A non-vessel operating common carrier (NVOCC) is a shipping company that acts as a freight forwarder but does not have its own vessel.
The carrier is the middleman between the shipper and various shipping lines.
It offers consolidation services as well as negotiates the rates with the carriers.
After the NVOCC forms a contract with the shipping lines to carry the freight, it then sells shipping services to its customers.
On the other hand, a freight forwarder is a third-party logistics provider that arranges the transportation of goods from one place to another on behalf of the shipper.
They are responsible for coordinating the shipment of goods from the point of origin to the final destination. They ensure that the shipment is transported in a cost-effective manner and delivered on time.
NVOCC (Non-Vessel Operating Common Carrier)
A non-vessel operating common carrier (NVOCC) is an ocean carrier that transports goods from one place to another but does not own any of its own vessels.
It acts as a middleman between the shipper and various shipping lines and offers consolidation services while also bargaining with the carriers to get the best possible rates.
In other words, it is responsible for ensuring that the shipment is transported from one place to another, while the shipping line is the one providing the actual transportation of goods.
Moreover, NVOCC plays an important role in international trade as it provides businesses with cost-effective and flexible shipping options to them.
It also provides an alternative to working directly with shipping lines and offering a wider range of services.
If needed, NVOCC can handle all the aspects of the shipping process, such as documentation, customs clearance and freight tracking.
How Does NVOCC Operate in International Trade?
NVOCC is an extremely important part of international trade. In the container shipping industry, NVOCC offers cost-effective alternatives to traditional shipping lines.
It consolidates cargo from multiple shippers into a single container. This allows them to negotiate lower rates with shipping lines based on the large volume of business they bring.
The role of an NVOCC in container shipping includes: 1. Procurement
NVOCC is a shipping company that purchases ocean transportation services from shipping lines on behalf of its shippers.
2. Consolidation of Shipments NVOCC consolidates multiple shipments into a single container. This reduces the cost of transportation for shippers.
3. Documentation
NVOCCs are also responsible for preparing and filing the necessary documentation for the shipment, which includes bills of lading, commercial invoices and customs declarations.
4. Tracking and Monitoring
One of the roles of NVOCC also includes tracking and monitoring shipments from origin to destination. This way, they ensure that the shippers are updated on the status of their shipments at all times.
5. Customer Service
NVOCC also provides customer service and support. It includes answering questions, resolving issues and ensuring that shipments are delivered on time.
Advantages of Using NVOCC
NVOCC offers convenient, cost-effective and flexible services to businesses that are looking to manage their international trade better.
Many businesses opt for NVOCC because of the following advantages it offers:
1. Cost-effectiveness More often than not, NVOCC has bulk purchasing power. This allows them to negotiate lower rates with shipping lines and pass on the savings to their customers.
2. Flexibility
They offer a range of shipping options and services. These options and services can be customized to meet the specific needs of their customer’s business.
3. Single-point-of-contact One of the advantages of NVOCC is that it provides a single point of contact for all shipping-related issues.
This is convenient and simplifies the process of organizing and managing shipments.
4. Improved Transit Times
Typically, NVOCC has access to a range of shipping routes.
This results in improved transit times compared to shipping directly with a traditional shipping line.
5. Enhanced Visibility
NVOCC often offers tracking and monitoring systems. These systems provide real-time information on the status of shipments, giving customers more visibility and control over their supply chain operations.
6. Reduced Documentation
Another advantage of NVOCC is that it often handles all of the documentation required for international shipping. This greatly reduces the administrative burden for customers.
Disadvantages of Using NVOCC
While NVOCCs offer many advantages, there are also some disadvantages that should be considered:
1. Lack of Control
Since NVOCC contracts with other shipping lines to transport goods, they may have limited to almost no control over the quality of the shipping services provided.
2. Dependence on Shipping Lines
NVOCC is highly reliant on shipping lines to provide transportation services. So, if the shipping line experiences any problems, such as strikes or equipment breakdowns, it can severely impact the delivery of goods.
3. Capacity Constraints
NVOCC may often not have the same level of access to shipping capacity as shipping lines. This results in longer lead times and higher costs for customers during periods of high demand.
4. Limited Services
There is a possibility that NVOCC may not offer all of the services compared to traditional shipping lines, such as specialized handling for hazardous or oversized goods.
5. Responsibility for Damage
Since NVOCC is completely responsible for any damage or loss to goods during transit, even if it is caused by the shipping line, it results in increased liability and risk for NVOCC as well as its customers.
6. Lack of Direct Access to Vessels
NVOCCs do not operate their own vessels. This means that they do not have direct access to real-time information about vessel schedules and availability which might not be ideal for urgent shipping orders.
To summarize, even though NVOCC offers multiple benefits to its customers, it is important that businesses consider the potential disadvantages and weigh the costs and benefits before making a decision to use these services.
Freight Forwarder
A freight forwarder is a third-party logistics provider that specializes in arranging and managing the shipping of goods on behalf of its customers.
It plays an important role in the global supply chain as they help to facilitate the movement of goods across borders and between countries.
It offers businesses a variety of services that they can customize as per their needs and requirements.
Businesses often leverage the resources of freight forwarders to reduce the complexity and risk associated with international shipping.
Freight forwarders effectively and efficiently manage their customers' shipping needs so that they can focus on their core business activities.
How Does a Freight Forwarder Operate in International Trade?
When it comes to international trade, freight forwarders play an important role in facilitating the movement of goods across borders by following the steps given below:
Step 1: Assessing Shipping Needs
The freight forwarder starts by assessing the specific shipping needs of the customer, including the type and volume of goods, the desired delivery time and the budget.
Step 2: Sourcing Shipping Option
The freight forwarder will then source the most appropriate shipping options from multiple carriers, such as air, sea and road transport. These options are based on the customer's needs.
Step 3: Negotiating Rates
The freight forwarder then negotiates the rates with shipping lines, airlines and trucking companies to ensure that their customers get the best possible price.
Step 4: Preparing Documentation
The freight forwarder goes forward with the documentation required for international shipping, such as bills of lading, customs declarations and insurance certificates.
Step 5: Coordinating the Delivery
To ensure that the goods are delivered on time and without any damage, the freight forwarder will coordinate the delivery of goods from the point of origin to the final destination.
Step 6: Providing Visibility
Freight forwarders also provide real-time tracking and monitoring systems that give the customer visibility into the status of their shipment.
This allows them to make informed decisions about their supply chain.
Step 7: Clearing Customs
The freight forwarder also handles all customs clearance procedures, such as the preparation of necessary documentation and the payment of duties and taxes.
Step 8: Ensuring Delivery
Finally, the freight forwarder will ensure that the goods are delivered to the final destination in compliance with all applicable laws and regulations.
The role of a freight forwarder in international trade is to manage the complex and often challenging process of shipping goods from one country to another, ensuring that the shipment is delivered on time, in good condition and at a competitive price.
Advantages of a Freight Forwarder
With a range of services, freight forwarder also provides multiple benefits to businesses who choose to use their services, such as:
1. Cost-Effectiveness
Freight forwarders have the experience to negotiate the best rates with shipping lines, airlines and trucking companies.
This can result in significant cost savings for customers.
2. Better Time Management
A freight forwarder also takes care of all the documentation required for international shipping.
This frees up time and resources for the customer, which they can spend on their core business activities.
3. Reduced Risk
Freight forwarders are experts in the complex and often challenging process of international shipping. Using their services ensures a reduced risk of costly mistakes and delays.
4. Single Point of Contact
By working with a freight forwarder, customers can simplify the shipping process and have a single point of contact.
5. Improved Visibility
Freight forwarder provides real-time tracking and monitoring systems.
This gives customers visibility into the status of their shipments and also allows them to make better-informed decisions.
6. Added Value Services
They also offer additional services such as packaging, labeling and consolidation. This helps customers to streamline the shipping process and reduce costs.
7. Expertise in Compliance
The freight forwarder has a deep understanding of the laws and regulations with regard to international trade.
This ensures that shipments are in compliance with all applicable laws and regulations.
Disadvantages of a Freight Forwarder
While there are multiple benefits to using a freight forwarder, there are also some disadvantages that businesses that should consider, such as:
1. Increased Cost
While freight forwarders can negotiate better rates, the cost of their services can still be significantly expensive for businesses, especially for small and medium-sized enterprises.
2. Lack of Control
Using a freight forwarder, businesses may have less control over their shipping process and be completely dependent on the freight forwarder's expertise and ability to manage the process effectively.
3. Limited Transparency
The shipping process can be complex, and some freight forwarders may not provide customers with enough information about the shipping process. This can lead to a lack of transparency and visibility.
4. Carrier Reliability
Freight forwarders are dependent on the reliability of the shipping lines, airlines and trucking companies they work with. If these carriers are unreliable, it can negatively impact the delivery of goods.
5. Capacity Constraints
Freight forwarders may have capacity constraints during peak shipping seasons. This can lead to longer lead times and increased costs.
7. Service Quality
The quality of service provided by freight forwarders can vary widely. It is important for businesses to do their due research to ensure that they are working with a reputable and reliable freight forwarder.
Businesses should carefully evaluate their specific needs and goals before deciding whether to use a freight forwarder.
Once they’ve decided to use the services of a freight forwarder, they can choose a reputable and reliable service provider to minimize risks and maximize benefits.
Key Differences Between NVOCC and Freight Forwarder
NVOCC and freight forwarders are often confused to be synonymous with each other.
However, there are many key differences between them, starting with their operations - NVOCC is a company that provides transportation services without having its own vessels.
- A freight forwarder is a logistics provider that, on behalf of the shipper, arranges the transportation of goods.
Though NVOCCs and freight forwarders play important roles in the logistics industry, they play different roles.
NVOCCs specialize in ocean transportation, while freight forwarders offer a wide range of transportation options to their customers.
NVOCC majorly offers only ocean transportation services, but freight forwarders offer a variety of services, including procurement,
transportation, storage and more.
The other difference between the two is that NVOCC is responsible for transporting goods from one place to another, whereas freight forwarders are responsible for coordinating the shipment of goods from the origin point to the final destination.
It is important to know the difference between NVOCC and freight forwarders for businesses as it helps them make well-informed decisions about their supply chain operations and optimize their shipping costs and process.
By choosing the right service provider, businesses can rest assured that their goods will be transported safely and efficiently, thus supporting their success in international trade.
