Freight Forwarders and NVOCC – What Is The Difference?
Often confused with being the same, freight forwarders and NVOCC are two different terms used in the maritime world globally. Both freight forwarders and NVOCC are recognized as Ocean Transportation Intermediariesby the Federal Maritime Commission (FMC*). As a result people sometimes confuse the two. But what exactly is the difference between freight forwarders and the NVOCC? In this article, we explain how freight forwarders and NVOCC are different and their role in international transportation.
The FMC has coined the abbreviation NVOCC. It stands for Non-Vessel Operating Common Carrier. It is a carrier company that provides ocean freight services, though it may or may not own any vessels.
NVOCC is very cost-effective for small business owners or individuals who require to import or export goods but cannot afford to hire containers or ships for the purpose.
Organizing shipping for corporations and individuals, NVOCC buys space from vessel-operating common carriers and sub sells it to exporters, small shippers, or freight forwarders.
The work of NVOCC involves loading up the cargo from the customer’s place and taking it to the gateway ports. In all cases, It also looks after the final delivery of goods to the consignee at the destination.
NVOCC offers better rates and reduces the burden on smaller organizations for importing or exporting their goods across the globe. It makes the whole process of shipping goods through containers a simplified task by doing the necessary documentation on their own and the customers face no trouble going through the complex documentation procedure.
Although the NVOCC does not own transport containers, they make the whole process of transporting goods easier for the customers and ensures no loss to the client at any step of shipping the cargo and delivering it to the desired location. The NVOCC saves the client from getting involved in typical tasks like delivering goods to a container yard, proper packing and stuffing of goods, safe passage during a journey, proper deconsolidation at the destination, and clearing the goods through customs and other checks.
NVOCC also provides online track and trace service to their clients for locating their goods while in transit and gives valuable information about the sailing time that gives a great advantage to business owners for planning accordingly.
NVOCC operators must obtain an FMC license and have to apply for tariffs before starting to operate in the United States. The NVOCC’s functions are similar to carriers. Functions include issuing bills of lading and publishing tariffs. However, it does not include intermodal transportation. In the industry, the NVOCC is called the carrier to shippers and shipper to carriers.
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The various functions of the NVOCC –
Transporting goods from producers to end consumers with shippers as carriers.
Receiving and delivering cargos in the form of carriers.
Issuing own-house bills of lading along with other required transportation documents.
Booking space and mainline carrier shipping.
Managing payments and other charges between ports.
Consolidation and deconsolidation of containers through CFS (Container Freight Station*) or using third-party services.
Freight forwarder
A freight forwarder is a company (or person) that carries out the planning and execution of transporting logistics internationally for the shipper.
The agent or company that functions as a freight forwarder has to perform a number of tasks on behalf of the shipper, such as negotiations, container tracking, customs documentation and freight consolidation.
The responsibilities of the freight forwarder-
#1 – Shipment Tracking
The primary responsibility of the freight forwarder is to the collection of the cargo that needs to be shipped. They must also monitor the progress of the cargo at every stage.
#2 – Customs Brokerage
The forwarder must own a legal license, issued by the designated authority, in order to process the required shipping documents, including customs and port documentation, bills of lading and other associated shipping documentation.
#3 – Warehousing
Forwarders are responsible for providing a storage facility from the very beginning when the cargo is picked up at the port of loading, the port of discharge and until the cargo reaches the desired location.
Most of the larger forwarders have their own warehouses. Others may arrange the storage facility using third-party outsourcing.
#4 – Negotiations
This task requires experience. The forwarder must negotiate with the cargo carriers to make the transportation more cost-efficient.
Also, the forwarder has the responsibility to perform a lot of other tasks that are essential in the shipping process –
- Offering expert consultancy service to customers and informing them about the usage of the correct incoterms, letters of credit, licenses, permits and other general information relevant to the safe transportation of the cargo.
- Arranging inland haulage of the cargo,. This is one of the most important tasks performed by the forwarders from/to the customers’ location and port as necessary.
- Forwarders should also have extensive knowledge of cross-border cargo movement to work out the complexities of international trade.
Having a license is a prerequisite to carry out the complicated import/export activity by a forwarder A few other skills are also necessary –
- Every country has a different set of policies and protocols that need to be followed throughout the process. A good forwarder should be fully aware of these.
- They must have quick decision-making power to deliver the cargo on time.
NVOCC
The FMC has coined the abbreviation NVOCC. It stands for Non-Vessel Operating Common Carrier. It is a carrier company that provides ocean freight services, though it may or may not own any vessels.
Organizing shipping for corporations and individuals, NVOCC buys space from vessel-operating common carriers and sub sells it to exporters, small shippers or freight forwarders.
NVOCC operators must obtain an FMC license and have to apply for tariffs before starting to operate in the United States.
The NVOCC’s functions are similar to carriers. Functions include issuing bills of lading and publishing tariffs. However, it does not include intermodal transportation. In the industry, the NVOCC is called the carrier to shippers and shipper to carriers.
The various functions of the NVOCC –
- Transporting goods from producers to end consumers with shippers as carriers.
- Receiving and delivering cargos in the form of carriers.
- Issuing own-house bills of lading along with other required transportation documents.
- Booking space and mainline carrier shipping.
- Managing payments and other charges between ports.
- Consolidation and deconsolidation of containers through CFS (Container Freight Station*) or using third-party services.
The differences between freight forwarders and NVOCC
- Recognized forwarders belong to the international association FIATA (International federation of freight forwarders). NVOCCs does not have any such association.
- Freight forwarders issues their own bill of lading and other required documents based on the guidelines of FIATA. The NVOCC issues a bill of lading which does not require any defined global standards .
- Forwarders do not own and operate containers and use shipping lines. Some larger NVOCCs have their own fleet of containers.
These are the key differences between freight forwarders and NVOCC operators.
Summary
The maritime industry has taken global economic development to new heights. According to some published figures, around 80 per cent of international trade by volume and over 70 per cent of global trade by value is carried by sea and managed by ports worldwide.
There is much debate as to who offers the best and most cost-efficient ocean freight services, freight forwarders, or NVOCCs.
The pros and cons of each should be examined before a decision is made.
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