The goal here is to pull back the curtain and take a closer look at the different responsibilities of freight forwarders without getting lost in the details. Hopefully with a better understanding of a freight forwarder’s role, the shipping community can make educated decisions about how to make use of freight forwarders.
When I talk to importers about international shipping, I like to divide the process up into three parts: origin, international transportation, and destination. We’ll look at what freight forwarders do to assist in each of these three parts of the shipping process.
In order to ship a product internationally, the product has to first find its way out of the country. Unfortunately, this is often not as simple as loading the goods onto a plane. Here is a list of some of the possible tasks that need to be completed to get a shipment exported:
Export Customs clearance – In some countries, this process is easier than others. To export a product from the United States is relatively easy. A company needs to file an export declaration. Prior to doing so, the company should make sure whether the product requires an export license. By in large, the U.S. export declaration process is straightforward and simple with few hurdles. In most cases, the freight forwarder will assist with the actual export declaration. Exporting from China is a different story. An export license is required in most circumstances. Many shippers in China do not have their own export license. In such instances, we can help the shippers work with a 3rd party trading company to borrow their export license. In addition to the export license issue, the Chinese government routinely examines exports to make sure the export reporting is accurate. Freight forwarders also play an important role to make sure these examinations move forward smoothly.
Arranging to pick up the goods from the shipping location and taking the product to the port- For air freight shipments, the freight forwarder will arrange to pick up the shipment and deliver the goods to the airport warehouse. For FCL ocean shipments, we arrange for a trucker to pick up an empty container from the port, deliver the container to the shipper, in some cases assist with weighing the container, and then take the container back to the port for loading on a vessel. For LCL ocean shipments, the freight forwarder arranges a trucker to pick up the shipment and deliver the goods to a consolidation warehouse at the ocean port.
Warehouse loading of freight – For air shipments, many forwarders will work to load the product into ULDs (specialized pallets / containers used to store goods on a plane). For LCL ocean shipments, forwarders will work with a consolidation warehouse to pack the goods into a container.
Shipping documentation – The freight forwarder issues airway bills for air shipments and bills of lading for ocean shipments.
Freight forwarders have contract rates with various airlines. We will take into account faster and slower flight transit times, helping shippers get the best price based on their scheduling needs. For certain routings, freight forwarders will consolidate cargo to maximize the price savings for shippers.
For full container (FCL) cargo, freight forwarders sign contracts directly with steamship lines. This allows freight forwarders to negotiate better rates and in turn offer better pricing to shippers. Freight forwarders help shippers book their containers with a steamship line. When the vessel arrives, the freight forwarders will work with the steamship line to release the container to the customer.
For less than container (LCL) cargo, freight forwarders help consolidate cargo into a container for transportation to a designated destination port.
- For air shipments, the freight forwarder works with the airline warehouse to make sure all the goods have arrived and pay any airline warehouse fees.
- For ocean shipment, the freight forwarder helps pay for an assortment of port fees. In the case of LCL shipments, the freight forwarder has to also arrange with the CFS warehouse to unload and segregate the cargo.
Customs Clearance – Freight forwarders need to work with Customs Brokers to arrange the proper customs clearance of shipments. In some instances, the freight forwarder will be a customs broker as well and can take care of this service directly.
Delivery of goods from the port to the final destination. Freight forwarders will work to find the right truckers to arrange deliveries to the final destination. This is often more complicated than it sounds. For full containers, freight forwarders need to make sure the containers are actually available at the terminal before dispatching the deliveries. The freight forwarder has to then follow up to make sure the delivery is arranged within the scheduled time frame and hopefully not be subject to extra charges (ex. waiting time charges or container detention charges)
There are many other tasks that freight forwarders are asked to complete, some of which are unique to the respective country from which the goods ship from or to.
It is important for companies who are looking to select a freight forwarder to understand which portion of the shipping process they want to be responsible for. The reality is that freight forwarders can be flexible. The shipper and the buyer should negotiate early on which part of the shipping process they want to handle. We find it very common that buyers will want to be responsible for international freight charges as well as destination fees, but will want shippers to be responsible for origin fees. This is why the Incoterms are so important. The Incoterms were designed to assist shippers and buyers to determine their responsibilities in the shipping process. Once the Incoterms are agreed upon, the shipper and the buyer can then decide on what role they need their freight forwarder to play.