
  • Supply chain visibility
  • Communication platforms
  • Data management and analytics
  • Integration with other systems
  • Exception management
  • Continuous improvement

B. Definitions

In order to fully understand freight forwarding, we should examine what freight forwarders are, especially compared to other shipping-related entities, such as freight brokers and non-vessel operating common carriers (NVOCCs).

1. Freight Forwarders vs. Freight Brokers

There are key distinctions between freight forwarders and freight brokers, despite the fact that both play an important role in making international shipping possible.

The phrase “freight forwarder” refers to a business or person that mediates shipments between senders and carriers, airlines, and shipping lines. Freight forwarders provide a variety of logistics and shipping management services. Specifically, freight forwarders are known for offering:

  • Multi-modal expertise
  • End-to-end services
  • Their own assets and infrastructure
  • Liability for cargo

By contrast, a freight broker functions as an intermediary between shippers and carriers. Freight brokers are also called transportation brokers or logistics brokers. They link up shippers with reliable carriers to get cargo where it needs to go. Freight brokers are similar to freight forwarders in that they facilitate the movement of goods, but freight brokers don’t take physical control of the cargo or provide any extra logistical services.

Freight brokers typically offer:

  • Carrier sourcing
  • Facilitation of transactions
  • Limited liability
  • A focus on matching capacity and demand

2. Freight Forwarders vs. NVOCCs

As opposed to a freight forwarder or a freight broker, an NVOCC is a third-party logistics provider that arranges for the consolidation of various shippers’ less-than-full-container loads (LCLs) into full container loads (FCLs). Containers are a standard steel shipping enclosure for large items that are sealed and measure 8 feet (2.43 meters) wide by 8.5 feet (2.59 meters) high by either 20 feet (6.06 meters) or 40 feet (12.2 meters) long.

NVOCCs typically provide:

  • Containerized ocean transportation
  • Bill of lading issuance
  • Their own consolidation and deconsolidation services
  • NVOCC bonds

C. Legal Requirements for Freight Forwarders in Different Countries

Around the world, freight forwarders have different legal responsibilities, depending on the countries in which they operate. Below is a brief outline of what some of those responsibilities are for the key nations of the United States, China, the UK, and Canada.

1. United States

In the United States, freight forwarders must comply with a wide range of regulations and laws. Freight forwarders are required to have:

  • Federal Maritime Commission (FMC) registration
  • Federal Motor Carrier Safety Administration (FMCSA) registration
  • Transportation Security Administration (TSA) approval
  • A customs broker license
  • Compliance with U.S. export control laws
  • Liability and cargo insurance

2. China

In China, freight forwarders must adhere to a number of rules and regulations. Chinese regulations mandate that freight forwarders have:

  • Business registration
  • A freight forwarding license
  • A customs broker license
  • Insurance
  • Compliance with Chinese laws and regulations
  • Compliance with quality and safety standards
  • Adequate documentation and record-keeping

3. UK

In order to do business in the UK, freight forwarders must comply with a number of rules and regulations. In the United Kingdom, freight forwarders need to have:

  • Business registration
  • Assumption of financial responsibility
  • Insurance
  • Compliance with UK laws and regulations
  • Customs clearance
  • Quality and safety standards
  • Documentation and record-keeping

4. Canada

There are rules and regulations that freight forwarders in Canada must follow. Canadian regulations for freight forwarders require that they have:

  • Business registration
  • Canada Border Services Agency (CBSA) registration
  • A freight forwarding license
  • Insurance
  • Compliance with Canadian laws and regulations
  • International Traffic in Arms Regulations (ITAR) and export-control compliance
  • Documentation and record-keeping

D. Why Should You Hire a Freight Forwarder?

Not everyone needs the services of a freight forwarder. Below, we’ll briefly touch on what some of the advantages and disadvantages are to using a freight forwarder.

1. The Advantages of Using a Freight Forwarder

Companies engaged in global commerce and transportation can benefit greatly from working with a freight forwarder. Using a freight forwarder will get you:

  • Expertise and knowledge
  • End-to-end logistics management
  • Access to a transportation network and relationships
  • Customized solutions
  • Documentation and compliance
  • Risk mitigation
  • Cost efficiency

2. The Disadvantages of Using a Freight Forwarder

The use of a freight forwarder has many benefits, but there are also certain drawbacks to consider. Some of the negatives of using a freight forwarder include:

  • Costs
  • Loss of control
  • Limited communication and responsiveness
  • Dependency on a third party
  • Limited flexibility
  • Contractual obligations

E. Freight-Related Documents

Freight forwarding has the potential to be confusing for people who are learning about it for the first time. Below are a few explanations of common terms in the world of freight forwarding.

1. Bill of Lading

When it comes to transporting goods internationally, a Bill of Lading (B/L) is an important piece of paperwork for both freight forwarders and shippers. It’s a combined contract, receipt, and proof of ownership document for the items being sent.

A Bill of Lading is relevant to freight forwarding as a:

  • Contractual document
  • Receipt of goods
  • Document of title
  • Proof of shipment
  • Document for customs clearance
  • Document for freight payment

2. Commercial Invoice

A Commercial Invoice is a crucial part of any international commerce transaction, including freight forwarding. It details the items that are being sent, together with their value and the conditions of sale.

A Commercial Invoice is relevant to freight forwarding as a:

  • Document of sale
  • Customs declaration
  • Determination of import duties and taxes
  • Document for customs clearance
  • Document for insurance coverage
  • Document for record-keeping and accounting

F. Helpful External Resources

If you want to learn more about long-distance freight forwarding and shipment, there are a number of resources on the web that can help you. These websites are recommended for further exploration:

1. https://www.globaltrainingcenter.com/international-logistics/

The Global Training Center offers informative webinars on international logistics that anyone can take.

2. https://internationalforwardingacademy.com/

The International Forwarding Academy gives online classes in freight forwarding, international trade, and logistics.