NVOCCs are essential in shipping. So are NVOCC licenses. Find out the difference between freight forwarders and NVOCC – and how you can get an NVOCC license.
Having a licensed NVOCC from FMC means your organization is reliable. However, procuring an NVOCC license is quite a task, mostly because:
The procedure is not clear causing confusion. And NVOCCs are often confused with freight forwarders.
Freight not! 😉
Here we’re breaking down everything about NVOCCs, the difference between the two, how to get the license, and much more. Keep reading…
What is an NVOCC?
Acronym for Non-Vessel Owning Common Carrier, NVOCC are transport companies that organize shipments for their clients ‘independently’ i.e. –
- The company doesn’t own any vessels.
- It issues its bill of lading (B/L or BoL) or equivalent document.
It signs contracts with shipping companies to transport containers and goods. An NVOCC does that by leasing space from other ocean carriers (or VOCCs). They act as a courier service, responsible for sales, stuffing, and transportation of the cargo from point A to B.
The NVOCC companies function as an ocean carrier but without operating the vessel. However, they are often confused with the freight forwarders.
NVOCC vs. Freight Forwarders – The Difference
The general tasks of forwarders and NVOCC are the same. They book cargo, organize cargo movement, negotiate contract rates with various carriers. They also consult, prepare, and process relevant shipment documents. Because of the similarity in services, NVOCC and freight forwarders are often used interchangeably.
But, they are vastly different. Here’s listing the points of variation between the two:
|They issue the House Bill of Lading.||They issue the Bill of Lading* depending on the FIATA document standardization.|
|Besides operational service costs, they can add a profit percentage after leasing the space from other carriers.||A freight forwarder is not allowed to add any profits on container/vessel fees (can only collect surcharge, handling, and service fee).|
|They act as the middlemen: carrier-to-shippers and shipper-to-carriers.||Freight forwarders act as agents of the shippers.|
|NVOCC’s can own a fleet of containers.||They do not own any equipment.|
And now that we are clear, here’s everything you need to know about getting an NVOCC license.
What is an NVOCC License?
FMC or Federal Maritime Commission is the US federal agency regulating the US ocean-based transports. US-based companies acting as freight forwarders or NVOCCs must obtain an Ocean Transportation Intermediary (OTI) license from the FMC. Non-US-based NVOCCs are not required to obtain a license but can simply register with the FMC.
Why it is important
From a company’s perspective, having an FMC license means NVOCCs can negotiate deals with the shipping lines. It also allows the NVOCCs to generate in house bills of lading, which is recognized as carrier bills.
From a client’s perspective, working with an FMC-licensed NVOCC creates a certain level of trust and reliability in the company. FMC licensing ensures:
- Right Pricing
FMC prevents NVOCCs from charging customers unfair costs by monitoring agreements, including mergers and acquisitions among the carriers.
FMC license regulates everything for NVOCCs. That gives you as a shipper some security. Because when working with an FMC-licensed NVOCC you have someplace to go if you need help with unfair treatment.
Shippers prefer to work with FMC-licensed NVOCC because it provides a safety net. Many things can happen with the NVOCC. It can go out of business, or any other damage occurs while having the shippers’ cargo in their possession. When this happens shippers have some chance of recovering the cost.
Types of OTI License
All NVOCC and freight forwarders are required to apply for an OTI license with the FMC in the United States. There are 3 types of license that one can apply depending on their requirements:
- OTI-NVOCC License
This is the most popular license. It authorizes the company to a long list of things. Such as issue its bill of lading, set their prices for the shipments. And sign contracts with the ocean carriers for purchasing the services.
- OTI-OFF License
With an OTI Ocean Freight Forwarder (OFF) License, the company cannot perform the activities listed under the OTI-NVOCC license. However, it can collect a commission from carriers for documentation and shipments arranged by them.
- OTI-NVOCC & Forwarder License
With this, the company can operate either as an NVOCC or a forwarder. But, the FMC does not allow the company to act as a forwarder and an NVOCC for the same shipment.
How to Apply for an FMC OTI License?
Step 1: Determine the type of license the company needs depending on your requirements.
Step 2: Establish or confirm your corporate identity (sole proprietor, LLC, or Corporation).
Note – If you are a non-US applicant, you must first establish a presence in the US to be eligible for applying for an OTI License.
Step 3: Appoint a qualifying individual (QI) with at least 3 years of verifiable OTI experience. The experience must be gained by working for an FMC-licensed company (NVOCC, carrier, or forwarder) based in the US. And you must have 3 references to verify credibility.
Step 4: Fill out the FMC-18 form. Submit and pay the fee: $250 (for electronic application) and $1962 (for paper application).
Step 5: Submit proof of financial responsibility. The FMC will not issue a license without a valid surety bond. The fees vary for different NVOCCs:
For OTI-NVOCC License = Fees + $10,000 per branch office
- US-based NVOCCs Fee: $75000
- Non-US-based NVOCCs Fee: $75000
- Non-US-based NVOCCs without an OTI Fee: $150,000
Step 6: Upon receiving the license, register and publish your NVOCC Charges.
Important: The license needs to be renewed every 3 years.
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