In the shipping world, you may hear a lot about shipping lines, freight forwarders, airlines, cargo lines, along with many other terms. And very often, shippers ask: "Why do I need a freight forwarder? Can I just work directly with the shipping lines?"
As a quick explanation, a freight forwarder (FF) forwards all the services needed to import or export your products to you – their customer. They do this with the help of shipping lines, airlines, truck companies, customs brokers, warehouses, and other logistics parties. They have special agreements with these service providers and that is one of the advantage when you work with forwarders.
Let’s take a look at the main differences:
A FF sub-leases the space in a ship to carry one or more containers. A forwarder does not own any shipping vessels, but they do work closely with the shipping lines that do. A forwarder is the intermediary between the shipping line and you and other business owners, as they consolidate different companies’ shipments into one container. Otherwise, it would be impossible to ship small loads of cargo at affordable prices, since you would have to pay the shipping line for a full container. These same rules apply to an airline, although airlines do not offer containers – just space in the cargo hold. They provide a better rate to a FF that ships bigger volumes, and the savings are then passed on to you by the FF.
Network of service providers
A FF always sub-contracts other companies to provide import and export services – that is why they are called a forwarder. They have relationships not only with shipping lines, but also with customs brokers, truck companies, warehouses, dedicated printing companies, and many other businesses that a shipper might need. The FF will provide you with all the services necessary to move your products from origin to destination using their network of service providers. The benefit of working with a FF is huge when you don’t want to waste time tracking down services from different companies, a process that involves many different contact points, different quotes, different conversations, different invoices, etc. A shipping line cannot provide value added services, because they are dedicated only to transport containers in a ship. Sometimes the shipping line can truck the container from the port to a final destination, but without document services, customs clearance, or any other service.
A FF will usually have a location for consolidation of cargo, sometimes referred to as Container Freight Station (CFS). They use this location to load/unload containers, receive all the import items that are coming from the ship to prepare them for distribution, and store all the export items that come from different companies to be consolidated into one container. Shipping lines and airlines do not have a CFS, because they do not do consolidation.
Common agreements between FF and shipping lines
Freight forwarders work with shipping lines in order to get the best deal possible. FF try to obtain special agreements for rates, demurrage and detention benefits, credit terms, or sometimes even General Rate Increase (GRI) omissions. The negotiations depend on the size and demand of the FF at the import/export locations, but also on their ranking at the global level and on the negotiations being done by headquarters.
The most common agreement is the contract for specific shipping rates. Freight forwarders consolidate shipments from multiple shippers, while shipping lines might offer certain rate levels in exchange of minimum volumes from a FF, which can last for a few months. That is why for small and medium shippers, working with freight forwarders is more beneficial than going directly to shipping lines. Shipping lines do not work directly with small or medium shippers. The rates offered by them (to forwarders) are usually affected by peak seasons, such as Chinese New Year, or by increases in bunker prices. If you work constantly with the same FF, you will need to find out if they have special agreements that can benefit your freight. But in general, FF will forward their rate discounts to their clients, adding their valuable expertise, service network, and constant attention to detail.