If you’re new to the world of freight transportation, you may be wondering what exactly a freight forwarder is, what they do, what they’re responsible for, what you as the shipper have to handle, and how forwarders differ from freight brokers and non-vessel operating common carriers (NVOCCs). Well, you’ve come to the right place. We’re going to answer the basic question of what a freight forwarder does compared to other service providers, so you can make an informed decision about purchasing freight and choosing a reliable partner.
What Is a Freight Forwarder?
The role of a freight forwarder is to act as an agent for shippers, coordinating and organizing the movement of goods from origin to destination, in exchange for an agreed-upon fee. They typically do not own their own logistics assets (trucks, trailers, warehouses, ships, etc.) but secure these services on behalf of clients.
The formal practice of freight forwarding dates back to London in the early 1800s, when innkeepers would hold and forward personal effects as a value-added service for their guests. It grew as trade increased between Europe and the United States.
By the nature of their business, freight forwarders have extensive relationships with a network of carriers and providers across transportation modes, including ocean lines, air carriers, trucking firms, rail and intermodal companies, drayage providers, and warehouse operators. So they serve as a one-source solution for customers through these connections. Because freight forwarders book freight for many customers, they leverage their freight volumes to negotiate lower freight rates than you would pay on your own.
What Are a Freight Forwarder’s Responsibilities?
Freight forwarders are responsible for handling a variety of tasks for shippers, including booking freight with a carrier; submission of shipping documents (bill of lading or BOL, commercial invoice, certificate of origin, etc.); freight consolidation; and often inland transportation and warehousing.
The role of a freight forwarder may also include handling export and import documentation for customs clearance, possibly through a third-party customs broker if they don’t provide the service themselves. This can include filing export declarations and import entries, calculating duties and taxes – such as the Value-Added Tax (VAT) – and securing clearance through the origin and destination ports. The forwarder also ensures compliance with export controls, embargoes, and product‑specific regulations from agencies like FDA, USDA, DHS, etc.
What are the Shipper’s Responsibilities?
Freight forwarders make sure shipping details and paperwork are correct to avoid delays, but they are reliant on getting the proper information from the shipper. For instance, the shipper is responsible for providing precise descriptions of the goods, including Harmonized System (HS) codes and values for calculating duties and taxes, as well as weights and dimensions. They must declare any special characteristics, such as hazmat shipping, perishables, or temperature requirements, for both export and import.
Shippers must also pack their cargo properly in order to withstand the bumps and jostling of long-distance transportation. They must use proper labeling, including designation of dangerous goods, stack load warnings and product barcodes, and ensure that packing lists match the commercial invoice and BOL to avoid customs delays.
Lastly, the shipper is responsible for deciding on cargo insurance if they want to secure coverage beyond the limited liability of the carrier. Freight forwarders can assist with securing cargo insurance.
What’s the Difference Between Forwarders and Carriers?
Carriers and freight forwarders both play key roles when it comes to door-to-door shipping, but their responsibilities are different. Carriers handle port-to-port service, and may provide door-to-door service depending on the agreement. But in that case, they tend to favor major shippers, making it hard for SMBs to get the attention they deserve.
Freight forwarders coordinate a range of services beyond freight, including customs clearance, insurance and warehousing. They can negotiate better rates with carriers based on volume commitments across many shippers. Forwarders can also bundle services, offer creative routing, handle exceptions, coordinate claims, and provide compliance guidance.
While carriers have direct control over the shipping process, providing clear accountability, they often have limited services beyond transportation. This means that shippers may need to find additional providers for services such as customs clearance, warehousing and final-mile delivery.
What Are the Payment Terms With a Freight Forwarder?
Payment to your freight forwarder is governed by your contract with them, not by the Incoterms on your sales agreement. It can be either freight prepaid (shipper pays fees and transportation costs in advance) or freight collect (shifts some costs to the consignee or buyer on delivery).
Forwarders often issue a pro forma invoice upfront so you can remit payment or a deposit before the freight moves. The final invoice, including carrier charges, duties, and any adjustments is due under the agreed upon payment terms, such as net 30 days. Many forwarders extend the terms to net 45 days for established clients, billing after the shipment is completed. New or small‐volume customers may be asked for cash in advance, a deposit, or payment on booking.
What’s the Difference Between a Freight Forwarder and Freight Broker?
At a glance, both freight forwarders and freight brokers serve as middlemen in shipping, but their roles, responsibilities, and liabilities differ significantly.
The responsibility of a freight forwarder is to act as the seller’s agent, arranging end-to-end logistics on their behalf. Forwarders, in some instances, have warehouses or trucks. They coordinate cross-border documentation, customs clearance, and marine cargo insurance if desired, acting as the seller’s in-country logistics department.
A freight broker, on the other hand, facilitates domestic moves, matching shippers’ loads with carrier capacity. Brokers do not issue a BOL or take possession of goods. Instead, they arrange transportation under the carrier’s BOL and earn a commission. Brokers are licensed by the FMCSA and must maintain surety bonds, but they typically do not hold assets or have regulatory responsibility for customs or export compliance.
To sum up, freight forwarders offer broader services, especially for international and multimodal shipments. Brokers specialize in leveraging carrier networks to fill and move domestic freight.
What’s the Difference Between a Freight Forwarder and an NVOCC?
A non-vessel operating common carrier, or NVOCC, as the name implies, handles all aspects of ocean freight shipping but does not own or operate cargo ships. The shipper’s responsibilities as outlined above are the same whether using a freight forwarder or an NVOCC.
All NVOCCs are freight forwarders, but not all freight forwarders are NVOCCs. Think of it like the relationship between DVDs and Blu Ray in your home entertainment: a Blu Ray player can handle Blu Ray discs and DVDs, as it’s backward compatible, but a DVD player cannot handle Blu Rays.
In similar fashion, an NVOCC can provide all the services of a freight forwarder, but it doesn’t go the other way. For instance, an NVOCC, as a registered carrier, contracts directly with the steamship line, while a freight forwarder cannot. A forwarder can facilitate the booking, but you’ll sign the contract with the carrier. Also, an NVOCC can issue its own House Bill of Lading (HBL), which a freight forwarder cannot.
When you contract with the carrier for port-to-port transit, the freight forwarder is responsible for handling services outside the port, such as drayage and trucking. That means you as the shipper have two parties to deal with, creating opportunities for error and finger-pointing.
An NVOCC takes full responsibility for your cargo, often from door to door, which includes arranging customs clearance, drayage, and ground transportation. They monitor the cargo and keep you informed about its progress. If there is any damage in transit, the NVOCC handles the claim with the carrier. They can also pursue contingency plans in the case of a delay. Whatever happens, you have one point of contact.
NVOCC or Freight Forwarder: What Works For You?
An NVOCC functions like an ocean carrier, buying vessel space in bulk under its own service contracts and issuing its own HBL. They are legally responsible for cargo from origin to destination. A freight forwarder, on the other hand, is strictly your agent, arranging space and relying on the carrier’s Master BOL and liability.
Because NVOCCs negotiate volume discounts directly with steamship lines, they can often offer more competitive rates, especially for smaller shippers. They buy large blocks of space from steamship lines under long-term service contracts, committing to minimum volume thresholds in exchange for steep rate breaks. They often lock in favorable rates over extended periods and across multiple trade lanes, smoothing out short-term market swings. In addition to better rates, an NVOCC also obtains negotiated service-level perks from carriers such as extended free time and guaranteed space.
The role of a freight forwarder, by contrast, is typically to negotiate rates on the cargo owner’s behalf. They may secure competitive spot rates, but they lack the large, guaranteed volumes that underpin an NVOCC’s wholesale discounts. Some forwarders partner with NVOCCs or carrier networks to tap into similar volume deals. But as a rule of thumb, NVOCCs hold the edge on volume discounts.
How Do Freight Forwarders Compare to Customs Brokers?
A customs broker makes sure your imported goods are cleared through US Customs and Border Protection (CBP). While they help with many aspects of importing and complete documentation on your behalf, you as the importer are ultimately responsible for filing accurate paperwork with CBP and paying all applicable duties and taxes.
A licensed customs broker is intimately familiar with import procedures, regulations and documentation. They’re responsible for double-checking information in your filings, making sure all the data is in place, and that CBP submission deadlines are met. They also calculate all the import duties and fees you’ll be assessed.
While not responsible for the actual CBP filings, freight forwarders are involved in preparing documents such as the BOL, packing list, certificate of origin, and import declaration. They work closely with customs brokers on import documentation. Forwarders and NVOCCs often provide customs brokerage as part of their overall service offering.
Knowing Your Freight Transit Options Leads to Better Decisions
A freight forwarder plays an important role as a shipper’s agent, handling duties such as negotiating and booking with carriers, submitting documentation, and arranging transportation to and from port.
With decades of experience handling logistics for import/export shipments between the US and Europe, I.C.E. Transport is your go-to licensed NVOCC and freight forwarder rolled into one. Our broad partner network of carriers, alliances and trucking/intermodal providers, plus offices in New Jersey, Poland and Lithuania, means you receive unmatched service, value, and reliability.
Whether you’re a small-to-medium-sized import/export business or a larger operation, I.C.E. gives you the same white-glove treatment, including door-to-door service, sailing date and lane options, and contingency planning. We also specialize in heavy and out-of-gauge cargo, provide air, ocean freight service and more.
To learn how we can design a plan that suits your specific needs and fits within your budget, contact the experts at I.C.E. Transport today and start a conversation.
