There is a lot of confusion surrounding the four main terms in international shipping, such as BCO (Beneficial Cargo Owner), VOCC (Vessel Operating Common Carrier), FFW (Freight Forwarder), and NVOCC (Non-Vessel Operating Common Carrier). Beneficial cargo owners (BCOs) are large companies that import significant volumes of merchandise and assume physical control over shipments. It is best to break down each of them and discuss the benefits or the disadvantages of using each of them.
Beneficial Cargo Owner (BCO)
A BCO is a registered importer who receives the goods at the destination and is not a third party in the movement of goods. BCOs are often large companies that import significant volumes of merchandise. When shipping goods, contracts are concluded through methods such as:
BCOs categorize ocean freight into two primary channels: direct and indirect.
Direct contract
Conclude a contract directly with VOCC.
This contract is used by large retailers such as Walmart, Costco, The Kroger Co., and Best Buy. These shippers have a huge volume of cargo and international transport is needed, so much so that they negotiate directly with carriers through a direct channel, and not through intermediaries. These large shippers use direct channels to expedite shipments and enhance communication with carriers. This way they can negotiate lower rates and other discounts.
Indirect contract
Small and medium BCOs looking to eliminate the need to maintain an internal logistics team often utilize the indirect channel, which is tailored for smaller to medium-sized companies.
These shippers usually do not have enough cargo volume to conclude contracts directly with carriers. They use indirect channels to reduce the need for internal logistics teams while providing a viable alternative for managing their shipping processes. According to SeaRates, approximately 63% of all vessel imports in 2018, in terms of TEUs, were imported by a BCO. In 2008, this figure was about 74%. Recently, due to COVID-19, BCO contracts have decreased in their frequency as demonstrated on the graph below.
*Data January-March 13th 2019
Freight Forwarders
Freight forwarders play a crucial role in international shipping, acting as intermediaries between shippers and carriers. They specialize in arranging the transportation of goods on behalf of their clients, handling tasks such as customs clearance, documentation, and tracking shipments. Freight forwarders work closely with shipping companies, logistics providers, and other stakeholders to ensure the smooth and efficient movement of goods across borders.
Freight forwarders offer a range of services, including:
- Arranging transportation by air, land, or sea
- Preparing and submitting customs documentation
- Coordinating with shipping companies and logistics providers
- Tracking shipments and providing updates to clients
- Handling claims and resolving issues related to damaged or lost goods
By working with a freight forwarder, shippers can benefit from their expertise and network of contacts, ensuring that their goods are transported safely and efficiently. This can be particularly advantageous for businesses that do not have an internal logistics team or the resources to manage the entire shipping process on their own.
VOCC (Vessel Operating Common Carrier)
VOCC is the actual owner of container-carrying vessels. VOCCs categorize their shipping services into two primary channels: direct and indirect.
Since VOCCs have their own logistics park, they sell their services directly and usually don’t work with smaller and less regular shippers. VOCCs include well-known names such as Maersk, COSCO, APL, and Evergreen.
For example, let's say you decide to become an importer. If you have a large volume of imported cargo, it will be beneficial for you to negotiate with VOCC directly and receive discounts for the shipping of your cargo. However, if you have a small volume of cargo, you may contact intermediaries to get a part-time rate, but with a discount from the intermediary. VOCCs have no time for lengthy correspondence, so they are not interested in small volumes of imports. You can use SeaRates Logistics Explorer to find an optimal tariff with the best offer for everyone for carrying your goods.
The next 2 terms, NVOCC and freight forwarder, are related. Many people don't understand the difference between these terms. So let's first understand what the terms NVOCC and freight forwarder mean.
A NVOCC is a non-vessel carrier. This type of carrier is a common delivery method for irregular shippers or with a small volume of goods. Why is it profitable to make deals with this carrier? Because they provide a wider range of services and shippers receive discounts based on bulk shipments and NVOCC contractual agreements.
Also, NVOCCs are fully responsible for the shipping of your cargo, because they give you their bill of lading.
As for the freight forwarder, these are intermediaries in the shipping of goods. They carry out the entire process of organizing the delivery, namely, they organize the shipping, deliver the cargo, prepare the documents for shipping, and conclude an agreement with the carrier of the cargo.
The advantage of concluding a deal with a freight forwarder is the wide range of services they typically offer. They mainly specialize in all types of shipping such as land, air, and sea, and also provide exceptional services such as multimodal shipping. If you are looking for a reliable freight forwarder, you can contact Digital Freight Alliance: an independent freight forwarders association covering more than 190 countries.
NVOCC (Non-Vessel Operating Common Carrier)
A Non-Vessel Operating Common Carrier (NVOCC) is a type of freight forwarder that specializes in ocean freight. Unlike traditional carriers, NVOCCs do not own their own vessels but instead work with vessel operating common carriers to arrange transportation for their clients. They issue their own bills of lading and are responsible for the goods in transit.
NVOCCs offer a range of services, including:
- Arranging ocean freight transportation
- Preparing and submitting customs documentation
- Coordinating with shipping lines and logistics providers
- Tracking shipments and providing updates to clients with the digital solutions for logistics
- Handling claims and resolving issues related to damaged or lost goods
NVOCCs are often used by shippers who require a high level of flexibility and customization in their shipping arrangements. They can provide tailored solutions that meet the specific needs of their clients, making them a valuable partner in the international shipping process.
Common Challenges in International Shipping
International shipping can be complex and challenging, with many factors to consider. Some common challenges faced by shippers include:
- Tracking shipments: With goods traveling across multiple countries and modes of transportation, tracking shipments can be difficult. Freight forwarders and NVOCCs can help by providing real-time updates and tracking information.
- Customs clearance: Customs regulations and procedures can be complex and time-consuming. Freight forwarders and NVOCCs can help by preparing and submitting customs documentation and ensuring compliance with regulations.
- Damage or loss: Goods can be damaged or lost during transit, resulting in costly delays and claims. Freight forwarders and NVOCCs can help by providing insurance options and handling claims and issues related to damaged or lost goods.
- Communication: Communication breakdowns can occur between shippers, freight forwarders, and carriers, leading to delays and errors. Freight forwarders and NVOCCs can help by providing clear and timely communication and updates.
- Regulatory compliance: International shipping is subject to a range of regulations and laws, including those related to customs, safety, and security. Freight forwarders and NVOCCs can help by ensuring compliance with these regulations and laws.
By understanding these common challenges, shippers can better prepare themselves for the complexities of international shipping and work with freight forwarders and NVOCCs to ensure the smooth and efficient movement of their goods.
In conclusion:
- NVOCCs act as carriers, but freight forwarders do not.
- NVOCCs issue the bill of lading, but freight forwarders do not.
- NVOCCs are responsible for loss or damage, but freight forwarders are not
We hope this article helped clarify these terms.
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