If you’re importing from China, most probably, you have come across NVOCC.
Maybe, you don’t know what it is.
Or, you’re wondering how NVOCC compares to freight forwarders.
Today’s guide covers everything you need to know about NVOCC.
- What is NVOCC?
- Functions of an NVOCC
- Types of NVOCCs
- Difference between NVOCC and Shipping Line
- Why you should consider an NVOCC when Shipping from China
- How NVOCC compare to Freight Forwarders
- Functions of VOCC
- Difference between VOCC and NVOCC
- Disadvantages of Using an NVOCC for International Shipping
- How to Select a Reliable NVOCC Service Provider
- Required Qualifications for an NVOCC Service Provider
- Benefits of Working with a Licensed NVOCC
- Risk of Working with Un-licensed NVOCC
- The difference between OTIs, OFFs, and NVOCC
- Cost of NVOCC Services
- How to handle the Unexpected Situations when Shipping with NVOCC
What is NVOCC?
NVOCC is an abbreviation for Non-Vessel Owning Common Carrier.
It refers to operations involving sales, stuffing, and transportation of containers to various gateways ports.
This ocean carrier transports shipments without operating any ocean shipping vessels under its house bill of lading.
You can also describe it as a shipper to carriers and a carrier to shippers.
It may operate as a freight forwarder in some circumstances.
Functions of an NVOCC
It plays several roles in international trade and shipping such as the following;
- To establish a contract with ship-owners and for a predetermined number of slots in their vessels. This is in exchange for relatively lower rates.
- To contract shipping lines and ocean freight cargo to allow for movement of consignments from one point to another.
- To issue a bill of lading and assume any responsibility and liability for the consignment.
- To consolidate smaller container loads and charge for the occupied space.
- To pay for port space and transportation of the shipments. It is also responsible for payment of demurrage
- To liaise with the port authorities in ensuring the vessel berths on time. It also facilitates commencement and completion of the vessel’s operations within the specified timeline.
- To act as intermediaries in the transportation of shipments.
- To facilitate faster movement of shipment from one point to another. The essence of this is to reduce imminent inconveniences likely to arise at the port.
Types of NVOCCs
Ideally, NVOCCs are divided into three main categories based on the nature and scope of their business;
On-Carrier type NVOCC
It is a type, which engages in trans-shipment.
It has its agents and offices at major transit, as well as destination points.
The agents and branches are responsible for receiving the items from inland or road carriers and issuing the bill of lading.
The items are then transited to ocean carriers who complete the process to the destination and consignee ports.
On-Carrier NVOCC does not have restrictions when it comes to routes.
It is a type, which transports goods on their specific routes.
It accepts your shipments, offers a bill of lading, and accepts liability for the consignment.
Ideally, they are contractual carriers and do not necessarily complete the transportation process themselves.
Instead, they deliver the shipment to actual carrier and receive once the goods get to the destination to deliver to the consignee.
Broker NVOCC – This type gets the shipment from different importers, consolidate them and find transport means from a carrier or on-carrier NVOCCs.
Broker NVOCC engages in the organization of transport, distribution, and choice of modes of transportation.
It also focuses more on determining the best routes and service improvements, among others.
Difference between NVOCC and Shipping Line
There is a thin line between the roles and functions of these two entities.
Some of the differences between them include the following;
NVOCC refers to an agent whose principal function is to coordinate with different partner lines.
The essence is to obtain relevant paperwork to facilitate stowage plans and seamless operations.
A shipping line refers to the entity responsible for the direct or indirect carriage of the consignment by air, sea, road, inland waterway, or combination of all.
This undertaking usually arises under a contract of carriage.
COSCO Shipping Line
The core function of a shipping line is to provide containers for domestic and global trade.
This is in the form of carriage of domestic cargo in international containers movement.
On the other hand, NVOCC’s main role is to act as intermediaries in the transportation of shipment to and from different destinations.
NVOCC is responsible for handling different aspects of commercial activities if shipping vessels.
Such activities may include booking, issuance of own bill of lading, and other relevant documentation.
Shipping line, on the other hand, handles the actual operation of the vessel.
This involves navigating the vessel and ensuring the shipment arrives at the expected port of destination.
NVOCC works with different shipping entities as long as both parties agree on the specific terms and conditions of engagement.
A single NVOCC entity can work with numerous shipping lines simultaneously.
Shipping lines are independent entities.
They are licensed as individual operators for transporting goods to and from different places.
Why you should consider an NVOCC when Shipping from China
Sipping goods from China can be quite demanding.
It requires meticulousness and high efficiency to guarantee the best results.
And that’s where considering NVOCC becomes handy.
Some of the beneficial reasons why you need to choose NVOCC in this process include the following;
Visibility of supply chain through high-touch service;
You rarely get consistent visibility and communication throughout entire transport process in ordinary carriers.
Considering reliable NVOCCs guarantees dedicated and single point of contact, which provides you with constant communication.
It enables you to know the status of your shipment, all through until it gets to your hands.
Visibility and communication between transition points are vital since it averts inaccuracies and delays, among others.
It mitigates risks;
Direct carriers’ contracts are potentially risky whenever there is a shift in market conditions.
NVOCC becomes critical when there are sudden transportation needs outside the scope of your ordinary contract.
Ideally, NVOCC is versatile and has resources to neutralize all inevitable risks and guarantee a smooth delivery process.
While at it, NVOCC still maintains affordable pricing.
You obtain supply chain insight from professional from expertise forecasting;
It is a daunting task to analyze different reports, contracts, industry trends, and price volatility, among others.
You also need a professional with a specific bias in global markets to manage costs effectively.
Considering NVOCC herein becomes fundamental since it has a formidable network with various players in this industry.
It makes it easy for them to read, analyze, and interpret reports and data with authority.
Working an aptly credentialed NVOCC with reliable partners can establish unforeseen risks and have an impact on your supply chain.
It offers flexibility;
In international trade, your transportation needs may vary from time to time, depending on various prevailing circumstances.
NVOCC provides the necessary flexibility in regards to the carrier base.
It can also leverage it to enable it to find relatively favorable pricing or capacity.
How NVOCC compare to Freight Forwarders
Many people often consider NVOCC and freight forwarders as the same thing.
However, they differ both functionally and legally.
Some of the main differences between these two include the following;
A freight forwarder is an entity in international trade handling different activities related to shipments of imports and exports.
NVOCC, in contrast, refers to an entity, which provides services related to ocean freight as a carrier.
Even so, it could either have or lack its own or operated vessel.
Freight forwarder acts as an agent for shippers, whereas NVOCC acts as a carrier to the shipper and also shipper to carriers.
Freight forwarders may as well work as the agent for some NVOCC entities.
On the contrary, you can hardly find an NVOCC acting as an agent for a freight forwarder.
NVOCCs tend to own and operate and own their fleet of containers.
On the other hand, freight forwarders use containers provided by shipping lines.
NVOCCs are covered under carrier liability, as stipulated in the terms and conditions outline in FIATA.
On the contrary, forwarders are covered under their liabilities as outlined in FIATA terms and conditions.
NVOCC issues own house bill of lading.
This document may or may not be used depending on global standards.
Freight forwarder issues own bill of lading and other necessary paperwork.
All these documentations are based on standardized documentation provided by FIATA.
Most freight forwarders own and operate their warehouses.
It is essential when it comes to adding value to its shipping services.
NVOCC comparatively, do not own nor operated warehouses.
Functions of VOCC
To begin with, VOCC is an acronym for Vessel operating Common Carrier.
Essentially, they are the owners of the massive vessels you often see carrying numerous containers traversing the ocean.
They perform various roles more or less similar to NVOCC only that the latter does not own the vessel.
Some of these functions include the following;
- To provide transportation of different types of shipments between two or more countries for compensation.
- It is responsible for transportation of the cargo from the port of loading to port or point of destination.
- To issue the bill of lading and assume responsibility of the shipment all through until it gets to the recipient at the port of destination.
- To use a vessel operating between different ports for all or part of the transportation.
Difference between VOCC and NVOCC
In VOCC, the owners or the company operating the vessels who own them.
They maintain and control different aspects regarding transportation of the various consignments to and from numerous places.
In HVOCC, the entities do not own any shipping vessel.
Even so, they facilitate transportation of various items to different ports of destinations through other shipping lines.
In essence, these two perform a more or less similar function.
The major difference is VOCC owns and operates the vessel, whereas NVOCC does not own a vessel but still manage to transport goods.
The other difference is VOCC is independent and only works as a single operator.
In contrast, NVOCC is flexible and can work with carriers from multiple alliances.
Disadvantages of Using an NVOCC for International Shipping
Using NVOCC for shipping your cargo can have drawbacks, albeit a few. Some of these include the following;
Information lapse – In most instances, there will be slow information as far as shipment tracking is concerned.
NVOCCs do not operate the ships; hence cannot necessarily be in the position to know obtain all the tracking information when required.
Only suitable for small volume cargo – NVOCC is ideal for shipping a few containers.
If you are shipping thousands of containers every time, NVOCC would not necessarily be a suitable choice.
This is from the perspective of both cost-effectiveness and time-consciousness.
Efficiency of NVOCC is subject to its acceptance to all the responsibilities for the shipment.
It also must issue its bill of lading document.
Otherwise, it can derail the shipping process leading to unprecedented delays and inconveniences.
How to Select a Reliable NVOCC Service Provider
NVOCC service providers are many in this sector, making it quite challenging to pick on the most suitable one.
You need to be careful since not all providers are reliable in different aspects of providing this service.
Some important tips of obtaining and working with reliable NVOCC service provider include the following;
Are they experienced? – In this industry, experience is fundamental.
It is an illustration of exposure to all relevant information, which guides in the best decision making.
Always consider a provider with relative experience in handling such businesses.
Go for a credentialed entity – It always gives you peace of mind when dealing with accredited NVOCC service provider.
It becomes easy to trace the whereabouts of this agent.
Most importantly, it shows you are dealing with a recognized entity.
It should have multiple service contracts – It is a fundamental aspect when you are seeking alternative means.
And this is common after the availability of space on vessel, trucking, or Airline Company becomes an issue.
Should handle multiple types of shipments – The service provider should be versatile and able to provide alternatives in shipping different types of items to various destinations.
It should have relevant partners, experience, and know-how on how to go about shipping unique consignments.
Should have a network of agents in the destination country – This is an added advantage.
It facilitates easy, convenient, and faster movement of the consignment to your place.
In this case, the NVOCC service provider only coordinates with their network on the other end to enhance the efficiency of shipment.
Do they have the capacity? – An ideal NVOCC must have adequate human capital, facilities, and systems in place.
This enhances the efficiency of overall service delivery.
Required Qualifications for an NVOCC Service Provider
Before becoming an NVOCC service provider, you need to conform to specific regulations stipulated by the regulatory body.
Some of the requirements herein include the following;
You must obtain an operational license – Any NVOCC service provider must be credentialed by a particular organization regulating this trade.
An entity can only obtain a license after meeting all the required standards for the trade.
Proof of financial responsibility – The essence of this is to display the ability to pay off claims should they arise.
Ideally, it acts as a cushioning measure, which comes in handy when there is a claim repayment raised against the entity.
Published tariff – It is the document, which outlines the cost and guiding principles of NVOCC services. The tariff is vital since it guides the customers on determining the best suitable for them.
It also helps as a guide for payment of claims should they arise.
Benefits of Working with a Licensed NVOCC
- It guarantees a certain level of protection. All licensed NVOCCs comply with stipulated regulations, including the shipping Act. Failure may so lead to risk of facing unprecedented fines.
- A licensed NVOCC is well-cushioned in the business since it has to deposit a mandatory base capital upon registration. This provides a safety net for the customers in case the NVOCC goes out of business while having your consignment in their custody.
- There is always a price catalog, which all registered NVOCC must adhere to. In this case, you can always raise a complaint; in any event, you are overcharged.
- Licensed NVOCCs are also held to rules and regulations by a regulatory body. It makes it possible for you to get relative support as a shipper whenever you feel aggrieved or feel unfairly treated.
Risk of Working with Un-licensed NVOCC
- There is no level of protection. It is a 100% risk since unlicensed NVOCC service provider can hardly be traced to determine any fine in case of gross misconduct.
- Any form of price control does not apply to unlicensed NVOCC. It can choose to extort you irrespective of the existing conditions, and there is nowhere you can report about it.
- There is no cushioning amount of money unlicensed NVOCC service provider subjected to. It operates freely, and should the business go under, you’re like not to obtain your cargo in case it has it in possession.
The difference between OTIs, OFFs, and NVOCC
OTIs refers to a Federal Maritime Commission-licensed entity to operate as an NVOCC or ocean freight forwarder or both.
It merely implies that OFFs and NVOCC are or can both be OTI.
OFFs refer to Ocean Freight Forwarders responsible for arranging international cargo shipments.
It may involve booking a space on a vessel or merely dispatching a consignment.
To become an OFFs, you must be FMC-licensed.
You must also provide financial responsibility for any imminent claims, which might arise from cargo transportation.
NVOCCs refer to carriers providing ocean transportation but hardly operate their vessels.
They contract transportation to a vessel owner, but the NVOCC is liable for the shipment.
Cost of NVOCC Services
The cost of these services varies significantly depending on many factors.
For instance, the quantity of the shipment determines the specific price you’ll pay for these services.
Large consignment is usually more expensive to ship using NVOCC compared to smaller shipments.
The distance is also another element determining the NVOCC shipping cost.
The longer the distance, the higher the charges.
Also, the specific mode of transport used influences the amount payable for this service.
The cost for air, trucking, and ocean freight vary hence determines the specific amount of money you will pay.
Moreover, the NVOCC entity you choose to work with also determines the actual price you’ll pay in the long run.
Even so, it would be important to understand a regulating body often controls the prices for this service.
How to handle the Unexpected Situations when Shipping with NVOCC
Effective communication is vital.
You need to be in contact with the NVOCC agent at their respective office.
It enables you to know the specific status, and you can find a better solution jointly if need be.
You can raise a complaint to the licensing board regarding the situation, especially if it a case of gross misconduct.
The licensing board will look into the matter and come up with a fair solution to both parties.
I hope now you know who a NVOCC is.
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