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What is a Freight Forwarding Company? How Does It Work?

Freight forwarding is the entire process of logistics planning and execution for the international movement of goods, on behalf of shippers. Freight forwarders are known to handle freight rate negotiations, container tracking, customs documentation, freight consolidation, among other tasks.

Note that Freight Forwarding revolves around contracts with carriers and helping every party involved with crucial details and information for a trouble-free business operation. Comparing the role of freight forwarders today with those in the past shows no difference.

The most notable change witnessed in this industry has to do with the mode of operation, rather than the process. From the pen and paper era, the industry has moved to the use of printed documents, and now digital technology has revolutionized almost every shipping operation.

However, the principles of freight forwarding still remain the same. The principles of freight forwarding center around the smooth and cost-effective transfer of goods. To effectively achieve this, freight forwarders become experts in handling the logistics necessary to ensure that goods arrive on time.

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In this industry, having the right knowledge and skills to handle freight forwarding is vital to ensuring the efficient shipment and delivery of goods. Even as the knowledge of customs regulations is a crucial aspect of everything, the successful movement of goods through freight forwarding tends to depend primarily on its service industry.

Owing to that, freight forwarding relies on ensuring you have the right people whose commitment to excellence and customer satisfaction will make sure that goods reach their final destination in a prompt and efficient manner. A good number of customs brokerage firms understand this and ensure that their most qualified personnel are available to acknowledge and develop a comfortable shipping experience for their clients.

What is a Freight Forwarding Company?

A freight forwarding company is a firm that employs agents that can take care of paperwork and documentation for shipping and receiving logistics. Note that the primary aim of these businesses is to ensure a company’s goods are efficiently delivered by the specified date.

They will take care of everything, right from cargo manifests to insurance claims and even ship items on internal bills of lading. Have it in mind that the process of international shipping requires clear communication between different transportation companies in the supply chain.

Shipments can get delayed if a vehicle breaks down, if a port is backed up, or if there is bad weather at the port of origin or destination port. A setback at any point in the supply chain entails that the goods or shipment could be in limbo, while everything else stays on as normal.

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Note that the ability to find the most efficient route of transportation is just one aspect of the services offered by freight forwarding companies. When it involves international import and export, customs documentation can be very daunting.

Indeed, customs documentation is very vital, as one small mistake or error can institute issues at the port and also warrant customs officials to delay shipments. Freight forwarders are experts in taking care of everything to ensure customs clearance by organizing all required documents.

Other things like bills of lading, insurance certificates, packing lists, certificates of origin, and commercial invoices are all part of what a freight forwarding company handles. Have it in mind that a good freight forwarding company can take care of a business’s goods throughout the entire shipment process.

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They will more or less make sure goods and shipment get from the warehouse to the customer’s choice of location. Small businesses can’t always afford to handle all the logistics involved in shipments, so they need freight forwarding companies.

How Does Freight Forwarding Work?

Just like it was stated above, the process of shipping goods and merchandise requires a huge amount of paperwork, regulations, and processes. Note that all these things can be very challenging for people new to international trade and shipping.

However, today, it is very possible to move goods internationally without having to deal with the stress and troubles associated with importing and exporting goods. Freight forwarding companies are known to take care of the numerous responsibilities on behalf of their clients. and their business.

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Although it may seem like an unnecessary additional cost to pay a freight forwarding company for efficient and reliable service, but these experts offer a vast range of services and can indeed help you save more money.

  1. Export Haulage

The movement of shipments from a shipper’s location to the freight forwarders’ warehouse is what is more commonly referred to as export haulage.

This requires the help of a truck or train to move the shipment. However, note that the time it will take will also depend on the distance, geographical location, and what the shipment is. This first stage will take anywhere from a few hours to a few weeks.

  1. Items Checkpoint

Immediately following the export haulage stage, have it in mind that Freight forwarders receiving the goods will check to make sure and also verify everything was transported without incidents.

  1. Export Customs Clearance

Note that before shipment will be moved, it always goes through clearance processes from the country of origin. All these processes are carried out by customs brokers. These experts are expected to submit details about the cargo and any supporting documents that are required.

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Most often, an agreement is established between the shipper and consignee who are tasked with this process. If a freight forwarding company does not offer this service, it is expected to find a third-party customs broker service.

  1. Import Customs Clearance

You will have to understand that once the shipment arrives, authorities in the destination country will also have to check import customs documents. The secret to this stage is that it can even start right before the cargo even arrives. Note that it is the job of the freight forwarder or nominated customs broker to see to this clearance by the time the cargo arrives.

  1. Destination Arrival and Handling

Note that this stage involves a number of different processes immediately after the cargo arrives. Have it in mind that this is when freight forwarders receive all documents for the cargo, including outstanding documentation, carrier bills, and more. This stage of freight forwarding is handled of by the freight forwarder.

  1. Import Haulage

This stage of freight forwarding is also like the very first stage in the process. It involves the transportation of the cargo from the warehouse to the final destination of the final receiver. Note that this process can be handled by freight forwarders or the consignee.

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The primary aim of freight forwarding has remained more or less the same throughout the centuries. Freight forwarders are known to aid get customers goods shipped safely to their preferred destination.

However, the means leveraged by freight forwarders have evolved over time to take advantage of the current technology to meet the demands of more complex shipping routes. As the global economy continues to expand, experts expect the need for freight forwarders to only become more necessary to the world’s commerce.

Frequently Asked Questions

  1. What Are The Stages Of The Freight Forwarding Process?

To ensure the swift movement of freight and loads, here are the stages of the freight forwarding process;

  • Determine Credit
  • Establish Mode of Transportation
  • Determine Weight and Dimensions or Containers Needed
  • Review Documentation
  • Schedule Transportation
  • Cut Bills of Lading
  • Monitor the Cargo’s Movement
  • Contact the Notify Party When Cargo Reaches Destination
  • Arrange for Delivery to Final Destination
  • Invoice the Client
  1. What Services Do Freight Forwarders Provide?

Freight forwarders function as an agent or intermediary between the company that makes the shipment and the final destination of the goods. Most freight forwarders offer the following services;

  • Consolidation and deconsolidation
  • Cargo insurance and customs compliance
  • Inland transportation from source and/or to destination
  • Preparation of documentation
  • Warehousing and storage services
  • Ocean or air freight transportation
  1. What Is Freight Forwarding In Logistics?

This simply refers to when a freight forwarder takes care of all considerable logistics of shipping goods from one international destination to another, an issue that would otherwise be a formidable burden for their client.

  1. What Does A Freight Forwarder Actually Do?

They act as agents between the shipper and different modes of transport like air, ocean, rail, and land. Since they are experts in transportation services, they also provide clients with service options that are not available to most people working individually.

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They are known to leverage established relationships with carriers, to effectively negotiate the ideal and possible price to transport shippers’ goods along the most economical route by analyzing various bids and choosing the one that best balances speed, cost, and reliability.

  1. Does FreightCenter Handle Freight Forwarding?

No, FreightCenter does not handle freight forwarding. They only function as a freight broker on behalf of the shipper but does not physically handle your freight.

  1. What Is The Difference Between Logistics And Freight Forwarding?

Logistics companies, unlike freight forwarders, tend to own most of their assets including intermodal fleets of trucks, boats, or planes, but may not always have access to actual shipping routes. They most times specialize in specific areas such as dry box, long haul, cold storage, intracity, or large scale.

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Although some still try to cover every aspect of the supply chain. Meanwhile, Freight forwarders are known to partner with numerous logistics companies either nationally or internationally, which entails that price checking abilities are far better and also more deliberate than what you can achieve when working directly with a logistics company.

They are also known to have more knowledge and experience around specialty companies, which tend to vary greatly depending on types of transport, services, and lead times, among other elements.

  1. How Do I Know If I Need A Freight Forwarder?

Although you don’t really need a freight forwarder to import or export goods, but since importing and exporting can involve very daunting documentation and confusing regulations, most successful importers and exporters always leverage the expertise of commercial freight forwarder to be their logistics partner.

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Connecting with shipping companies, understanding documentation and the customs laws of various countries remain the primary duties of freight forwarders. They understand it all so you don’t have to.

  1. What Does A Freight Forwarder Do?
  • Offering expertise and advice to the shipper
  • Booking freight space on the modes of transportation
  • Packaging, warehousing, and distribution
  • Offering insurance services
  • Perform documentation and custom clearance
  1. What Are The Benefits Of Using A Freight Forwarder?

Here are few benefits of using a freight forwarder;

  • Flexibility
  • Versatility
  • Cost-effective
  • Hassle-free
  • Manageability
  • Security
  • Cost-Effective
  • Accurate Documentation
  • Inventory Management
  • Warehousing
  1. What Is The Difference Between Freight And Logistics?

Freight more or less refers to the method through which the goods are transported. Note that it is meant to extensively refer to cargo being shipped through various means, for instance, by air or sea. Meanwhile, logistics is the methodology used to get the goods from point A to point B.

  1. How Do Freight Forwarding Companies Work?

They serve as a middleman between the transportation services and the shipper.  They are tasked with arranging the whole process including the storage and the shipment of the goods. In addition, they also negotiate the cost of the transport and choose the most reliable, fastest, and economical route.

  1. What Is An International Freight Forwarder?

International freight forwarders are known to specialize in forwarding goods internationally and can ensure the needed steps are followed to get the goods to their destination safely and legally. International freight forwarders sometimes also offer comprehensive services that include the packaging of goods.

  1. What Is A Container Freight Station Or CFS?

A Container Freight Station is simply a facility that consolidates or de-consolidates freight before preparing such freight for the next leg of its journey. This is where LCL cargo is taken for consolidation (at origin) and deconsolidation (at destination). The CFS charges a fee for this service, based on the size and volume of the cargo.

  1. Cargo Tracking Note, What Is It And Where Is It Used In Shipping?

It is simply an official marine document that contains information concerning the cargo and all its movement between ports. Note that this document is expected to be submitted to the various shippers’ councils in various countries.

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Have it in mind that it is impossible to clear the cargo from the customs zone without a valid certificate covering the whole shipment. Note that the shipper or his agent or the forwarder is tasked with securing the cargo tracking note from several authorized representatives. In most countries, it is expected to be validated at least 5 days before the vessel arrives at the port.

  1. How Does A Freight Forwarder Make Money?
  • They resell full time equivalent savings to companies
  • Build out new supply chain relationships
  • Connect loads to data-driven insights
  • Manage company-owned assets
  • Source capacity
  • Hold carriers accountable
  1. How much do different freight channels cost?

This will surely depend on what you’re importing, how you’re importing it, and the space available. Notably, carriers are known to charge by actual weight or dimensional weight (the volume in cubic meters multiplied by 167) – whichever is more.

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Note that average air freight costs from China to the US are around $1.50 – $5.00 per kilogram for between 8 – 10 days of transit. Average ocean freight cost from China to the US sit around $0.50 per kilogram for between 30 – 40 days of transit. Note that this price tends to be more stable than air.

  1. Can A Freight Forwarding Company Handle Business To Business Shipping?

Yes, a lot of freight is for B2B (also sometimes referred to as Commercial Freight) business and some companies specialize in this type of freight.

  1. What Is A Freight Forwarder And What Are The Advantages Of Working With A Freight Forwarder?

A freight Forwarder is tasked with helping you arrange your imports and exports – dealing with the logistics of preparing documentation, tracking cargo, or filing insurance claims, and many other things. The advantages of hiring freight forwarders are vast and include:

  • Timely Pickup and Delivery
  • Efficient Track Systems
  • Security
  • Cost-Effective
  • Accurate Documentation
  • Inventory Management
  • Warehousing
  1. What Are The Benefits Of Hiring A Freight Forwarder?
  • Manageability and Organization
  • Freedom from Contracts
  • Cost Savings
  • Simplicity
  • Versatility
  1. Where Can You Find Shipping Documents You Need?

Every country has unique policies, regulations, taxes, duties, and shipping documentation requirements that can make international shipping complex and time-consuming. However, to know which  documents  are  needed  for any shipment, the  best  place to start  is  your foreign customer/importer or a  freight forwarder.

  1. Can A Freight Forwarder Complete Business To Business Shipping?

Yes, although businesses may have their in-house arrangements to ship goods abroad, a good number of them still rely on freight forwarders to do this for them.

  1. Do Freight Forwarders Responsibilities Overlap With Those Of Customs Agents?

Yes, most times the role of the Freight Forwarder and the Customs Broker can overlap and be interchangeable. A Customs Agent is a federal law enforcement officer whose main task is to protect and secure the Border. Meanwhile, a freight forwarder is an agent who functions on behalf of shippers to coordinate the transportation of goods.

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Note that freight forwarders offer customs brokerage services (customs clearance, ISF filing, etc) and this tends to require them to work with customs agents to resolve customs issues.

  1. Is There Any Minimum Required Weight Shipment For You To Find Freight Forwarders?

No, whether the weight of the cargo is light or heavy, there is no minimum required weight shipment for you to find a freight forwarder.

  1. What Is Demurrage And Detention In Shipping?

Demurrage also referred to as storage, is the charge terminals place on your shipment if it is held up at the terminal for some reason (delayed transportation, still clearing customs, etc.) after its free time has expired. Meanwhile, Detention is charged when the carrier’s equipment is still in use by the shipper or consignee beyond the LFD, regardless if full or empty.

  1. What Kind Of Documentation Will A Freight Forwarder Ask For To Help Get Your Product Door To Door?
  • Letter of Credit
  • Importer Security Filing (local customs requirements)
  • Commercial Invoice
  • Packing List
  • Export/Import Customs Declaration
  • Bill of Lading & Sea Waybill
  • Certificates (production, vessel, phytosanitary)
  • Air or Rail Waybill
  • Arrival Notice
  • Certificate of Origin
  1. How Do Freight Forwarders Help Businesses Save Money?
  • Improvements in Your Logistics Flow
  • Assistance with Paperwork and Customs Clearance on International Shipments
  • Better Rates on Consolidations and Other Types of Shipments
  • Simplifying Charges and Invoices from Carriers
  1. How Can You Ship Dangerous Goods And Hazardous Materials?

One of the primary reasons goods are noted as “dangerous” is the risk they pose to those transporting the goods. To ship dangerous and hazardous materials, ensure that all dangerous items are noted in your air waybill and commercial invoice under “Item Description”.

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In addition, note that most couriers will mandate you to complete an expanded international air waybill and include a 24-hour telephone number on your shipper’s declarations. Shippers are also expected to stay current in transport regulations affecting hazard classification, packaging, marking labeling, and documentation.

  1. What Maximum Weight Of A Shipment Can You Schedule For Pickup Without Additional Authorization?
  • Domestic Services: If a shipment has an actual or dimensional weight of 3,000 lbs. (1,361 kg) or more, additional authorization is required.
  • International Services: If a shipment has an actual or dimensional weight of 3,000 lbs. (1,361 kg) or more, additional authorization is needed
  1. When Importing To The States And Your Freight Forwarder Needs To Navigate A Large Pool Of Water, Should You Do This By Air Or Sea?

The answer to the above question will depend on Distance, Type of cargo, Time sensitivity, and Budget. However, generally, air freight is ideal for shipments up to 500kg in weight that contains time-sensitive and/or high-margin products. Meanwhile, ocean freight is good for shipments over 500kg and those containing low-margin, hazardous, and/or non-urgent items.