Freight forwarder explained

A freight forwarder or forwarding agent is a person or a company who co-ordinates and organizes the movement of shipments on behalf of a shipper (party that arranges an item for shipment) by liaising with carriers (party that transports goods). The carriers may use a variety of shipping modes, including ships, airplanes, trucks, and railroads, and often use multiple modes for a single shipment. A freight forwarder does not move the goods but acts as an agent in the logistics network and will carry out freight consolidation, rate negotiations, shipment tracking, customs and other documentation, among other tasks. FIATA describes a freight forwarder as the "Architect of transport".

International freight forwarders typically handle cross-border logistics and have additional expertise in preparing and processing customs documentation and performing activities pertaining to the regulations of different countries. Freight forwarders typically have information with respect to commercial invoice, shipper's export declaration, bill of lading and other documents required by the carrier or country of export, import, and/or transshipment.

Modern freight forwarders offer an end-to-end process i.e. shipping the goods from the place of origin to the final destination and may offer additional services such as warehouse planning, cargo insurance and customs brokerage. Together with tracking, freight forwarding agents often have real time information on the freight. Some forwarders may specialize in niche areas such as rail-freight, and collection and deliveries around a port.

History

The first international freight forwarders were innkeepers in London, England who held and re-forwarded the personal effects of their hotel guests in the early 1800s.^[1] One of the earliest freight forwarders was Thomas Meadows and Co. Ltd., established in 1836. With the increase in trade between Europe and United States, Medows served as an intermediary to arrange for the transportation of freight from the manufacturers to customers through rail transport and steamships. The services were later expanded to cover consultative solutions and handling customs requirements.^[2]

Definition and functions

A freight forwarder is an entity who co-ordinates and organizes the movement of shipments on behalf of a shipper (party that arranges an item for shipment) by liaising with carriers.^[3] A carrier is an entity that actually transports goods and may use a variety of shipping modes, including ships, airplanes, trucks, and railroads, including multiple modes for a single shipment.^[4] For example, the freight forwarder may arrange to have cargo moved from a plant to an airport by truck, flown to the destination city and then moved from the airport to a customer's building by another truck.

A freight forwarder does not move the goods but acts as an agent in the logistics network and will carry out freight consolidation, rate negotiations, shipment tracking, customs and other documentation, among other tasks.^[5] International Federation of Freight Forwarders Associations (FIATA) describes a freight forwarder as the "Architect of transport".^[6]

The original function of the forwarder was to arrange for carriage by contracting with various carriers. Forwarder responsibilities included advice on documentation and customs requirements in the country of destination. His correspondent agent overseas looked after his customers' goods and kept him informed about matters that would affect the movement of goods. Modern freight forwarders offer an end-to-end process i.e. shipping the goods from the place of origin to the final destination and may offer additional services such as warehouse planning, cargo insurance and customs brokerage.^[7] In a single transaction, the forwarder may be acting as a carrier (principal) or as an agent for his customer or both. Together with tracking, freight forwarding agents often have real time information on the freight.^[8] Some forwarders may specialize in niche areas such as rail-freight, and collection and deliveries around a port.

International freight forwarders typically handle cross-border logistics and have additional expertise in preparing and processing customs documentation and performing activities pertaining to the regulations of different countries. Freight forwarders typically have information with respect to commercial invoice, shipper's export declaration, bill of lading and other documents required by the carrier or country of export, import, and/or transshipment.^[9] Freight forwarders often charge a fee for the activity and might include transportation costs from factory and to delivery, freight charges, customs and other fees and documentation charges.^[10]

National variations

• In Australia, most licensed Customs Clearance Agents operate under a freight forwarder. The entities are registered with the government with the licenses renewed every three years.^[11]
• Transport Canada is the federal department responsible for implementing and enforcing transportation policies and programs with the Canada Border Services Agency responsible for enforcing most regulations that affect international freight forwarders. The Canadian International Freight Forwarders Association (CIFFA) was established in 1948 to support and protect the character, status, and interest of foreign freight forwarders by establishing uniform trade practice and regulations.^[12]
• Federation of Freight Forwarders’ Associations in India is the apex body and the umbrella body of 28 associations across India representing 6,500 custom house agents, employing over 110,000 people.^[13]
• With more than 82% of manufactured products being exported, freight forwarders are important contributors to the Irish economy. Associations including the Irish International Freight Association represent the industry through educational and representative roles.^[14]
• In Kenya and Tanzania, freight forwarders are commonly referred to as clearing and forwarding agents. A license is required, which can be acquired from the respective revenue authorities. Freight forwarders are responsible for clearing consignments through customs, arranging transportation and forwarding the consignment to the consignee.^[15]
• Freight-forwarding in Nigeria has been in place since the exporting of groundnut as a cash crop beginning in 1914, though not initially as freight forwarding but as the means of transportation of goods and services from one country to another. Following the method of their British, agents were used to facilitating the transport of goods and services.^[16]
• Pakistan International Freight Forwarders Association PIFFA has more than 500 freight forwarding companies as members and is the local representative of FIATA and member association for Pakistan.^[17]
• In the United Kingdom, freight forwarders are not licensed, but many are members of the British International Freight Association (BIFA), a trade association for UK-registered companies engaged in the international movement of freight by all modes of transport, air, road, rail, and sea. BIFA has over 1600 members, known generally as freight forwarders, who offer a wide range of services within these various modes.^[18]
• Companies handling domestic freight in the United States by road must be registered with the U.S. Department of Transportation's Federal Motor Carrier Safety Administration.^[19] Such forwarders are "carriers" who accept freight for transport and are liable for delivering the freight under their own bill of lading. International ocean freight forwarders arranging for shipments to and from the US must be licensed by the Federal Maritime Commission as ocean transportation intermediaries, who are ocean freight forwarders or non-vessel-operating common carriers (NVOCC). NVOCCs dispatch shipments from the United States via common carriers and books or otherwise arranges space for those shipments on behalf of shippers; ocean freight forwarders prepare and process documentation and perform related activities pertaining to shipments.^[20]

Modern Global Freight Forwarding Organizations.

Modern International freight forwarding organizations (IFFs) are formidable entities with revenues running into billions of dollars and have  direct presence in countries across the globe. They serve as pivotal entities in the facilitation of global trade, orchestrating the movement of goods across international borders with efficiency and precision.^[21] Over the years, these organizations have evolved significantly, transforming from networks of contracted agents to large corporations with a direct presence in countries worldwide, boasting revenues running into billions of dollars.^{[22] [23]}

As per The Brainy Insights. (2023). Freight Forwarding Market - Global Outlook and Forecast 2022-2027 .^[24] The global freight forwarding market was valued at $201.6 billion in 2021. It is expected to grow at a compound annual growth rate (CAGR) of 3.9% from 2022 to 2030 and reach $284 billion by 2030.

The International freight sector plays a pivotal role in facilitating trade across diverse supply chain networks, spanning from business-to-business (B2B), business-to-consumer (B2C), to consumer-to-consumer (C2C) transactions. In the current economic environment, logistics firms leverage multimodal transportation modes such as land, air, and water, adapting to evolving market dynamics and the growing digitalization of commerce.^[25]

United Parcel Service Inc, Deutsche Post AG, FedEx Corp, A.P. Moller - Maersk AS, and Deutsche Bahn AG are the top 5 logistics companies in the world by revenue. Cumulatively, the top 10 logistics companies generated revenue of $538,842 million.^[26]

However, alongside the core business there is a discernible trend of diversification in revenue streams among IFFs, indicating a dynamic and adaptable industry. Studies such as that by Murphy and Daley (2001) provide insights into the evolution of the industry, noting the a significant presence  of small companies within the IFF landscape. ^[27]

The industry has also undergone digital transformation. Riedl et al. (2018) emphasize the importance of embracing digital technologies in freight forwarding operations. Their research underscores the significance of technology adoption. The integration of technologies such as barcode systems, electronic data interchange (EDI), and enterprise resource planning (ERP) remains crucial for enhancing operational efficiency. In the era of Industry 4.0, as highlighted by Adeitan et al. (2020),^[28] global logistics have undergone significant digital transformation

See also

• Logistics
• Physical inventory
• Standard trading conditions
• Supply chain

Notes and References

1. Book: Jackson, Sarita. 12. International Trade in Services Effective Practice and Policy. 2021. 978-1-0003-6969-4. Taylor & Francis.
2. Book: How Logistics Facilitate an Efficient Freight Transportation System. 2013. 5. U.S. Government Printing Office.
3. Web site: Meaning and Definition of "freight forwarder". Random House. 8 January 2023. https://web.archive.org/web/20210210003838/https://www.infoplease.com/dictionary/freight-forwarder. 10 February 2021.
4. Web site: Freight Forwarder Definition & Legal Meaning. Black's Law Dictionary. 2nd. 24 January 2023.
5. Huang. Sheng Teng. Bulut. Emrah. Duru. Okan. December 2019. Service quality evaluation of international freight forwarders: an empirical research in East Asia. Journal of Shipping and Trade. en. 4. 1. 14. 10.1186/s41072-019-0053-6. 2364-4575. free.
6. International Federation of Freight Forwarders Associations (FIATA). United Nations Economic Commission for Europe. 1 December 2023.
7. Book: Michelmann, Marc. Load, Seal, & Ship. 14. 1985. Load, Seal, & Ship.
8. Web site: Strategic Considerations for Compliance to Incoterms. SIPMM Publications. 5 March 2023.
9. Web site: What is freight forwarding?. CAF. 1 December 2023.
10. DHL. 2020. Basic overview of Incoterms. 28 April 2020.
11. Web site: About licensing. Government of Australia. 1 December 2023.
12. Web site: About our association. CIFFA. 1 December 2023.
13. Web site: Federation of Freight Forwarders' Associations in India. FFFAI. 1 December 2023.
14. Web site: Irish International Freight Association. IIFA. 1 December 2023.
15. Web site: Clearing fowarding agents. Government of Tanzania. 1 December 2023.
16. Book: Hogendorn, Jan. Nigerian Groundnut Exports: Origins and Early Development. 1978. 978-9-7812-5005-7. Ahmadu Bello University Press.
17. Web site: About PIFFA. PIFFA. 1 December 2023.
18. Web site: British International Freight Association. Overview of BIFA. 29 December 2023.
19. Web site: Office of Transportation Intermediaries. Federal Maritime Commission. U.S. Government. 20 April 2016. https://web.archive.org/web/20150328193531/http://www.fmc.gov/bureaus_offices/office_of_transportation_intermediaries.aspx. 2015-03-28. dead.
20. Web site: Ocean Transportation Intermediaries. Federal Maritime Commission. United states Government. 20 April 2016.
21. Bowen . John . Leinbach . Thomas . April 2004 . Market Concentration in the Air Freight Forwarding Industry . Tijdschrift voor Economische en Sociale Geografie . en . 95 . 2 . 174–188 . 10.1111/j.0040-747X.2004.t01-1-00299.x . 0040-747X.
22. Web site: Riedel . J . T . Chan . Schöndorfer . S . The digital imperative in freight forwarding. . Center for Digital Innovation, BCG: Boston, MA, USA..
23. Murphy . Paul R. . Daley . James M. . 1996 . A Preliminary Analysis of the Strategies of International Freight Forwarders . Transportation Journal . 35 . 4 . 5–11 . 0041-1612.
24. Web site: Freight Forwarding Market Size, Trends And Outlook 2032 The Brainy Insights . 2024-03-05 . www.thebrainyinsights.com.
25. Book: Proceedings of the 23 rd International Scientific Conference . Business Logistics in Modern Management . October 2023 . 18495931.
26. Web site: Size of the freight forwarding market worldwide 2021-2031 . 2024-03-06 . Statista . en.
27. Murphy . Paul R. . Daley . James M. . 2001-01-01 . Profiling international freight forwarders: an update . International Journal of Physical Distribution & Logistics Management . 31 . 3 . 152–168 . 10.1108/09600030110389433 . 0960-0035.
28. Adeitan . Ayodeji Dennis . Aigbavboa . Clinton . Agbenyeku . Emmanuel Emem-Obong . 2020 . Arai . Kohei . Bhatia . Rahul . Kapoor . Supriya . Global Logistics in the Era of Industry 4.0 . Proceedings of the Future Technologies Conference (FTC) 2019 . Advances in Intelligent Systems and Computing . en . Cham . Springer International Publishing . 652–660 . 10.1007/978-3-030-32523-7_48 . 978-3-030-32523-7.