Freight Forwarding 101

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INSTRUCTOR: At the highest level, a freight forwarder is a company that provides services to facilitate international trade. This could span from relatively simple documentation administration for customs purposes to much more complex tasks like organizing and operating a buyer's consolidation for a client and contracting with a steamship line to transport that cargo to an overseas destination.

In general, a freight forwarder specializes in international trade and makes it easier for their clients to move goods across international borders. The ultimate goal of a freight forwarder is to make sure that the cargo they're contracted to move arrives in the same condition it was received, at the time it was requested to arrive, and at the cost it was quoted.

As a general statement, freight forwarders do not own transportation assets. And many, like Flexport, fall into a legal category called NVOCC, or Non-Vessel-Owning Common Carrier. In addition to moving physical shipments, many freight forwarders employ customs brokers who can also act as an agent to prepare shipping documentation and transmit customs entries to regulatory agencies around the world.

INSTRUCTOR: To further define the world in which freight forwarders operate, it may help to put them in context within the larger transportation world. Most people have heard of parcel couriers such as DHL UPS and FedEx. They are the muscle behind getting Amazon shipments to your door. But these shipments, given their small size, do not actually move through the freight network.

And we mostly don't think of these firms as freight forwarders for that reason, though each do have business units that handle palletized and containerized freight.

Large freight forwarder firms that handle freight are companies that most consumers have never heard of but more truly specialize in these kinds of large shipments and cargo movements. 99%-plus of companies that ship, buy, and sell goods internationally utilize the services of freight forwarders like these and their competitors. To define another term you may hear, we need to address the small number of very large companies that choose to manage these movements largely without the use of freight forwarders.

These companies, known as BCOs or Beneficial Cargo Owners, are shippers that move freight on a large scale with large associated internal teams.

They handle the freight movements directly with steamship lines and truckers.

When you think of a BCO, think large big box retail companies, large furniture companies, national supermarket chains, et cetera. Typically, these are the biggest of companies that want to control the movement of goods under their own contracts and do not use the services of a freight forwarder for the bulk of their shipping needs.

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INSTRUCTOR: Let's now dive deeper into why a shipper or consignee would choose to move their goods with a freight forwarder rather than handle these logistics themselves. There are over 190 countries around the world.

While a company might not ship to every single one, for those they do ship to, it is important to have a logistics expert familiar with the local market to advise on the operation. They can provide recommendations on the most cost-effective or fastest options and guide an importing or exporting company through the relevant government formalities involved with the process.

Freight forwarders play a key role to ensure a shipment is compliant with both international transportation regulations and the laws of the exporting and importing countries. At a shipment's origin point, freight forwarders will coordinate with shippers to prepare documents like a shipper's letter of instruction, bill of lading, certificate of origin, contract of carriage, et cetera. They will also handle equipment scheduling, terminal arrangements, trucking details, and any other logistical hurdle that pops up.

Having a local expert to guide a client through these complex and ever-changing procedures is a must.

Contracting with a freight forwarder that has an international presence provides this local guidance and allows the client to move shipments with relative ease. Lastly, forwarders have also developed specialized services based on industry needs and have evolved to provide hard-to-find expertise to these industries. Some forwarders have targeted specific industry verticals or have business units that target these verticals, including auto manufacturers, liquor and spirits producers, perishables companies, and chemical and hazardous materials companies. Still others have targeted specific trade lanes, such as agricultural exports from the United States to South America or electronic shipments from Taiwan to the EU and US. The largest forwarders, Flexport among them, target all of these services and more.