What does VOCC mean?
A VOCC or "Vessel-Operating Common Carrier" is a shipping company that owns and operates vessels and leases them to other entities. Also known as a shipping line, shipping company, or ocean carrier, a VOCC is responsible for managing the cargo and transporting it to the right destination at the scheduled time. A VOCC usually focuses on providing port-to-port services to its customers but sometimes may partner with rail and road transport companies for shipping to inland destinations. All imports and exports booked with VOCCs are documented in the Master Bill of Lading.
Larger enterprises typically opt to work directly with VOCCs, as they have the volume to fill an entire shipping vessel. VOCCs do not offer LCL (Less than Container Load) services, so SMBs with smaller cargo sizes cannot ship directly through VOCCs.
What is the role of VOCC in shipping?
Larger enterprises like retail conglomerates, global ecommerce giants, or consumer goods corporations have massive delivery requirements that necessitate entire fleets of ships at their disposal. This is where VOCCs come into the picture. With a complete fleet of carriers in their possession, VOCCs enter into agreements with these major organizations to transport a minimum quantity of cargo over a fixed period of time. An important condition is that the volume of the cargo from these organizations needs to occupy the complete vessel.
In addition to partnerships with large shippers, VOCCs also enter into service contracts with Non-Vessel Operated Common Carriers (NVOCCs). These service contracts allow NVOCCs to rent spaces on a ship to SMBs or shippers with smaller cargo. While an NVOCC offers services similar to that of a VOCC, they do not own and operate the vessel. So, NVOCCs and freight forwarders book space and equipment directly with VOCCs and act as liaisons for moving smaller shipments.
Why use a VOCC for your shipping needs?
Transportation and other functions related to freight trade are not the forte of most shippers. Therefore, such entities need the service of professionals to carry out tasks such as transportation and last-mile delivery in international trade until their goods reach their end customer. Vessel-Operating Common Carriers (VOCCs), also known as ocean common carriers, shoulder a part of this by providing transportation of passengers or cargo by water.
By assuming the responsibility for this transportation from the port or point of receipt to the destination, VOCCs bring convenience into the fold for shippers.
Essentially, VOCCs enable shippers to pay undivided attention to their mission-critical tasks.
Examples of VOCC
Some of the well-known VOCCs are:-
A.P. Moller-Maersk Group
China Cosco
Hapag-Lloyd
Ocean Network Express (ONE)
Evergreen Line
Hyundai Merchant Marine
Yang Ming Marine Transport Corporation
Zim Lines
CMA CGM S.A.
Mediterranean Shipping Company S.A. (MSC)
How to enter into a service contract with a VOCC?
Service contracts with VOCCs need to be filed using the Service Contract Filing System (SERVCON) of the Federal Maritime Commission (FMC). This Web Service incorporates the filing of service contracts into the contract management system (CMS) of the FMC.
Service contracts are drawn between a shipper and a VOCC in which the shipper commits to provide a minimum quantity of cargo over a definite period of time and the VOCC agrees to a certain rate and a defined level of service. The shipper could be NVOCCs, freight forwarders, or multinational companies.
These service contracts and their related amendments and notices need to be filed confidentially with the FMC. The FMC monitors the service contract filings for clauses that are prohibited by the Shipping Act of 1984.
What are the VOCC charges?
VOCC charges are also known as freight fees that include ocean freight rates, surcharges, and certain adjustment factors depending on Port of Loading (POL) and Port of Discharge (POD). These typically include pre-carriage, carriage, and post-carriage fees. VOCC charges are extremely volatile due to fluctuations in demand and supply, fuel prices, terminal costs, etc.
Some common VOCC charges are:-
- Ocean freight rates
- Fuel surcharge
- Packing charges
- Chassis utilization surcharge
- Customs clearance
- Wharfage
- Documentation charges
- Carriage charges
- Bunker Adjustment Factor (BAF)
- International Security Port Surcharge (ISPS)
- Peak Season Surcharge (PSS)
- Terminal Handling Charges (THC)
- B/L fee
- Hazardous Surcharge
Advantages and Disadvantages of using VOCC
Advantages
Customized transportation One of the privileges of having access to an entire vessel is route customization and optimization. VOCCs allow shippers to control the course of the shipping vessel. They can customize the route to avoid delays at congested ports and also optimize it according to the loading and unloading times. Route adjustments can be made by tracking the traffic at destination ports, much before the ship arrives at the port. For instance, if a shipper finds that many vessels are waiting for more than 45 days to come into a certain harbor, they can reroute their vessel to another less congested port and connect with a trucking and logistics provider to complete the shipping process faster.
Partnerships for end-to-end shipping To cater to all customers and enable door-to-door deliveries, many VOCCs have now partnered with railways, logistics providers, trucking services, and other inland transport providers to offer a complete package to their enterprise customers. A good example is China’s Cosco partnering with TNT Express to integrate door-to-door shipping into their services.
Faster shipping times By leveraging the features of customized shipping routes and strategic tie-ups with partner organizations, VOCCs facilitate faster shipping for their clients. Consequently, a faster delivery enhances the customer experience, accelerates manufacturing operations, and can lead to company growth.
Flexibility With the carrier vessels in their possession, VOCCs provide the flexibility of making last-minute modifications like changing cargo routes or increasing cargo size. They also offer more time for detention to avoid demurrage charges, make space for priority cargo and extend cutoff times for exports.
Immediate notification VOCCs notify their customers directly in case of changes in routes or delays in shipment. There are no delays in these alerts as they are from the carrier itself and do not have to go through an intermediate party. This means the customers will receive real-time updates on their cargo shipments and can adjust their schedules to account for delays or damage to cargo.
Security Once the cargo is in possession of a VOCC, it is their responsibility to ensure that the cargo reaches the destination without any damage. To make the process seamless, VOCCs act as the single point of contact for all shipment-related information.
Disadvantages
- Not Available to SMBs
Due to the huge volume of shipment in VOCCs and the fact that VOCCs can set their own shipping rates, only large enterprises can afford to work directly with a shipping line. This leaves the large number of SMBs to opt for the more flexible option of working with an NVOCC.
Differences between VOCC and NVOCC
FAQs
1. NVOCC vs VOCC: Which option is best for you?
NVOCCs with their flexible cargo size and service charges are a better option for small to midsize businesses. Larger enterprises can go for VOCCs after checking if they provide door-to-door services.
2. Are VOCCs better than NVOCCs?
No option is necessarily better than the other. The selection of the shipping service depends on your requirements of cargo volume, flexibility, door-to-door or port-to-port services.
