Exporters often use these two words as if they mean the same thing. Many companies in India work as both. But they are different roles, with different risks. If you are starting out, or deciding what to add to your business, the difference matters.
What a freight forwarder does
A freight forwarder arranges the movement of someone else's cargo. It finds a line and books the space. It arranges transport and paperwork, and works with everyone involved. Its customer is the exporter or importer. It earns on the service and on the margin in its rates.
Traditionally, a forwarder acts as the customer's agent. It arranges the carriage, but it does not promise to carry the goods itself.
What an NVOCC does
NVOCC stands for Non-Vessel Operating Common Carrier. It has no ships. But to its customer, it acts like a carrier.
- It buys space from shipping lines, often under its own contract. It sells that space again at its own rates.
- It issues its own bill of lading, as the carrier.
- It takes on a carrier's responsibility to its customer for the goods.
- It often runs its own containers, or leases them. So it has to manage them around the world.
The shipping line sees the NVOCC as its customer. The exporter sees the NVOCC as its carrier.
The difference in one question
Ask this question. If the cargo is damaged at sea, who does the customer claim from?
When a forwarder acts as an agent, the claim is generally against the carrier, and the forwarder helps. With an NVOCC, the customer claims against the NVOCC under its bill of lading. The NVOCC then claims against the line. So an NVOCC carries more risk. It needs to think about liability insurance and the terms on its bill of lading.
The line between the two is not always this clear. A forwarder who issues its own house bill of lading may be treated as a carrier for that shipment. What decides it is what your documents say, not what you call yourself.
Money and risk
A forwarder needs less money to start. It has no containers of its own to run, and it can change lines from one job to the next.
An NVOCC can often control its rates and its space better, and it earns on its own containers. But it has to pay for what it commits to. Empty containers must be moved back to where they are needed, and a box standing idle costs money. Detention becomes something you charge as well as something you pay. So someone has to keep track of every box.
Registration in India
Rules change, so check them before you act on this.
- In India, a freight forwarder has no single licence of its own for sea freight. Many join a trade body such as FFFAI.
- An NVOCC deals with the Directorate General of Shipping. If it issues multimodal documents, it registers as a Multimodal Transport Operator under the Multimodal Transportation of Goods Act, 1993.
- To clear goods through customs, you need a Customs Broker licence, under the Customs Brokers Licensing Regulations. People still call this a CHA.
Many companies do all three
Often one company acts as a forwarder on one job, an NVOCC on another and a CHA on a third. That is fine. But your people must know which role they are in for each job, because the documents and the risk change with it.
How to choose
Stay a forwarder if your strength is service and your customers change routes often. Think about becoming an NVOCC only if you have all of these:
- steady volume on a few routes
- money to commit
- agents you trust at the other end
- someone who will watch the containers every day
Moving too early is a common and costly mistake. The cost of containers keeps running when the cargo stops.
In Shipment 360
Shipment 360 works for a freight forwarder, an NVOCC and a CHA in one system. A job can start from a booking, from a B/L on an import, or as a customs job you open by hand. An NVOCC that runs its own boxes can follow them in Asset Management.