Freight forwarders are intermediaries that manage complex supply chains and offer value-added logistics services. They use their ‘black book’ of contacts to negotiate the best routes and shipping prices for clients.
The first step is determining the terms of shipment, known as Incoterms. They are essential to international operations and determine who is responsible for handling shipments during the import and export process.
Logistics
Managing the logistics of shipping is one of the most important duties for freight forwarders. This involves managing raw materials and manufactured products from production to distribution, as well as negotiating trade regulations with international partners. A successful career in freight forwarding is often a step towards becoming a shipping manager or export office manager, and many forwarders are chartered members of the Chartered Institute of Logistics and Transport (CILT).
During the import and export process, forwarders must ensure that all of the necessary paperwork and customs requirements are complete before the shipment leaves the country of origin. This includes obtaining export permits, completing a commercial invoice and customs declaration, and ensuring that all documents are in compliance with local laws. Often, the freight forwarder will also take out insurance for their customer’s goods, and will monitor them during transit until they reach their final destination.
In addition to coordinating with carriers, freight forwarders are often experts in international trade rules and regulations. This enables them to work with clients to determine the best route for their shipments, including air, sea, rail, and road freight. They will choose the most cost-effective and efficient option for their client’s needs, based on the type of cargo, the origin and destination, and the preferred timeframe.
Forwarders are also a key component of triangular operations, where three companies involved in manufacturing, selling and delivering goods are located in different countries. In this case, a freight forwarder will arrange to have cargo transported from the manufacturer to an airport by truck, flown on to a destination city by plane, and then moved into the final customer’s building by another truck.
Freight forwarders are a vital link in the supply chain, and their services can help businesses maintain positive customer feedback, increase profitability, and grow into new markets. However, it is essential that companies choose the right forwarding service for their specific needs, and make sure they are compliant with all local and international regulations. This will ensure a smooth, effective, and safe transportation of goods. To learn more about the benefits of choosing a quality freight forwarding service, speak with an expert today.
Customs
The world of international shipping is full of complex rules and regulations, including customs. Freight forwarders must be able to navigate these regulations in order to ensure compliance with governmental agencies, as well as to keep track of changes as they occur. The ongoing trade tensions between the US and China, for example, have led to tariffs on certain goods, as well as new procedures for clearance at ports of entry. It’s important for freight forwarders to stay on top of these developments in order to best serve their clients.
A freight forwarder is responsible for several export formalities, including Schedule B classifications, Shipper’s Letter of Instruction (SLI), Automated Export System filings and export licenses. They also arrange insurance and terminal handling fees. In addition, they may be responsible for initial pickup (depending on the Incoterm agreed between the supplier and customer), interim storage and freight consolidation.
Freight forwarders must comply with a wide range of standards and regulations, such as product safety, environmental protection and sanitary and phytosanitary requirements. They also need to comply with regulations related to labor and human rights, and intellectual property protection.
When evaluating potential freight forwarders, ask them about their understanding of these requirements and what steps they take to manage compliance. Also, look for a company with experience in the regions and countries you intend to export to or import from.
Having the right documents in order to get your shipment through customs is critical. If you aren’t able to do this, your goods could be delayed or even seized. That’s why it’s important to partner with a company that offers a consultative approach and takes the time to understand your business and its needs.
In addition to helping you with your documentation, a good freight forwarder will also be able to advise you on how to pack your cargo properly. This is particularly important as incorrect packing can attract attention from customs officials, leading to delays or additional costs. They can also handle the payment of duties and taxes on your behalf. Finally, they can double check the paperwork before submitting it to guarantee nothing gets missed.
Risk Management
As with any business, a freight forwarder is exposed to various risks when transporting cargo. While a risk management strategy does not eliminate all possible threats, it can minimise them and help businesses to operate smoothly while providing peace of mind for their customers. Some of these risks include:
Non-payment
A significant risk for freight forwarders is financial loss due to non-payment. This can be avoided by conducting thorough credit checks before working with new clients, and establishing clear payment terms. In addition, freight forwarders should also consider taking out a policy to cover this risk, such as the DFA (Distribution Finance Association) network that guarantees transactions between enrolled member offices.
Cargo damage
Performing diligent cargo screening and monitoring is essential for freight forwarders to mitigate the risk of loss and damage. This includes implementing warehouse safety protocols and enforcing strict maintenance schedules on vehicle fleets and warehouse infrastructure. Using technology solutions to track shipments and monitor performance helps to streamline processes and ensure on-time delivery.
Transportation disruptions
Unpredictable and unforeseen events can disrupt the supply chain, resulting in costly delays. This is why contingency planning is vital. It is important to develop backup plans in case primary routes become unavailable, and to maintain relationships with multiple carriers so that a company is not overly reliant on one supplier.
Cyber risks
Cyber security is a major concern for freight forwarders, as hacked customer data and malware threatens the integrity of the organisation’s IT systems. Taking proactive measures to mitigate these risks, such as conducting regular security audits and enforcing staff training, is essential.
Other risks
Freight forwarders face several other risks, including regulatory changes that affect operational compliance. For example, new regulations may require air freight companies to use low-sulfur fuel. Keeping up with changing laws can be difficult, especially when global regulations apply across jurisdictions. To help with this, some freight forwarders are partnering with experts in compliance to gain access to the latest information and advice.
Compliance
A company’s freight forwarding operations may be separate from its core business, but they must adhere to the same regulatory requirements as other businesses. This includes compliance with the Export Administration Regulations. In addition, forwarding agents have duties regarding the screening of transactions and parties, record-keeping and documentation and ensuring compliance with international trade agreements and customs procedures.
As a logistics business, you must be prepared for disruptions in your shipping process due to natural disasters, capacity shortages, fuel costs or service interruptions caused by carrier failure. You can mitigate these risks by implementing risk-management programs and developing contingency plans. It’s also important to select reliable carriers and maintain open lines of communication. This will help ensure that your customers’ goods are shipped quickly and efficiently, and will avoid delays and cancellations.
Freight forwarding companies must also be mindful of the changing regulatory landscape when it comes to trade restrictions, sanctions and export controls, and the customs laws of the countries in which they operate. It’s important for European logistics companies to stay informed by regularly reviewing international trade regulations and customs rules, and by communicating with regulators and partners globally.
Dedicated customs management software helps freight forwarders navigate complex customs regulations. It also automates many of the manual tasks involved in the process, reducing errors and saving time. Additionally, software can flag suspicious transactions and detect potential violations of (inter-)national trade laws and free trade agreements.
While it’s tempting to pass your product classification, reporting or recordkeeping responsibilities to your freight forwarder, it puts you at risk for penalties and fines and exposes your business to legal liability. It’s far better to take responsibility for these processes yourself and work with a forwarding agent who can meet your compliance needs.
A reputable freight forwarding company will have a dedicated team that stays abreast of regulatory changes, compliance expectations and best practices. They’ll be able to advise you on what documents are required for the shipment of your cargo and assist with obtaining them. The team will also conduct regular audits to ensure compliance and provide you with a report of their findings.
