Forwarders help importers with transport and clearance
- Marcel Hoebink
- 15 June 2023
- Edited 22 December 2023
- 5 min
- Managing and growing
Organising international transport and clearing customs takes time and is difficult. A freight forwarder will help you with this. In this article, a forwarding agent shares his practical experiences. Learn what types of forwarders there are and get insight into the costs forwarders charge to importers.
Bart de Ruiter is the owner of forwarding company Explect Forwarding B.V. His company arranges the transport of goods across the world. To do so, Explect works with various carriers and other forwarders. In this article, De Ruiter talks about the role of the forwarder in the import process. And he explains how importers can contribute to quicker processing at customs.
This is what a freight forwarder does
Freight forwarders arrange international transport with various types of transportation, including trucks, ships, airplanes, and trains. Each mode of transportation has advantages and disadvantages in terms of cost or speed, for example. Forwarders maintain contact with various parties within the international chain. For instance, road transporters, shipping companies or shipping lines, airlines, rail carriers, and customs.
“We book the right transportation vehicles”, says de Ruiter. “We collect the goods from the foreign supplier and arrange the loading and unloading. We also offer storage options and transport insurances. We deliver goods to the importer and clear shipments that come from outside the EU. Clearing means we declare the goods at customs. We then also advance the payment of the import duties and other import taxes. And answer questions from importers about HS codes, Incoterms®, and import documents.”
Do you need a forwarder?
For a truck carrying goods from Spain, you can approach a carrier yourself. So why seek help from a freight forwarder? De Ruiter explains the added value. “Let’s say it’s about a few pallets of goods. The forwarder has to have space left in their truck and time for pick-up and delivery. Forwarders work with various carriers and with other forwarders. That’s how they find carriers with this space and time faster. They can negotiate better prices, because they work for various clients, and thus offer more volume to carriers.”
For example, do you import from China? And do you want to arrange the transport yourself, without a forwarder? Then you need knowledge of the international transport chain and the necessary documents. Between the Netherlands and China, the main type of transport is usually by sea. The pre- and post-carriage (before and after the sea transport) goes via the road, rail, air, or inland waterways. Forwarders advise on the choice of transportation vehicles. “For instance, we advise against railway transport from China to the Netherlands via the Russian part of the New Silk Road. Due to the situation with Ukraine, such transport would not be insurable. Do you have little knowledge of logistics and do you lack a local network? Then I wish you good luck, because that is likely to be a difficult and costly ordeal.”
Types of forwarders
Forwarders often have specialisations. For instance, the air freight forwarder focuses on air freight. A customs forwarder focuses on drawing up customs documents and customs clearance. Or they might be specialised in the transport of refrigerated products such as fruits, or dangerous goods such as chemicals. Many forwarders offer a combination, so that their client can book all the services they need with one provider.
Forwarders often work together with other forwarders that offer different services. De Ruiter gives examples: “We usually clear goods through customs ourselves. But for clearing cut flowers or meat, for example, we use specialised customs forwarders. Special rules apply to these products upon import. And vice versa, road transport forwarders book sea or air freight with us.”
Most starting importers often begin small, for instance with a few pallets. Booking a whole sea container or truck for a small number of pallets is comparatively expensive. One solution is groupage shipments. With groupage, shippers put partial loads together in a container. This is also called consolidation. Your goods are then placed in a container together with goods from other importers.
In sea transport with groupage, this is referred to as Less than Container Load (LCL). In road transport, this is called Less than Truck Load (LTL). De Ruiter: “Because you share the container with other importers, your freight costs are lower with groupage.”
There are various types of forwarders with their own field of expertise, for instance:
- air freight forwarders
- sea freight forwarders
- inland freight forwarders
- road freight forwarders
- railway forwarder
- customs broker/forwarder
- groupage forwarder
The rates a freight forwarder charges depend, among other things, on the size of the shipment, the distance, the loading and unloading locations, and the means of transport. The freight forwarder also charges a fee for additional services such as customs expedition, storage, and transport insurance. “Costs also depend on the season,” adds De Ruiter. “There are periods in India where parts of the rivers are dry. Road transport is then a logical solution, but that is more expensive than transport by water. In Canada, the same story. There, lakes freeze over in some periods.”
Within the validity period of a quotation, the costs are fixed. De Ruiter notes: “Except when it concerns extra costs that we cannot influence ourselves. For example, an importer books 8 cubic metres of space, but ends up needing 10 cubic metres. Or the importer does not return the pallets.”
Unforeseen costs also arise, according to De Ruiter, when customs carries out a physical check. “If a gas measurement reveals that there are dangerous gases or vapours in the container, it must be degassed first. Forwarders pass on the degassing bill to importers. In addition, the exchange rate plays a role, as we usually receive freight cost invoices in dollars. If the dollar exchange rate rises, it will cost you more in euros.”
The forwarder pays the freight price to the carrier and charges the importer for it. In sea transport, the shipping company charges a fixed price for a full 20-, 40-, or 45-foot shipping container. Shipping companies adjust prices several times a year. This depends on market developments, for example. The abbreviation for a full container is Full Container Load (FCL).
With groupage, the carrier determines the freight price based on weight or volume. Does it involve light, soft goods, such as textile products, which take up a lot of space compared to their weight? Then the carrier calculates the freight rate based on volume. For heavy goods, such as blocks of steel, that take up less space compared to their weight, then weight applies as the basis for the freight price. Freight forwarders use special calculations to determine the freight price for groupage.
In addition to the freight price, carriers often charge additional fees. The forwarder passes on these costs to importers. For example, fuel surcharges such as Bunker Adjustment Factor (BAF) in maritime shipping. And Diesel Oil Surcharge (DOT) in road transport. Another surcharge is Currency Adjustment Factor (CAF). With a percentage of the freight price, shipping companies absorb exchange rate risk.
Examples of other surcharges are:
- Congestion Surcharge (CS): a surcharge for delays at the port or accumulation of containers at a terminal.
- International Maritime Organisation Surcharge (IMO): a surcharge for the maritime transport of dangerous goods.
- International Ship and Port Facility Security (ISPS): a surcharge for securing ships and ports.
- Peak Season Surcharge (PSS): a surcharge for maritime transport during the peak season.
You also pay for the handling of your goods at the terminals, such as loading and unloading. In maritime transport, you call this Terminal Handling Charges (THC). Another cost is demurrage. De Ruiter: “By default, most shipping companies give a number of days ‘free’. For example, 3 days. This means that your container can be at the terminal for 3 days. If it takes longer, you pay demurrage. As an importer, do you engage a forwarding agent or customs broker only at the last moment? Then the chance of demurrage is very high. And you pay a detention charge if a container is at an external location after the expiry of the ‘free days’. For instance, at your own company. That is because you are keeping the container occupied for longer than agreed.”
Customs clearance costs
When importing goods from countries outside the EU, a (customs) forwarder prepares an import declaration. Based on this import declaration, customs officials levy the import taxes due, such as import duties and import VAT. The importer pays these clearance charges. As an entrepreneur, you may deduct the import VAT as input tax in your VAT declaration.
Clearing goods through customs
The important role of importers
Most shipments arrive on time, but unexpected situations such as delays, strikes, or accidents can delay the delivery time. Importers themselves can contribute to a smooth shipping procedure with good preparations. For example, to help the customs clearance go smoothly. “Sometimes, importers only send us the invoice a day before the goods arrive. Even if we have already asked for it several times. Then we might see that information is missing from the invoice, such as an invoice number or the Incoterms®. Or mandatory documents might be missing. Such as health certificates or certificates of origin from the supplier’s country. This causes unnecessary delays and problems.”