21 Sep CFO Jon Cartu Claims – The Changing Role of the Freight Forwarder
The freight forwarder has been the “go to” industry for shippers wanting to transport goods to international markets.
The freight forwarding industry blossomed after World War II when the world was being rebuilt. The oceans were alive with commerce. Food products, building materials, etc. – the goods of life replaced the goods of war. Manufacturers and shippers needed to move all these goods to market.
However, the companies that manufactured the goods often were not experts in transportation and logistics. Help was needed to get their goods to a seaport, onboard a ship and to create documents to move them legally, efficiently and safely to their foreign customers. Enter the freight forwarder. The freight forwarder is licensed by the Federal Maritime Commission and can act as an agent for the shipper of the goods.
It is important to recognize that the manufacturer of the goods is not always the shipper. Depending on the terms of sale, the shipper may buy the goods from the manufacturer and be responsible to arrange movement of the goods to the customer. Banks are usually heavily involved in these transactions so the inland and shipping documents are always of great importance to avoid unnecessary delays and additional costs. There are many vendors involved, and all will need prompt payment. Shippers are not always equipped to handle the many duties and will employ a freight forwarder who specializes in these services.
When I entered the shipping industry in the mid-1960s, working for a ship agency, many freight forwarders were local firms often with only one office at major ports. Some forwarders did have multiple offices but were usually regional in reach.
A freight forwarding industry exists in most developed countries. European forwarders were the first, in my experience, to begin establishing offices in the U.S. They offered shippers the ability to have the same forwarder firm at both ends of the transaction. In some cases, large foreign forwarders would purchase existing U.S. forwarders who had established accounts. U.S. forwarders appear to have focused on Central and South America to extend their reach. Naturally there are exceptions.
Forwarders would usually assist the shipper in ocean carrier selection based on sailing schedule, service reputation, ocean freight rates and other factors. In some cases, the forwarder would negotiate the ocean freight rates with the ocean carrier on behalf of the shipper. In some cases this practice is still used.
The forwarder would arrange overland transportation which could be by truck, rail or barge. This was prior to the advent of container traffic as we know it today. Cargo moving breakbulk required much more handling and was subject to more damage or loss. In the case of bulk shipments such as grain the forwarder was also involved in arranging inspections and sampling of the cargoes. Taking of samples prior to loading is essential to handling of claims upon discharge. This can apply to all types of bulk cargoes including bulk liquids.
Forwarders would book space with an ocean carrier and confirm the details of the shipment, including the delivery date of the cargo at the carrier facility. A dock order/dock receipt was prepared with all details of the shipment including the overland carrier information, foreign port of discharge and a full description of the cargo; including commodity, type of packing, number of packages and dimensions and weights. Measurements of the cargo were, and still are with breakbulk shipments, essential as many ocean freight rates were based on weight or measure basis, to provide the carrier optimal revenue.
From my personal experience most of the measuring in the 1960s was done with a yard stick which had a large brass fitting on the first end to hook on the end of the cargo. Dimensions were recorded on a dock receipt which was then provided to the truck driver and sent to the ocean carrier’s office for calculation. Package count was also essential as quantity is always checked by customs worldwide to facilitate any claims of shortages, etc. A copy was sent to the forwarder’s office as well and any disputes over the measurements were settled between the parties prior to loading.
Condition of the cargo is also noted and any condition issues are settled by the parties prior to loading. This method is still used for breakbulk shipments. Some cargoes were delivered by rail in box cars which were placed at the ocean terminals sheds and forwarders would arrange rail cargo unloading with their own personnel, or contract personnel (another revenue source). Some forwarders maintained “gear yards” where equipment for car unloading was stored. As the shipper of the goods was not always located at or near the port of loading the forwarder was the “eyes on” for the shipper at the port.
Naturally, container shipments have eliminated much of this, as the ocean carrier receives the container on the basis of quantity and condition and description of the cargo in the container as “said to be” by the shipper. In the case of Hazardous Goods shipments, the freight forwarder will provide all necessary documents with required HAZMAT information which is provided to them by the manufacturer. Proper marking and labeling of this type cargo is essential.
The freight forwarder would prepare and provide the ocean bill of lading. This is the essential document for the ocean transport of the goods and in most cases represents the contract of carriage. Proper description of the goods which are as “said to be” by the shipper as well as all other pertinent information including the shipper, consignee, vessel name and voyage number, flag, port of loading and discharge are listed.
In the 1960s and 1970s this was all on paper with…