Logistics Terms What are the Differences? NVOCC vs Freight Forwarder

In the maritime logistics industry, both NOVCCs (Non-Vessel Operating Common Carrier) and Freight Forwarders play an intermediate role in arranging transport between shippers and ocean carriers. NVOCCs don’t own ships but secure space from other ship owners to provide transport services to shippers under their name. On the other hand, freight forwarders sign a transport contract on behalf of shippers and work as an agent who conducts a transport.

Let’s focus on commonalities and differences between NVOCC and Freight Forwarders.

NVOCC is an acronym for “Non-Vessel Operating Common Carrier,” which indicates “a transport company that doesn’t own ships.” In the maritime transportation service, NVOCCs don’t have ownership of cargo, make a contract for transportation of customers’ cargos, and issue shipping documents.

They serve diverse maritime transport services, mostly those are used by importers or exporters dealing with overseas cargos.

Ownership of ships: NVOCCs don’t own ships. It secures space through a contract with ship owners.

Securing large space: NVOCCs secure space stably through a large volume shipment contract with ship owners.

Selling split space: NVOCCs provide smaller spaces to various shippers.

Issuing own Bill of Landing: NVOCCs issue its own Bill of Landing separate from one from ship owners.

Multimodal transport: NVOCCs offer multimodal transport which covers not only maritime transport but also inland transport, unloading, etc.

Diverse additional services: NVOCCs give services such as insurance, customs clearance, packaging, etc. to shippers for convenience.

Various transport options: Through contracts with diverse carriers, NVOCCs provide various transport options.

Favorable for small shippers: They allow small-size shippers to enjoy benefits from a large volume of shipment.

One-stop service: They offer One-stop service by offering additional services, such as customs clearance, insurance, etc. other than transport.

1) How NVOCCs Operate
NVOCCs make a transport contract with shippers and decide freight rates and transport conditions. They secure space from carriers, load cargos and manage the transportation process. They issue shipping documents under its (NVOCC’s) name and buy insurance. As such, NVOCCs provide the one-stop transport service to shippers and take overall authority and responsibilities.

2) Legal Status of NVOCC
From a legal perspective, an NVOCC is defined as carrier(s) in domestic and international marine transport acts. As a carrier, it is responsible for the safe transport of cargos and damage and loss during the transport. In addition, as it is involved in a contract, it has the rights to issue transport documents, secure space and purchase insurance.

Freight Forwarders are an intermediary in the transport process, providing the best ways to deliver customers’ cargos to destinations through various modes. Forwarders don’t have ownership of cargos and play the role of managing and coordinating contracts between customers and shipping companies.

Utilizing diverse transport modes: Forwarders design optimal routes using diverse ocean, air and land transportation modes.

Global network: They build a wide network across the world and support stable and rapid transport.

Combined services: They give a wide range of additional services, such as arranging transport, customs clearance, insurance, storage, package, etc.

Optimized routes: They compare transport options and find the most efficient route to cut down on expenses.

Solving problems: They promptly resolve issues (delays, customs, etc.) during the transportation, minimizing damage of shippers.

Real-time tracking: They provide accurate information to shippers by tracking locations of cargos in real-time.

Expertise: Forwarders support efficient transport based on expertise and experience in international logistics.

Network: They can deliver cargos quickly and safely as they build a wide-spread network with shipping companies, airlines, customs agents, etc.

One-stop service: A shipper can address all tasks with one company as forwarders provide additional services, such as transport, customs clearance, insurance, etc.

Cutting costs: They streamline complex transport processes and reduce costs through the economy of scale.

1) How Freight Forwarders Work
They reflect requirements of shippers, signing a contract with liners or NVOCCs, and negotiating conditions and rates. And they arrange and manage the entire process of transport from loading to the arrival of cargos. In this process, they implement tasks of booking space, preparing documents, handling customs clearance, organizing warehouse storage and delivery, etc.

2) Legal Status of Freight Forwarders
From the legal point of view, forwarders are categorized as a freight forwarder, not a carrier. As a forwarder is not a party signing the transport contract, it is not under direct responsibility for damage or loss during the transport. However, they could be in charge of damage during the transport arrangement.

Arranging transportation: Both arrange and manage cargo transportation on behalf of shippers.

Multimode transport: Both design and operate the most optimized routes by utilizing transportation modes of ocean, air, land, etc.

Shipment documents: Both make and submit shipment documents, such as Bill of Landing, invoices, etc. and go through customs clearance on shippers’ behalf.

Cargo tracking and management: Both track cargos and transportation status in real-time and provide the information to shippers

Additional services: Besides transportation, both offer diverse additional services including insurance, storage, packaging, etc. to promote shippers’ convenience.

Global network: By leveraging a wide network across the globe, both support rapid and stable transportation.

While NVOCCs and freight forwarders have distinct roles, their roles like transportation, customs clearance, shipment tracking, and customer services overlap. These common tasks could help customers to efficiently manage complex global transportation.

Ownership of Ships

NVOCC: It doesn’t own ships but rent space from carriers to transport goods. In other words, it doesn’t sail ships by themselves but transport goods by renting space.

Forwarder: Generally, it doesn’t own ships and focuses on cargo shipment.

Issuance of Bill of Landing

NVOCC: it can issue its own Bill of Landing because it signs a direct contract with shippers and has a partial responsibility for transportation.

Forwarder: Normally, it issues HBL (House Bill of Landing) and acts as an intermediary for shipment.

Liability of Transportation

NVOCC: It partly holds responsible for cargos, which means that it has partial responsibility for damage or loss of cargos.

Forwarder: As a party organizing the transportation, the liability for transportation is limited. The liability for damage or loss mostly lies with ship liners.

Service Scope

NVOCC: It focuses on ocean transport and plays the role of a carrier by issuing its own Bill of Landing.

Forwarder: It organizes multimodal transport by combining ocean, air and land transport and provides additional services including customs clearance, insurance, storage, etc.

International Association

NVOCC: It doesn’t follow standard processes as it is not linked with an international association.

Forwarder: As it is related to FIATA (International Federation of Freight Forwarders Association), it abides by the process of FIATA standards.

Warehouse Ownership and Operation

NVOCC: It doesn’t own or operate a warehouse. But only big NVOCCs that play all functions of carriers have their own warehouses.

Forwarder: It usually owns and operates a warehouse for cargo to move them to airports and ports.

How They Operate

NVOCC: It works independently through an agent or a third-party company.

Forwarder: Through coordination, it cuts costs and improves on-time delivery.

Since there are some differences, factors such as types of cargo, distance, budget and others should be considered in advance before making a decision to choose an agent.

If the differences between NVOCCs and freight forwarders are clear, you need to decide which service is more appropriate for you while figuring out two main determining factors.

Service Scope: If you are well aware of the ocean transport process and only need a simple serivce of transportation, an NVOCC could be a good option. You can save some fees but can’t receive additional services.

Costs: Forwarders find the most appropriate routes, prepare containers and transportation modes, and suggest the best rates but they charge high service costs.

If you are not well-informed about the process of maritime transport, a forwarder could help you.

In many cases, NVOCC owns containers and forwarders utilize external assets.

While both NVOCC and Forwarder provide transportation services, forwarders offer customized services that meet the needs of customers by combining ocean, air, and land transportation modes.

Both undertake the logistics tasks of shippers and support smooth transportation. In this process, both provide diverse additional services.

An NVOCC is more suitable for large cargos and long-distance ocean transport while shippers find a forwarder more advantageous when addressing cargos with small volumes and multimodal transportation. In terms of costs, an NVOCC could charge higher costs as it utilizes its own infrastructure and a forwarder could be more cost-competitive as it coordinates with a variety of shipping companies.

An NVOCC is mostly dedicated to ocean transport. Therefore, if you require multimodal transport using not only ocean but also air and land, choosing a forwarder would be more efficient. Shippers need to finalize an agent considering conditions and requirements.