Freight Brokers Vs Forwarders: Key Differences
The cargo transporting industry consists of different professional services that offer specific advantages, depending on the customer’s needs.
In that regard, freight forwarding and brokerage represent crucial cogs in the machine.
These two roles provide timely, accurate shipments, acting according to their particular responsibilities. This article will explain the differences and similarities between freight brokering and freight forwarding solutions.
What Are Freight Brokers?
Freight brokers fulfil a middleman role, connecting the shipper with an appropriate carrier. A shipper will hire the broker with the express purpose of finding the service that will haul whatever cargo needs moving.
A professional broker should hire a carrier directly. This is worth mentioning. Shady brokers may work with a secondary broker, which is a potentially fraudulent practice. If you’ve ever wondered what is double brokering freight, you’ve just read a straightforward description.
Double brokering is different to the completely regular co-brokering practice. The main difference is that, in co-brokering, the shipper is aware of the entire freight chain. With double brokering, that’s not the case.
The freight broker will never handle the cargo in any capacity. That’s one of the crucial distinctions between broker authority vs carrier authority. Instead, they’ll serve as the agent for transaction purposes, securing a carrier for the specific shipping job. Of the total price a broker charges, about 15% will go to the agent themselves, while the rest will be paid to the carrier.
What Are Freight Brokers?
A freight forwarder, broker, and carrier may seem similar, but the three services differ in whether and how much contact they have with the actual cargo. As mentioned, a broker might not even see the cargo. The carrier, on the other hand, will be assigned practically nothing other than transporting the shipment. But a freight forwarder is somewhere in the middle.
Freight forwarding solutions provide the necessary shipment arrangements, acting as a similar intermediary to freight brokers. However, a forwarder will handle the shipment in the initial stages. The freight will be stored with the forwarder until the carrier takes it over. In certain cases, forwarders may also act like carriers – they’ll have their own transport equipment and vehicles, providing a full service.
A freight forwarder will handle the cargo insurance, warehouse storage, and the shipping, whether by their own means or using a dedicated carrier. The freight will be transported under the forwarder’s bill of lading.
Freight Broker vs. Freight Forwarder at a Glance
Despite sounding relatively similar, freight brokers and forwarders have less in common than you may think. To better understand both services, let’s examine their main differences and similarities.
Freight brokers and forwarders differ in their responsibilities, registrations, particular services, and specializations.
Unlike a freight forwarder, broker services don’t include direct shipment management. This means that freight brokers don’t carry the same responsibility as forwarders. Should anything happen to the shipment, the broker won’t be liable in any way – the carrier will have that responsibility.
In contrast, a freight forwarder is the one signing the contract with the client, and the terms of that contract include freight liability. The additional responsibility also means the forwarder will be free to manage logistics as necessary, allowing them more freedom in the transport strategy.
In terms of how each service registers, brokers will carry a brokerage registration, while forwarders will be registered as operators. Here, again, forwarders have additional responsibilities. They’ll have to specify the forwarding plan to account for taxes and other legal obligations.
The services that freight brokers offer include:
- Carrier negotiations
- Delivery schedules
- Vehicle booking
- Vetting potential partners
- Warehouse reservation
- Shipment tracking
- Delivery coordination
- Translations for the purposes of international transport
Forwarders will have several other unique roles to fulfil:
- Freight transportation
- Cargo distribution, combination, division, and bundling
- Shipment packaging and insurance
- Unloading the shipped packages
- Taking inventory
- Customs and shipping agreement management
Finally, freight brokers and forwarders will differ in specialization level. Brokers will usually act as generalists in terms of shipping outsourcing, but forwarders will be more narrowly specialized. The forwarder’s job will often include legal peculiarities of different countries.
Brokers and forwarders have certain things in common, too. Firstly, similar to a freight forwarder, broker services will include regular client interaction. Next, both parties will be familiar with shipping regulations and the industry’s best practices.
Finally, the two services will utilize the same or similar skills to perform their tasks in the best way possible. These skills may include organization, planning, negotiation, finances, and more.
Knowing Your Way Around the Freight Broker Industry
If you want to find a reliable freight broker, you should ensure the service has the following documentation in order:
- Broker authority registration
- A trust fund or surety bond
- A process agent registration
These three documents will ensure the broker is in good standing and is cleared for specific activities legally. Besides the mentioned, it would be good if the broker also had specific training and a comprehensive insurance policy.
How to Find the Best Freight Forwarding Solutions
When it comes to freight forwarders, the main thing to find out is whether they’re registered for specific transportation means. In particular, there are two types of forwarder registrations:
- Ocean freight forwarders, which can handle shipping
- NVOCC or Non-Vessel-Operating Common Carrier, which issues a bill of lading without operating the shipping vessel
Get Familiar with Cargo Transportation Options
Knowing the differences and similarities between freight brokers and forwarders will help you choose the best option for your purposes. That way, your cargo will be handled in the most optimal manner, helping you avoid additional complications during the shipment process.
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