Freight Forwarder

A freight forwarder is a company that arranges the movement of goods on behalf of shippers, booking space with ocean carriers, airlines, railways and trucking firms and handling the paperwork that lets cargo cross borders. Most forwarders own no ships or aircraft. They buy transport capacity in volume, combine smaller loads, and sell the joined-up service to importers and exporters under one quote and one point of contact.

Forwarding sits between the cargo owner and the operating carrier. It is often confused with customs brokerage, a separately licensed activity in many countries, and with the non-vessel operating common carrier (NVOCC), which accepts carrier liability and issues its own transport documents. The trade's worldwide body is FIATA, the International Federation of Freight Forwarders Associations, founded in Vienna in 1926 and now based in Geneva.

Think of a travel agent for cargo. A family planning a trip abroad could book every flight, train, hotel and transfer separately, but an agent who knows the routes and the fine print can stitch the journey together and step in when a connection is missed. A freight forwarder does the same for a pallet of machine parts or a box of clothing travelling from a factory to a shop on another continent.

The forwarder picks the route, reserves space with the companies that actually move the goods, prepares or checks the documents the authorities and the bank will ask for, and keeps track of the shipment along the way. Small shippers gain the most, because the forwarder can group their boxes with other customers' goods and pass on the lower price that comes with buying in bulk.

A typical forwarder offers a bundle of services that can be bought together or one at a time:

• Booking and routing. The forwarder chooses carriers and transit points and reserves capacity, often under contracts it negotiates for its whole customer base.
• Consolidation. Part loads from several shippers are packed into one container or air pallet, a practice built on containerization and the TEU as a unit of capacity.
• Documentation. Forwarders prepare or check the commercial invoice, packing list, certificates of origin and transport documents, and apply the delivery terms the parties agreed under Incoterms.
• Customs and compliance. The forwarder coordinates export and import clearance, either itself or through a licensed broker, and screens parties and goods against export controls and sanctions lists.
• Cargo insurance, warehousing and tracking. Many forwarders arrange marine cargo cover, store goods between legs and report delays such as long dwell time at a congested port, which can lead to demurrage charges.

The legal role a forwarder plays matters when goods are lost or damaged. Acting as an agent, the forwarder arranges carriage in the shipper's name and is liable mainly for its own negligence in choosing and instructing carriers. Acting as a principal, it contracts as the carrier, issues its own house bill of lading or house air waybill, and answers for the whole journey while buying space from the real carrier under a master bill. A single shipment can therefore carry two layers of documents.

In the United States the Federal Maritime Commission licenses ocean transportation intermediaries, a category that covers both ocean freight forwarders and NVOCCs, and requires them to show financial responsibility through a bond. Customs brokers are licensed separately by US Customs and Border Protection. Other countries draw the lines differently: many have no forwarder licence at all and regulate only customs representation, so national rules should be checked for each market.

Air freight is charged on whichever is greater, the actual weight or a volumetric weight that reflects the space a parcel occupies. Under the common IATA convention of 6,000 cubic centimetres per kilogram, the volumetric weight is:

• $L$, $W$ and $H$ are the length, width and height of the package in centimetres.
• $W_{\text{vol}}$ is the volumetric weight in kilograms; the chargeable weight is the larger of $W_{\text{vol}}$ and the actual weight.

A crate measuring 120 by 80 by 100 centimetres takes up 960,000 cubic centimetres. Dividing by 6,000 gives a volumetric weight of 160 kilograms. If the crate actually weighs 110 kilograms, the airline and the forwarder bill 160 kilograms, so light, bulky goods cost more to fly than their scale weight suggests. Ocean groupage uses a similar rule, commonly treating one cubic metre as equivalent to 1,000 kilograms.

Because forwarders produce or collect most of the shipping documents, they sit close to the payment side of trade. Under a letter of credit or a documentary collection, the exporter is paid only when the right documents reach the bank, so a forwarder's error in dates, port names or descriptions can delay settlement. Where the parties need a transferable document, the forwarder may issue an order bill of lading; where the goods are already paid for, a straight bill of lading or a waybill is usually enough.

FIATA publishes standard forms for its members, including the negotiable FIATA Multimodal Transport Bill of Lading (FBL) and its digital equivalent, the eFBL. Forwarders that issue the FBL must carry liability insurance on its terms. The move towards the electronic bill of lading is changing this work, as is the scrutiny banks now apply to shipping records when checking for trade-based money laundering.

• FIATA – International Federation of Freight Forwarders Associations
• Federal Maritime Commission