05 Freight Forwarding

Freight Forwarding
10/23/23 DR. AKUMUNTU JOSEPH

Transportation Industry
Functions of Intermediaries
Freight Payment
Warehousing Brokerage
Vendor Management Demand Management
Transportation Fulfillment
Supply Chain Inventory
Software Load Planning

Security Procurement
Reverse Logistics

Definitions
• Freight Forwarding Services:
means services of any kind relating to the carriage,
consolidation, storage, handling, packing or distribution
of the Goods as well as ancillary and advisory services
in connection therewith, including but not limited to
customs and fiscal matters, declaring the goods for
official purposes, procuring insurance of the goods and
collecting or procuring payment or documents relating
to the goods.
• Freight Forwarder:
means the person concluding a contract of Freight

forwarding services with a customer.
• Carrier: means any person actually performing the carriage of the
goods with his own means of transport ( performing Carrier) and
any person subject to carrier liability as a result of an express or
implied undertaking to assume such liability ( Contracting carrier).
• SDR: Special Drawing Rights, which were created by the

International banking system to resolve difficulties caused by wide
fluctuations between one currency and another.
• Customer: means any person having rights or obligations under

the contract of freight forwarding services concluded with a freight
forwarder or as a result of his activity in connection with such
services.

Strategies Of Freight Forwarding Companies
Consignor a person or company who puts goods in the care of others
(forwarding agent/freight forwarder, carrier/transport operator) to be
delivered to a consignee
Freight forwarder / intermediary who arranges for the carriage of goods and/or associated services on
forwarding agent behalf of a shipper
Carrier the company responsible for the carriage of goods, either directly or
using a third party
Self-entry Freight forwarder operates transports
Bundling and As it is traditionally done by forwarding agents: collecting, bundling

warehousing and dispatching of loads in order to gain price advantages
Logistics ...the process of planning, implementing, and controlling the

efficient, effective flow and storage of goods, services, and related
information from point of origin to point of consumption for the
purpose of conforming to customer requirements." Note that this
definition includes inbound, outbound, internal, and external
10/23/23 movements, and return of materials
DR. AKUMUNTU JOSEPH for environmental purposes.
What is Freight Forwarding?
What do forwarders do
•Freight forwarding is all about the smooth flow of
international trade.
•The freight forwarder is the party who ensures that

internationally traded goods move from point of origin to
point of destination to arrive:
At the right place,

At the right time,
In good order and condition,
At the most economic cost.
To accomplish this, expertise is required in
a number of different areas:
• Logistics.
• Statutory compliance.
• Risk Management.
• Finance and Payment.
• Cross functional integration

Logistics
• Close co-operation is required with transporters in every mode

– road, rail, sea and air. Freight forwarders are constantly
negotiating freight rates with transport providers, comparing
the costs of moving cargo along different routes via different
modes and then designing logistics infrastructures which
provide the best compromise between cost, speed and
reliability.
• Once a forwarder’s recommendations with regard to cargo

routing have been accepted it becomes the responsibility of the
forwarder to ensure that the goods concerned are transported
and delivered as planned.
• The process of designing and executing these logistics plans

has earned for the forwarder the title "Architect of Transport”
The forwarder being truly the Architect of Traffic is the most
important link in the chain of international movement of goods
between countries and continents.
•No trade without transport.
•Trade means a change of ownership of the goods.
•Transport enables the buyer to receive the goods he has bought.
•It is the forwarder who by means of a proper choice of transport

routes and carriers enables the goods to reach the consumer fast
safely and in the most economical way.
•The forwarder acts as consultant to commerce and industry. He

informs on transport costs, correct packing and knows which
documents are necessary for import and export operations,
customs clearance, banking
Statutory compliance
• A vital ingredient to successful trading on world

markets is that every transaction must comply with a
myriad of statutory measures and their related
procedures, especially those associated with
Customs.
• It is in this area that the specialized skills and

knowledge of the freight forwarder come to the fore.
Without these, international traders would become
hampered through being distracted from their core
activities-meeting the material needs of world
business.
Risk Management
• To every international trade transaction there is an

element of risk and the increased complexity of
international trading as compared to local buying and
selling requires that these risks are managed with
tools which are correspondingly more sophisticated.
• International traders require that their forwarders be

in position to advise and assist them in minimizing
those risks which are particularly associated with the
movement of goods – loss, damage and destruction,

Finance and Payment
• Forwarders are entrusted with goods which are very often
dispatched under conditions where buyer and seller are not
known to one another.
• Under these circumstances the forwarder must be obliged to

ensure that all requirements of the door to door operation are
complied with to the letter, especially as far as the accurate and
timely production of documentation is concerned – excellence in
this filed leads to prompt settlement for goods purchased and
satisfied traders.
• An especially acceptable aspect of freight forwarding is the

facilitation, through consultancy and networking,
• Advice to the alternative methods of financing of the transactions

concerned and the establishment of payment methods that are
mutually beneficial to both parties.
Cross functional integration
• Business in the 21st century characterized by an important feature- the way
in which suppliers, manufacturers and consumers are being drawn closer and
closer together so that,.
• The forwarder is ideally placed to act as the catalyst to maximize the benefit
from advances in information technology which are revolutionizing these
processes.
• Furthermore the role of the forwarder will be key because, in adopting cross
functional integration strategies, companies are increasingly outsourcing
their non core activities.
• The ability to ensure the efficient and effective door to door movement of
goods from country to country from the time an order is placed until finished
goods are delivered to the final consumer places the freight forwarder in a
position to make a unique contribution to the enhancement of value to the
activities of exporters and importers.

The freight forwarder, manager of the logistic chain
• Anyone wishing to ship goods abroad wants to be certain that

they will arrive at their destination in the same pristine condition
as when they started.
• The freight forwarder, like a spider in its web, has been operating
successfully on the international logistic market for years. He
concludes transport agreements with carriers on behalf of the
principal/customer who wishes to have his goods conveyed from
one place to another. He is independent. The strength of the
freight forwarder is his knowledge and expertise in the complex
transport market.
• A large number of factors play a role when seeking the optimum
logistic solution for goods carriage. Transport modality, speed,
type of goods, point of departure, destination, trade and
customs regulations, costs, and so on, may also all be
determining factors in the matter of whether a product can
compete with other products on the world market.
Compliance with foreign trade regulations and letter of credit
instructions
• In accordance with the information received from his

customer, the forwarder is able to take care that foreign
trade regulations and Letter of Credit instructions are strictly
complied with.
• In many cases he attends to the preparation of Certificates of

Origin and consular invoices as well as the certifying of these
documents.

The role of Freight Forwarders
Choosing a freight forwarder
• Professionalism is not luxury but a prerequisite and in choosing a

freight forwarder, potential customers seek assurance in terms of
capability and integrity.
• For this reason the British International Freight Association (BIFA)

has introduced its own registration scheme with strict criteria for
membership, including adoption of the Association's Standard
Trading Conditions, sufficient liability insurance to meet
obligations and acceptance of a Code of Conduct, before
companies can appear on the list that is issued to would-be
customers..

When to use a freight forwarder
• When considering sales or purchases abroad, due attention should

be paid to the physical delivery at the outset.
• The forwarding industry, with its overseas branches or partnerships

provides valuable resources. For instance, parties may need
guidance on who is responsible for what, how the transport and
associated costs are apportioned between buyer and seller, how to
ensure the goods comply with local regulations, and, ultimately
advice on payment options through the international banking
system.
• It is impossible to define all forwarder functions, but principal

activities are a mix of 'traditional' and the so-called 'value-added'
services and include:
1- Advice on the appropriate transport mode
• After having concluded a contract with his customer and having solved
any problems relating to packing and having decided the transport
route, the forwarder will set in motion the transport of goods by
concluding contracts of transportation with the carriers concerned.
• Being an expert in combined transport, especially in container traffic,

he will explore all the various possibilities offered by the different
carriers. Due to his daily contact with the carriers, he will usually be
able to arrange the goods without delay and in cases of urgency to
achieve prompt dispatch
• The forwarder will attempt to match requirements to transport

availability in an impartial manner without obligation to particular
routes or the need to maximize investments in ships or aircraft. for this,
a thorough knowledge of the options is essential to make a decision
based on cost, location, urgency and nature and value of the goods.

2- Choosing a suitable carrier and conclusion of the
contract
• Transit times, service frequency, estimated time of

arrival and any flag stipulations will need to be taken
into consideration, especially where conditions need
to be met in a letter of credit transaction.
• The forwarder can make a booking on the shipper's

behalf and contract with the carrier. Should
unforeseen problems occur such as strikes, port
congestion or breakdowns, the forwarder, as agent of
the shipper, can put alternative plans into effect.

3-Organisation of groupage
Very few carriers will offer every destination throughout the world. The
forwarder is in a position to consolidate a large part of the goods
entrusted to his care into so-called group age shipments assembled
according to the size of consignments and their weight/bulk
4- Provision of carrier &forwarder documentation
 Whether bills of lading, airway bills, FIATA Multimodal

Transport documents or CMR Notes, in arranging the
transportation the forwarder will also provide the
appropriate documentation in order to fulfill that transaction.

5-Compliance with Letter of Credit requirements
• Consular and documentary requirements can differ from

country to country. For the exporter, collecting all the relevant
documents and certificates can be onerous; for the forwarder,
its all part of a day's work.
• Banks deal in documents - not in goods - and documents

presented accurately and on time can greatly clear the path
through the international payment procedures

6-Customs clearance:
• Apart from most goods moving, customs clearance remains a

necessity, for exports and imports, as does the administration and
control of the associated duties and taxes. Preparation of customs
entries has long been a freight forwarder specialty, and there are
other aspects of control and reporting .
• In the export trade, the forwarder handles for his customer the
customs formalities, usually simultaneously with the dispatch of the
goods. In the import trade the services of the forwarder, as customs-
specialist, are equally vital.
• He has to clear the goods promptly on arrival. The customer thereby

saves time and has his goods readily available, especially when he
submits all necessary commercial documents in good time. The
forwarder as Customs Broker is also able to give prior advice to his
customers on customs clearance aspects of proposed imports
7-Advice on packing
• No two cargoes are the same. Security needs to be

appropriate to the destination and transit risk, the
mode of transport, the fragility and value of the cargo
and whether it is considered dangerous or innocuous..
• Forwarders can assist the interpretation of the rules

on marking, handling and documentation. Some will
offer a packing service, or put customers in touch with
experts in this field.

8-Insurance cover during transit
Traders will want the assurance that they are covered from
door-to-door and not just on one specific leg of the journey.
As part of the commercial transaction, the freight forwarder

acts as an insurance agent and will advise on and arrange the
most appropriate method of cover while providing the insurer
with details of transit risks or transshipment.
It is Possible that Insurers may also require declarations to

cover delays in transit or extensions to normal policies to cover
packing and security.

9-Warehousing and distribution advice
Many commercial goods, in particular consumer

goods and spare parts will have to be stored in a
warehouse before or after the transportation.
Most forwarders have their own warehouses with

sophisticated modern equipment for the handling of
goods.
So warehousing may also be included in the services

provided by the forwarder. So he is able not only to
advise his customer but to organize distribution as
well
10-Supervision of the movement of goods
:
The supplier does not only wish to sell ; he also wishes
to retain his customers by giving first class delivery of
the goods .
In order to ensure that the goods are delivered in

compliance with instructions, the forwarder will going
to supervise the whole movement of the goods through
up to date means of communication, so he will be able
to follow up and to supervise the movement of
consignments throughout the world

What are the new requirements of forwarders and logistics
providers?
• New Requirements Availability of specific know how in

logistics:
• Considerable investements for warehouses, process

engineering, information flow and interfaces connecting
manufacturers with suppliers and customers.
• Management and consulting activities, anticipation of

market trends and innovation

Scope of Freight Forwarding Services
Unless the consignor, the person sending goods, or the

consignee, the person receiving goods, wants to attend to
any of the procedural and documentary formalities himself,
it is usually the freight forwarder who undertakes on his
behalf to process the movement of goods through the
various stages involved.
The freight forwarder may provide these services directly or

through sub-contractors or other agencies employed by him.
He is also expected to utilize, in this connection, the services
of his overseas agents. Briefly, these services are:

On behalf of the Consignor (Exporter)
Choose the route, mode of transport and a suitable carrier

Book space with the selected carrier
Take delivery of the goods and issue relevant documents such as the
Forwarders' Certificate of Receipt, the Forwarders' Certificate of
Transport,
Study the provisions of the letter of credit and all Government
regulations applicable to the shipment of goods in the country of export,
the country of import, as well as any transit country; he would also
prepare all the necessary documents.
Pack the goods (unless this is done by the consignor before handing
them over to the forwarder), taking into account the route, the mode of
transport, the nature of the goods and applicable regulations, if any, in
the country of export, transit countries and country of destination.
Arrange warehousing of the goods, if necessary.
Weigh
10/23/23 and measure the goodsDR. AKUMUNTU JOSEPH
Draw the consignor's attention to the need for insurance and arrange for the insurance
of goods, if required by the consignor.
Transport the goods to the port, arrange for customs clearance, related documentation
formalities and deliver the goods to the carrier.
Attend to foreign exchange transactions, if any.
Pay fees and other charges including freight.
Obtain the signed bills of lading from the carrier and arrange delivery to the consignor.
Arrange for transshipment en route if necessary.
Monitor the movement of goods all the way to the consignee through contacts with the
carrier and the forwarders' agents abroad.
Note damages or losses, if any, to the goods.
Assist the consignor in pursuing claims, if any, against the carrier for loss of the goods
or for damage to them.
On behalf of the Consignee (Importer)
 Monitor the movement of goods on behalf of the consignee

when the consignee controls freight, that is, the cargo.
 Receive and check all relevant documents relating to the

movement of the goods.
 Take delivery of the goods from the carrier and, if

necessary, pay the freight costs.
 Arrange customs clearance and pay duties, fees and other

charges to the customs and other public authorities.

Arrange transit warehousing, if necessary.
Deliver the cleared goods to the consignee.
Assist the consignee, if necessary, in pursuing claims, if any,

against the carrier for the loss of the goods or any damage to
them.
Assist the consignee, if necessary, in warehousing and

distribution

The Forwarder :
Principal or Agent
• Principal : One who accepts responsibility for a specific transportation.
• Agent: one who acts on behalf of somebody else.

Factors that distinguish Principal from
Agent
The legal issue causing the most difficulty to
forwarders during the last century has been the
principal-agent distinction:
•Forwarder acting as agent ( intermediary) need only exercise

reasonable care in arranging transport of its customer goods.
•A forwarder acting as a principal (carrier) has undertaken to

deliver its customer’s goods at destination requires more than
reasonable care

• There is no obstacle to a forwarder undertaking to carry goods
to destination, and then subcontracting the actual
performance. they can make contracts with the actual carriers
on behalf of a shipper.
• If the freight forwarder issued an FBL, he would expressly have

assumed liability as a carrier and he also be held liable as a
carrier if he deemed to have impliedly accepted such liability

Factors that lead to the conclusion that a
forwarder has impliedly accepted the liability as
carrier
• Did the forwarder issue its own document covering the transport ?
• Did the forwarder receive a transport document that its customer could
enforce against the actual carrier?
• Did the forwarder perform any part of the transport with its own employees
or equipment ?
• Was the forwarder compensated for its services by a commission calculated

upon expenses of transport, or by a spread between the freight it paid and its
charges to its customer?
• Was there a prior course of dealing between forwarder and customer?
• What were the exact terms of any oral representations made by the
forwarder in negotiating its engagement?

Did the forwarder issue its own document
covering the transport?
• If a forwarder issued a document covering the transport, the

terms of that document generally govern the forwarder’s
liability for carriage of the goods.
• A forwarder who does not issue a transport document is acting

as agent

Did the forwarder receive from the actual carrier
a transport document that its customer could
enforce against the actual carrier ?
• If a forwarder gives his customer a document evidencing a
contract between the customer and a carrier, the inference is that
the forwarder acted as agent ( Most ocean bills of lading identify
the forwarder who booked the shipment as an agent).
• FIATA Model Rules deal with this factor in Article 7.1 which
reads:
• “However, the freight forwarder shall not be deemed liable as
Carrier if the customer has received a transport document issued
by a person other than the freight forwarder and does not within
a reasonable time maintain that the freight forwarder is
nevertheless liable as Carrier.”
Did a forwarder perform any part of the transport
services with its own employees ?
• In some circumstances, a customer would be justified in

treating the actual carriers as subcontractors to the forwarder
for that part of the transport that the forwarder did not
perform

How was the forwarder compensated for its services
• Few forwarders charge a commission for a door to door movement

based on a percentage of the freight paid carriers. Most customers
prefer a lump sum billing that allows them to calculate the costs of
transport precisely when fixing their selling price for their goods.
• So taking a spread between freight paid the carrier and freight

charged to the customer can only mean that a forwarder is acting
as a principal.
• As a matter of law the freight forwarder would be liable as

contracting carrier if he has quoted his own price for the carriage
without any obligation to give account for his outlays to the
customer.
Was there a prior course of dealing between the
parties
• This factor seems to be the most important of all. Courts are

not convinced by complaints from an experienced businessman
that a forwarder didn’t explain the significance of the
documentation to it. A customer cannot escape legal
consequences clearly flowing from documentation for similar
transactions it received on previous shipments

What were the exact terms of any oral representation
made by a forwarder in negotiating its engagement?
• Despite efforts of forwarders to reduce their contracts to

documentary form, customers rely upon the words used in
their discussions with a forwarder’s employee. In a close case, a
court will consider the implications to be drawn from the exact
words used.

FIATA Model Rules:
THE FREIGHT FORWARDER'S Liability
6. The Freight Forwarder's liability (except as principal) 6.1. Basis

of liability.
6.1.1. The Freight Forwarder's duty of care:
• The Freight Forwarder is liable if he fails to exercise due diligence and take
reasonable measures in the performance of the Freight Forwarding Services,
in which case he, subject to Art.8, shall compensate the Customer for loss of
or damage to the Goods as well as for direct financial loss resulting from
breach of his duty of care.
6.1.2. No liability for third parties;

• " The Freight Forwarder is not liable for acts and omissions by third parties,
such as, but not limited to, Carriers, warehousemen, stevedores, port
authorities and other freight forwarders, unless he has failed to exercise due
diligence in selecting, instructing or supervising such third parties”
7- The Freight Forwarder's liability as principal
• 7.1 The Freight Forwarder's liability as Carrier:
• The Freight Forwarder is subject to liability as principal not only

when he actually performs the carriage himself by his own
means of transport (performing Carrier), but also if, by issuing
his own transport document or otherwise, he has made an
express or implied undertaking to assume Carrier liability
(contracting Carrier).
• However, the Freight Forwarder shall not be deemed liable as

Carrier if the Customer has received a transport document
issued by a person other than the Freight Forwarder and does
not within a reasonable time maintain that the Freight
Forwarder is nevertheless liable as Carrier.

7.2. The Freight Forwarder's liability as principal
for other services
With respect to services other than carriage of goods such as but

not limited to , storage, handling, packing or distribution of the
goods, as well as ancillary services in connection therewith the
freight forwarder shall be liable as principal:
1-When such services have been performed by
himself using his own facilities or employees or,
2-If he has made an express or implied undertaking

to assume liability as principal.

7.3 The basis of the Freight Forwarder’s liability
as principal
• Freight Forwarder as principal shall be responsible for

the acts and omissions of third parties he has
engaged for the performance of the contract of
carriage or other services in the same manner as if
such acts and omissions were his own and his rights
and duties shall be subject to the provisions of the law
applicable to the mode of transport or service
concerned, as well as the additional conditions
expressly agreed or, failing express agreement, by the
usual conditions for such mode of transport or
services.

END

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Freight Forwarding

10/23/23 DR. AKUMUNTU JOSEPH

Supply Chain Inventory

Software Load Planning

10/23/23 DR. AKUMUNTU JOSEPH

means the person concluding a contract of Freight

• SDR: Special Drawing Rights, which were created by the

• Customer: means any person having rights or obligations under

10/23/23 DR. AKUMUNTU JOSEPH

Bundling and As it is traditionally done by forwarding agents: collecting, bundling

Logistics ...the process of planning, implementing, and controlling the

•The freight forwarder is the party who ensures that

At the right place,

• Finance and Payment.

• Cross functional integration

10/23/23 DR. AKUMUNTU JOSEPH

• Close co-operation is required with transporters in every mode

• Once a forwarder’s recommendations with regard to cargo

• The process of designing and executing these logistics plans

•No trade without transport.

•Trade means a change of ownership of the goods.

•Transport enables the buyer to receive the goods he has bought.

•It is the forwarder who by means of a proper choice of transport

•The forwarder acts as consultant to commerce and industry. He

• A vital ingredient to successful trading on world

• It is in this area that the specialized skills and

• To every international trade transaction there is an

• International traders require that their forwarders be

10/23/23 DR. AKUMUNTU JOSEPH

• Under these circumstances the forwarder must be obliged to

• An especially acceptable aspect of freight forwarding is the

• Advice to the alternative methods of financing of the transactions

10/23/23 DR. AKUMUNTU JOSEPH

• Anyone wishing to ship goods abroad wants to be certain that

• In accordance with the information received from his

• In many cases he attends to the preparation of Certificates of

10/23/23 DR. AKUMUNTU JOSEPH

• Professionalism is not luxury but a prerequisite and in choosing a

• For this reason the British International Freight Association (BIFA)

10/23/23 DR. AKUMUNTU JOSEPH

• When considering sales or purchases abroad, due attention should

• The forwarding industry, with its overseas branches or partnerships

• It is impossible to define all forwarder functions, but principal

• Being an expert in combined transport, especially in container traffic,

• The forwarder will attempt to match requirements to transport

10/23/23 DR. AKUMUNTU JOSEPH

• Transit times, service frequency, estimated time of

• The forwarder can make a booking on the shipper's

10/23/23 DR. AKUMUNTU JOSEPH

4- Provision of carrier &forwarder documentation

 Whether bills of lading, airway bills, FIATA Multimodal

10/23/23 DR. AKUMUNTU JOSEPH

• Consular and documentary requirements can differ from

• Banks deal in documents - not in goods - and documents

10/23/23 DR. AKUMUNTU JOSEPH

• Apart from most goods moving, customs clearance remains a

• He has to clear the goods promptly on arrival. The customer thereby

• No two cargoes are the same. Security needs to be

• Forwarders can assist the interpretation of the rules

10/23/23 DR. AKUMUNTU JOSEPH

As part of the commercial transaction, the freight forwarder

It is Possible that Insurers may also require declarations to

10/23/23 DR. AKUMUNTU JOSEPH