Freight Forwarder and Clearing Agent

freight forwarder and clearing agent - shipping and freight resourceThere are several entities involved in the successful transportation of a shipment.. However big or small a shipment is, two entities stand out due to the importance of their roles in a shipment..

These entities are a Freight Forwarder and a Clearing Agent..

It is very important to understand the functions of a freight forwarder and a clearing agent and their role in a shipment as this is often confused..

While in a lot of cases, a freight forwarder and clearing agent may be the same entity, there are many cases where they are different as well and in this post we explore the similarities and difference between a freight forwarder and clearing agent..

 


Who is a Freight Forwarder..??

In the most succinct and layman terms, 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 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..

If you think why you need a freight forwarder, as per the WTO, global trade in 2017 was worth USD.17.2/- trillion and with forecasted volume growth of 4.4% in 2018 and 4.0% in 2019..

As per UNCTAD, in 2017 global trade carried was around 10.7 billion tons with containerised shipments accounting for 1.8 billion tonnes carried in 148 million TEUs, covering 9117 billion ton-miles.. 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 yourselves for the above volume..

Especially if you don’t know about the intricacies of the industry or you a beginner to importing.. 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) although they are not an NVOCC
  • arrange transportation of the cargo from/to the customers’ premises and port
  • have a thorough knowledge of over border cargo movement
  • MAY or MAY NOT also do Customs Clearance
  • may or may not be accredited to customs, port etc and cannot do customs clearance if not accredited
  • acts as a carrier in cases where they issue house bill of lading

Below are the Top 10 Ocean Freight Forwarders for 2018 as listed by Transport Topics

Rank Company Headquarters TEUs Handled
1 Kuehne + Nagel Inc. Switzerland 4,355,000
2 DHL Supply Chain Germany 3,259,000
3 Sinotrans Ltd. China 2,950,800
4 DB Schenker USA Germany 2,126,800
5 Panalpina Inc. Switzerland 1,520,500
6 DSV Air & Sea Ltd. Copenhagen, Denmark 1,389,611
7 Expeditors International of Washington United States 1,070,424
8 Kerry Logistics Network Hong Kong 1,053,485
9 Hellmann Worldwide Logistics Germany 897,379
10 Bollore Logistics France 856,000

 

Who is a Clearing Agent..??

freight forwarder and clearing agent - shipping and freight resourceEvery country has its own set of regulatory requirements relating to customs but one common requirement is that the clearing agent or customs broker (as they are referred to in a few countries) have to be accredited with the local customs authorities, border agencies, port and other authorities relevant to the shipment of goods..

They should have a valid clearing licence at the time of clearing the goods on behalf of the customer.. A few countries have very strict licencing requirements which are regularly reviewed and the agents that don’t follow these, may have their licences revoked..

A clearing agent is essentially an agent who specifically takes care of the customs clearance aspect of the business..

In many countries, clearing agents write examinations.. Only after the passing of this exam, they can transact as a clearing agent in that country..

USA and India are some of the examples where customs licence examinations are held..

Some countries like Australia however, seem to have stopped the customs examinations, preferring “acquired experience” over customs licence examinations for the purpose of licencing customs brokers..

Apart from the obvious function of lodging documentation with customs, a clearing agent has many other equally important responsibilities which affect them directly and also their clients..

A clearing agent

  • is a company accredited with the local customs authorities, border agencies, port etc
  • arranges to pass the relevant documents at customs
  • has in-depth knowledge of the HS Codes, the calculation of Duty and VAT
  • organises payment on the duty and VAT applicable
  • assists customers with duty drawback etc
  • does not negotiate freight rates with carriers on their own or on behalf of the client
  • does not issue own bills of lading in their capacity as a clearing agent
  • may be appointed by a freight forwarder or by the customer (exporter or importer)

When compared to a freight forwarder, a clearing agent is more specific to the country where they are based, as they deal directly and extensively with the local customs authorities and are au fait with the local requirements..

freight forwarder and clearing agent - shipping and freight resourceFreight Forwarders have more of a global presence since they may be present in a lot of countries compared to Clearing agents or Customs Brokers who tend to be more localised..

If you look at the above freight forwarders list, you may realise that all these freight forwarders have their own customs clearance department/divisions which means under normal circumstances and shipments, they would not use 3rd party customs clearing agents..

However, there might be cases where their role is only to handle the freight forwarding for the shipment whereas the customer appoints a different entity to handle customs clearance..

It all really depends on the contract of sales and the terms of shipment between the buyer and seller..

While a freight forwarder may be able to generate more revenue than a clearing agent, the big advantage that a clearing agent has over a freight forwarder is that their services will be required by the shipper and consignee FOR EVERY SHIPMENT, whereas the shipper or consignee might not use the services of a freight forwarder for every shipment..

So a customer necessarily needs the services of a clearing agent..

But, having said that, a lot of importers and exporters also have their customs clearing departments in-house which means they do not require the services of a 3rd party clearing agent..

 

One of the common goals/functions of these two entities is to advise their customers on the requirements to ensure a smooth shipment and arrange the same on behalf of the BCO.. So while two entities may have some overlapping activities, both are essential cogs in the wheels of global trade..

While writing this article I thought it would be interesting to find out how many of my readers are Freight Forwarder only, Clearing Agent only, Both or Neither..

So oblige me and take this quick poll..

Sorry, there are no polls available at the moment.

 

 

This article has been republished after updating a few changes to the original post in 2009

*** End of Article ***

60 thoughts on “Freight Forwarder and Clearing Agent”

  1. Hello my name is princ..i did the course of International Trade and transport and also the Supply chain Management and Logistic,i do have knowledge on the Freight forwading process and custom clareance (framework)using the software coofreight as a communication tools,am looking for an internship in a Freight Forwader company to specify myself and also further my knowledge…i am really in need, i would like to be trained specially as a clearing agent…it a need..i am creaving for the knowlledge

    Reply
  2. I’ve been your silent reader for quite some time and now I’m delighted to say that I’m inspired by your articles. You have shared very valuable information and knowledge that people should recognise. Thank you for sharing. I would love to see more updates from you.

    Reply
  3. Wow, this article was quite clear and very helpful to a novice like me, Thanks Hariesh ! So for a prospective business of say 300 TEUs a year, what would you recommend , go with the big guys and have them use their own c & f agents or go with medium sized Freight Forwarders and hire your own c & f agent ?

    Reply
  4. Yes, good article. The one thing you didn’t talk about was insurance. If you want to see the colour drain from the faces of forwarders, the word general average. That’ll curdle the.milk on your Weetbix in the morning. It’s when there is,a breakdown on board a vessel, repair costs , to wage costs and warfare costs are split among the consignments on board. Then the owner or consigned must pay this,amount or.lose the goods. Hence insurance is a safe option.

    Reply
  5. Yes Hariesh, quite different. However, Customs Brokers are required to pass an exam and become licenced to practice. An annual fee is also required of the Customs Broker to maintain the licence.

    Reply
  6. I am a Clearing Agent in Guyana, i the business for 3 years. In Guyana we do not require a licence or have to sit exams to operate.

    Reply
    • GIT is an abbreviation that stands for Goods In Transit
      Every carrier or transporter is obliged to secure the goods being transported especially through two or more nations in case of any risks leading to partial or total loss of goods being moved.
      That security is provided by an insurance company in form of a bond/fare value relating to cost of goods being moved.
      The higher the penal sum the more the volumes a carrier/transporter can move within a stipulated time

  7. very interesting topic indeed.and so helpful.

    i am a clearing agent from Namibia,have been for 4 years now. however i have experienced that many customers when they ship their consignment, they do not know that there is a freight forwarder somewhere in the middle. the customers comes directly to the clearing agent with the documents not knowing even if the shipment has left its origin. and this makes them really frustrated and gets angry at clearing agents only and causes certain delays as well. i advise shipping agents to advise the customers on the process that has to be taken before the consignment reaches their destination. not necessarily the arrival date but the steps to take in order for them to have.

    thanks for all the information and articles you keep sending. they are amazingly helpful.

    Reply
  8. Hello,
    I am new in the industry and having “PGD in Logistics and Supply Chain”.
    But working as “export marketing” in a company for last six months.

    Now I am confused that which field is better in which field should I go further?
    If anybody can give me guidance it will be helpful for me.
    Please don’t give me diplomatic answers.

    Reply
  9. Thanks guys. Am learning alot from the comments I have read here.
    I have somewhat related question. After paying fob+cif on an import, can a clearing agent still charge shipping freight on their invoice as a separate charge.
    Hope someone will assist
    Regards

    Reply
  10. Really interesting information. Thanks for sharing. It provides an easy explanation of difference between freight forwarder and clearing agent. Clearing agent has to deal with all legal documents of his client whereas a freight forwarder is responsible for storing and forwarding the cargoes securely.

    Reply
  11. Am a lecturer in one of the colleges, i normally deliver about clearing and forwarding, am very much happy to be on this site, hope we will discuss a lot about clearing and forwarding and even shipping management, maritime management and procurement etc.

    Reply
  12. Hi all,
    I’m new in the freight forwarding industry and I don’t have a lot experience in the custom clearance , maybe you could help me.
    Usually in an import procedure before the vessel arrive , I do the custom clearance base on the only copies of commercial invoice and paking list sent to me by email by the overseas agent without having had on my hand the original commercial invoice and packing list yet , because usually the importer send to me all commercial docs by mail two or one day before the vessel arrive.

    What could it happen if I have made the custom clearance but after that I haven’t received any original commercial invoice and packing from the importer but only the original hbl for release the cargo ?
    Is it always necessary save the original commercial invoice and packing list or it could be enough having an attached copies sent by email?

    Reply
    • Hello Giovanni, each country has different rules relating to what documents you have to present to customs and whether those should be original or copies.. If you are able to do clearances based on the copies, then there is no real need for the commercial invoice or packing list originals.. The copies serve the same purpose.. Trust this answers your question..

  13. Freight forwarder this very good on the exporter for risk mitigation or minimizing and on cleaning agents are very needed for every country if not there’s no need for some documents in export so the disappeared of that document may cause the problem of life like supplying of harmful product to the clients and other which destroy our environment
    Thank you

    Reply
  14. hey guys,

    i am new to import export and shipping. could you lay mans terms explain how i can bring goods from india to UAE and also reexport the same without any hassles to other countries as and when required. Are there companies who pic up the goods from the manufacture and send it directly to us after taking care of all the formalities from country of origin to country of destination. thanks a lot for the information

    Reply
  15. Hi! my name is Emmanuel kabera; i think the relationship depend on exsting on that freight clearing and forwerder roles essentially all of this two sides secures the business of various exporters and importers .

    Reply
  16. Thanks so much for this informative article. I am planning to venture into this kind of business since I am getting lots of potential customers from my blogs which deal with used cars from japan. There is no doubt in my mind that this site is going to be my port of call anytime I need to learn something. Thank you and keep on the good work.

    Reply
    • My friend cleaning is likes to manage or to control the export and import documents but forwarding is all about to your responsibility to other one
      Thank you

  17. Many freight forwarders nowadays also do customs clearing, which – in this case – adds up their advantages over other freight forwarders who don’t provide the clearing service. It’s very likely that the shipping will go faster and cheaper with the freight forwarders which offers clearing service.

    If you are looking for a freight provider, give us a quote request at X2 Elite Global Logistics Network

    We are X2 Elite, a global logistics network whose members are the professional freight forwarders representing major ports around the world.

    Reply
  18. Hi Mfana, that possibly could be true, but also bear in mind that there are more clearing agents who need warehousing facilities which the forwarders have.. So i think the co-existence will possibly continue for quite some time..

    Reply

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