What is a Freight Forwarder [2021]

what is a freight forwarder

In this article, we’ll take a deep dive into understanding what a freight forwarder is, what a freight forwarder is not, what a freight forwarder does and how a freight forwarder serves its customers.

Freight forwarding is a service industry responsible for organising and overseeing the worldwide movement (or shipping) of goods (or cargo) across international and domestic freight routes from one location to another. While a freight forwarder is the intermediary who acts the mediator on behalf of importers and exporters or sellers to ensure the safe movement of goods through the supply chain to the next point of distribution in the network.

Freight forwarders have the unenviable task coordinating and managing your shipments through the relevant customs, authorities and officials while organising the type of transportation of goods will use. Common freight options include ocean, rail and airfreight services which are often secured by their personal trusted network.

 

What does a freight forwarder do?

The shipping and transportation of cargo are undertaken by heavy-duty modes of transport including sea/ocean freight, rail freight, road transport and air freight shipments usually in 40ft containers. However it is important to note, freight forwarders are not directly responsible for the physical movement of shipments. The physical movement of the goods is undertaken by shippers and hauliers who are in contact with the freight forwarding company.

Smaller independent freight forwarding companies primarily serve as liaisons, connecting retailers and manufacturers with the transportation services needed to transfer the cargo whilst larger multinational organisations are often responsible for the movement of millions of cargo tonnes every year.

Responsibilities from the freight forwarder include the management of the transportation of goods including cost-effective and timely route planning, detailing how the cargo will be transported and how the goods will be stored during transit. Lastly, freight forwarders specialise in the customs clearance process by managing the documentation to ensure safe and secure passage across international borders.

 

The value of a freight forwarder

As we become increasingly globalised and interconnected, the expertise of freight forwarders is fast becoming central in day-to-day cross border international trade operations.

Beyond the physical logistics of moving cargo from one location to another, there are many regulations that govern the movement of goods internationally. These regulations and laws can vary between continents, countries and regions depending on what goods are being shipped.

Reputable freight forwarders will be broadly knowledgeable regarding matters related to taxes, port tariffs, licensing, customs procedures, shipping manifests, scheduling dates, fees, surcharges, restrictions, the political climate, inspections, timelines, HS codes and anything else that can impact the transportation of goods. For example, using freight forwarders with Authorised Economic Operators (AEO) status boosts the profile of the organisation’s customs compliance making the process much easier.

Services can include:

  • Organising the packaging and labelling of goods
  • Booking and coordinating cargo space
  • Negotiating contracts, transport and handling costs between businesses, customs and securities compliance plus other legal entities
  • Coordinating and tracking of transportation (worldwide), including special arrangements for delicate or sensitive cargos
  • Cargo insurance, including assistance with the filing of claims for mishandled, lost or damaged goods

 

Common mistakes (when opting not to use a freight forwarder)

Failure to buy shipping insurance

Retailers without dedicated transport departments or logistics experts have often made the mistake of failing to get goods (or cargo) insured or insure the items with the wrong insurance. While ocean freight shipping is often a reliable method for transporting shipments, the risk goods could become damaged or lost in transit can never be entirely ruled out. Other issues include extremes in weather which can result in damaging losses. Make no bones about it, failure to buy the relevant insurance is a high stakes gamble.

Experienced freight forwarders will be well versed in the necessary level and type of insurance required for your needs. However, if you opt not to use a freight forwarder, you should research your insurance options and learn about different types available for your cargo. As with anything, it is always recommended to source professional advice on the topic if you are unsure.

Cheap is not always best-regarding rates

Inexperienced shippers invariably opt for the lowest priced freight forwarder with the objective to maximise their profits and reduce their costs, thinking this is the most effective strategy.

Yet what consumers can often forget to do is look at the value rather than cost. In the logistics industry, cheap rates do not necessarily translate into value. Any reputable freight forwarder will work with you to lower your cost base as much as possible, but buying cheap can be a false economy.

Think about the long term business value you’ll gain from a freight forwarder as advice and guidance about customs procedures or specific shipping lanes, via specific countries, can often prove priceless.

Should I use a freight forwarder?

The transportation of goods across international borders requires an extensive knowledge base covering a variety of different areas, from optimal route planning to import taxes and duty on goods.

Should you opt not to use a freight forwarder you’ll need to have a familiar understanding of the relative international laws, customs, current affairs and relationships with the relevant third parties. Knowledge of the appropriate shipping methods, insurance and regulations applicable to the ports or countries will also be necessary. Given the scope of information required to manage and coordinate the shipping of goods internationally, a freight forwarder could prove value for money in helping you to establish your relationships with large overseas manufacturers and work with you to help plan your next step.