Forwarding Charges Definition: Everything You Need to Know
Forwarding charges definition is the outlining of the costs of the physical movement of goods between countries (transnational logistics).4 min read
Forwarding charges definition is the outlining of the costs of the physical movement of goods between countries (transnational logistics) and, in many cases, the costs of the legal processes of such a movement (customs duties) by clearing and forwarding agents who render such services to exporters and importers.
Technically, forwarding agents and clearing agents are separate entities. However, many entities serve as both clearing and forwarding agents to their clients, especially as the line separating the two functions in the current business world is thin.
What Is Forwarding?
Forwarding is the provision made to ensure the safe transportation of a shipment to its target destination. Different countries have different labels for freight forwarders. Some names by which freight forwarders are known are the following:
- Forwarding agents
- Clearing agents
- Customs broker
- Shipping and forwarding agents
- Clearing and forwarding agents
Forwarders, in their capacities as consultants, advise and offer several solutions to importers and exporters on how to get the best deals and results in the delivery process. The following are examples of aspects of the delivery process they advise on and help with:
- They advise on what packaging choices are best.
- They provide pointers on the best route to take.
- They advise on the best choice of transportation mode (known as groupage in the freighting industry).
- They provide guidance on the rules and regulations of the customs.
- They give advice on the best insurance coverage for the cargo.
- They help with the documentation of transportation.
- They help with tracking the progress of the shipment.
- They also help with processing the letter of credit for banking requirements.
The Need for Forwarders
The process of legally shipping cargo from one country to another can be complicated because of the various processes and stages involved in ensuring the safe arrival of the cargo. That's why it's good practice to engage the services of freight forwarders who are knowledgeable international freight professionals.
For instance, the exporter or importer with little or no experience may not know about the benefits of groupage, which works well and minimizes transportation hassle when shipping special cargo. Groupage also helps when there's a need to take advantage of grouping similar goods or goods bound for the same destination together. A savvy forwarding agent knows what's best.
It is the responsibility of the freight forwarder to plan the transportation of heavy project cargo and negotiate the best rates for their clients. The freight forwarder also sees to the offloading of the shipment, which involves verifying the cargo of their clients and separating them from other goods. The forwarder should also be present during surveys to note damages or losses on behalf of their clients in the event of logistic mishaps.
Unforeseen Shipping Costs
How would you feel if you opened up the final invoice for your shipment and saw a higher total cost than you signed up for? For reasons unknown to you, your cargo transportation had somehow attracted extra fees. Typically, you would be sad, or you would feel frustrated and angry.
Actually, there are some fees shippers may not be aware of when they book their cargo. Such fees can accrue over time and result in higher-than-expected total costs, which could lead to dissatisfied clients. However, for clients who are aware of such costs, there would be no unpleasant surprises.
Customs duties are an obvious part of clearing and forwarding shipments. However, not every importer builds them into the overall cost of their shipping. Don't be caught in that mistake. Do your due diligence and talk things over with your freight forwarder concerning how much you're expected to pay for your shipment. It's good practice to work with a higher budget and spend less at the end of the day.
Demurrage is the keeping of cargo too long at its port of arrival and the extra cost incurred as a result of such a delay. Generally, you won't have demurrage-related issues if you know how long you're permitted to keep your cargo at the port (it's usually between four to seven days for both imported and exported goods). However, if you don't make your findings properly or you wrongly assume that you can keep your cargo at its port of arrival longer than you're allowed, you'll run into extra expenses.
For instance, if the destination country of your shipment has different hold times at port from any other countries you're familiar with and you don't do some research to equip yourself with the required knowledge, you'll have to deal with demurrage-related hassle and detention. You can avoid this by doing due diligence.
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