How To Choose a Freight Forwarder For Your Import/Export Business

How To Choose a Freight Forwarder For Your Import/Export Business

When it comes to international trade and business, selecting the right freight forwarder is like choosing the right supplier, vendor or accountant; you are choosing a partner that will help your business succeed. Your freight forwarder should be a trusted partner for your logistics needs, that is, if they are doing their job right. In this article, I’m showing How to Choose a Freight Forwarder For Your Import-Export Business.

In this fast-changing world which is highly reliant on supply chain optimization, cost efficiency, timeliness, and consistent service, shippers, importer, exporters and others involved in the supply chain must make a determination on which freight forwarder to select for their international and domestic logistic needs.

What you will learn in this article:

  • BASIC SHIPPING NOTIONS/TERMINOLOGY/ABBREVIATIONS 
  • BASIC FREIGHT FORWARDING TERMS
  • QUESTIONS YOU MUST ASK YOURSELF BEFORE CONTACTING AN INTERNATIONAL FREIGHT FORWARDER
  • 10 CRUCIAL QUESTIONS TO ASK YOUR FREIGHT FORWARDER
  • REPUTABLE FREIGHT FORWARDERS

BASIC NOTIONS / TERMINOLOGY / ABBREVIATIONS TO MAKE YOUR SHIPPING LIFE EASIER

Many people think that shipping containers is as simple as moving an object from point A to B.

Within the shipping industry, most people know that this is most definitely not true. Behind the scenes in the shipping industry, which literally has changed global economies (imagine the E.U. and Thailand without container trading,) there are so many variables, alternatives, and opportunities, all contributing to the increasing complexity of the world of shipping.

One of the biggest challenges for anyone entering the shipping industry for the first time is to have access to all of the industry’s basic and specific notions. This information opens the doors to a better understanding of what shippers are talking about.

Correct terminology and abbreviations also play a fundamental role within this complex industry. Speaking the same “shipping” language can help avoid misunderstandings, which most of the time lead to errors and negatively affects service performance and revenue.

VERY BASIC SHIPPING TERMS:

  • FCL: Full container load
  • LCL: Less than container load

CONTAINERS: TYPES, AND ASSOCIATED TERMINOLOGY

  • Standard Container/Dry Van/High Cube: STD/DV/HC
    • Most common sizes 20 feet and 40 feet (20DV/STD – 40DV/STD – 40HC)
    • 40HC is 1 foot taller than STD 40’ container
    • We also have 45HC – 5 feet longer than a regular 40HC
  • Flat Rack: FR (Used for cargo Over weight/height/width)
  • Open Top: OT
    • Used for cargo over weight/height
    • Associated with this we might hear also “In Gauge” – “Out Gauge.”
    • In Gauge means the dimensions of the special cargo are smaller than or equal to those of the container
    • Out Gauge dimensions are bigger and exceed container dimensions
  • Platform: for cargo Over weight/height/width/length
  • Reefer Containers: 20RF/40RF/40HR same dimension as regular containers
  • Tank Containers: 20TK

HERE’S THE MEASUREMENT SYSTEM ASSOCIATED WITH CONTAINERS, WHICH IS ALSO USED TO SIZE VESSELS:

  • TEU: Twenty Equivalent Unit. One 20’ is equal 1 TEU (1 slot)
  • FEU: Forty Equivalent Unit. One 40’ is equal 2 TEU or 1 FEU (2 slots)

BELOW IS A QUICK RECAP OF THE WEIGHT AND DIMENSIONS OF STANDARD CONTAINERS:

SAILING SCHEDULE-RELATED TERMINOLOGY:

  • POL: Port of Loading
  • POD: Port of Discharge
  • Port Pairs: combination of ports at origin and destination
  • ETA: Estimated time of Arrival
  • ETD: Estimated time of Departure
  • ATA: Actual time of Arrival
  • ATD: Actual time of Departure
  • MLB: Mini land bridge
  • Rotation: Order in which the ships call the various ports
  • Transit Time: time from port A to port B
  • Direct Service: when a container leaves and arrives on the same ship
  • Transshipment Service: when a container leaves on a ship and arrives on a different ship

INTERMODAL TERMINOLOGY:

  • Pre-carriage: transportation between point of origin and POL
  • On-carriage: transportation between POD and final inland destination
  • Live load: pick up the empty container at the port/depot, go to the customer facility and wait without leaving, for the container to be loaded and then returned to the port/depot to drop the full container
  • Live unload: pick up the full container at the port/depot, go to the customer facility and wait without leaving, for the container to be unloaded and then return to the port/depot to drop the empty container
  • Drop & pick: the only difference with the live load/unload move is that the container is dropped at the customer facility and the trucker comes back after a certain amount of time to pick it up (2 trips)
  • Drop & hook: same for drop and pick but the trucker instead of leaving without container on the first trip, picks up another empty/full at the same facility to be returned at the port/depot
  • Chassis split: when the container is not located in the same place as the chassis and the trucker needs to bring the chassis to the container location. For example: If an ocean port doesn’t have any chassis available or the trucker doesn’t own chassis, the trucker may travel to a nearby chassis pool first, pick up the chassis, and then proceed to the port from there.
  • Pre-Pull: A pre-pull is when the trucker pulls an FCL container from the port/depot and stores it at the trucker’s yard instead of immediately delivering it.
  • Stripping: is the unloading of various small consignments from a single container, usually done at off site / forwarder’s facility

DOCUMENTATION TERMINOLOGY:

  • Owner: whoever owns the goods
  • Shipper: whoever ships the goods (can be either “proprietary shipper” or NVOCC)
  • Consignee: whoever receives the goods
  • Notify: whoever is to be notified when cargo arrives
  • Beneficial Cargo Owner: BCO (Shippers with direct contract with Carriers)
  • NVOCC: Non-Vessel Operator Common Carriers.
  • Freight Forwarder: Intermediary between Shipper and Carrier
  • Broker: Intermediary at destination (usually notify) to clear Customs
  • Master Bill of Lading: BL

TYPES OF PAYMENTS:

  • Prepaid: Charges paid at POL
  • Collect: Charges paid at POD
  • Elsewhere: Charges paid in a country which is not the at POL neither the POD

TYPE OF CHARGES (THE MOST COMMON):

Commercial Charges:

  • Ocean Freight: OF (the money due for the carriage of goods)
  • Bunker: BUC (cost for the fuel used by the vessel during the voyage)
  • Arbitrary: Charge to cover the cost of a feeder vessel to get the container to the main port

Seasonal Charges:

  • Peak Season Surcharge: PSS
  • Winter Surcharge: For example, it is applicable during winter season to ports in Russia
  • Congestion Surcharge: to cover the cost of exceptional congestion at POL and/or POD

Operational Charges:

  • Wharfage: WHA (A charge assessed by a pier or dock owner for freight handled over the pier or dock or for a steamship company using the pier or dock)
  • ISPS: International Ship and Port Facility Security Charge
  • THC: Terminal Handling Charge
  • Roll Over Fee: if the container gets rolled on the next vessel due to Shipper’s error

Equipment Charges:

  • Per Diem
  • Storage
  • Detention
  • Demurrage

The purpose of this section is to provide some fundamental information, useful when you first enter the world of the shipping industry, but much more could be mentioned.

Before going into more details on additional insights into freight forwarding and how to select a freight forwarder, let’s go over some industry terms:

FMC – FEDERAL MARITIME COMMISSION

FMC – Federal Maritime Commission (FMC) is in charge of governing vessel operators and non-vessel operators such as NVOCC’s and Freight Forwarders.

FREIGHT FORWARDER

Freight Forwarder – Freight forwarder, forwarder, or forwarding agent is a person or company that organizes shipments for individuals or corporations  to get goods from the  manufacturer  or producer to a market, customer or final point of distribution.

OTI – OCEAN TRANSPORTATION INTERMEDIARY

OTI – Ocean Transportation Intermediary (OTI) is licensed by the FMC to be an ocean freight forwarder, a non-vessel operating common carrier (NVOCC), or an ocean freight forwarder and NVOCC.

NVOCC – NON VESSEL OPERATING COMMON CARRIER

NVOCC – Non Vessel Operating Common Carrier (NVOCC) is a consolidator or freight forwarder who does not own any vessel, but functions as a ‘carrier’ by issuing its own bills of lading or air waybills and assuming responsibility for the shipments. Similar to a Freight Forwarder but typically they have better ocean freight rates and can issue bills of lading.

IAC – INDIRECT AIR CARRIER

IAC – Indirect Air Carrier (IAC) refers to any person or entity within the United States not in possession of an FAA air carrier operating certificate, that ships cargo belonging to any other person or entity. An IAC undertakes to engage indirectly in air transportation of property and uses for all or any part of such transportation the services of a passenger air carrier.

Each Indirect Air Carrier must adopt and carry out a security program that meets TSA requirements. An IAC is essentially a freight forwarder that also handles air cargo.

IATA / CNS

IATA / CNS – International Air Transport Association (IATA) / Cargo Network Services (CNS), IATA is the airline industry’s trade association that also sets guidelines for air cargo. CNS is the US arm of IATA that regulates US IAC’s

QUESTIONS YOU MUST ASK YOURSELF BEFORE CONTACTING AN INTERNATIONAL FREIGHT FORWARDER

To start with, the size of your company shouldn’t determine the size of your freight forwarder (size of of your freight forwarder is defined as a combination of volume shipped, revenues and # of employees). Many large companies use small freight forwarders and many small companies use large freight forwarders.

Therefore there are many other questions that must be answered and other criteria analyzed to conclude which freight forwarder is right for you and your company.

Let’s look the questions you must ask yourself before contacting an internatioanl freight forwarder;

  1. What are my Incoterms with my supplier or my buyer? At what point does my responsibility and liability of the cargo begin or end?
  2. What mode of service do I need? Do I need port to port, port to door, door to port, or door to door services?
  3. What is the origin address of the cargo, what is the final destination?
  4. What is the size/weight/dimensions/value of my cargo? What is the value?
  5. Is my shipment considered oversized or out of gauge?
  6. Depending on the mode of transport: what size ocean container, what volume of air cargo, or size domestic cargo will I be shipping?
  7. How is my cargo packaged? Do I need additional packing/loading services?
  8. Is my cargo considered hazardous? If so, do I have the MSDS, which is required by my freight forwarder?
  9. Is there any sort of import or export license required for the import or export of my cargo depending on the commodity and ultimate destination of the cargo? If so, do I know how to apply for that license?
  10. Will I need any special services such as: documentary services such as document attestation or legalization services, drop and pull of a container (container left overnight at supplier), customs clearance and duties paid, CBP/FDA/USDA exam processing, in-bond entry, commodity classification (HTS codes), fish & wildlife license, prior notice, annual bond for imports, consolidation of cargo, deconsolidation or any other type of additional service?
  11. If cargo will go to a fulfillment center such as Amazon.com, will I need additional repacking services, labeling, pick and pack or other service required to deliver to Amazon.com fulfillment centers? 
  12. Will I ship my cargo in an ocean container, RORO vessel, breakbulk vessel, airplane, truck, barge, rail or other mode of transport? Will I need intermodal services that provide a combination of these services?

10 CRUCIAL QUESTIONS TO ASK YOUR FREIGHT FORWARDER

The freight forwarding industry is constantly growing, with plenty of new companies competing for business alongside established. If you’re looking to use a freight forwarder to organise your shipments, you may be wondering how to choose which freight forwarder is right for you, especially with so many companies to choose from!

To help make it easier, here are ten questions you should ask potential freight forwarders to ensure you have all the information you need to make the right decision.

1 – Why should I entrust my shipping to you?

Sometimes, the simplest questions get the most revealing answers. Asking an open question like this invites the potential freight forwarders on your list to sell the best features of their service. And as they’re the experts in the freight forwarding field, these could be features that you hadn’t considered, that can aid and even add value to your business.

It will also allow you to get a feel for how good the customer service is – for example, how knowledgeable are the agents and are they happy to spend time answering your questions? A friendly rapport can go a long way towards good working relationships, so test the waters before you commit to any partnership.

2 – Do you offer the kind of shipping that I need?

If you know what kind of shipping you require, then it makes sense to confirm that it’s a service offered by the freight forwarder and this isn’t as simple as finding a freight forwarder that provides shipping by sea.

For example, you may not require the standard FCL (Full Container Load) shipping and instead want to ship smaller cargo on a LCL (Less Container Load) basis. Or maybe you require RORO (Roll-on Roll-off) shipping for wheeled cargo?

Perhaps you need to ship specialist cargo such as perishables that have to be temperature controlled, or dangerous goods that are subject to increased shipping regulations? Checking that your freight forwarder has the right facilities and expertise will save you from wasting time or settling for a second-best service.

3 – What relevant experience do you have?

Anyone can set up as a freight forwarder, so asking about experience is essential. A freight forwarder with many years in the business will have previously encountered pretty much any issue you can think of and will be able to avoid or minimise its effects.

On the other hand, a brand new freight forwarding business may still be learning as they go. You’ll also want to ask specifically about the type of cargo that you want to ship. A freight forwarder with ten years experience in a niche area may be a better fit for you than one with 20 years more general experience. 

4 – Do you hold any accreditations?

As formal qualifications and certifications are not required to set up a freight forwarding business, looking for a forwarder with accreditations can really help you to sort the best from the rest.

5 – Will my shipments be insured?

The question of insurance is one that’s often over-looked until further down the line, but it’s vital that your goods are protected as they make their journey across the globe. Knowing who is responsible for your goods if something goes wrong while they’re being shipped is essential and looking at marine policies should always be the recommendation.

6 – Will you complete all the required paperwork?

The paperwork that goes with importing and exporting can be complicated and confusing, so a freight forwarder that will handle some or all of this on your behalf will save you time, stress, hassle and potential mistakes.

7 – Do you offer port-centric logistics?

Port-centric logistics are becoming increasingly popular as a way to streamline the shipping process and potentially save money and freight miles. If you’re interested in an at-port storage and distribution service, then you’ll want to choose a freight forwarder that offers this at your preferred port of arrival. If you’re going to be shipping by air, ask about similar services close to the relevant airport.

8 – How extensive is your network?

The best freight forwarders have a well-established and extensive network, ensuring smooth movement of cargo worldwide, and also indicating good relationships with partners. If you know where you want to move goods to or from, it’s worth asking about the strength of a forwarder’s contacts in that particular area. 

9 – Can I track my shipments?

Nowadays, most people expect to be able to track their goods in real-time. Whether you’re importing goods for your own business use, or stock that will be delivered to an end-customer, knowing where your cargo is, and when you can expect it to arrive, is very useful. Not only will it help you to plan your own business schedule, but it’s also information that you can use to provide a better service to your customers. 

10 – What is included in the quote?

When choosing a freight forwarder, it’s better to think in terms of value rather than cost. Not all freight forwarders offer the same service package, so ensure that you know exactly what’s included in the price you’re quoted. Equally, you don’t want to be paying for a service that you don’t need.

Checking what’s included and what services are available at an add-on cost will enable you to build a freight forwarding package to suit your business requirements and budget perfectly. A freight forwarder that’s focused on offering the best service to its customers will have no problems answering your questions honestly and helping you to do exactly that.

Reputable Freight Forwarders

One of the best ways to ensure that your freight forwarder is experienced, good at their job, and offers fair prices is that they have a good reputation among their other clients, and also serve many clients.

Armstrong and Associates is a third party logistics company that ranks the top freight forwarders in the world each year by gross revenue, TEUs shipped on the oceans, and metric tons shipped by air.

According to A&A, DHL Supply Chain and Global Forwarding were tied for being the top freight forwarders in the world in 2017, with $27,598,000,000 USD in gross revenue after shipping 3,259,000 TEUs over the oceans, and 2,248,000 metric tons via the air.

DHL was tied with Kuehne + Nagel, who did $22,574,000,000 USD in gross revenue with 4,355,000 TEUs shipped by sea and 1,570,000 metric tons by air. While you don’t necessarily need the best freight forwarder in the world in order to get the job done, the size of the forwarder should definitely be a concern.

You should also be thinking about how your product will be shipped – by air or sea – because most companies are more prolific at one than the other. For instance, Sinotrans Limited ships 3,360,300 TEUs by sea compared with just 533,300 metric tons by air.

If you would like to check top 25 freight forwarders list, you can look at this link.

CONCLUSION:

Congratulations! You have officially learned the issues of how to choose a freight forwarder for your import-export business. Now start booming and make the world your business!

Also, if you would like to learn more about international trade, here is a link to our international trade for beginners guide. You can also watch videos on my YouTube channel.

Now I would like to hear your thoughts:

What’s your first takeaway lesson from this article?

Or maybe you have a question about the topic.

Either way, leave a comment below right now.

Leave a Reply