If you are new to using a freight forwarder, or maybe have been using one and had not thought to ask about credentials, here are three things your freight forwarder must have.
OTI/NVOCC License
Choosing a freight forwarder that doesn’t have an OTI/NVOCC license is a BIG mistake and can cost you a fortune because there are freight forwarders that operate without an NVOCC license. This license, issued by the Federal Maritime Commission (FMC), allows the freight forwarder to issue its own bill of lading. In order to obtain the license, the applicant must demonstrate expertise in the field, financial stability and reveal the company’s true owners.
Additionally, the license requires a surety bond. That bond has been placed for YOUR protection. To ensure that the freight forwarder is in compliance and you would be recompensed for any unforeseen issues check to make sure your freight forwarder has an OTI/NVOCC license. The FMC has a claim procedure in case individual negotiations prove fruitless. To check the status of a freight forwarder, go to the FMC’s website (www.fmc.gov). FMC lists all licensed freight forwarders along with the type of their license.
Solvency
Having the security of an FMC bond is just one point to consider. The solvency of a freight forwarder is another very important aspect of this business. After all, the freight forwarder is in possession of your cargo. Businesses with solvency issues tend to do things with merchandise that isn’t theirs. For example, if the freight forwarder is experiencing solvency problems, there is an increased likelihood of theft of your property.
Another possible problem with such providers: If they don’t have the money to pay for the freight (to the carriers), you can’t get your freight released. In other words, due to some other dealings a freight forwarder may have with other agents, ports, steamship lines, airlines, truckers and warehouses, your precious cargo might be held hostage for someone else’s debt.
Keep in mind that a bonding company only requires financial information from the freight forwarder when obtaining a bond. Afterward, a bonding company won’t require additional financial information to renew. Therefore, you should also conduct regular business due diligence in selecting your freight forwarder.
Customs Broker License
If you ship internationally, you will need a freight forwarder with a customs broker license. Choosing a freight forwarder that hires another company to do customs clearance because they don’t have (or maybe lost) their own customs broker license.
Dealing with a freight forwarder (without a customs broker license) that hires another company to do your Customs Clearance is a significant risk for your business. A customs broker acts as your agent and your attorney in front of customs. But if the customs broker makes a mistake, the authorities are coming after you.
So, you absolutely want to know who you’re doing business with. And if your freight forwarder uses a third party for customs clearance, you want to know everything about his customs broker. And even then, it’s a problem because when you’re doing business through a third party, that third party has the power to bind you to certain statements with regards to the United States government.
A freight forwarder is not just a third-party provider – they are an extension of your business. You should select a freight forwarder that has all of the necessary licenses and certifications in order to conduct business correctly and avoid possible fines.