How to use freight forwarding
The freight forwarding industry can provide a range of key services to traders, taking over on your behalf many of the responsibilities involved in transporting your goods around the world as quickly, securely and affordably as possible.
As well as arranging the transport of your goods - by air, sea, rail or road - freight forwarders provide other services such as customs clearance, export documentation and insurance. They offer distribution, warehousing, packaging and other supply chain services. Most forwarders will handle parts of the process for you, or can offer control of the entire transport process. Many transport and logistics operators also offer freight-forwarding services.
This guide outlines the how freight forwarders can help traders. It explains the roles of forwarders, customs agents and brokers and lists the key things to look for when hiring a freight forwarder.
Freight forwarding services
The role of a freight forwarder is to help importers and exporters transport their goods.
The freight forwarder's core responsibilities
Most freight forwarders are likely to specialise in particular service areas, modes of transport or markets. Freight forwarders are often seen as the travel agents of international trading.
If you have a consignment of goods you need to move from country A to country B, a forwarder will identify and book the best routes, modes of transport and specific carriers for you dependent on your requirements. Many transport and logistics operators also offer freight-forwarding services.
Using a forwarder can cut your costs. Because they arrange for the transport of huge numbers of consignments, they can consolidate loads going to a single destination to keep freight charges down for individual traders. You should compare prices from a range of suppliers to find the best level of cost and service for you.
Other services freight forwarders provide
Freight forwarders typically offer a wide range of secondary trade-related services as well as their core transport ones. These include:
- customs clearance - forwarders can complete customs paperwork on your behalf, and pay any taxes or duties owed
- other documentation issues - eg Bills of Lading, or any documents required by banks before payment is released
- insurance - many forwarders will be able to supply insurance services
- inventory management
- logistics and supply-chain management of value-added activities
Bear in mind that you'll also be able to use your forwarder as a valuable source of information and advice about the international trading process. This can be particularly useful for businesses that are new to international trade.
For example, you can ask a forwarder as part of your contract to help you ensure your goods are properly packaged and labelled for export.
Freight forwarders and customs agents and brokers
For many traders, the most important category of trade-related service providers is freight forwarding.
In addition to arranging transport for your goods, freight forwarders also offer a range of other services - from customs clearance and trade documentation to insurance and supply-chain management. While many forwarders offer a range of services, customs agents and customs brokers provide a different service.
Customs agents and customs brokers fulfil similar roles to each other and the terms are often used interchangeably.
What is the difference between a freight forwarder and a customs agent or broker?
While a freight forwarder will arrange for your goods to be transported from one country to another and typically provide other services as well (such as customs clearance), customs agents and brokers make sure that your goods can be cleared through customs en route to the final place of delivery in the UK.
Agents and brokers in the UK usually operate as direct representatives, but they can also act as indirect representatives. A direct representative acts in your name and can't be held liable for your customs debt. An indirect representative acts in their own name but on your behalf. They can be held liable for your customs debt.
Most freight forwarders also offer customs-clearance services. However, you should note that in some countries outside the UK customs broking is a licensed profession. This means you'll be limited in the range of people you can appoint to clear your goods through customs for you. However, when most consignments arrive at their final port/airport of destination, they are customs cleared by the importer in conjunction with their locally appointed customs broker.
Whether you decide to use a freight forwarder or a customs broker or agent, make sure that you provide them with full and accurate information. The key things to provide are a copy of the commercial invoice and the tariff classification code for your goods - unless you have asked them to classify the goods for you.
Advantages and disadvantages of using a freight transporter
When transporting your goods around the world, you can manage the process yourself or outsource your transporting needs to a freight forwarder.
The factors you should consider when deciding if you should use a freight forwarder include:
the scale or complexity of your transport needs - the more complicated your requirements, the more likely you are to benefit from using a specialist service
whether you have the expertise or experience to arrange transport yourself - remember you also have to consider technical requirements such as customs clearance procedures
whether you have the time and expertise to manage the process yourself
cost - freight forwarders may be able to offer lower freight rates than you can negotiate with carriers, but you should be clear about all fees and surcharges you'll be liable for and about the level of service you'll receive
the possible convenience of using a freight forwarder to handle most or all of your trade-related services rather than having to manage multiple service providers
whether you can comply with security arrangements and labelling rules for your goods
As with most business decisions, it's a matter of weighing up the advantages and disadvantages. There is no simple answer. The cost-benefit equation will differ from business to business, and possibly also from transaction to transaction.
Bear in mind that you may be able to gain valuable advice from your freight forwarder. In the same way that accountants are often a useful source of general business advice, working with a freight forwarder can be a good way of learning about international trade.
Finding and choosing a freight forwarder
As with all aspects of international trade, it pays to do your research before choosing a freight forwarder to look after the transportation of your goods. Draw up a shortlist of at least three and compare them before selecting one.
How to find freight forwarders
There are many bodies that can help you search for freight forwarders, including:
experienced exporters - preferably those in your sector, whose freight needs are likely to be similar to yours
your trade association - it should be very familiar with the freight needs of businesses in your sector
freight-forwarding trade associations - particularly the British International Freight Association (BIFA) for UK freight forwarders and the International Federation of Freight Forwarders Association (FIATA) for those overseas
Bear in mind that while there's a relatively small number of major global freight-forwarding companies, there are thousands of smaller specialist operators.
How to choose a freight forwarder
The most important factor in choosing your shortlist of freight forwarders should be their experience with the routes and goods your business deals with. For example, if you transport goods that need refrigerated containers, ask for references from businesses with similar needs.
Other things you should find out about your shortlisted candidates include:
which ancillary services they can provide, and how they charge for them
how long they've been running and how well established they are - ask for references
how willing they are to explain the process to you as it unfolds - this can be a valuable learning opportunity if you're new to international trading
the overall cost for their services
The costs of using a freight forwarder
It's not possible to give a precise indication of costs, but this page outlines some of the main influences of the costs of using a freight forwarder.
Basic determinants of freight costs
The five main factors that influence cost are:
mode of transport - eg airfreight can be significantly more expensive than transit by road, rail or ship
distance / destination - the farther your goods have to travel, or the more unusual the destination, the higher costs are likely to be; particularly due to rising fuel cost
weight and volume - charges are usually based on the weight of goods, but calculation switches to volume above a certain threshold (one cubic metre per tonne for shipping, three for road, and six for air)
value - in some instances, such as earthenware and woollen textiles, charges are calculated on the basis of goods' value per tonne
the type of contract you have with the freight forwarder - while most forwarders usually charge per shipment, some will agree an annual service contract, so you should weigh up the costs and benefits of each type
Additional freight forwarding charges
Loads that require special handling of any sort will usually attract an extra charge.
This covers goods such as:
perishable goods and live animals
outsize goods that don't fit in standard containers
other irregular goods, eg a load that can't have anything stacked on top of it, or goods that require a special crane for loading
However, extra charges depend on your contract. Freight forwarders and carriers sometimes add an additional fee for handling these types of products. Always ensure that you get a full quotation from your freight forwarder and understand exactly what you are and what you are not paying for.
Security for road goods
Some dangerous goods travelling by road, normally moving in large quantities, are subject to legislation. The rules mean any company transporting dangerous goods must:
- only offer dangerous goods to carriers that have been appropriately identified
- make sites that temporarily store dangerous goods secure
- run security awareness training
- have a security plan in place, if you deal with high consequence dangerous goods
Bear in mind that asking your freight forwarder to provide secondary services - such as arranging customs clearance or insurance cover - will obviously lead to higher charges.