The Functions of a Freight Forwarder

Forwarders can act as your agent or representative, and can provide many valuable services, starting when you receive your first order and need help in making your quotation, to preparing the documents necessary for collecting the payment for your export sale. To be of maximum assistance, the forwarder should receive a copy of the letter of credit, if one is involved, together with your shipper’s letter of instruction (SLI) ( – index page – 27-1).

The forwarder can perform these services, listed more or less in the chronological course of the export transaction:

• Advise the various means of transportation and routes.
• Do research for the most favorable rates. Today, this can often be facilitated through computer software programs.
• Advise the shipper, both from direct experience and by use of sometimes costly reference works, of special conditions in the country of destination concerning port and airport facilities, regulations for clearing goods through foreign customs, and other arcane facts that can save a great many future headaches.
• Advise and assist in obtaining whatever export license are required.
• Arrange for inland freight and warehousing if necessary.
• Receive and consolidate the merchandise for shipment and make delivery to the appropriate carrier.
• Arrange for special crating and packing.
• Make the booking on a carrier for the desired flight or voyage, and reserve the required containers.
• Supervise the on-loading of the shipment.
• Arrange for receipt of a clean bill of lading or air waybill according to the terms and conditions of the SLI, the order itself, and/or the letter of credit.
• Prepare the shipper’s export declaration for the Bureau of the Census statistical needs and for customs clearance of your export license and shipment.
• Obtain the necessary consular invoices, certifications, legalizations, and the many other special documents that might be required.
• Arrange for the appropriate transit insurance, possibly under the forwarder’s own master policy if the shipper does not have one.
• Prepare the documentation for presentation to the bank for collection against documents or under a letter of credit.
• Deliver all documents to the shipper’s office at any point in the shipping process that the exporter wishes to assume control and responsibility for documentation.
• Follow up on the fate of the shipment at the foreign destination or at any of the transfer points in between.• File any transportation claims that arise with the airlines or the steamship lines. This is an area in which a forwarder can be of particular help.
• Send telexes or FAX communications, and provide messenger service during the course of the entire export shipping and collection.

Most forwarders are capable of performing all of these duties, but because they involve so much detail and so many exceptions, few can perform perfectly in all roles on all occasions without error and direction. Any shipper is advised to keep track of the export transaction, and many shippers are better equipped to handle certain portions of the shipping process themselves.

Forwarding charges are in addition to what the forwarder receives in commission from the carriers, or in the case of air shipments, included as profit margin in the freight rate quoted or received as a consolidator’s discount. This keeps airfreight forwarding fees to a very modest level if the shipment is of reasonable value. Naturally, many of the items on the list are out-of-pocket costs or direct overhead and will be charged for separately, such as documentation, messengers, and telexes. In the case of air shipments, forwarders will often share with their best customers, part of the substantial special discount they receive, even if not functioning as a consolidator, if they are very active on a particular route.
Between deregulation and the fact that airfreight today is a seller’s market, your shipments must be considered in the light of at least two factors. First, of course, is the rate, then reliability that the freight will move on schedule rather than being bumped for a higher priority shipper or shipment. While the forwarder’s combined volume is of great help in obtaining priority, even this does not provide definite assurance.

Except for larger shipments, usually more than 2,200 pounds, you must rely on the forwarder to have good consolidation facilities for your primary routes, and to give you a fair quote based on the forwarder’s consolidation rate or the forwarder’s negotiated rate, if consolidation is not involved. Keep in mind, it is the forwarder’s margin over the consolidation rate or negotiated rate that is the airfreight division’s primary source of profit. Once you have located a suitable airfreight forwarder, it is best to work closely with the staff and let them handle your easy shipments, as well as those requiring hard work. It is the overall relationship of costs, service, and rates that must be considered in the case of your airfreight forwarder. On the other hand, you might need more than one forwarder to get favorable rate structures to all your destinations. The forwarder’s speed in handling documents, and the special necessity for such speed in the case of airfreight, is another consideration you must keep in mind as a shipper.

Surface shipments are a somewhat different matter. Marine rates can be studied more on a case-by-case basis because the forwarder has less at stake in terms of rate structure. Ocean freight forwarders do not upcharge on ocean rates. They provide a rated bill of lading to assure you the rate you were charged is the same as the ocean carrier billed. Again, deregulation has changed the rules, such as diminished control by steamship line conferences, and directly negotiated rates. NVOCCs have also changed the ocean shipping competition picture.The ocean forwarder receives a much smaller commission from the steamship line, and therefore must rely much more on freight forwarding fees and handling charges. Many forwarders have their own NVOCC operation, as well as being independent NVOCCs through whom you can ship directly, or through your own forwarder. Bargains on ocean rates are much more difficult to find with today’s upsurge in export activities, and there never was much discounting done. Also, there might be less differential in NVOCC rates, now that the industry stabilizes as the weaker operations go out of business. The greatest savings in surface shipping today can be found by experimenting with combinations of routes to various ports, and with intermodal arrangements).

In most cases, the forwarder will bill the exporter for the freight charges as well as handling and any special charges if the exporter’s good credit is established. For new customers, or on very large shipments, however, the forwarder might request that freight be paid before the bill of lading is released.

%d bloggers like this: