Is the distinction between NVOCCs and freight forwarders significant? This is a common question, therefore we decided to investigate it further in the following post. Read on to learn everything there is to know about NVOCCs, including their responsibilities, licensing, and how they differ from freight forwarders.
Topic in this article by Freightender are:
- NVOCC explained
- Freight forwarder explained
- What is the difference between NVOCC’s and Freight Forwarders
- NVOCC pricing vs Forwarder pricing
The term ‘Nvocc’ is defined as…
NVOCC is an acronym for Non-Vessel Owning Common Carrier. The sales, stuffing, and transit of containers to gateway ports are all part of the NVOCC process. The agents of NVOCC handle the bill of lading issue and overseas distribution.
What is the role of an NVOCC?
A NVOCC (non-vessel operating common carrier) is a company that organizes shipments for individuals or businesses to transport items from a manufacturer or producer to a market, client, or final point of distribution. An NVOCC enters into arrangements with shipping lines to ensure the shipment of a specific number of units each year. In exchange, the shipping line offers the NVOCC discounted prices. As a result, NVOCC becomes the largest trade maker for container shipments.
NVOCCs enter into contracts with shipping lines to ensure that a specified number of containers are shipped each year. In exchange, shipping lines offer NVOCCs preferential pricing.
Their primary responsibilities include sales, staffing, and container transportation to certain ports. Furthermore, NVOCCs have the ability to create their own Bill of Lading.
What is a freight forwarder?
A freight forwarder is a company that specializes in arranging cargo for shippers. Freight forwarders typically offer a wide range of supply chain services, including:
- Freight transportation by sea or air
- Inland transit from the point of origin to the point of destination
- Documentation preparation
- Services for warehousing and storage
- Consolidation and deconsolidation
- Customs compliance and cargo insurance
Most freight forwarders use their own bills of lading or waybills to ship their goods. The destination agents (overseas freight forwarders) then take responsibility. Document delivery, deconsolidation, and collection or delivery are all services provided by these agents. A freight forwarder, in layman’s terms, is a company that coordinates the import and export of cargo.
What is the difference between a Non-Vessel Operating Common Carrier (NVOCC) and a Freight Forwarder?
The majority of individuals are unaware of the distinction between NVOCCs and freight forwarders. We’ll concentrate on the three most crucial factors to help you comprehend the difference:
- NVOCCs issue their own bill of lading, which may or may not be based on any worldwide standard. Freight Forwarders issue their own bill of lading, which is often based on standardized documentation issued by the FIATA.
- NVOCCs act as a carrier to the shipper and as a shipper to the carriers (they act as an intermediary and do 100% of the work for shippers), whereas freight forwarders act more like agents to shippers.
Containers: This is perhaps the most significant distinction; freight forwarders do not own any equipment, but most NVOCCs own and run their own fleet of containers.
A typical NVOCC does not offer freight forwarding services, but the distinction between an NVOCC and a more traditional Freight Forwarder might be muddled at times.
Freight forwarder pricing
Because there are so many factors that go into shipping, calculating the cost of a freight forwarding service is difficult. Some freight forwarders will include some expenses in their first quote, while others will provide them as an optional add-on. In some situations, the freight forwarder may not provide a specific service at all, allowing you to make your own arrangements.
Before engaging the services of any freight forwarder, it’s critical to acquire a complete description of what’s included in an estimate. A professional forwarder would gladly provide you with a detailed itemization, allowing you to evaluate quotes based on actual value, rather than price.
Here’s a summary of the shipping costs that must be paid – whether they’re included in a given quote or not is something you should confirm with your selected forwarder.
Carrier fees
Whether you choose to ship your goods by air, sea, or road, you must pay for the mode of transportation. As a general rule, maritime freight is the least expensive, while air freight is the most costly. The cost is affected by the distance travelled, albeit this does not always imply that a longer distance equals a higher cost. Because of the laws of supply and demand, a freight forwarder may be able to negotiate reduced carrier charges on popular routes, but less popular routes with fewer carriers have less chance for bargaining.
Costs of Containers
You’ll either be charged for a full container load (FCL) or a less than container load (LCL) when shipping by sea (LCL). If you don’t have enough cargo to fill a container, choosing LCL may save you money. However, you’ll be sharing your container with other shipments, and there will be a cost associated with separating these shipments at the destination port.
Similarly, your items will be packaged into a Unit Load Device (ULD), which can be a pallet or a container, for air freight.
Cargo Classification
Some types of cargo are more expensive to ship than others, for example, perishable items, which require a special type of container, or dangerous goods, which require more cautious handling. Shipment of goods that do not fit in a conventional container or that require the use of a crane or other specialized equipment for loading and unloading will be more costly.
Cargo Volume and Weight
The size and weight of your shipment can have an impact on shipping costs. A shipment’s chargeable weight is determined by translating its volume to a weight equivalent. The actual weight or the computed volumetric weight, whichever is greater, becomes the charged weight. In essence, two shipments can be the same weight, but the one that takes up more space will cost more to transport.
Packaging and Palletization
Goods must be palletized and packed in a specified way when imported and exported, and any wood used must comply with international regulations. Some freight forwarders charge an extra fee for packaging services, so you can be confident your goods are in compliance with regulatory rules at the destination port. Returning items to the port of origin for repacking can be very expensive!
Surcharges Not Included
A fuel surcharge, also known as a Bunker Adjustment Factor, may be applied by the carrier to protect them from variations in fuel costs (BAF). A carrier may also charge a Currency Adjustment Factor (CAF) to protect themselves against currency fluctuations, as well as a war risk surcharge, a security surcharge, a peak season surcharge, or a demurrage penalty for late loading or unloading.
Insurance
While carriers are required by law to hold carrier liability insurance, it may only give a limited level of protection, leaving your goods unprotected. It’s a good idea to insure your package, which many freight forwarders offer as an add-on service. Inquire with your forwarder about if insurance is included in the quote or may be purchased separately. You’ll have to get cargo insurance directly from an insurer or broker if your forwarder doesn’t provide it.
Costs of Documentation
The relevant documentation, such as the Bill of Lading, invoicing, and import and export documents, is normally completed by a freight forwarder for you. In most cases, the upfront price will include an administrative fee for this service. Special paperwork-required items, such as dangerous or prohibited commodities, are likely to impose a surcharge.
Destination fees
In the shipping process, there are several destination fees, such as charges for handling (terminal handling charge) and clearing the products at the loading and discharge ports. An additional security premium may be imposed by a port. Unpacking (particularly the expense of separating LCL cargoes), warehousing fees, and the cost of inland haulage, if necessary, are all potential destination charges.
Administration
Using the services of a freight forwarder saves you time and effort in organizing, coordinating, and managing the various aspects of the shipping process. However, the forwarder does not provide this service for free, and an administration fee will be included in their offer.
Additional costs
Some freight forwarders provide additional services to handle the entire shipping procedure. John Good Logistics, for example, provides product procurement, packing and packaging, unpacking and sorting, warehousing, distribution, and end-customer delivery.
Tender response solution
RFQ management or Internal tender management is a unique solution for forwarders who are looking to streamline their quotation process for the tenders they receive from their customers. With our TRP solution, the process of manually working on excel files belongs to the past. Thanks to a rule-based engine, Freightender uploads and validates tender data in a quick fashion and distributes it directly to the right colleagues and partners who will quote the price. All quotes are centrally brought back together automatically so that the Tender Manager can review the different quotes before they are being sent to the customer. Business intelligence gives full insight and statistics on the tenders that are being managed.
Freight RFQ attack in Q1 2022
We speak to a lot of forwarders and shippers and the general picture is that a massive amount of RFQ’s will be launched in January and February 2022.
This will not be your regular port congestion but big-time congestion on the desk of the people that need to quote for your tender, the pricing managers and the tender managers. So therefore some free advice!
• start as fast and as early as possible with your tender
• ensure your data is good and clean
• don’t over invite carriers
• use a professional party, platform or provider to tender with
• don’t overcomplicate your tender
• give the carriers enough time to quote during the different rounds
• avoid giving lane updates during the tender
Forwarders will save about 15% more time quoting to tenders sourced via Freightender compared to other platforms. If they use our Tender Response Platform they will save over 40% of time. No other provider in procurement has made the bridge between the internal forwarder quoting process and the shipper procurement process. But Freightender has.
Collaboration platform for fowarders and shippers
Are you a logistics service provider and you want to take part in more freight tenders from automotive, building materials chemical industry, and fmcg industry companies? Join TendrX today and respond to tenders of our customers.
Or learn more on: https://tendrx.io/
