At a dinner party recently someone asked my friend Jim, “So Jim, what do you do for a living ?”
Jim said “Oh, I am a freight forwarder”
“A who……….!!” comes the reply..
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..
To 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 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..
As per the WTO, global trade in 2015 was worth USD.16/- trillion.. Out of this global trade, UNCTAD estimates containerised 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..