Help Center
Help Center
Help Center

Here you can find useful information about shipping & logistics.

Here you can find useful information about shipping & logistics.

Here you can find useful information about shipping & logistics.

Slider

Contents

What is freight forwarding?

A freight forwarder (or forwarding agent) is a person or a company who organizes the movement of goods from the manufacturer or producer to a destined distribution center, customer or other end-point (door-to-door). In its purest form, a freight forwarding company does not own any assets like warehouses, trucks, vessels, warehouses or airplanes but outsources the physical carrying activity to a carrier.

The reason why customers make use of freight forwarding services instead of carriage services directly lays in the definition of freight. When the total weight of goods remains below 70kg, the goods are regarded as ‘parcels’ or ‘express’. Express companies like UPS, FedEx, DHL or TNT own assets throughout the full supply chain to move the shipment from one end-point to another. However, when the cargo exceeds the approximate threshold of 70kg, no company owns enough assets to move the cargo from endpoint to endpoint. Thus, multiple (type of) carriers are involved in handling the chain of movement.

It requires a lot of knowledge, time and effort to manage such a supply chain with so many subsequent actors. Customers therefore tend to use freight forwarders as their main point of contact and service provider, who in turn, outsource the services to carriers.

The freight forwarding contract - All you need to know in a nutshell

A freight forwarder contracts with a client for the obligation of entering, for the benefit of the latter, into one or more contracts of carriage with a carrier to transport goods which are put at the freight forwarder’s disposal by the client. The freight forwarder thus enters into a contract of carriage not for its own benefit but for the client’s benefit. Therefore, a freight forwarding contract is a contract of commission (agency), whereby the commission agent contracts in its own name, but at the client’s risk and account. In other words, although it is the freight forwarder which is a party to the contract of carriage, all obligations, costs or liabilities will ultimately be borne by the client and not by the freight forwarder.

In freight forwarding, forwarding agreements are usually subject to forwarder’s terms & conditions or the general terms & conditions of the sector, developed by the national association of freight forwarders from the respective country, as national laws allow for freedom of contract in this matter. This means that in forwarding agreements there are no legal constraints for setting any type of rights, obligations or liabilities. Nevertheless, such sector conditions are regarded as soft law and thus, the freight forwarder and the customer have to agree upon their applicability.

As an example, almost all freight forwarders operating in the Dutch market, operate under the FENEX conditions, which are supplemented by Dutch law, Book 8 of the Civil Code.

Due to the nature of the freight forwarding contract as a commission contract, the freight forwarder has to exercise due diligence (reasonable care) in the selection, instruction and supervision of the third parties (carriers, insurers, warehousing operators etc) it contracts with in the name of the customer. Should it fail to exercise due diligence, the forwarder itself and not the third party contractors will be liable towards the clients.

For instance, if the forwarding agent is aware that a carrier is insolvent and lacks any liquidity at the moment the carriage contract is concluded, in case of a claim for compensation from the client against the carrier, it will be the forwarder who will have to step up and pay the compensation as it didn’t exercise due diligence and selected a bankrupt carrier to perform the carriage.

FCL/LCL - Which one should I book?

Full Container Load (FCL) and Less Than Container Load (LCL) are very common connotations referred to when shipping goods overseas. FCL is a type of ocean shipment whereby the cargo occupies the full carrying capacity of a container, either a 20ft or 40ft container. Oppositely, LCL shipments imply that the cargo to be shipped is not sufficient to justify the use of an entire container, but consolidating the cargo with that of other shippers into one container is a better option. Does it seem too simple? That’s because shipping it’s never simple. Hereby some other factors to help you decide whether to use FCL or LCL as shipping possibilities:

LCL requires extra operations than FCL, such as consolidation in Port of Loading, processing multiple documents by Customs Authorities and deconsolidation in Port of Discharge, thus creating the possibility of extra delays. From this perspective, an FCL shipment may arrive at destination sooner than an LCL shipment.

On the other hand, as FCL shipments need to be claimed from the carrier, delivered to destination and then the container be returned to the carrier, all in a matter of several days (usually 7-10 days), FCL consignments are more likely to accrue demurrage or detention costs as LCL shipments are usually cleared immediately and taken to warehouse for deconsolidation.

If you ship your goods on LCL terms, you will sometimes receive a House Bill of Lading from the agent to whom you released the goods and the agent will thus become a ‘paper carrier’. This way, you can have an exact view of who your carrier is, notwithstanding the fact that the agent further contracts with an ocean carrier to perform the carriage from which he receives a Master Bill of Lading.

Incoterms explained

In international trade we come across several shipping terms such as FOB, CIF, DDP which make us think about international sales contract and the Incoterms Rules. But do we know exactly what these rules are, what their purpose is and what do they actually imply? Hereby some explanations of the 11 Incoterms Rules 2010:

Ex Works (EXW)

Delivery occurs and all the risks pass to the buyer when the seller places the goods at the disposal of the buyer at the seller’s premises or at another named place in the sales contract (i.e. factory, warehouse, etc.). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export.

Free Carrier (FCA)

The seller must deliver the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties must clearly specify the point within the named place of delivery, as the risk passes to the buyer at that point.

Carriage Paid To (CPT)

In CPT, the seller has to hand over the goods to the carrier or another person nominated by the seller at an agreed place and must contract for and pay the costs of carriage necessary to ship the goods to the named place of destination.

Carriage and Insurance Paid To (CIP)

CIP works similar to CPT as the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place and must contract for and pay the costs of carriage necessary to ship the goods to the named place of destination. In addition to CTP, the seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage, on a minimum cover. Should the buyer wish to obtain extra insurance protection, it will need either to agree on it with the seller or to make its own arrangements.

Delivered at Terminal (DAT)

DAT means that the seller fulfills its obligations when the goods, once unloaded from the transport vehicle, are placed at the disposal of the buyer at a named terminal (including but not limited to warehouse, cargo terminal, container yard etc) at the named port or place of destination. The seller bears all risks for bringing the goods to the terminal and for unloading them.

Delivered at Place (DAP)

The seller transfers all the risks to the buyer when he places the goods at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The buyer bears all risks for unloading the goods and for bringing the goods to his premises.

Delivery Duty Paid (DDP)

With DDP, the seller delivers the goods when they are cleared for import and put at the disposal of the buyer on the transport vehicle at the named place of destination. The seller bears all the costs for bringing the goods to destination and has the duty of clearing the goods not only for export but also for import, and to pay for all customs formalities and duties.

Incoterms rules specific for sea carriage or carriage by inland waterways

Free Alongside Ship (FAS)

FAS means that the seller completes delivery when the goods are placed alongside the vessel, for example on a quay, nominated by the buyer at the named port of loading. The risk for loss of or damage to the goods passes when the goods are delivered alongside the ship. The buyer bears all costs from that moment onwards.

Free on Board (FOB)

The seller must load the goods on board the vessel nominated by the buyer at the named port of departure. All the risks are transferred to the buyer when the goods are put on board the vessel by the seller and the buyer bears all costs from that moment onwards.

Cost and Freight (CFR)

CFR works similar to FOB, meaning that the seller has to place the goods on board the vessel and the risk of loss of or damage to the goods passes to the buyer when the goods are on board the vessel. In addition to FOB however, the seller must also contract for and pay the costs and freight necessary to ship the goods to the named port of destination.

Cost, Insurance and Freight (CIF)

CIF is very similar to CFR. This means that the seller delivers the goods on board the vessel and the risks pass to the buyer when the goods are on board the vessel. The seller must also contract for and pay the costs and freight necessary to ship the goods to the named port of destination. The seller must further insure the buyer’s risk of loss of or damage to the goods on a minimum account. Should the buyer wish to get extra insurance protection, it will need either to agree upon it with the seller or to make its own extra arrangements.

What are storage, demurrage and detention costs?

You booked a shipment, paid the freight and all other duties included, but later you received another invoice with extra costs for storage, demurrage or detention? In practice, people seem to get confused about the meaning of these costs and the reason they accrue. To help you fully understand the reason why you received these costs and their meaning, hereby some brief explanations:

Storage

Storage costs are compensation for using the port, terminal or inland container yard facilities to store the container. These costs are levied by the port or the terminal to the carrier and the carrier will seek to recover them from the importer. Normally, these charges are already included in the freight, but can be charged separately as well, if extra storage time is necessary.

Demurrage

Containers belong to shipping lines (carriers) and they must be cleared by the consignee within a specific time frame (known as ‘free time’) allowed by the carrier, usually between 7 to 10 days. Demurrage charges accrue when the container is not moved out of the port/terminal for unpacking within the allowed free days offered by the shipping line. Demurrage costs are levied by the liner to the consignee (importer).

Detention

Unlike demurrage, detention costs arise in case the importer has picked up the container for unpacking, but the empty container has not been returned to the nominated place within the agreed free-time. In other words, detention costs are compensation for the carrier because the importer ‘detained’ its container and the carrier could not make use of it.

Container sizes

Containers can greatly vary in size and capacity and it really depends on the goods you want ship which one you must use, as their size influences the booking price. Down below you can find some quotes about the different types of containers existing:

Container sizes

(*) These containers are very rarely seen in practice as they are not very cost-efficient when it comes to international shipping. For smaller quantities of cargo, the option for Less than Container Load (LCL) remains a better choice.