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What Does a Freight Forwarder Do & Do You Need One?

Importing and exporting are key components for many lucrative businesses. International shipping could present great business opportunities for you, but may also seem daunting. If you have not heard the term “freight forwarder” before, you may be a little confused. Is it a shipping company? A distribution manager? An importing and exporting partner? A commercial freight forwarder is none of these things — but it takes on some of the responsibilities of all of them. Here’s what you need to know about using an international freight forwarder for your business-to-business shipping. The process, paperwork, and regulations involved in international trade may seem intimidating. However, you can be a successful international shipper without getting caught up in the logistics of logistics. That’s what a freight forwarder is for.

This blog covers the basics of what a freight forwarder is, what a freight forwarder does, why you should use a freight forwarder, and even how to find a freight forwarder for those who are interested in international shipping, whether importing or exporting. Freight forwarders are an integral part of the supply chain and global maritime trade and although they are involved in all modes of transport (sea, road, rail, and air), here I am concentrating on the seaborne trade which accounts for over 90% of the world’s trade. However, many people are still unaware of Who is a Freight Forwarder and their role in the whole chain.. who is a freight forwarder explain, there is no one simple and quick explanation as to who is a freight forwarder and what they do. In the most succinct and layman terms, a Freight Forwarder is a multi-function agent/operator who undertakes to handle the movement of goods from point to point on behalf of the cargo owner. The essence of the best logistics company in Lahore 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 2015 was worth USD.16/- trillion. Out of this global trade, UNCTAD estimates containerized shipments accounted for about 1687 million tonnes (2015 estimate) carried in 177.6 million containers (2015 estimate), covering 998 billion ton miles (2016 estimate).. Staggering isn’t it..?? If you are an importer or exporter imagine having to go through the activities of arranging trade and 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 the shipping line 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

So, can just about anyone become a freight forwarder..?? Theoretically, the answer seems to be YES. 

I say this because there is no global regulation or licensing requirement for anyone wanting to become a freight forwarder compared to someone wanting to become a clearing agent or customs broker which incidentally is different from being a freight forwarder. As long as one is able to fulfill above duties and the client is satisfied with their credentials, anyone can term themselves a Freight Forwarder. A forwarder will however need to register with the Local city/revenue authorities, Tax authorities etc as per local regulations for the purposes of issuing an invoice and conducting a forwarding business legally. As per my knowledge USA with its OTI licensing and China with its Class A,B,C,D forwarder licensing, requires a freight forwarder to be licensed before commencing forwarding operations.. (If anyone knows of any other countries where you are required to be licensed to operate as a freight forwarder, please do share..) A forwarder may also need to be registered with local customs and port authorities in order for them to file their own manifest, release their delivery orders or issue their bills of lading. While the big boys in freight forwarding may have their own infrastructure and facilities to handle the functions of a freight forwarder, there are scores of freight forwarders who don’t have their own infrastructure and facilities and outsource most of their activities. They carry out all or most of the above-mentioned activities as a 3PL Logistics provider whose definition includes freight forwarders, courier companies, companies offering logistics and transportation services on a sub-contracted basis.. The term freight forwarder, however, is being used quite loosely nowadays and a lot of the companies/people entering the logistics field term themselves a freight forwarder for lack of better understanding of their operation and what to call themselves..

In their own interest and to ensure the prompt handling of their cargo, a customer (importer or exporter) must do their due diligence when appointing a freight forwarder and follow the necessary precautions and safeguards especially if they are importing for the first time or exporting for the first time. Also be aware that a freight forwarder is different from a clearing agent, an NVOCC, and a freight broker.

What does a freight forwarder actually do?

There is a lot that goes into arranging your international shipping. While the freight forwarder handles the details of your international shipping, it is important to know what a freight forwarder does not do in order to understand what a freight forwarder actually does. A freight forwarder does not actually move your freight itself. The freight forwarder acts as an intermediary between a shipper and various transportation services such as ocean shipping on cargo ships, trucking, expedited shipping by air freight, and moving goods by rail. A freight forwarding service utilizes established relationships with carriers, from air freighters and trucking companies, to rail freighters and ocean liners, in order to negotiate the best possible price to move shippers’ goods along the most economical route by working out various bids and choosing the one that best balances speed, cost, and reliability. Freight forwarders handle the considerable logistics of shipping goods from one international destination to another, a task that would otherwise be a formidable burden for their client.

Export.gov puts it this way:

To comply with export documentation and shipping requirements, many exporters utilize a freight forwarder to act as their shipping agent. The forwarder advises and assists clients on how to move goods most efficiently from one destination to another. A forwarder’s extensive knowledge of documentation requirements, regulations, transportation costs and banking practices can ease the exporting process for many companies.

Why should I use a freight forwarder?

A freight forwarder is not required for importing or exporting goods. However, because importing and exporting can involve so much documentation and so many regulations, and these regulations and the required documentation can vary from country to country, many of the most successful importers and exporters use a commercial freight forwarder to be their logistics partner. Knowing the shipping companies, the documentation, and the customs laws of various countries is their job. They know it all so you don’t have to. That means a good freight forwarding service can save you untold time and potential headaches while providing reliable transportation of products at competitive rates. A freight forwarder is an asset to almost any company dealing in international transportation of goods, and is especially helpful when in-house resources are not versed in international shipping procedures.

There are many advantages to using a freight forwarder. Here are a few listed:

  1. A Freight Forwarder handles ancillary services that are part of the international shipping business
  2. Insurance
  3. Customs Documentation
  4. etc…
  5. A Freight Forwarder provides to consolidators as well as individual shippers:
  6. Non-Vessel Operating Common Carrier documentation
  7. Bills of Lading
  8. Warehousing
  9. Risk Assessment and Management
  10. Methods of International Payment

A Freight Forwarder insists on personal communication and great customer service. Again, Export.gov puts it well:

Whether the firm is large or small, the weight of the cargo light or heavy, the freight forwarder will take care of cargo from “dock to door” if requested to do so. This can include the correct filing of export documentation, all arrangements with carriers, packing, crating and storage needs. So, the small and medium-size exporter need not deal with many of the details involved with the logistics of exporting their goods. In addition, freight forwarders typically charge modest rates for their services and have access to shipping discounts. Given the years of experience and constant attention to detail provided by the forwarder, it may be a good investment.

Courtesy: Best logistics company in Lahore

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