Know The Difference Between a NVOCC And Freight Forwarder

September 06 , 2021 | CATEGORY : SERVICES

Even as all stakeholders in the logistics business are increasingly expanding their offerings to cater to the needs of the customers, the line of distinction between a Non-Vessel Operating Common Carrier (NVOCC) and Freight Forwarders is blurring by the day. At their core, while NVOCCs act as carriers for the shippers and shippers for the carriers, Freight Forwarders are fundamental agents for the shippers. Effectively, a freight forwarder is merely appointed to act as an agent of the exporter or importer, whereas the NVOCC is engaged in the nature of a professional service provider. While both are primarily Ocean Transport Intermediaries (OTIs), each of them has its uniqueness in terms of its scope, the scale of operations and statutory status.

Freight Forwarders

A freight forwarder, by definition, is an entity employed by an importer or exporter to handle varying activities related to the movement of their shipments. From organising the movement of cargo from the point of origin to the destination through multiple modes of transport and negotiating contract rates on behalf of the customer, to booking the cargo with carriers under their own or customer’s freight contract and processing all relevant shipping documents such as Customs and port documentation, bills of lading and associated shipping documents, the freight forwarder, entrusted with the movement of cargo, undertakes multiple activities as the agent of the customer. The freight forwarder usually issues its own approved house bill of lading.

Moreover, the modern-day freight forwarders, keen to offer customised services for their clients, also undertake other allied functions such as providing expert advice and consultancy services related to the usage of the correct international commercial terms, licenses & permits, letter of credit and other general information relevant to the safe and efficient movement of the cargo. Aligning with the backward or forward integration with the supply chain, some freight forwarders also arrange storage of the cargo, be it before shipment from the port of loading or after clearing the port of destination before its distribution as per the client’s needs.  Some of the leading freight forwarders even have their own warehouses, while others offer storage through strategic partnerships with third-party warehousing service providers. The freight forwarders also arrange inland movement of the cargo to and from the point of origin and destination, as per the requirement of the clients.

The NVOCC mandate

A NVOCC, on the other hand, is a logistics entity that provides ocean freight services as a carrier either with its own or operated vessels or by entering into dedicated contracts with vessels for fixed slots on-board and offering these slots across trade routes with multiple shipping lines to exporters, importers, freight forwarders, Customs clearance agents and direct customers. In doing so, the NVOCC issues its own house bill of lading as a carrier and assumes the responsibilities of a carrier as per the terms and conditions of the bill of lading. Equipped with the requisite licenses and meeting the compliance standards as per the requirements of the respective ports and authorities, the NVOCC clearly defines its freight rates, charges, surcharges, freight classifications, rules, regulations and practices akin to the carrier.

Professional NVOCCs provide end-to-end solutions to their customers – from loading cargo from the customer’s facility and transferring it to the gateway port, to delivering the goods to the consignee at the destination, while discharging their primary duty of carrying the goods with the shippers. Some of the leading NVOCCs have their own warehouses as well as their own container fleet, enabling them to offer services like cargo consolidation at the point of origin and deconsolidation at the destination, besides assisting clients with other compliances and clearing their goods through Customs.

The key difference

The fundamental difference between a freight forwarder and an NVOCC is that while the former acts as an agent for the shipper, the latter acts as a carrier to the shippers and a shipper to the carriers. In discharging their roles, while freight forwarders do not own their own containers and use the containers of the shipping lines, leading NVOCCs have their own fleet of containers.

On the other hand, while some big freight forwarders own and operate their own warehouses to offer value-addition by way of storage facilities to their clients, NVOCCs usually do not have their own warehouses. However, leading NVOCCs attached to larger logistics organisations, like Allcargo’s NVOCC vertical, not only have their own warehouses but also other resources like worldwide presence through their own offices and affiliates, network partners, experienced and trained personnel across the portfolio of services, best-in-class infrastructure and cutting-edge technologies, that allow them to offer 360-degree end-to-end cost-efficient solutions to their customers.