Q: I’ve been in transportation for quite a few years, and I thought I was pretty familiar with the industry. But we’re just now opening up an international market, and I feel like I’m starting all over.
We’re shipping to an Asian subsidiary (a recent acquisition) in fairly large quantities, as well as having product imported from them, and I started, as I usually do, trying to negotiate directly with the maritime carriers. That didn’t work well because even though to me our projected volume is pretty sizable, it wasn’t enough to attract much interest from the ship lines. It was suggested to me that we deal instead with an international freight forwarder.
That sounded OK to me; I’ve used domestic forwarders in the past, and I’m familiar with how they operate. But in international service it seems to be a whole different world. The forwarder I contacted told me he wouldn’t issue me a bill of lading, that it would come from the carrier instead. “Then what am I paying you for?” I asked. He said his job was just to set up the arrangement, but that he wouldn’t actually do the transportation.
Well, I knew that, but to me the big benefit of forwarders is that to the shipper (me), they do the same things as carriers except the actual haulage — including issuing bills of lading, assuming in-transit liability, and so on. This guy indicated he’d be acting more like a broker, and I’m leery of brokers because they don’t take on those other responsibilities.
And it gets even more confusing, because our forwarder told us we also needed to hire a broker! I mean, how does that work out? Is this some obscure sort of double-brokerage, which I hate like poison? Can you clarify any of this for me?
A: Yeah, I can, but I can also tell you you’re way out of your depth. At least for now, you need to hire somebody with more experience in international trade; you’re a babe in the woods here, because international operations are very different from what you’re used to in domestic service, including the terminology.
“A rose is a rose is a rose,” Gertrude Stein wrote. But she wasn’t involved in transportation, where the names of things can be so radically different that her rose would probably be a nasturtium or a tulip if it were in another flower bed.
Well, not the names of all things. A carrier is still a carrier, be it in international or domestic trade. But in the maritime area, there are two types of carriers: plain old carriers, and non-vessel-operating common carriers.
The first kind are the ship lines, which should be familiar. The second are what you’re used to calling “freight forwarders” in domestic service — that is, they provide all the services of carriers (issuing bills of lading, accepting loss-and-damage liability, etc.) except, as their name tells you, they don’t operate ships and therefore don’t physically move the cargo.
But if you don’t have enough volume to interest carriers in negotiating with you, that’ll probably hold true for NVOCCs, too.
Now, notwithstanding the name, an “international freight forwarder” isn’t an NVOCC. It’s the maritime version of a domestic broker. That is, it arranges for, but doesn’t provide, the transportation service. And, like the brokers you’re used to, it doesn’t issue B/Ls of its own, doesn’t accept liability for loss and damage, doesn’t, in other words, act as a carrier to its shippers.
What the international forwarder can do for you is combine your volume with that of its other customers to get you better rates. It also can (as with domestic brokers) take a lot of the hassle of setting up transportation off your back.
As for the “other broker” your international forwarder is advising you to contact, that’s undoubtedly a customhouse broker. These folks specialize in shepherding your shipment through the paperwork required to cross national borders. So this isn’t “double brokering” at all; the two perform quite different tasks.
One last thing: You seem concerned about having the party you deal with assume in-transit loss-and-damage liability. Well, maritime liability is a lot less than on domestic shipments. Quite literally, if your shipment is damaged when the captain steers the ship onto a reef while blind drunk, the carrier’s not liable. You’ll need separate insurance.
You’ll also need, as I said, more expertise in maritime transportation. It is indeed a “whole different world.”
Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.