In the logistics and shipping industry, the terms NVOCC (Non-Vessel Operating Common Carrier) and freight forwarder are often used interchangeably. Understanding the differences between them is crucial for businesses and individuals involved in international trade.
In this article, we’ll explore the distinctions between NVOCCs and freight forwarders, guide you on which option to choose, and address some frequently asked questions about NVOCCs.
What is NVOCC?
Non-Vessel Operating Common Carriers (NVOCCs) are ocean carriers that ship cargo without owning any sea vessels. They do this by buying large volumes of space from other lines that operate ships, called Vessel-Operating Common Carriers (VOCCs). They then resell this space to shippers (consignors), adding their own tariffs.
NVOCCs thus act as middlemen for consignors and VOCCs and provide them benefits such as reduced shipping rates for consignors, and consistent business for VOCCs.
What is a Freight Forwarder?
A freight forwarder acts on behalf of consignors by managing the entire logistics process of shipping goods from one destination to another. They handle tasks such as booking cargo space, coordinating with carriers, and preparing necessary shipping documents, ensuring a smooth transition through the supply chain.
Furthermore, freight forwarders provide additional services like customs clearance, cargo insurance, and warehousing. Their role is to streamline the shipping process, allowing consignors to concentrate on their business while ensuring efficient and compliant delivery of their goods.
NVOCC vs Freight Forwarder
NVOCCs and freight forwarders play crucial roles as third-party logistics providers (3PLs), facilitating the transportation of goods across global markets.
Both entities operate under their own House Bills of Lading (HBLs) and maintain strong partnerships with various logistics companies, enabling them to access optimal routes, competitive prices, and flexible schedules. Additionally, to operate legally, both NVOCCs and freight forwarders must secure an Ocean Transportation Intermediary (OTI) license from the Federal Maritime Commission.
Despite these similarities, key distinctions exist between the two. The table below outlines the differences between NVOCCs and freight forwarders.
| NVOCC | Freight Forwarder | |
|---|---|---|
| Role | Act as carriers for consignors | Act as agents on behalf of consignors |
| Modes of transport utilized | Sea freight | Sea, air, road and rail |
| Preparation of documents | Issue Bills of Lading | Do not issue Bills of Lading Ensure all shipping documents are in order |
| Storage of goods | Do not have their own warehouse | Have their own warehouse |
| Liability for goods | Assume liability for ocean cargo | Do not assume liability for goods |
| Pricing | Can add a profit percentage to their rates | Can only add operational fees |
| How cost savings are achieved | Buy capacity in bulk from carriers | Negotiate transport costs based on individual shipment needs |
How to Choose Between an NVOCC and a Freight Forwarder
Here are some factors to consider when deciding whether to engage an NVOCC or a freight forwarding company.
Cost
NVOCCs typically offer cheaper services than freight forwarders due to their smaller scope of work. If you are on a tight budget, you may consider choosing an NVOCC.
Warehousing
NVOCCs are suited for businesses that ship purchased goods regularly as they don’t offer warehousing solutions. On the other hand, freight forwarders are good for manufacturers that produce large volumes of products and need to utilize storage facilities since they often own warehouses.
Familiarity with shipping documents
NVOCCs are suitable for businesses that can manage shipping documents in-house. Conversely, freight forwarders are suitable for companies less familiar with trade paperwork as they can provide assistance and advice regarding the paperwork and documentation.
FAQs About NVOCC
Can NVOCCs be freight forwarders?
An NVOCC can function as a freight forwarder, managing not only the ocean shipping component but also overseeing the range of services required. This includes trucking, customs clearance, warehousing, and more, streamlining the entire logistics process under one roof.
On the other hand, freight forwarders are not necessarily NVOCCs. Freight forwarders without NVOCC status cannot enter into direct contracts with shipping lines or issue their own Bills of Lading.
Is an NVOCC better than a freight forwarder?
Choosing between an NVOCC and a freight forwarder depends on your specific needs.
If you have experience managing global door-to-door shipments and simply need to book space on an ocean vessel, working directly with an NVOCC might be a more cost-effective option. However, if you require more comprehensive support, including route optimization, rate negotiation, and additional logistics services, a freight forwarder could be the better choice.
For customized freight forwarding solutions that align with your unique requirements, contact M&P International Freights today. Our team is ready to assist you in navigating the logistics landscape and ensuring your shipments are managed efficiently.