As a new business, you're perhaps still learning the ropes on how you ship goods from overseas markets to a 3PL warehouse. You're maybe still in the process of trying to find the perfect 3PL that can effectively ship and store your products. But importing (and exporting) goods is frequently a complicated process involving protracted steps and exorbitant fees.
No business should attempt to take on all the paperwork and regulations alone when importing goods becomes necessary. Fortunately, you'll discover most businesses use a process called freight forwarding to take care of the above complex procedures.
With international exporting and importing a major part of business today, you need to know what a freight forwarder is. In addition, you should know their process, including what occurs through customs clearance and drayage from the port to the warehouse.
Let's take a look at how you can define a freight forwarder and how to find a quality one.
Defining What a Freight Forwarder Does
You'll find a lot of lengthy explanations online for what a freight forwarder does, yet you can basically define it as an intermediary who arranges the importing or exporting of your goods for a fee.
You may have to work closely with a customs broker or brokerage who is an "agent of the importer”. Customs brokers are frequently the importer's only point of contact with the U.S. Customs Service and advises on the technical requirements of importing, preparing and filing entry documents, obtaining the necessary bonds, depositing U.S. import duties, securing release of the goods and arranging delivery to the importer's premises or warehouse.
Freight forwarders focus on coordinating shipping and customs clearance services from the overseas manufacturer to the local warehouse. Typically, they don't do the actual shipping but instead have relationships with any number of carriers. Freight forwarders usually leverage their pre-existing relationships with shipping carriers, such as air freight, rail freight ocean freight and truck freight, so that they can deliver the best pricing for their clients.
Furthermore, freight forwarding companies typically don’t offer storage and shipping services once the product arrives locally, although there are a few that do. For those companies looking to bring product from overseas and who utilize an outsourced fulfillment service, it’s important to choose the best option for managing these related but specialized services. Clearly, fulfillment services are far different than Freight Forwarding services, but you may wonder if fulfillment companies offer freight forwarding. There is no single answer. Should your company utilize separate companies for each step? Are there companies that perform both services underneath one roof? If you utilize one company, what things should you look for in making the best decision? Below, we’ll explore the answers to these questions so that you can make the best decision for importing and distributing your products.
One thing they don't do is actually do the transporting of goods. They work closely with those who provide transportation, including ocean cargo shippers, truckers, air freighters, and rail services.
All of these have complex fees involved in the moving of goods to your warehouse. A freight forwarder works as your advocate to negotiate better prices on the transportation. They do this through a bidding process so you can get the best possible price out of numerous transportation choices.
The operative word is "organizes". The freight forwarder doesn't actually move the goods but handles the logistics of their movement. This involves relationships with various shippers, by land (trucks and railroads), air and water. Any movement may involve multiple modes and shippers. Freight forwarding includes all associated paperwork, including data collection, and for international shipments, preparing and processing customs. Freight forwarders also have expertise in regulations and legal issues.
Specific papers a freight forwarder reviews on international shipments include commercial invoices, the shipper's export declaration, the bill of lading and other documents required by the carrier or country of export or import. The work of the freight forwarder doesn't end when a shipment enters the country. Drayage refers to picking up an ocean container from the port or rail ramp, delivering it to the 3PL warehouse, and returning the container.
While this is a general overview, you should learn about each procedure in detail and how much knowledge the best freight forwarders have to make importing simpler.
Working with an experienced freight forwarding service helps you navigate the frequently complex steps involved in customs clearance. They understand import documentation, which frequently involves handling the purchase order of the buyer, the sales invoice of the supplier, the bill of entry, and the bill of lading.
The forwarder also needs to deal with the packing list, and certificate of origin. However, this is frequently just the start because different regulations from the importer, or financial institutions, can complicate documentation further.
Sometimes businesses go through customs brokers to handle the customs clearance processes. Nevertheless, freight forwarders with extensive experience should already know the details.
It works easier when you properly communicate information to your freight forwarder. The importer needs to make sure their shipping containers are properly loaded. Also, be sure to provide accurate paperwork to your freight forwarder so there aren't any mistakes.
Drayage from the Port
If you're still unfamiliar with the term drayage, it means trucking service transporting your goods from a port to another destination. In your case, it could mean transporting directly to your 3PL warehouse in another part of the country.
Many freight forwarders work near ports, and they'll negotiate the fees involved with those transportation services. It doesn't always mean trucking services and can often mean negotiating prices with rail services or air freight.
Thanks to a freight forwarder's knowledge of pricing in this industry, they'll know which price is the best for you. Their experience also tackles complicated banking procedures involved with payment to importers.
Useful Freight Forwarding Terminology
The following list isn't exhaustive but provides a few basic terms to assist as you consider whether to handle freight forwarding internally or delegate it to a third-party.
3461: U.S. Customs and Border Protection Application for Entry/Immediate Delivery. This form details the content of cargoes entering the U.S.
BOL: Bill of Lading. The carrier issues this document and provides details of a shipment.
Customs Status: Customs Clearance status on a shipment, required before release into the U.S.
Drayage: Picking up an ocean container from the port or rail ramp and returning the empty container.
OBL: Ocean Bill of Lading, used by a steamship line to show receipt of cargo and associated details.
OBL status: Steamship lines require payment before releasing cargoes.
POD: Proof of Delivery. Used by carrier to show that cargo delivery.
Finding the Right Freight Forwarder
You can find various sources online that help you track down the best freight forwarders across the United States or abroad. What you'll appreciate is that many of them charge modest rates, even though this can vary depending on their expertise.
Before you get to this point, you'll need to find a 3PL warehouse first. We can help you find the right one with our reliable vetting resources here at WarehousingAndFulfillment.com.
What Happens if You Choose a Fulfillment Company That Doesn’t Offer Freight Forwarding?
Some fulfillment companies do not offer freight forwarding services because (as you can see) it can be complicated and even labor intensive. In that case, you would need to hire a separate freight forwarding service. That is not, necessarily a bad thing. On the upside, you get to enjoy the benefits of the expertise of both firms, and as one focuses on brining product in from overseas, and the other on storing and shipping upon arrival, it can mean substantial savings. On the downside, it means two relationships to manage and high prices if you are not a bulk importer.
In this case, you can choose the best freight forwarding company based upon research and/or recommendations from others. While you won’t necessarily receive bulk discounts unless you have a large volume of import shipments, you can choose the company that you’re most comfortable with and you can certainly use the bidding process to leverage a better overall rate. If you don’t have any referral sources, you can either research companies individually or through the use of an online quoting service. Nonetheless, be sure to pay attention to these points:
- Make sure you’re comparing “apples to apples” on your quotes, especially with regard to origin and destination terms of the agreement. Some companies will offer port to door (meaning that it doesn’t include freight from the factory to port of origin), some companies will offer door to door (from factory to warehouse), etc. Make sure you include all costs on each proposal to make the best decision.
- Make sure each quote includes ALL fees. Similar to door to door versus other methods of quoting, freight forwarding companies may not include all fees on their proposal. Some important fees to look out for are customs fees, demurrage fees, insurance fees, courier and documentation fees, overweight container fees, and many others. Especially if this is your first international shipment, take your time to ask questions of any fees that you don’t understand so that you don’t get surprises when your final bill is received.
- Make sure you check into the track record of the freight forwarder. To the extent possible, be sure to check into the financial and professional background of any potential international shipper. Have others been happy with the service? Your product is far too important to use an unreliable company just because they quoted the best rate.
Some Fulfillment Companies Have Freight Forwarding Referrals
Of course, some fulfillment houses, create partnerships with a freight forwarding firm that they recommend if you are importing or exporting as part of your e-commerce work for managing import transportation. Again, there are pros and cons to consider. The upside is that you have a more streamlined approach, and if you encounter problems, you can contact the fulfillment center as well as the freight forwarder. Both have reputations at stake. Of course, you may not get the best pricing because one might earn a referral bonus or commission off the other. You also need to double check references. Though you might like the fulfillment center, it does not mean their preferred freight forwarder is all you need or the best fit. Again, you also have two separate relationships, but there is a connectedness that is of benefit to you.
Is an All-In-One Solution the Best for Your Company?
Lastly, there are some fulfillment centers that actually have "divisions" operating as freight forwarding firms. This means a single relationship with a range of departments or experts that offer the individualized services. The downside to such opportunities is that they are usually much larger companies if they can afford to have a completely separate freight forwarding and international shipping division. This means, of course, that they may only focus on larger volume accounts with larger companies. While this isn’t always the case, it may present challenges for smaller shippers and e-commerce companies.
So, a fulfillment center can help with customs brokering and freight forwarding, but it pays to find out what the overall pros and cons are of the different approaches. Before you make a decision on your import solution, consider the various relationships that are involved. Take the time to find your freight forwarding, customs brokering and fulfillment center providers to be clear about all of the costs, logistics and demands involved in your ecommerce enterprise.
Contact us to learn more about what to look for in 3PL's and in freight forwarders, both of whom need to work in tandem.
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