International trade is a complicated mechanism with a lot of gears and tools involved.
To help the trading parties, the freight forwarding services were introduced.
In this FAQ, we’ll try to figure out, what the freight forwarding process is and how it can help in worldwide trade.
- What freight forwarder means? Is it the same with freight forwarding officer?
- How does freight forwarding work?
- What are the main duties and responsibilities of a freight forwarder?
- Why is it profitable to use freight forwarder services?
- How much does freight forwarding cost? What is a freight forwarding additional charges?
- How do freight forwarder and carrier differ?
- Is it possible to ship a container directly without using freight forwarders?
- Which documentation is needed for the fast-forwarding process?
- How is freight forwarding different from transportation?
- What is the step by step process of freight forwarding?
- Do I need a freight forwarder for my e-commerce store?
- Freight forwarding and 3PL: how are these two correlate with each other?
- What is freight forwarding insurance?
- How does a freight forwarder handle missing freight?
- What are the general problems of freight forwarding process?
- What is the difference between freight forwarding and export house?
- What is the difference between freight forwarding and customs brokerage services?
- What is a freight forwarder bond?
- How to start a freight forwarding business?
- What is the biggest freight forwarding company in China/worldwide?
- How digitalization affects freight forwarding business? Would it still be actual in the future?
- What is a container type? How many types are used in freight forwarding?
- Freight forwarding KPI: what is it?
- How can I choose the right freight forwarder?
What freight forwarder means? Is it the same with freight forwarding officer?
A “freight forwarder” term has a lot of synonyms, such as “forwarding agent”, “forwarder”, etc.
All of them describe a person or company that organizes product shipments from the supplier.
Freight forwarding officer is yet the same as the freight forwarder.
The only difference is that a freight forwarding officer is a person in all cases, while the “freight forwarder” concept can mean both human beings and businesses.
How does freight forwarding work?
Freight forwarding is a wide-spread method of international transportation both for corporate and personal use.
Freight forwarders coordinate the shipment of goods from one destination to another using various carriers (such as air, sea, road, and railway freight).
To do so, the complex of methods is used.
Below you can see the main services freight forwarder can offer:
- Customs clearance.
- Import and export paperwork.
- Inventory management.
This list is not exhaustive; there can be other actions performed by the freight forwarding entity.
Due to such services, the whole process of importing and exporting of products becomes less stressful.
What are the main duties and responsibilities of a freight forwarder?
The freight forwarder uses the best routes and methods for moving big freights to the destination point.
The forwarding agent has to be sure that goods can reach the buyer in the shortest time.
So, the forwarder has to utilize several modes of transport most efficiently.
The freight forwarder has to conduct researches while planning routes.
He takes into account:
- the kind of transported products;
- the distance to the final destination;
- any specific customer requirements with regards to the final delivery time.
The forwarding agent also has responsibilities connected with:
- packing process;
- insurance procedures;
- customs documentation and other regulatory requirements.
A good forwarder has to have high organizational skills.
S/he has always keep an eye on under control freight, using satellite technologies and software apps.
Finally, such a person (company) has to communicate with its clients and make payments on their behalf.
Please, also check this helpful Youtube guide for a freight forwarder.
Why is it profitable to use freight forwarder services?
We can see 5 key factors which make freight forwarder services helpful:
Flexibility. Using forwarder services, you can easily change your choices about shipping companies or transportation modes without any troubles.
Cost-effective. Freight forwarding services can help you to save a lot of money. Shipping companies work with bulk freights, which makes lower rates possible.
No customs hassle. The customs rules and regulations can make your delivery confusing and complicated. The freight forwarder will make sure that you can avoid all these troubles.
Additional services. Such options include purchase tracking, packaging, and on-demand reporting. When choosing a freight forwarder, it is a good choice to pick the company with helpful extra services.
If you are interested in international shipping from China, you don’t have to continue your search of trustful freight forwarder: Bansar specialists are always here to perform all the needed logistic tasks.
How much does freight forwarding cost? What is a freight forwarding additional charges?
The freight forwarding process requires various costs and fees.
They can be separated into two groups: common and non-standard charges.
There are 3 general charges which have to paid practically in any case:
Air/road/sea shipping fee. This is the most obvious one. It depends on the dimensions of your cargo, country of origin, and the delivery distance.
Some forwarders might include additional fees here:
- Cargo screening charge.
- Airline security fee.
- Fuel surcharge.
Pickup charge. These are the fees connected with pick up of goods from a warehouse.
Forwarder handling charge. This type of fee is connected with different paperwork, including copying documents and preparing the bill of lading. This charge might range from $35 to $75.
The non-standard (additional) fees might refer to:
- Certificate of origin. In some countries, you may need this document to verify the manufacturer of the products.
- Hazardous materials. Dealing with hazardous materials always require additional costs and fees.
- Legalization procedures. In the vast majority of countries, the legalization procedure is connected with verifying documents by a consulate or embassy.
Remember that there are additional charges in the case of each country.
For example, the US government presumes extra export fees, such as TSA Security and AES charges.
How do freight forwarder and carrier differ?
Freight agents provide forwarder services and organize delivery through a carrier.
In some cases, a forwarder can be a carrier as well.
The main difference is that the carrier uses its transport, while the forwarder relies on a third party in this matter.
Is it possible to ship a container directly without using freight forwarders?
Yes, it is possible, choosing between the next two options:
- by applying for a long term contract with some shipping line;
- by using extra agents (such as transporter, customs house agent) as well as shipping lines.
Note: shipping lines work works only with full load orders. It is impossible to order a small number of goods in this situation.
Also, it is recommended to use forwarder services if any challenges occur.
Such persons (companies) have huge expertise and worldwide partners, so they can deal with all kind of issues.
Which documentation is needed for the fast-forwarding process?
A lot of documentation is needed for freight forwarding process, especially in the case of international shipping.
Such papers include the next ones:
- Export license, packing list, and declaration.
- Commercial invoice.
- Inspection certificate.
- Certificate of origin.
- Bill of lading.
How is freight forwarding different from transportation?
Transportation of goods is connected with the delivery process only, while the forwarding services cover products movement, handling, storage, packing, and so on.
What is the step by step process of freight forwarding?
There are 6 basic steps of freight forwarding process.
Step 1: Pick up Delivery
This stage is also called export haulage.
It presumes the movement of items from a supplier’s location to the freight forwarders warehouse.
It requires the use of a truck or train to move goods.
The timeline of this step depends on the huge amount of factors, including distance, geographical location and the type of goods.
Step 2: Goods inspection
Right after the export hauling ends, the forwarder begins to inspect the goods and prepare them for departure.
This step starts by checking of goods quantity and quality.
It is also important to figure out the legal status of goods.
If there are some kind of issues, the forwarder can contact the buyer to fix them before the goods can be banned at customs.
Also, at this step, the forwarding agent can perform packaging if the supplier hasn’t made enough to secure the products.
Step 3: Export customs clearance
Before items can be shipped to the country of destination, it is required to clear them at customs.
On this stage, the freight forwarder can work with a customs broker or perform customs procedures himself.
Customs require to submit details about the cargo and provide them any supporting documents.
Usually, the supplier and buyer agree on who is responsible for this process.
If a freight forwarding agent can’t provide such services, it is required to find a third party with a customs brokers.
Step 4: Import customs clearance
In general, this step is similar to the export clearance.
When the cargo arrives at the final destination country, its authorities have to check such goods and all the connected import customs documents.
This step, like the previous one, can be conducted with the help of freight forwarder or a third party with a customs brokers.
Note: a good forwarder starts to process this stage even before the cargo arrives at the destination country. This helps to save a lot of precious time.
Step 5: Destination arrival and handling
After clearing goods, the forwarder gathers all the documents and pick up the freight.
At this step, the freight forwarding agent receives all documents for the cargo, including outstanding documentation, carrier bills and so on.
This stage is always processed by the freight forwarding company itself.
Step 6: Delivery to the recipient
This step is also called the import haulage and it is quite similar to the export haulage.
The forwarding agent transport goods to the buyer and transfer them with all papers.
Also, the buyers (receivers) can decide to collect the cargo themselves from the freight forwarder warehouse.
The freight forwarding process includes selecting the most appropriate routes and travel options for you as a buyer.
Do I need a freight forwarder for my e-commerce store?
This is kind of a picky question which mainly depends on the type of e-commerce store, targeting audience, and quantity of the shipping goods.
When you transport a lot of products inside the country, using carrier services can be a good idea.
However, the amount of shipments needs to be huge in this case (like dozens of shipments a day).
But this will guarantee you the best rates.
It is also recommended to hire 3-5 carriers if you want to speed up the process.
If you transfer goods internationally and need storage services, the freight forwarder should be the best option.
Such a company can act as a carrier and deals with complicated customs clearance procedures.
Finally, forwarders are fully responsible for any loss or damage to the products, so they store and transport them with extreme accuracy.
If you ship worldwide but do not need to store your goods, you can look for a 3PL (third-party logistics company).
Such entities are similar to freight forwarders and we’ll talk about the difference between them in the next questions.
Freight forwarding and 3PL: how are these two correlate with each other?
As we said previously in this article, 3PL (third party logistic) providers and freight forwarders have quite similar roles.
The differences between them become more obvious after reading about each service.
Freight forwarders allow companies to get the best rates and combination of carriers figured out on their behalf.
They coordinate almost everything from booking cargo space to filing insurance claims.
Their services end at organizing how your products will get from point A to point B.
3PL providers can take care of your entire supply chain.
This includes warehouse storage, picking, and packing, as well as shipping.
Third-party logistics services offer some flexibility as well since companies can pick and choose which services they’d like.
What is freight forwarding insurance?
Freight forwarding process presumes billion dollars in cash flow, so the insurance is an obvious option.
Good insurance coverage from the forwarding agent liability includes:
- Bill of lading liability.
- Errors & Omissions (E&O).
- Bailee liability for warehouse and trucking operations.
- Packing and container filling liability.
- Container and transportation equipment coverage.
- Customs liability.
- Third-party liability (mostly in the case of 3PL companies).
How does a freight forwarder handle missing freight?
In this matter, everything depends on a contract which you sign with a freight forwarder.
The forwarding agent also signs similar liability contracts with shipping lines and carriers.
In general, such agreements specify the course of action when the loss or damage of goods happens.
Once the freight forwarder signs the contracts he’ll try to ensure that there would be no such troubles.
If they still arise, the forwarding agent will take care of such losses himself or with the help of the insurance company.
What are the general problems of freight forwarding process?
The freight forwarding process is facing a lot of challenges.
The following are the most common problems.
Unclear rules of the competition
The freight forwarding depends on the economics of various countries, as well as on international regulation rules.
It makes the process quite complicated and uneven, due to different rates, fees, and charges.
Customs clearance complications
Following the previous topic, here is another problem of freight forwarding process: uneven customs regulation worldwide.
This has limited the scope of operations of a freight forwarder. Which means that most of the freight forwarders will venture on the local market.
We’ll describe this problem more precise later in this FAQ.
Let’s just mention that in the modern environment it becomes easier for buyers to process their shipments directly.
So the freight forwarders have to find new ways on how to help their customers.
What is the difference between freight forwarding and export house?
Export house is a company which is mostly located in the supplier’s country.
It is involved in the export of the products through their agents and distributors in the destination country.
Freight forwarding process covers a lot of stages, including exporting goods.
Please, head back to the previous question about 6 steps of freight forwarding.
What is the difference between freight forwarding and customs brokerage services?
Freight forwarder provides a wide range of services, while a customs broker helps to get through customs clearance.
Customs brokers focus on the import side of transportation.
For exporters, the customs broker is a foreign country deal, which can be handled by a forwarding agent.
The freight forwarder deals with the logistics of moving your products from A to B.
The customs broker, on the other hand, deals with the bureaucratic side, document completion, of getting your goods into the country.
Freight forwarders are always working together with customs brokers to help with export procedures.
What is a freight forwarder bond?
The Federal Motor Carrier Safety Administration (FMCSA) obliges all forwarders and freight brokers to hold such a bond (BMC-84).
The main task of this bond is to guarantee that you will be performing your job duties in full accordance with federal and state rules.
A bond protects the entities you work with (such as other shippers, motor carriers, etc).
If the freight forwarder can’t fulfill the law rules or contact terms, someone can claim his bond.
Note: freight forwarder bond is a rule which arises for US forwarding agents only.
How to start a freight forwarding business?
Starting a freight forwarding business consists of several key steps.
First of all, you have to conduct comprehensive market research.
You will save a lot of time and resources if you answer two main questions at this stage:
- What is your target audience?
- What volumes of cargo do you plan to work with?
Based on this information, you can purchase/rent only the necessary equipment.
Your market research will narrow down to a specific type of consumer.
Having studied a niche, you need to decide: whether to create a business from scratch or buy a franchise?
Buying a franchise, you get a ready-made business model and support.
But keep in mind that you will work according to the rules of the franchise owner.
Creating your own freight forwarding business is more difficult, but in the long run, it will bring big profits.
Also, business processes remain under your complete control.
Finally, you should clearly understand what services to provide and decide what equipment you need for it.
Most startups in this niche begin with the purchase/rental of vehicles and a warehouse.
The warehouse should be in a convenient location for vehicles access.
Also, the amount of start-up capital should allow you to purchase logistics software.
Without it, effective work in the freight market is impossible.
Hint: choose a narrow specialty (transportation of a certain type of goods or by certain transport means).
This will help to avoid competition with strong market players.
What is the biggest freight forwarding company in China/worldwide?
The biggest freight forwarding company in China is CNXtrans.
Company is based in Shenzhen – the main logistics hub in China.
Worldwide leader of freight forwarding business is DHL.
Currently, it is a part of the Deutsche Post DHL Business Group.
The company headquarters are located in Bonn.
How digitalization affects freight forwarding business? Would it still be actual in the future?
Digitalization of the economy leads to rapid and large-scale globalization.
For carriers, this means a growing burden on transport networks and a greater demand for services.
Today, the effective work of a freight forwarding company is impossible without the use of IT products.
This creates new challenges for the business:
- Creating own data warehouses.
- Development of software for freight movement tracking.
- Creating a support service capable of instantly responding to a customer request at any time.
- Hiring IT specialists who are into the nuances of the freight market.
In general, the digitalization of the freight market has led to improved communication within transport systems and between the carrier and the client.
Also, thanks to the analytics of large databases, it has become easier to form a favorable price and interact with a specific target audience.
What is a container type? How many types are used in freight forwarding?
There are four main container types for cargo transportation:
- dry storage container;
- rigid Intermediate Bulk Containers;
- intermodal Tank Containers (ISOs);
- flexible Intermediate Bulk Containers (FIBCs).
In general, there are 16+ container types, that are used in freight forwarding.
Freight forwarding KPI: what is it?
KPI is short for key performance indicators. It is a bunch of analytical tools which can help you to calculate your activity.
The main KPIs for the freight forwarder is the next:
This KPI shows the number of various incidents from the placement of the order to the delivery of a shipment.
Using it, any freight forwarder can identify patterns and correct errors to make the transportation process safer.
On-time in full
This logistics KPI is also known as OTIF.
It is used to measure the percentage of orders delivered within the stipulated time (without any problems or documentation issues).
It is an ideal KPI which show how punctual and safe the services of a freight forwarder are.
Lead time is a KPI that tracks how long your company’s processes different stages of freight forwarding process.
It is good to know the exact amount of time spent in each stage of the supply chain and optimize this time.
This KPI is used by the freight forwarders that offer warehousing services.
It monitors the expenses involved in the management of your warehouse facilities.
This KPI shows the average time spent between the exit for collect/delivery and the return of the vehicle to your warehouse.
It is widely used by road transportation companies.
Container capacity utilization
This indicator shows how you use the load capacity of a vehicle during road transport or a container during sea freight.
If you are always making full-loaded deliveries, then this KPI will be higher.
This KPI displays the forwarding company employees’ production rate (workforce/labor hours/productivity).
It means all charges related to each logistics operation developed by your company.
A number of shipments
Evaluates the average of cargoes handled by your company at a stipulated time (weekly/monthly/yearly).
This list of freight forwarding KPIs can be continued with other values.
Bansar can guarantee the highest performance regarding all the above-mentioned KPIs.
Our comprehensive experience and worldwide net of trustful partners are making us the best deal when it comes to shipping from China.
How can I choose the right freight forwarder?
The best freight forwarding agent has to have the next key features.
Experience is the most important factor when it comes to shipping issues (like dockworker strikes, port shutdowns, cargo reroutes, customs problems, warehousing organization).
An experienced freight forwarder always has an answer for even the most complicated issues.
A widespread network
The best forwarding agent is the one that has the full-fledged net of agents worldwide.
When choosing a forwarder, make sure it has connections in the destination country.
When choosing a freight forwarding company, confirm that it has all the services you need.
This helps all your international shipments go smoothly.
Certification and licenses
Always ask the freight forwarder about their certificates and other credentials.
They show if a freight forwarder has the specialized training and security requirements to correctly handle shipments.
A forwarding agent with excellent clients service can provide support for effective international trading.
Bansar is proud to be among the most reliable and fast-growing freight forwarding companies in China.
We provide extremely competitive shipping rates and can timely deliver any type of product worldwide.
Choosing us as your trustful partner you can be sure that it will be a win-win situation.