Important Differences Between NVOCC (Non Vessel Owned Common Carriers) and Freight Forwarders

There are a number of interchangeable functions between NVOCCs (Non Vessel Owned Common Carrier) and freight forwarders.  However, in certain situations they have important differences which affect transportation protocols.  Knowing the differences can save time and unnecessary paperwork.

• NVOCCs often both own and operate their shipping containers.  At times, they also lease containers for their use or on behalf of others.  This capability allows them to cutout the middle man and makes the shipping process more efficient.  Freight Forwarders cannot operate this way.
• The United States and certain other countries require NVOCC operators to report their tariff to the proper government branch, thus creating a public tariff. There is a range country specific rules, including who is the designated point of contact and when contact is to occur.  Freight forwarders are not required to operate this way.
• Based on where they are operating, NVOCCs may have to assume the status of a virtual carrier.Depending on the jurisdiction, the NVOCC may be required to accept all the liabilities of the carrier.  Although this adds risk and responsibility to the NVOCC, it is considered to be worthwhile.
• Freight forwarding companies may act as either an agent or partner for a NVOCC.  The NVOCC does not need to be the agent or partner of a freight forwarding company.  This provides more flexibilty and allows NVOCCs to adjust based on the situation.

NVOCCs are frequently termed ship less shipping lines, acting similar to a common carrier, except that an NVOCC does not operate the vessel transporting the container.  The NVOCC brokers space on ships for the aggregate volume of its clients.  Volume garners lower rates which they then pass on to their shippers.  Shippers might choose the services of an NVOCC to avoid damage liability.  The NVOCC can be deemed a carrier who works for shippers and also a shipper to the carriers.

The services provided by a freight forwarder can also be undertaken by the NVOCC.  This includes having personnel available to handle the inland shipping when it reaches its destination, arranging for insurance on behalf of clients and clearing customs (end to end logistics).

Shipping Advantages Provided By an NVOCC (Non Vessel Owning Common Carrier)

Today when an International shipper is looking for their best options, they might want to consider the benefits of using a Non Vessel Owned Common Carrier (NVOCC).  These shippers are able to accommodate the needs of both large and small companies.  Many government agencies also regularly utilize the services provided by a NVOCC. 

According to an article in Maritime Journal, “The N.V.O.C.C. is a freight forwarder who sells a combined transport package incorporating a sea transit. He is not a ship owner, nor does he appear to be normally involved in the chartering of ships although no doubt he could do this.”  

OTI 

Prior to a company becoming a NVOCC, they will need to obtain their ocean transportation intermediary (OTI) license.  This means they will have to be qualified as a shipper by following a variety of steps required by the Federal Maritime Commission. 

Bills of Landing 

A NVOCC operates in the same way as any other cargo carrier.  They are able to issues bills of landing (BOL).  This is a document that confirms that goods have been taken on board a vessel.  It verifies the goods will be shipped to a particular destination and consignee for end delivery.  

Experience 

Most NVOCC shippers will have all the experience necessary to handle a wide variety of cargo types.  They will be able to do importing as well as exporting.  NVOCC shippers can handle everything from over sized items to temperature sensitive cargo and more.  

Tariffs 

NVOCC will file tariffs with necessary government regulatory bodies.  This will generate the required public tariffs.  

Experience 

An experienced NVOCC will know every important aspect of cargo shipping.  They will know how to successfully book space with shipping companies.  A NVOCC will be able to provide all required documentation for the shippers they utilize.  They will be able to coordinate the efficient delivery of cargo domestically as well as internationally.  

If you would like to know more about how an NVOCC (Non Vessel Owned Common Carrier) can meet your cargo shipping needs we can help.  Contact us today and learn more.

Do Freight Brokers Really Need Auto Insurance?

Freight Brokers wrestle with many questions when deciding cost management strategies. One of the biggest is whether or not they need Auto Insurance. The straight forward answer is absolutely. There are so many unpredictable, uncontrollable forces out there, (accidents, storms, hijackings, theft, vandalism) that it's impossible to avoid a lawsuit sooner or later, even if you have nothing to do with the incident. Just having your cargo there can put you at risk. If a truck gets into an accident, the first thing lawyers want to do is drag everybody they can into court. The average claim on an auto accident is about 2.6 million dollars. Without proper Auto Liability Insurance, such a claim can be devastating to a business. Liability costs for shipping skyrockets, severly impairing profitability.

There are many steps you can take to protect your assets and not face serious punitive damages as a result of death or injury from the movement of freight. One of the best steps is having someone with years of industry experience to review your current business model & current contracts in place. GSIS, Inc. is a leader in Risk Management education and Insurance Solutions. Our company is focused on educating our clients on risk management stratagies for the freight broker industry. We are always interested in spreading current news topics relating to the industry including major catastrophes and current laws that effect the Freight Broker/Transportation industry. Contact us at http://www.gsis.com

Here at Global Solutions Insurance Services Inc. we deal in the many forms of domestic and international trade insurance and our trained professionals help you choose a policy that fits your needs perfectly.

If you contract truckers to move freight and someone is injured or killed, are you covered?

Serious financial exposures confront domestic freight brokers, freight forwarders and their shipper clients when trucking operations they contract to move freight injure or cause fatalities.

 Are you covered?

 
The Right Policy is out there but do you have it in place?

 Have you ever asked yourself the question, “I am a company with domestic freight broker authority and how do I protect myself from law suits if I get named in one because a Common Carrier or Contract Carrier I contracted to move freight causes an injury or fatality?”
 You may have heard different arguments on how to cover this exposure. Of great concern to this writer is the fact some insured’s are under the mistaken impression that a “Non Owned and Hired Endorsement” added to a General Liability or Executive Auto policy is a means of covering this exposure.

You are mistaken if you feel this coverage will respond to the exposure facing domestic freight brokers and their shipper clients. This is a mistake that could be very costly as we have seen in the recent case Sperl Vs CH Robinson/Tyson Food Logistic involving a 23 million dollar judgment against this freight broker and shipper. (A post trial motion has been filed).

With this in mind, it is critical for the sustainability of any operation, that this exposure be addressed with the right coverage.

A close examination of the NOH Endorsement format makes it pretty clear this is NOT intended to address the exposures incurred when you contract 3rd party truckers to move freight for you.

The basis of premium rating and premium adjustment under a NOH endorsement states salaries of employees because the intent of the endorsement is to cover the Non Own & Hired exposures of an employee using their vehicles for company purposes, such as bank deposits. Ask any commercial underwriter what the intent of a NOH endorsement is and they will state that it is to cover the exposures of employees driving their own vehicles for company business or an executive on a business trip using a rented car for business purposes.

The right policy: Contingent Auto Liability policy for domestics freight brokers or domestic freight forwarders.

A specific policy format has been developed for domestic freight brokerage and freight forwarding operations. The policy has been referred to as Contingent Auto liability policy. The key feature to a policy that truly covers the exposure is specific reference within its format that it is intended to cover. Such copy states, “Companies with Freight Broker Authority or Domestic freight forwarding authority who contract trucking operations who are independent agents with Common Carrier Authority, Contract Carrier authority or Intra-state authority.”

Some policy formats in the marketplace clearly state the insurance carrier has a duty to defend. Having this clause reflected within the format is another critical element to the coverage a freight broker must have in place. The principal benefit is underwriters responding to legal costs should they be named in a law suit because a third party trucker caused an injury or fatality and the freight broker ends up being named in the law suit.

Very few insurance carriers are willing to write a Auto Liability policy for domestic freight brokerage operations and domestic freight forwarding.

You will find a very limited number of insurance companies willing to write the commercial auto exposure that faces a domestic freight broker or forwarding operation for the following reasons.

The normal paradigm for underwriters of commercial auto coverage is to review detailed information associated with the trucking operations. Most insurance carriers that write commercial auto require MVR’s, hard copy loss runs and vehicle ID numbers, all relating to the commercial auto exposure. Indeed this level of information is impossible for a domestic freight broker to provide as they could be working with thousands of common carriers each one with countless drivers and equipment lists.

Accordingly without such information, they won’t offer a quote. What you are left with are maybe six insurance carriers that openly acknowledge they are willing to take on the commercial auto exposures a domestic freight broker or freight forwarder incurs under their authority.

The shortage of insurance carriers willing to write the commercial auto exposures of domestic freight broker or freight forwarder may be one of the reasons the wrong type of coverage is being suggested by some insurance agents. These agents may not have an appointment with one of the few insurance carriers writing the class, leaving them to suggest alternatives that don’t really address the exposure.

Buyers beware, make certain if you are domestic freight broker or freight forwarder be certain your auto policies is intended to address the real exposure you face.

Domestic shippers beware, move freight only with domestic logistic operations that have the right coverage in place, if you don’t it could a very costly error.