Foreign Freight Forwarders
Foreign Freight Forwarders
As was mentioned in the international sourcing section of this chapter, dealing in ocean transportation involves a number of different institutions and documentation with which the typical exporter does not have expertise. This is true even if the manufacturer is exporting components to a foreign subsidiary controlled by a common parent corporation. Commonly the services of a foreign freight forwarder are employed. Even export management companies and other types of trading companies often use foreign freight forwarders for their specialized services.
The foreign freight forwarder is the largest export intermediary in terms of value and weight handled; however, the services offered are more limited than those offered by an EMC. Once a foreign sale has been made, the freight forwarder acts on behalf of the exporter in recommending the best routing and means of transportation based on space availability, speed, and cost. The forwarder secures such space and necessary storage, reviews the letter of credit, obtains export licenses, and prepares necessary shipping documents. Other services that may be provided include advice on packing and labeling, purchase of transport insurance, and repacking shipments damaged en route.
The freight forwarder usually is paid by the exporter on a percentage of the shipment value, with a minimum charge dependent on the number of services provided. In addition, the forwarder receives a brokerage fee from the carrier. The use of a freight forwarder still is usually less costly than providing the service internally, since most firms find it difficult both to utilize a traffic department full-time and to keep up with shipping regulations. The forwarder can get space because of its close relationship with carriers and can consolidate shipments in order to obtain lower rates.
As was mentioned in the international sourcing section of this chapter, dealing in ocean transportation involves a number of different institutions and documentation with which the typical exporter does not have expertise. This is true even if the manufacturer is exporting components to a foreign subsidiary controlled by a common parent corporation. Commonly the services of a foreign freight forwarder are employed. Even export management companies and other types of trading companies often use foreign freight forwarders for their specialized services.
The foreign freight forwarder is the largest export intermediary in terms of value and weight handled; however, the services offered are more limited than those offered by an EMC. Once a foreign sale has been made, the freight forwarder acts on behalf of the exporter in recommending the best routing and means of transportation based on space availability, speed, and cost. The forwarder secures such space and necessary storage, reviews the letter of credit, obtains export licenses, and prepares necessary shipping documents. Other services that may be provided include advice on packing and labeling, purchase of transport insurance, and repacking shipments damaged en route.
The freight forwarder usually is paid by the exporter on a percentage of the shipment value, with a minimum charge dependent on the number of services provided. In addition, the forwarder receives a brokerage fee from the carrier. The use of a freight forwarder still is usually less costly than providing the service internally, since most firms find it difficult both to utilize a traffic department full-time and to keep up with shipping regulations. The forwarder can get space because of its close relationship with carriers and can consolidate shipments in order to obtain lower rates.
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