There are two common terms that are sometimes used interchangeably in the freight and shipping industry: NVOCC and Freight Forwarder. However, they are actually different; especially in terms of the liabilities and documentation.
As defined by FMC, NVOCC stands for Non-Vessel Operating Common Carrier and it is basically a company that takes care of shipment organization for corporations and individuals. The prime motive is to provide services to the producers and manufacturers in the market while ensuring product delivery to the customer at the final end of the distribution process.
What is the difference between NVOCC and Freight Forwarder?
The general tasks of forwarder/NVOCC are booking cargo, organizing cargo movement, negotiating contract rates with various carriers, consultation, preparation and processing of the relevant shipment documents. NVOCC also takes responsibility to organize shipments as well as to sign contracts with the shipping line and carrier ensuring that a specific number of containers can be shipped every year. On the other side, shipping lines, acting as a carrier also offer better rates to these companies.
It is important to mention that NVOCC issues House Bill of Lading on their own; however, freight forwarders issue bill of landing depending upon the FIATA document standardization. Also, the freight forwarder is not permitted to add any profit on the top of the container or vessel slot; rather, they can only collect the surcharges, service fees and handling fees only.
The list of activities controlled and managed by NVOCC includes:
- Concluding international goods carrier contracts as carriers with the shippers.
- Delivering and receiving cargo in the form of carriers.
- Issuing of various transport documents along with house bill of landing.
- Handling booking space as well as the mainline carrier shipping.
- Arranging payments for transportation between port to port along with other essential charges.
- Consolidation as well as deconsolidation of containers using 3rd party services or through CFS.
The list of activities controlled and managed by Freight Forwarder:
- They arrange cargo movements for international destinations.
- Take responsibility to dispatch shipments via common carriers from the United States; may also arrange necessary space for the shipments via shippers.
- They process and prepare documentation related to all shipment activities.
There is no doubt to say that the United States of America is the largest importer all over the world. However, all NVOCC and freight forwarder companies in the United States need to apply for the Ocean Transpiration Intermediary (OTI) license. Federal Maritime Commission (FMC) takes care of issuing licenses to the eligible companies. For beginners, applying for the NVOCC licenses can be a little complicated. Don’t worry! Here we have mentioned all necessary details to ease the process for newbies in this field.
Types of licenses:
There are three types of licenses that one may apply in the United States to start maritime shipments.
- OTI-NVOCC License: The first most option is an OTI-NVOCC License that allows operators to release their own bill of lading, fix variable selling rates for the shipments and purchasing essential transportation services from carriers.
- OTI-OFF License: Operators having OFF (Ocean Freight Forwarder) license is not able to perform all those activities that are permitted under the OTI-NVOCC license. However, they can collect commissions on carrier allotment while facilitating documentation and shipping to the involved parties.
- OTI-NVOCC and Forwarder License: This type of license holders are eligible to operate either as NVOCC or as Freight Forwarder. But it is important to mention that FMC does not permit any company to act as NVOCC and Freight Forwarder at the same time.
Steps to apply for OTI License:
Below we have highlighted a few simple steps to apply for OTI-NVOCC license:
Step 1: First of all, the company needs to appoint a QI or qualifying individual with three years of valid OTI experience.
Step 2: Fill the Form FMC-18 either on paper or electronically.
Step 3: Submit the filled form and make payment for the mentioned application fee. Generally, for electronic format, you need to pay $250; whereas for the paper application, it requires $1962.
Step 4: In case if you are a non-US applicant, establish your presence in the country.
Step 5: Finally, submit the financial responsibility proof.
House Bill of Lading
The NVOCC takes responsibility for issuing of House Bill of Lading to the end customers. Note that, the shipper who is listed on the House B/L is conserved as the actual exporter or shipper for that particular shipment. As per this document:
- The shipper acts as an actual exporter or shipper for the cargo.
- The consignee acts as an actual importer or receiver for the cargo.
- As per the assignment is done via License, the consignee could also act as Notify.
As soon as the shipment is received by NVOCC from the assigned shipper; it releases the House Bill of Lading by considering that all the customs paperwork is finished. The biggest difference between NVOCC and Freight Forwarder is that licensed NVOCC is permitted to issue their own House Bill of Lading.