NVOCC vs. Freight Forwarder: Major Differences

What's in this article?

If you're in the market for freight shipping services, you may be wondering about the differences between NVOCCs (Non-Vessel Operating Common Carrier) and freight forwarders. Both types of shippers provide similar services and constitute a significant part of global trade – especially when it comes to shipping internationally.

But there are some significant differences between NVOCC and freight forwarders. In this article, we will discuss the key differences between freight forwarders and NVOCCs so that you can make an informed decision about which one is right for your needs.

What Are Freight Forwarders?

Freight forwarders are companies or individuals that specialize in arranging the transport of goods via air, land, or sea across different countries.

They act as a sort of travel agent for shipping in that they make all the arrangements necessary to ship your goods, mediating between the shippers and various international carriers. This includes trucking companies, ocean carriers (an NVOCC or a shipping line), as well as other transportation services.

In most cases, a freight forwarder will negotiate with a network of ocean carriers and entities that operate warehouses to find the most efficient and cost-effective shipping solution for shippers.

A freight forwarder may also provide other services such as finding warehouses for storage, arranging insurance, customs clearance, and filing other necessary paperwork.

What Is the Role of a Freight Forwarder?

The role of a freight forwarder is to act as a middleman between the shipper and the ocean carrier.

A forwarder's activities may include, but are not limited to:

Organizing cargo movement from Point A to B using multiple modes of transport, including sea, rail, and road. Points A and B may be inland or coastal locations
Negotiating freight rates with carriers on behalf of the customer
Booking cargo with carriers under their freight contract
Assisting in arranging transportation of the shipment from/to the customers' premises and port
Receiving cargo in warehouses before onward transport to customers' premises
Buying and claiming cargo insurance
Assisting the shippers (haul owners) with export declaration and import clearance
Offering consultancy services to shippers

Why Use a Freight Forwarder?

Here are some key reasons to use freight forwarding:

Save time and money

A freight forwarder can save you time and money by organizing the entire shipping process from start to finish.

This includes booking freight space, negotiating rates, and filing documentation.

Experience and expertise

A freight forwarder has the experience and expertise to ensure your shipment won't get lost in the shuffle.

A freight forwarder will make sure the carrier prioritizes your shipment and arrives at its destination on time.

What Are NVOCCs?

NVOCC stands for Non-Vessel Operating Common Carrier. These are carrier service providers that provide ocean freight shipping services without owning their vessels.

Instead, NVOCC operators usually have a fleet of load containers and contracts with VOCs (vessel operating carriers) or lines, which generally sell spaces on their vessels for shipping.

But even though they lack a vessel, NVOCC operators are recognized as carriers and issue their own House Bill of Lading.

In doing so, they undertake the responsibilities of a carrier, subject to the terms, conditions, and liabilities of their bill of lading.

It is widely believed that the US market has the largest number of NVOCC companies globally. The US may also be one of a few countries where NVOCCs need to be registered before offering services, as they must secure a license from the FMC before they can operate.

Examples of NVOCCs include:

Eagle Ocean Transport
Interactive Shipping
Kuehne + Nagel
Mainfreight
Nippon Express
DHL Global Forwarding

What Is the Role of an NVOCC?

The role of NVOCCs includes:

Issuing their bill of lading or waybills to customers
Holding cargo containers
Booking cargo space with lines on behalf of their clients
Tracking and tracing of shipments
Arranging land transportation from/to port
Clearing customs at the destination
Consolidation and deconsolidation of shipments using their own containers

What Are the Differences Between an NVOCC and Freight Forwarders?

Now that we have looked at the fundamental similarities of these two types of operators, let's turn our attention to the main differences:

Ownership of assets

One of the critical differences between freight forwarders and NVOCCs is that the former does not own any assets, while the latter does.

An NVOCC holds load containers and contracts with various lines to transport its clients' load.

On the other hand, a freight forwarder does not hold load containers. Instead, they rely on a network of carriers (VOCs or NVOCCs) to provide shipping solutions for their clients.

Contracts with shipping connections

Another difference between these two types of operators is the type of contracts they have with shipping lines.

An NVOCC has a contract with vessel operating carriers (VOCC) to sell spaces on their vessels and transport their clients' shipments, as they handle a considerable amount of orders from clients.

On the other hand, a freight forwarder does not have any contracts with other lines.

They usually don't need one as they don't own any assets, and they work with a network of carriers.

However, some freight forwarders may have service contracts with their respective lines to provide their clients with preferential treatment or rates.

Pricing

Another difference between NVOCC and freight forwarders is how they price their services.

An NVOCC usually prices its services based on a per-container basis.

They will charge a certain amount to use their load containers regardless of the volume of the haul being shipped.

On the other hand, a freight forwarder prices their services based on the volume of load being shipped. They charge extra for value-added services, such as storage, insurance, and customs, making them more expensive than NVOCCs.

Registration and licensing requirements

In most countries, NVOCCs must be registered with the relevant maritime authority and obtain a license before they can start operating.

However, this is not the case for freight forwarders.

In most countries, freight forwarders are not required to be registered or licensed because they don't own any assets and don't have contracts with various shipping lines.

However, there are some exceptions to this rule.

For example, in the United States, freight forwarders must be licensed by the Federal Maritime Commission (FMC).

In the European Union, freight forwarders must be registered with the local Chamber of Commerce.

Services freight forwarders and NVOCC providers offer

Freight forwarders typically offer a wider range of services than NVOCCs.

They can offer services such as:

Customs clearance
Insurance
Load tracking and tracing
Land transport from/to port
Storage and warehousing
Packing and crating

However, not all freight forwarders offer all of these services. It depends on the size and scope of their operation.

On the other hand, NVOCCs typically only offer maritime transport services, not other services such as land transport, storage, or clearing customs.

Some shipping companies act as a NVOCC and freight forwarder to satisfy their customers' needs.

Binding regulations

Another key difference between a freight forwarder and NVOCC is that the latter is subject to more binding regulations than the former because NVOCCs own their assets and have contracts with lines. Therefore, they are considered to be part of the maritime transport chain.

Because of this, they are subject to various international conventions and regulations such as the Hague-Visby Rules and the Hamburg Rules.

Freight forwarders are not subject to these conventions and regulations.

However, they are subject to other regulations, such as the license requirements of the country they are operating in.

Major differences in roles and responsibilities

Freight forwarders usually act as an intermediary between their clients and the various service providers they use. They will coordinate with different service providers to get their clients' shipments from point A to B.

NVOCCs, on the other hand, typically provide door-to-door services.

They take care of the entire shipping process from start to finish -- picking up the shipment, transporting it to the port, loading it onto the ship, and delivering it to its destination.

Global reach

Another key difference between freight forwarders and NVOCCs is their global reach.

Freight forwarders usually have a global network of agents and partners. This allows them to offer their services in different parts of the world, and monitor the goods of customers adequately.

NVOCCs, on the other hand, typically only operate in specific regions or countries. This is because they only have contracts with shipping operators in those regions or countries.

They only have a comparable reach when they act as both a forwarder and NVOCC.

Handling documentation

One of the most important responsibilities of a forwarder is handling documentation. This includes preparing and processing all the documents required for the shipment of cargo.

These documents include commercial invoices, packing lists, bills of lading, and insurance certificates.

Forwarders also track and monitor the status of the shipment and keep their clients updated.

NVOCCs also have to prepare and process all the necessary documents for the shipment of cargo. But most importantly, they issue their own bill of lading.

The bill of lading is a document that serves as an agreement between the carrier and the shipper to transport their haul from point A to Point B safely. This could be between 2 different ports, or from door to door.

Without the bill of lading, the cargo owner can't prove ownership or track and trace their shipment.

Filing cargo insurance

Another key responsibility of freight forwarders is filing cargo insurance on behalf of their clients. This is because they typically don't own the cargo they are shipping.

As such, they have to make sure that their clients' cargo is adequately insured in case of any damage or loss.

NVOCCs also have to file cargo insurance. But since they own the cargo they are shipping, they typically have their own insurance policy which covers the NVOCC's liability in case of any damage or loss to the shipment.

NVOCC vs. Freight Forwarder: How to Choose?

When it comes to choosing between a freight forwarder and an NVOCC, there is no one-size-fits-all answer.

It depends on your specific needs and requirements.

You can use an NVOCC if:

You need door-to-door shipping services
You are shipping from specific regions of the world where the vessel operator frequents
You have a large shipment
Your shipment isn't time-sensitive

You can use freight forwarders if:

You need shipping services from different parts of the world
Your shipment is small and time-sensitive
You require a wide range of services such as warehousing, assistance in documentation, etc.

What Is the Difference between NVOCC and OTI?

An OTI (Ocean Transportation Intermediary) is a company that provides international ocean transportation services as either a freight forwarder or an NVOCC.

An OTI must have an active license from the Federal Maritime Commission (FMC) to offer such services.

What Is the Difference between a Freight Forwarder and a Logistics Company?

Freight forwarding is simply the coordination and shipment of goods from one place to another using multiple transportation modes.

A logistics company, on the other hand, provides a complete range of supply chain solutions that manage the movement of goods throughout the entire lifecycle.

What Is the Difference between NVOCC and VOCC?

Both of them offer ocean freight services.

But, just as the name implies, while a VOCC has its own ocean vessel, an NVOCC doesn't.

They own containers and are always booking space on VOCCs.

What's Next?

NVOCCs and freight forwarders are both essential players in the international shipping industry. They offer different services and have their own advantages and disadvantages.

It's important to choose the one that best suits your needs, is reputable, and can be relied upon.

If you're looking for a trustworthy shipper to ship your car, freight, or heavy equipment, A-1 Auto Transport is here to help. Contact us now to learn about our competitive freight rates and comprehensive services.

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