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Wednesday , October 17 2018
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What is Freight Forwarders or Consolidators

The freight forwarder

freight-forward-processforwarder—is an individual or firm who renders cargo delivery services. In domestic (local) freight forwarding, it is the delivery of goods usually from the exporter’s premises to the local customs in exporting, and vice versa in importing. The customs broker also renders local freight forwarding for exporters and importers.
International (foreign) freight forwarding is the delivery of goods from the exporter’s premises (or from the port or point of origin) to the port or point of destination (or to the importer’s premises).

The freight consolidatorconsolidator or groupage operator—is an individual or firm who accepts less than container load (LCL) shipments from individual shippers, and then combines them for delivery to the carrier in full container load (FCL) shipment.

Freight-consolitors1The services of a forwarder are usually available in a consolidator, and the forwarder often engages in the consolidation of cargo. Hence, the term forwarder is often used synonymously with the consolidator.

The forwarder provides a wide range of services. Besides all of the export services available from a customs broker, the forwarder may also arrange for the insurance, export packing and trucking.

The forwarder usually receives the forwarder’s charges from the exporter. In addition, it may receive a commission from the carrierfreight company (ocean, air, truck and rail).

In the ocean shipment, the forwarder may ‘buy’ the shipping space, in a special arrangement with the carrier, and ‘resell’ the space to individual shippers, instead of receiving a commission. In such an arrangement, the forwarder functions as an independent distribution or logistical company known as the NVOCC (nonvessel operating common carrier) or NVO (nonvessel owner or nonvessel owning carrier), or commonly referred to as the ocean freight consolidator. The Case Sample: Freight Consolidation (1) below illustrates the function of a NVOCC or NVO.

Case Sample:
Freight Consolidation (1)

XY Consolidator ‘buys’ 100 containers of 20′ from RS Shipping on vessel S/S AMIGO, Voyage No. 8, the route is from Port A (of the exporting country) to Port B (of the importing country), at a discounted box rate of US$1,300/container.

To explain the case, it is assumed that the freight is charged on measure basis only, instead of weight or measure, and assumed that the capacity of 20′ container is 33 CBM (cubic meters). As such, XY Consolidator ‘buys’ a total fixed shipping space of 3,300 CBM at the ocean freight cost of US$39.394/CBM.

If the shipper UVW Exports books 10 CBM of space for a product directly with RS Shipping, on the same vessel and voyage number, the LCL (less than container load) rate is US$55/CBM. If the shipper ABC Exports books a 20′ container directly with RS Shipping, the FCL (full container load) flat rate is US$1,500/container, which is US$45.455/CBM. In case ABC Exports is able to load 28 CBM only due to the odd sized export packages, the freight cost is US$53.571/CBM. In general, the CBM cost of FCL is lower than the LCL.

XY Consolidator, which does not operate or own any ships, offers (i.e., ‘sells’ the space they ‘bought’) UVW Exports and other LCL shippers to transport their goods at US$54/CBM, against the US$55/CBM from RS Shipping. XY Consolidator offers ABC Exports and other FCL shippers at US$1,450/container, against the US$1,500/container from RS Shipping. In practice, the consolidator ‘selling’ at the same rate as the shipping company is not uncommon.

XY Consolidator groups all LCLs of individual shippers into FCLs, and then delivers all FCLs to RS Shipping in one lot, that is 100 containers of 20′ or less, if the space is not fully ‘sold’.

In such a case, XY Consolidator operates as a NVOCC and issues a freight forwarder’s bill of lading to each shipper, without receiving a commission from RS Shipping.

In a related case, the letter of credit from the importer may stipulate “transport documents issued by freight forwarder are not acceptable”, thus the bill of lading from a NVOCC is not acceptable.

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