As a small shipper, expanding your business internationally can feel both exciting and overwhelming. While it’s an incredible opportunity to grow your customer base, it also adds another layer of complexity – arranging transportation in a different country, navigating customs, and staying up to date with import regulations, just to name a few. With so many considerations, international shipping may seem like an impossible task to manage while also running your business. But the right partner makes all the difference.
That’s where a freight forwarder comes in. These international shipping experts simplify the process by helping you get your goods to their destination on time and within budget. In this guide, we’ll cover everything you need to know about working with a freight forwarder, from what they do to how to choose the right one for your business.
Table of Contents
1. What is a Freight Forwarder?
2. What Does a Freight Forwarder Do?
3. The International Shipping Process
4. Pros & Cons of Working with a Freight Forwarder
5. Tips for Finding a Reliable Freight Forwarder
6. How Much Does a Freight Forwarder Cost?
8. Your Responsibilities as a Shipper
Section 1: What is a Freight Forwarder?
A freight forwarder is a third-party logistics (3PL) provider that acts as an intermediary between shippers (the businesses shipping goods) and carriers (the service providers transporting the goods) to coordinate movement of freight around the world.
Think of a freight forwarder as an international shipping concierge. When a shipper chooses to work with them, they grant the forwarder permission to make decisions on their behalf in all matters related to the shipment. This can include the basics like arranging transportation and negotiating with carriers to additional services like customs clearance and freight insurance.
While it’s not necessary to hire a freight forwarder to ship internationally, they can be an asset to shippers unfamiliar with the documentation, regulations, and organization involved in the process.
It is important to note that freight forwarders are not carriers. While they can arrange transportation for cargo via ship, plane, rail or truck, they do not typically own assets. Instead, they coordinate within their network of asset-carrying service providers to move your goods from point A to point B.
But even without assets, freight forwarders are required to be licensed in the United States. Ocean freight forwarders must have an Ocean Transportation Intermediary (OTI) license from the Federal Maritime Commission (FMC) and air forwarders must be certified as Indirect Air Carriers (IAC) through the Transportation and Security Administration (TSA).
Other International Shipping Services
Freight forwarders may offer the most comprehensive service for international freight needs, but they are not the only type of provider that can assist you.
An NVOCC (Non-Vessel Operating Common Carrier) is a transportation intermediary with the same capabilities as an ocean carrier but does not own their own ship. Instead, they lease or buy space from ocean carriers and then contract that space with shippers under their own Bill of Lading (BOL).
NVOCCs often ship large amounts of cargo and receive volume discounts from carriers. This results in more favorable rates for shippers than if you had booked directly with the carrier yourself. NVOCCs also work with more than one carrier which gives you a larger selection of trade lanes to choose from.
Since freight forwarders and NVOCCs are both 3PL providers and classified as Ocean Transportation Intermediaries, it is common for the two to be confused or used interchangeably. While NVOCCs and freight forwards often work together, and one company can be both an NVOCC and a freight forwarder, there are some key differences.
- Transport Options: NVOCCs work exclusively with ocean carriers, while freight forwarders can use their network of service providers to transport via ship, plain, rail or truck.
- Documentation: NVOCCs issue their own BOL, while your cargo is shipped under the carrier’s BOL when using a freight forwarder.
- Service Capabilities: NVOCCs are hired as a service provider to transport goods from one point to another via ocean vessel, while freight forwarders act as an agent on behalf of the client to coordinate their entire shipping process from start to finish.
Independent carriers own and operate the ship or plane that is transporting your freight internationally. While it is possible for you to book transportation for your freight directly with a carrier, it is usually not beneficial or convenient for smaller shippers to do so.
Carriers prefer working with volume shippers because it makes it easier for them to fill the space on the ship or plane. Because of this, it can be hard for small shippers to get space. And even if you do, you will be charged a higher rate than larger shippers who receive a volume discount.
Finally, carriers usually do not accept less than container load (LCL) shipments that require consolidation. So if you are shipping with a carrier, you would need to pay for space for a full container load (FCL) even if it isn’t needed.
Section 2: What Does a Freight Forwarder Do?
To better understand the role of freight forwarders in the supply chain and the benefits they offer to small shippers, let’s look at some common services they provide.
Freight forwarders are immersed in the world of international shipping every day. It’s their job to stay up to date on constantly changing international shipping laws, import regulations, customs requirements, and global news to provide the best service to their customers. This deep understanding makes them a great resource on the nuances and best practices for this complex process.
Creating an efficient and cost-effective transportation plan for your shipment is another way the expertise of a freight forwarder benefits your business. A transportation plan is a roadmap that coordinates every touchpoint your shipment makes throughout its journey.
Does your merchandise need to be consolidated? Do you transport your goods to the origin port/ terminal by truck or rail? Should you use an ocean carrier or an air carrier? While it might take you a while to determine the right answers to these questions, a freight forwarder can quickly assemble the best options to create a streamlined operation.
Choosing a carrier for your freight is like choosing a contractor for your house – you want to make sure they are competent, reliable, and trustworthy to avoid risking your assets. When you work with a freight forwarder, they book with carriers who belong to a trusted network of partner service providers.
Not to mention, freight forwarders handle all the heavy lifting when it comes to securing a spot for your goods – including negotiating rates, booking the load, and providing payment.
Tracking and Tracing
When shipping your goods around the world, tracking and tracing can go a long way for peace of mind. Tracking uses GPS to monitor the location of a shipment in real time, while tracing uses an identifier like a waybill or tracking number to follow the movement of a shipment through the supply chain.
Freight forwarders use these systems to monitor your cargo’s journey from origin to destination, which they can check frequently for progress or sign of delay. If there does happen to be an issue, you can rest assured you will be notified and your freight forwarder will work to resolve it.
Transportation Documentation and Customs
Documentation, customs laws, and trade regulations all add a layer of complexity to the shipping process that can be intimidating even to seasoned shippers. Not only is it time-consuming to manage, but even small errors can lead to additional expenses and delays for your freight.
Freight forwarders take the guess work out of these processes by offering documentation services that handle all the standard transportation paperwork, and work with customs brokers that can facilitate customs clearance at the origin and destination countries for you.
Provide Insurance & File Claims
Liability insurance provided by carriers is limited and will not usually cover the full value of your cargo if it gets lost or damaged. When shipping internationally, freight is exposed to more risk, so getting additional insurance from a third party is a smart investment to protect your assets.
Most freight forwarders make it easy to add this protection by offering cargo insurance as part of their services. And if an incident does happen, the freight forwarder can handle the claims process on your behalf.
Section 3: International Shipping Process
Working with a freight forwarder is not only convenient, but it can also save you money in the long run. To illustrate the value that they can bring your business, let’s consider the process that an international shipment goes through.
While the exact process will differ based on your cargo’s needs, there are 6 common steps for transporting freight internationally: export haulage, export customs clearance, origin handling, carrier transport, import customs clearance, destination handling, and import haulage.
Parties Involved: shipper, transportation provider, warehousing provider
Definition: Export haulage includes the transportation of cargo from the shipper’s location to the origin warehouse or storage facility. Full container load (FCL) shipments may go straight to a port storage facility to await being loaded onto a vessel, while less than container load (LCL) and air freight shipments will be stored in a warehouse for consolidation.
Transportation for this step is usually done by rail, truck, or a combination of both. Depending on the mode of transportation used and distance traveled, it could take anywhere from a few hours to a few weeks.
Export Customs Clearance
Parties Involved: customs agent or broker
Definition: Before leaving the country, cargo must pass through customs and be cleared by officials in the country of origin. This process includes declaring the goods that are being shipped, providing all necessary documentation, and paying applicable duties and taxes.
While it is not legally required, most shippers will use a customs broker to streamline this step and ensure they are following the necessary laws and regulations. Once a shipment is cleared by customs, it is released to be transported to its destination.
If all the necessary information and payment is provided, customs clearance usually takes less than 24 hours.
Parties Involved: warehousing provider, origin agent
Definition: Origin handling includes all actions needed to prepare the shipment for international transport by ship or plane and is overseen by an origin agent. All freight is inspected and compared against the booking documentation for accuracy then loaded on the carrier ship or plane. LCL shipments must first be consolidated with other freight at the origin warehouse, packed in a container, and transported to the port to be loaded on a ship.
Parties Involved: ocean or air carrier
Definition: The carrier transports the shipment by sea or air from the origin port/ terminal to the destination port/ terminal.
The length of time your cargo is in transit will vary greatly depending on the mode of transportation you choose. Air freight can take as little as a few days to reach the destination, while ocean transport can take multiple weeks.
Import Customs Clearance
Parties Involved: customs agent or broker
Definition: Officials at the destination country check the import customs documentation to verify the contents of the shipment, confirm that the goods are allowed in the country, and collect any import duties.
Import customs clearance usually starts before the cargo even reaches the destination country and must be completed before the shipment is released. If the shipment arrives before these procedures are complete, it will be placed in a customs warehouse until it is cleared.
Like export customs clearance, this process usually takes less than 24 hours when proper documentation and payment is provided.
Parties Involved: destination agent, transportation provider, and warehouse service provider
Definition: Once the shipment arrives at the destination, it must be removed from the ship or plane and moved to the import warehouse. The destination agent oversees this process and collects the shipping paperwork from the carrier at this time.
From the warehouse, the cargo will be prepped for the final part of its journey to the consignee. When shipping LCL cargo, the full container is taken back to the warehouse and separated before being prepped for transport.
Parties Involved: transportation provider, consignee
Definition: The cargo makes its way from the import warehouse to the final destination where it will be accepted by the consignee. Like export haulage, this is usually done by truck, rail, or a combination of the two.
Even in this simple example, there are a minimum of 10 parties to coordinate with for a single shipment. And each part of the journey requires planning, coordination, communication, and strategic decision making to keep everything running smoothly. Not to mention selecting service providers, researching customs regulations, preparing documentation, and getting insurance coverage.
And that’s if everything goes right.
If there is a delay with the carrier, an issue with customs, or miscommunication with a service provider, you can count on spending additional time and money to fix it.
By partnering with a freight forwarder, you avoid costly mistakes and create efficiencies by letting them handle the intricate details of your international supply chain while you focus on what you do best – running your business.
Section 4: Pros & Cons of Working with a Freight Forwarder
Whenever you partner with a third party, it is important to make sure you are informed about your options, and you find the right fit for your business. One way to decide if a freight forwarder is right for you is by evaluating both the benefits and potential drawbacks.
Working with a freight forwarder means you don’t have to get involved in the minute shipping details. Instead, you have a single point of contact for all your needs. If you choose to allow them, most freight forwarders have the capabilities to handle every touchpoint from pickup to delivery including transportation, storage, documentation, customs, cargo insurance, and more. And with a single point of contact, there is also less paperwork because all services involved in the move are billed under one invoice.
If you are new to international shipping laws, regulations, and customs it can be easy to become overwhelmed and even easier to make mistakes. As experts in international shipping, freight forwarders provide oversight to ensure your cargo and documentation meets legal requirements, which means you can enjoy a faster shipping process and avoid potential penalties for errors.
For the inexperienced shipper, a knowledgeable freight forwarder can be invaluable. Their expertise allows them to choose the best possible transportation options based on your business’s priorities, such as cost and speed, and navigate international shipping procedures with ease – even when things don’t go as planned. Your freight forwarder can also advise you on your liabilities and responsibilities as a shipper, so you aren’t met with any unexpected problems.
With connections in the industry, freight forwarders have a network of trusted service providers and resources to choose from. These relationships allow them to offer customers a choice of multiple carriers and lanes for each shipment. Forwarders also benefit from the ability to negotiate better rates with their service providers on behalf of customers due to the large volume of cargo they ship.
While there are numerous benefits to using a freight forwarder, there are a few drawbacks to be aware of.
They Don’t Own Assets
Freight forwarders are equipped with numerous contacts and providers they work with to handle every part of your shipment. However, it is important to remember that as an intermediary, they don’t own any assets. Instead of transporting your cargo themselves, they organize the transport with carriers who own assets such as ships, planes, trucks, and containers.
This is important to understand for a few reasons:
- Freight forwarders have little control over schedule changes, service changes, and delays that occur once a carrier takes possession of your shipment.
- While your freight forwarders organize and monitor the transport of your freight, it is their service providers that handle your shipment and determine if it arrives safely and on time.
- In addition to ships and planes, freight forwarders also rely on other companies for access to assets like containers and trucks. So, if there is a shortage, your shipment will be delayed until the forwarder can source the equipment needed for the move.
Bad Freight Forwarders Take Advantage of Shippers
Like any business, there is the possibility of encountering providers that are only looking to make a profit and don’t have your best interest at heart. Since international shipping is a complex process with many moving parts, unethical freight forwarders take advantage of this ambiguity by price gouging inexperienced shippers.
Avoid falling victim by doing your homework. Research your freight forwarder before committing to a provider. Look at the reviews they have received from past customers, and make sure you get quotes from multiple companies so you can compare and see if you are getting a fair price. The more information you have, the more equipped you are to make a smart decision for your business.
In the next section, we will provide more tips for finding a freight forwarder you can rely on.
Section 5: Tips for Finding a Reliable Freight Forwarder
When you are choosing a freight forwarder, they are more than just another vendor. They will act as your partner who has an impact on the success of your business.
With such high stakes, it is important to make sure the provider you choose meets all your needs. Aside from their primary role of transporting your cargo internationally, a good freight forwarder should check off these boxes also:
- Provide reliable service you can plan your operations around
- Safely deliver your goods on time
- Provide fair pricing so you can stay competitive
- Communicate frequently and keep you informed
- Respond quickly to setbacks so they have minimal impact
Here are some factors to consider when evaluating a freight forwarder:
The more experience a forwarder has, the better equipped they are to navigate the complexities of international shipping and mitigate problems when they arise. With all the challenges that can arise (congested ports, equipment and labor shortages, union strikes, etc.), you will want someone who has seen it before and can confidently work around it.
To determine their level of experience, ask how long they have been in business. Also consider asking more specific questions about their experience working with your industry or desired modes of transportation.
Here are some ways to check if a forwarder is reputable:
- Customer Ratings: The experience other customers have had with a freight forwarder is usually a good indicator of the type of service you will receive. Read reviews and note any praise or complaints. Most companies have reviews on google that you can easily find through a search.
- Freight Deadbeats: This website aims to protect the freight forwarding community by listing untrustworthy logistics companies who have confirmed outstanding debts or have not honored payment agreements. Check against this list to make sure the company you are considering is not on it.
- Freight Forwarder Organization Memberships: Many freight forwarder organizations, like WCAworld, will have a directory of trusted members on their site. These directories are a good place to search for forwarding companies that have already been vetted.
- Ask for References: If you can’t find information for a freight forwarder on your own, ask them for references. Most companies will happily provide this information when asked. And if they don’t, it is a good sign to continue your search.
Ask anyone in business and they will confirm that who you know matters. This is no different for freight forwarders. Forwarders with large networks have more leverage and can offer more service options to you as the shipper.
Affiliation with professional organizations is one way that freight forwarders grow their network. Most organizations only want the best representatives of the industry to join so they have strict guidelines for membership. When a forwarder belongs to one of these organizations, it signifies that they keep up with latest industry standards, frequently evaluate new tools and best practices, have access to education to broaden their knowledge of the industry, and benefit from organization resources that help them do their job better.
Some freight forwarders will have the logos for the organizations they belong to on their website. Otherwise, you can check the member directory on the organization websites directly.
Here are some of the well-respected organizations for freight forwarding professionals:
- International Federation of Freight Forwarders Associations (FIATA)
- National Customs Brokers and Forwarders Association of America (NCBFAA)
- Florida Customs Brokers and Forwarders Association (FCBF)
- Licenses and Certifications
While some certifications and licensing are a legal requirement for freight forwarders, others are optional and demonstrate compliance and recognition within the industry. Ask freight forwarders for these credentials to get an idea of their reliability and service standards.
Here are some common certifications and licensing held in the industry:
- (OTI) License: All ocean forwarders based in the United States must have an Ocean Transportation Intermediary (OTI) license issued by the Federal Maritime Commission (FMC).
- (IAC) Certification: All air forwarders based in the United States are required to be certified as an Indirect Air Carrier (IAC) through the Transportation Security Administration (TSA).
- IATA Cargo Agency Accreditation: Issued by the International Air Transportation Association (IATA), this accreditation shows that the freight forwarder is considered ‘financially and professionally competent’ to IATA standards. They are also given an IATA Numeric Code which makes them globally recognizable to the air freight industry.
- AEO Certification: An Authorized Economic Operator (AEO) certification is issued by a national customs organization that states the holder follows World Customs Organization (WCO), or equivalent, security standards. Since they have been vetted, holders are considered low risk by customs authorities and experience a more streamlined border clearance process.
- CTPAT Certification: The Customs Trade Partnership Against Terrorism (CTPAT) certification verifies that the holder is recognized as an AEO by the United States.
- BASC Certification: Similar to the AEO certification, the Business Alliance for Secure Commerce (BASC) certification acknowledges companies with high security standards and allows them to have preferred treatment during customs processes.
Not all freight forwarders offer the same services. Some specialize in certain methods of transport or types of freight. Others may have limited offerings based on their size or countries that they service. At a very basic level, you need to confirm the one you choose offers the services your business needs.
If you are only looking for someone who excels in air freight, you may not need a whole suite of transportation and service offerings. But if you ship goods that travel via different transportation methods, or there is a possibility of you expanding your business in the future, it is best to find a forwarder that can offer air, ocean, rail, and road transport.
You should also check that the forwarding company has an agent in all the countries you frequently ship to so you can enjoy a more seamless experience.
Bottom line, the more services they have available, the more flexible they can be as your company’s needs grow and change.
Area of Expertise
Some types of cargo take special expertise, training, or certifications to transport successfully. Perishable, dangerous, time-sensitive, and temperature-controlled cargo are just a few examples where this may be the case. If your forwarder needs to have specialized qualifications to transport your freight, verify they have it.
Even if your freight doesn’t require additional qualifications, it is beneficial if the forwarder you are working with is familiar with your specific industry. Understanding what is required of your type of cargo allows them to deliver more personalized and streamlined service.
Technology is key to providing visibility in your international supply chain and a freight forwarder should stay up to date with the technical capabilities that provide the best service.
Some technology provides convenience like online dashboards that provide tracking information and ability to request a quote online.
Tracking technology allows you to follow your cargo’s journey and comes in varying levels of sophistication. Ask about features like real-time tracking, online tracing, and the ability to set up automatic notifications for your shipment.
If you move specialized cargo, confirm that the forwarder has any additional capabilities you require such as reefer temperature monitoring and control for perishable goods.
Level of Communication
Even though you are hiring a freight forwarder to handle your international freight for you, it is still important that you are kept informed during the process.
A good agent will be able to provide you with personal attention and be available to contact if you have questions or concerns. You also want to find someone who proactively reaches out with frequent updates and informs you of issues as they occur. This goes a long way to provide you peace of mind and builds trust within the relationship.
Section 6: How Much Does a Freight Forwarder Cost?
With so many factors impacting the price of an international shipment, there is no one-size-fits-all cost structure when working with a freight forwarder. The best way to ensure you receive the most accurate pricing is to understand what information to include in your quote request and the factors that will impact your overall cost.
How to Request a Quote
The first step in shipping with a freight forwarder is to request a quote. When providing information for your shipment, it’s important to be as specific and detailed as possible to receive accurate pricing.
This is the minimum information you should provide:
- Origin and destination: Provide specific addresses for where your cargo will be picked up and delivered. Also state when the forwarder will take possession of and release your cargo. Common arrangements include door to door, door to port, port to port, and port to door.
- Date of shipment: Be clear if you have a shipment and/ or delivery date that needs to be accommodated. If there is a strict deadline, planning far ahead of time will allow you more options and opportunities for cost savings.
- Mode of Transport: The two primary international shipping methods are ocean or air.
- Product description : Include a detailed description of the items you are shipping. For example, instead of saying you are shipping “shirts”, say “men’s cotton button-up shirts.” This allows customs to easily evaluate the shipment and calculate import or export fees due.
- Number of items: Specify the number of pallets or containers you are shipping as well as the quantity of goods contained inside. It is important to include the unit of measurement for the goods being shipped (pieces, cartons, bundles, etc.) for the most accurate count. This information is used to complete customs documents and determine the fees due.
- Cargo weight: Give an accurate weight of your freight including the weight of any packaging that will be used. (ex. If you are shipping beverages on a pallet, include the pallet in the weight provided.)
- Cargo dimensions (length x width x height): This is especially important for less than container load (LCL) or air freight where price is based on size. If you are shipping full containers, specify what size you are using – 20ft or 40 ft.
- How it will be packaged: Unless you arrange warehousing and packaging services, your cargo will be packaged prior to pick up. Common packaging types include pallets, crates, boxes, and containers.
- Special Requirements: Note if your cargo requires special handling or training, such as refrigerated goods or HAZMAT.
Factors Impacting Cost
When a freight forwarder assembles a quote, they use the information provided in your request to create a transportation plan. The final price will include the sum of each piece involved in the move and an added margin for their services.
Keep these factors in mind when reviewing costs:
- Distance Traveled: As with all shipping, the further your cargo travels, the more expensive it will be. For instance, shipping a container from the Florida to Germany will be less expensive than the same container going to from Florida to China.
- Time of Year: Shipping rates will be more expensive during peak season when there is an increased demand due to the holidays. For the United States and Europe, this period falls between June-October as shops prepare for Christmas and New Years. In China, there is increased demand around December and January due to Chinese New Year.
- Cargo Type: Perishable, oversized, and hazardous cargo are more expensive to ship due to the additional handling and documentation involved.
- Weight and Volume: How much weight and volume impacts your cost depends on the method of transportation you use.
Air freight rates are based on your shipment’s chargeable weight, which is calculated using both volume and weight. LCL freight is typically charged per cubic meter (CBM), so the amount you pay will increase as the size of your cargo increases.
Ocean freight is typically charged as a flat rate based on container size (20 ft. or 40 ft.), so weight and volume are only a factor if you exceed the standards acceptable for a single container.
- Container Costs: When shipping full container load (FCL), you will be charged per container, with 40 ft. being more expensive than 20 ft. LCL freight needs to be consolidated and packed into a container with other shipments before transport and unpacked at the destination which leads to additional handling fees.
- Additional Services: While convenient, add-on services like documentation, customs clearance, cargo insurance, packing, and warehousing will add to your costs. In this situation, it is important to be aware of your priorities for cost versus convenience and decide how much to rely on your freight forwarder accordingly.
Section 7: Understanding Your Quote – Common International Shipping Charges
Reviewing your quote may take a little extra time, but it is important so you can address any unclear language, missing information, or incorrect details. Understanding what you are paying for, and the terms involved will protect your bottom line and increase your chances for a successful shipment.
Below is a list of common charges associated with international shipping, categorized by application.
Since every shipment is unique, there will be different charges for each circumstance. When you work with your freight forwarder to create a transportation plan, the final cost will be determined by the services and factors involved.
Administration and Customs
- Administration Fee: This fee covers the administration work that the freight forwarder does while coordinating and managing your shipment.
- Documentation Fee: The documentation fee covers the processing and handling work done by the freight forwarder for documentation at the origin and destination port. Since processing is required at both locations, there will usually be a separate fee for each.
- Importer Security Filing (ISF) Fee: This is the cost for the freight forwarder or their customs agent to prepare the ISF documents required by customs and border patrol.
- Customs Clearance: These fees are paid to the freight forwarder or customs broker to facilitate cargo border clearance when entering the country.
Ocean-Specific Freight Charges
- Ocean Freight Rate (Base Rate): The base rate for ocean transportation is charged per container for FCL shipments and by cubic meter for LCL shipments.
- Bill of Lading (BOL) Fee: This is charged by the carrier charges as flat fee per bill of lading to process the transportation documentation for each shipment.
- Bunker Adjustment Factor (BAF): This is a fee the carrier charges to cover fuel costs when transporting cargo from port to port. The cost is based on TEUs (20 ft. container equivalent) and is non-negotiable. Carriers will update the amount charged periodically and it can differ between trade lanes.
- International Ship and Port Security (ISPS): This fee covers the carrier’s cost for implementing practices outlined in the ISPS Code. This code was adopted after 9/11 to create global standardized security measures to reduce risk in ocean transportation. The ISPS is charged at a flat rate based on container size and type.
- IMO2020 Surcharge: This charge covers the cost for carriers switching to cleaner fuel sources in compliance with International Maritime Organization (IMO) standards to reduce the amount sulfur in fuel. The amount charged is different for each carrier since they determine their own formula.
- Perishable Cargo Fees: Perishable cargo that requires a reefer will have additional fees to maintain the temperature-controlled climate throughout the journey. This includes charges for Pre-Trip Inspection (PTI), cold treatment, and electric plug-in while on the ship.
- Out of Gauge (OOG) Fees: This covers any freight that exceeds the standard size/weight and requires additional space and handling during the trip.
- Terminal Handling Charges (THC): This charge covers the cost of services involved in handling your cargo at the origin and destination port. It is a set fee determined by each port and will differ by location.
- Chassis Usage: This fee is charged by ocean carriers to use their chassis when moving your freight to or from the port.
- Demurrage and Detention: Demurrage and detention fees are both charged daily. Demurrage is charged when shippers don’t pick up their container at the carrier’s port terminal after the allowable free period. Detention is charged when empty containers are not returned to the carrier within the allowable period.
Air-Specific Freight Charges
- Air Freight Rate (Base Rate): The rate for air freight is based on chargeable weight. Chargeable weight can be calculated two ways: volumetric weight or actual weight, whichever is greater.
Actual weight is the number that shows on the scale when weighing your cargo.
Volumetric weight is calculated by taking the volume of the cargo (by multiplying its dimensions), divided by the predetermined density ratio.
Volumetric Weight= L x W x H (in cm) / density ratio (6000 for air freight)
- Fuel surcharge: This fee covers the cost of fuel to take the shipment from terminal to terminal. It is meant to offset any fuel price fluctuations and is usually charged based on a percentage of the shipment’s chargeable weight.
- Container Freight Station (CFS): This fee occurs when cargo entering or leaving the country must be temporarily stored while awaiting customs clearance.
- Ground Terminal Charges (GTC): This charge is for the cargo handling services needed inside the aircraft before the plane takes off. The amount you pay is based on the gross weight of your shipment.
- Security Surcharge: This charge is to cover security measures put in place at airports after 9/11. It is set by the airport and will differ per location.
- Airport Handling: This charge is for the cargo handling services needed in the airport terminal and is based on the gross weight of your shipment.
- Air Waybill (AWB) Fee: Like the BOL fee for ocean freight, the AWB fee is a flat amount charged per AWB for the carrier airline to process the paperwork.
- Hazardous Surcharge: Charge for shipping cargo classified as dangerous goods.
- Container Fumigation Fee: Certain types of cargo (raw wood, wool, fruit, etc.) are required to be fumigated before shipping. This fee covers the cost of the fumigation service and any transport to and from the service facility.
- Consolidation Fee: This charge is for packaging several smaller shipments together and occurs for both LCL ocean freight and air freight shipments.
- Cargo Insurance: This is the price to insure your cargo if you have chosen to purchase additional insurance to supplement carrier coverage.
- Warehouse Fee: This fee is specific to LCL/ air freight and applies when the shipper fails to pick up their items at the offload warehouse within the allowable number of free days.
- Transportation Fees: If your freight forwarder is arranging transport for your freight to or from the carrier’s location, there will be additional transportation fees included. These fees could include trucking, intermodal, or drayage depending on the movement required.
Section 8: Your Responsibilities as a Shipper
A freight forwarder will take care of all the heavy lifting involved in your international shipment, but it is important to be aware that you are still accountable for certain responsibilities as the shipper.
1. Choose Method of Transport
Your freight forwarder can offer a recommendation on the type of transportation to use, but it is ultimately your decision which to go with. Here are some pros and cons to keep in mind for each:
Cost: Ocean freight is typically much less expensive than air
Cargo Capacity: Due to the size of ocean vessels, they are able to handle most types of cargo, including oversize and heavy items
Speed: Ocean freight is significantly slower than air. The Same shipment that takes a few days by plane could take multiple weeks by ship
Reliability: The tracking available for ocean cargo can be less exact and the arrival timing is less reliable
Speed: Air transport is much fast than ocean. Often, it only takes a few days for cargo to reach its destination by plane.
Reliability: Air shipments are usually easier to track and more likely to arrive on time.
Flexibility: Airlines can offer multiple flights per day in major areas, whereas ships only travel a few times a week. It is also easier to reschedule flight in the event of a delay.
Cost: Shipping by air is significantly more expensive than by ocean.
Cargo Restrictions: There are much stricter limitations on what can be shipped by plane, with some hazardous items banned completely.
Capacity: Planes have a much smaller area to fit cargo than ocean vessels.
2. Define Service Boundaries
There are multiple moving parts to an international shipment, and it is your job to specify where you would like the freight forwarder to be involved in the process. Here are the four most common arrangements, from most to least involved:
Door to Door: The freight forwarder handles most of the shipping process. They pick up the freight from the shipper and handle it for the whole move until it is delivered to the consignee.
Door to Port: The freight forwarder picks up the freight from the shipper and handles it until it reaches the destination port/ terminal. The shipper is then responsible for transporting the shipment from the port/terminal to the consignee.
Port to Door: The shipper is responsible for getting the freight to the origin port/terminal and the freight forwarder handles the shipment from the origin port/ terminal until it is delivered to the consignee.
Port to Port: The freight forwarder is only responsible for transporting the freight from the origin port/ terminal to the destination port/ terminal and the shipper is responsible to arrange all transport before and after the ocean/air leg of the journey.
3. Provide Correct Information and Documentation
The success of your shipment depends on you providing the correct information and documentation to your forwarding agent. To avoid delays, make sure you have information ready ahead of time, including:
- Weight and dimensions
- HS Code: This Harmonized System (HS) code was developed by the World Customs Organization (WCO) as a universal system to identify goods being imported or exported internationally. Its purpose is to help customs officials determine duties and taxes owed.
- Country of Origin: A product’s country of origin is the country that it was manufactured, produced, or grown in. It’s used to regulate duties and taxes owed, eligibility for Free Trade Agreements, and import quotas. The guidelines for determining the correct country of origin for a product can be found in the Rules of Origin.
You may also be asked to provide documentation such as:
- Packing List
- Certificate of Origin (CO)
- Commercial Invoice
- Shipper’s Letter of Instruction (SLI)
4. Understand Incoterms
International Commerce Terms (Incoterms) are published by the International Chamber of Commerce and used to define the responsibilities of buyers and sellers during an international transaction.
Some conditions defined by incoterms include who assumes risk at different points in the journey, payment of customs duties, transportation arrangements, and delivery location. This way, Incoterms help to avoid transportation delays by creating a clear understanding between parties.
It is your responsibility to understand the Incoterms for your shipment and uphold your financial and legal obligations, even if your shipment is facilitated by a freight fowarder.
There are 11 Incoterms in total:
- For All Transport Types:
- Ex Works (EXW)
- Free Carrier (FCA)
- Carriage Paid To (CPT)
- Carriage and Insurance Paid To (CIP)
- Delivered at Place (DAP)
- Delivered at Place Unloaded (DPU)
- Delivered Duty Paid (DDP)
- For Ocean Transport Only:
- Free Alongside Ship (FAS)
- Free on Board (FOB)
- Cost and Freight (CFR)
- Cost Insurance and Freight (CIF)
5. Know Hazmat Requirements
Even if you hire a freight forwarder, you are ultimately liable as the shipper to ensure any dangerous goods are packaged, classified, marked, and labeled according to hazmat regulations. Failure to follow these guidelines will delay your shipment and lead to hefty fines.
Dangerous goods are defined as “any substance or material that is capable of posing an unreasonable risk to health, safety, and property when transported for commerce.” You may be surprised to find that many common items are considered dangerous like aerosol spray, perfume, mouthwash, and battery-powered electronics.
An item’s safety data sheet (SDS) will list if it is a dangerous good and provide instructions for safely transporting it. If you will be working with a forwarder when shipping hazardous goods, verify that they are Hazmat certified and have completed the required training.
You should also be aware of regulations specific to the transportation method you choose.
Shipping dangerous goods by ocean is regulated by the International Maritime Organization (IMO) and guidelines can be found in the International Convention for the Safety of Life at Sea (SOLAS) and the International Maritime Dangerous Goods (IMDG) Code.
The authorities for the transport of hazardous materials by plane are the International Civil Aviation Organization (ICAO) and the International Air Transportation Association (IATA). Standards from these groups can be found in ICAO’s Annex 18 to the Convention on International Civil Aviation from and IATA’s Dangerous Goods Regulations (DGR) Manual.
Partner with a Freight Forwarder to Move Your Business Forward
Shipping internationally may seem complicated but you don’t need to be an expert to make it happen for your business. Working with a freight forwarder enables you to benefit from their efficiency and expertise so shipping across borders isn’t a barrier to your success. With the information in this guide, you can feel confident in finding the right partner for you and continue to expand your business across the globe.