The Difference Between a Freight Forwarder and NVOCC

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When shipping containers from A to B, there’s a number of situations that can come up each and every day. Staying prepared for anything is a great way to avoid any sudden or last minute changes. Another great way to stay up on task is to immerse yourself within the industry, working to learn not only the terms, but every aspect within the business, including common practices, customer expectations, going rates, and more. This added exposure can lead to the solving of issues later on, generally before taking place.

difference between freight forwarder and nvocc

The Big Mix Up

One main area to understand upfront is the difference between freight forwarders and NVOCCs. An acronym for non-vessel operating common carrier, NVOCCs and freight forwarders are two different but similar positions. However, mixing them up is not an ill-placed assumption, not even a little bit. The two, in most cases, are practically the same entity. Both ship freight, both set up travels over large amounts of miles, and both work with both carriers and companies who need their goods moved to complete an order. However there’s also several instances in which they are not the same.

How they are Different

When it comes to deciphering freight forwarders and NVOCCs, there’s a few major points of reference that help to tell them apart. While many of their duties fall under the same umbrella, there are also many that do not. If it helps, look at them in the form of a venn diagram, where each position has its own circle, but some areas will overlap in the middle. Only the middle, doubling sections will be the largest of the bunch.

To better understand what each has to offer, look to these major differences that occurs between the two entities. For instance:

1)     NVOCCs can (and frequently do) own and operate the containers they ship; they may also lease (for their own use or others’) said containers. Cutting out the middle man, these workers eliminate steps within the shipping process, as well as those who are involved in each step. Freight forwarders do not (and cannot) follow this same protocol.

2)     Certain countries, such as the United States, require NVOCC operators to make a public tariff; this takes place when each respective operator reports his or her tariffs to the correct government branch. Each country has various rules set into place, including who is to be the point of contact, and when they should be contacted. Again, this isn’t requested of freight forwarders.

3)     Depending on the location, NVOCCs may have to take on the status of a “virtual carrier”. While other places require each NVOCC to take on the liabilities of the carrier. This is considered to be somewhat riskier, as well as taking more responsibilities, but many NVOCCs say that it is more than worth the added effort.

4)     Freight forwarding companies may act as either an agent or partner for a NVOCC; the vice versa is not true. Again, this provides more freedom and allows NVOCCs to adjust to the task as necessary.

As you can see, these differences are important ones. While they may be subtle to the layman’s or untrained eye, they each have the ability to greatly affect the issues and protocol of a trip. Knowing (perhaps even memorizing each of these specific scenarios) can help you and others understand when certain paperwork is to be filed, when it is unnecessary, and various other instances that will unlikely come up.

And, other than these major areas of difference, the two vessels are quite similar to one another. While NVOCC can be summed up as a carrier that works for shippers, it also works as a shipper to carriers. Simple, but an important note to take into consideration.

In contrast, the freight forwarder can be seen as the forwarding agent. Whether a person or company, the freight forwarder makes sure cargo gets where it needs to be, and what is the best way in order to get it there.

There are a number of areas in which freight forwarders and NVOCCs can be interchanged with one another, but in certain situations, their duties vary greatly. Know the difference before signing up to ensure a smooth transition.

About Patrik Berglund

Patrik is one of the Co-founders of Xeneta, container shipping software that helps business get actionable data on their shipping rates and transit times. He loves helping businesses improve their supply chain and, in his down time, reading and spending time with his newborn daughter. You can get in touch with him via @Xeneta or Linkedin.

Comments

  1. A very clear writing which can help a lot for the new exporters.

  2. Thank you for this description…very useful for the beginners

  3. Freight service through cargo ships are more suitable to send over heavy goods and thus are cost effective over airways. In shipping peoples mostly don’t know the difference between the NVOCC’s and freight forwarders. The information is really effective to understand the difference and I think the freight forwarders are commonly used everywhere as its more effective then NVOCC’s.

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