Logistics Providers Explained
January 15, 2021 Posted by normanadmin
There are different types of logistics providers in freight shipping and it can be quite confusing. In this guide, we will take a look at various logistics providers and explain what they do.
What is a Logistics Provider?
Large shipping companies, like Maersk, work with large importers (like Target) or importers shipping multiple times a month. These shippers have large volumes and in-house logistics expertise.
Smaller importers may not have the volumes or logistics expertise. This is where your logistics providers are your biggest assets.
Your time and resources are better spent procuring, marketing, and building your brand. Let your service providers deal with calling ports to get trucking appointment times or tracking your shipments to the warehouse.
90 PERCENT OF THE WORLD’S GOODS ARE TRANSPORTED BY OCEAN VESSEL
When you begin working with logistics partners during your shipping process, you will begin to interact with a range of providers from NVOCCs to customs brokers. Sometimes in the industry the terms are used interchangeably and it can be confusing.
Around 90% of goods sold globally are shipped by ocean. When you import internationally, getting goods from the factory to destination usually means moving by ship. The companies that own and operate these vessels are called ocean freight carriers.
Carriers are authorized to transport cargo according to a list of regulations. These regulations include taxation, types of goods that can be shipped, routes, and more. There are two main types of ocean carriers—VOCCs and NVOCCs.
VOCC stands for Vessel Operating Common Carrier and NVOCC stands for Non-Vessel Operating Common Carrier. A VOCC operates the vessel, while an NVOCC does not. However, both issue Bills of Lading, register with the Federal Maritime Commission, and assume liability for the goods being shipped.
VOCCs are shipping companies that own and operate vessels, as well as lease them to other entities. The vessel operators are responsible for transporting the cargo to the correct destination at the designated time.
NVOCC is an intermediary. This is an ocean carrier that does not own a fleet of ships. NVOCCs lease cargo space from ship owning entities. They have the same responsibilities of any carrier, including, collection, transport, documentation, and delivery.
NVOCCs may also operate as freight forwarders. So what is a freight forwarder?
Both carriers and freight forwarders track and transport your goods. Freight forwarders act as an intermediary between carriers and shippers. Freight forwarders are sometimes referred to as a “travel agent” for your freight.
Freight forwarders also negotiate with a range of carriers which allows them access to better rates and conditions.
Freight forwarders help importers and exporters by negotiating with carriers, securing space, handling documentation, consolidating or deconsolidating shipments, securing final delivery, and more. Freight forwarders usually handle more details than carriers.
Freight forwarders receive Bills of Lading from carriers and are not responsible for losses incurred during transportation.
Freight forwarders also:
- Secure additional transport based on incoterms
- Consolidate goods for transport
- Break down consolidated shipments for distribution
- Communicate between carrier and shipper
- Negotiate rates
- Ensure proper packaging according to shipping regulations
- Ensure correct labeling for international shipping
- Prepare and collect necessary documents including: Bill of Lading, Commercial Invoice, Certificate of Origin, Inspection Certificate, and more.
A freight quote does not include customs charges. This is a different transaction that involves specific taxes imposed by the government where goods are being shipped.
How much you will pay in duties, taxes, and fees depends on the goods you are shipping and their HS code.
What is an HS Code? HS Codes are a universal standard of six digits used to classify and define internationally traded goods. HS Codes also determine the tariff/duty of a traded product, as well as, help keep records of international trade statistics that are used in nearly 200 countries.
Since duties are calculated based on HS code, it is extremely important to know your product and how they are categorized. Clearing goods for importation is a complicated process with many requirements and this is where your customs broker can help.
Customs brokers are licensed by the Department of Treasury in order to conduct “Customs Business.” As such, a broker must comply with all relevant Customs laws and regulations (19 USC 1641 and 19 CFR 111). Customs brokers can assist companies with trade regulations, restrictions, tariffs, documentation, insurance and more. Customs brokers can help companies save time and avoid potential penalties.
A broker is also an agent to importers for which it holds a valid power of attorney. As an agent, any representations made by the broker to Customs will be held to its principal, i.e. the importer. A broker ensures compliance with Customs regulations. So, it is important to work with your broker to understand the goods and products you are importing.
Importers are expected to use reasonable care when importing goods into the United States. U.S. CBP can penalize importers for failure to use reasonable care pursuant to 19 USC 1592.
Some freight forwarders have in-house customs brokerage, which means you would not have to find a customs broker of your own. If your freight forwarder does not include customs brokerage services, you will be responsible for finding a customs broker and submitting all necessary information.
Third-party logistics providers assist shippers with transportation, distribution, storage and deliveries of both imported and exported goods.
After goods arrive at the port, or to a destination warehouse, many freight forwarders have completed their part of the transaction. 3PLs then take over the handling, storage, warehousing, delivery, etc.
3PLs may also help companies with repackaging and labeling deconsolidated shipments, making sure products are delivered to the correct place, and returns.
Krieger Worldwide offers all of the services above. If you are interested in more information, please reach out to email@example.com.