WHAT IS A FREIGHT FORWARDER?

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..
Also be aware that a freight forwarder is different from a clearing agent,
a NVOCC and a freight broker.