What is a forwarder? An introduction to how forwarders differ from freight forwarding agents (Otsunaka), the details of their operations, and the advantages of their utilization

When conducting transactions with parties overseas, it seems that many people are troubled by the complicated international logistics procedures. A "forwarder" provides help in such cases. 

This article provides a detailed explanation from the definition of a forwarder to the contents of their operations, the difference between forwarders and freight forwarding agents (Otsunaka), and the advantages of utilizing a forwarder. Please refer to the following as knowledge that can help advance your international logistics smoothly. 

A forwarder 

A forwarder (also called a freight forwarder) is a business that does not have its own means of transportation, but use ships, aircraft, and trucks, etc., to transport cargo in international logistics. The forwarder agrees a contract directly with the shipper and then takes care of all the complex procedures and arrangements necessary for international transportation. 

For companies (shippers) that import and export, forwarders are essential as international logistics professionals. When conducting transactions with parties overseas, in addition to arranging the means of transportation, it is also necessary to perform various tasks that require specialized knowledge, such as customs clearance procedures and the preparation of documentation. The advantage of outsourcing these tasks to a forwarder is that it enables a company to concentrate on its core business. 

Companies that own their own means of transportation (ships, aircraft, etc.) are called "carriers" and are distinguished from forwarders.

Main operations performed by forwarders 

Forwarders take on a variety of tasks in international logistics. Let's take a look at their main roles. 

Arrangement of international transportation, such as on ships or aircraft 

The basic work of a forwarder is to arrange means for international transportation. The forwarder selects the most appropriate transportation method to suit the cargo characteristics and the requirements of the shipper. For example, this may be marine transportation (on a container ship or bulk carrier), air transportation, or intermodal transportation (sea and air). 

In addition, forwarders agree contracts with multiple carriers (shipping companies and airlines), so they are able to propose the most cost-effective transportation plan for the shipper. If a company regularly transports large volumes of cargo, the forwarder will also work to secure the space necessary and negotiate rates. 

Preparation of transportation-related documents such as shipping documents 

International transportation requires a large number of documents. Of particular importance are the "Bill of Lading (B/L)" for marine transportation and the "Air Waybill (AWB)" for air transportation. The creation and management of these documents is another important part of the work of a forwarder.

Agency for customs clearance operations 

Customs clearance refers to the customs procedures required when cargo crosses an international border. Customs clearance procedures are required in both the exporting country and the importing country. A forwarder who has a license as a "customs-house business" can handle these procedures on behalf of your company. 

In specific terms, the forwarder prepares and submits the customs declarations, pays the customs duties and consumption taxes, and handles the response to inspections, etc. Customs clearance requires expertise in the laws and regulations of each country, so the existence of a forwarder is extremely important for the smooth operation of international trade. 

Related article: What is customs clearance? A detailed explanation of the procedural flow and of the declaration method and documents required, etc.

Storage of cargo at port or airport, packing and delivery work 

Forwarders are also responsible for receiving and handing over the cargo at ports and airports, and for temporarily storing the cargo. If necessary, the forwarder will also perform tasks such as cargo packing, crating and label attachment. 

In addition, many forwarders also offer a domestic delivery service. This allows the shipper to receive an integrated logistics service with door-to-door transportation from the port or airport to the final destination. 

Arrangement of cargo insurance 

There are various risks in international transportation. It is important to have adequate cargo insurance to cover unexpected issues such as cargo being damaged or lost, or the occurrence of transportation delays. 

A forwarder will select the appropriate insurance and complete the procedures necessary on behalf of the shipper. If a problem should occur, the forwarder will also file insurance claims on behalf of the shipper. Another important role of a forwarder is to propose the ideal insurance plan according to the value of the cargo and the transportation route, in order to protect the interests of the shipper.

Differences between forwarders, freight forwarding agents (Otsunaka), and customs brokers 

Forwarders, freight forwarding agents (Otsunaka), and customs brokers perform similar work, so they are often confused with each other, but each has different characteristics. Let’s clarify those differences here. 

Freight forwarding agents (Otsunaka): What were previously called shipping freight handlers 

The term "Freight forwarding agent" refers to what were previously called shipping freight handlers. The Japanese term "Otsunaka" literally means the intermediary for the shipper in a contract with a shipping company. In other words, they are the intermediaries between shipping companies and shippers. 

The enactment of two logistics laws in 1990 ended the legal category of the "Otsunaka" freight forwarding agent, and the companies concerned are now positioned as "consigned freight forwarding businesses." However, the "Otsunaka" freight forwarding agent term is still often used habitually. 

The business of these freight forwarding agents was primarily related to marine transportation, but the forwarders of today provide comprehensive international logistics services that also include air transportation. 

Customs brokers: Companies that act as an agent for the series of operations necessary for customs clearance 

Customs brokers specialize in customs clearance procedures, such as the declarations made to customs for imports and exports. In order to perform customs clearance business, it is necessary to have a license as a "customs-house business" and it is mandatory for a customs broker to have a nationally certified "Registered Customs Specialist" to perform the customs clearance procedures. 

Many forwarders also have a license to perform "customs-house business" and perform the customs clearance operations in-house. Originally, customs brokers are companies that specialize in customs clearance procedures. However, in recent years, there have been cases where customs brokers also handle transportation arrangements, and there are an increasing number of cases where the scope of work of customs brokers overlaps with that of forwarders. 

Advantages of using forwarders 

Let's look at five representative advantages of using a forwarder. 

The forwarder will perform all the complicated procedures on your behalf 

One of the advantages of utilizing a forwarder is that it can perform all the complicated procedures on your behalf. 

International logistics involves a wide variety of tasks, including the preparation of various documents related to imports and exports, customs clearance procedures, and the coordination in the local area. These tasks are all subject to different laws and regulations in each country, which means that the work can be a significant burden for companies that are new to overseas transactions. 

Forwarders take care of all these complicated procedures for you, so it is not necessary for staff of your company to devote an enormous amount of time and effort to this work. 

Higher cost efficiency than when performing the management in-house 

If a company tries to manage all aspects of international logistics in-house, high costs and a lot of time and effort are required to agree a direct contract with a shipping company or airline, to secure specialized staff, and to deal with any problems that may occur. Forwarders gather together and transport cargo from a large number of shippers, so a major advantage is that it is possible to use economies of scale for cheaper freight charges and services. 

In addition, forwarders partner with multiple transportation companies to select the ideal means of transportation and routes, so it is possible for them to propose logistics plans with excellent cost performance. Rather than making individual arrangements in-house, using a forwarder can be expected to reduce the costs for transportation, labor, and training, and therefore to make it possible to suppress the overall logistics costs. 

Transportation risks can be minimized 

There are various risks to international transportation, including weather-related delays, strikes, and political turmoil. Forwarders anticipate these risks and take measures against them, so another advantage of using a forwarder is that it is possible to minimize the problems during transportation. 

For example, in the event of an issue such as delays or cargo damage during transportation, the forwarder will promptly coordinate with the relevant parties, such as to arrange an alternative route, or to assist with insurance claims. Forwarders are also familiar with the differing customs clearance procedures and regulations of each country, so it is possible to prevent the occurrence of problems due to incomplete documentation or procedural errors. 

For a company that is anxious about doing business overseas for the first time, the presence of a reliable forwarder can be a great source of reassurance. 

Receive suggestions on the ideal logistics route 

Another advantage of using forwarders is that they can suggest the ideal logistics routes. 

In international logistics, rather than simply transporting cargo straight from point A to point B, it is necessary to select the route based on comprehensive consideration of various conditions such as the cost, delivery time, cargo characteristics, and risk management. Forwarders do not have their own means of transportation and instead use an extensive network of partnerships with multiple shipping companies, airlines, and land carriers, so they can offer the best combination of transportation mode and route to meet the needs of the shipper. 

This makes it possible for a company to develop the ideal logistics strategy for its business plan and trading conditions.

A global network can be utilized for transactions in multiple countries 

In recent years, in addition to overseas transactions that are completed between Japan and one other country, there have been an increasing number of cases of trilateral trade through a third country, and of multilateral transactions stretching across multiple countries. The global network of a forwarder becomes a tremendous advantage for the smooth promotion of the complex international logistics in these cases. 

Forwarders coordinate with logistics companies, local subsidiaries, and agents around the world and create the optimal route by combining all the modes of transportation, on the land and sea and in the air. Furthermore, if there is a sudden change in the international conditions or obstruction to the transportation, a forwarder can also use its global network to quickly arrange an alternative route to prevent logistics stagnation. 

This ability to respond to the situation is a great source of reassurance for companies trying to do business overseas for the first time, and for small and medium-sized companies that do not have overseas offices.

Points to check when choosing a forwarder 

Forwarders are professionals in international logistics, but the specific strengths and services of each company vary widely. Let’s look at four points to keep in mind as checks when selecting a forwarder. 

Cargo handled and specialist fields 

When choosing a forwarder, it is important to select one that specializes in the handling and means of transportation that are appropriate for the type of cargo of your company. Check points such as the following. 

• Is the forwarder stronger in marine transportation or air transportation?
•  Its past results in the handling of special cargo (hazardous materials, cargo requiring temperature control, etc.) 
• Its past results in transportation to your export destination country and region, and its network in the local area 
• Whether it supports small-lot cargo or large-lot cargo 

Selecting a forwarder that matches the cargo characteristics and transportation needs of your company will ensure more efficient and safer transportation. 

Service content and fee structure 

The scope of the services offered and the fee structures vary between forwarders. Large forwarders that offer comprehensive services may have different strengths and fees from specialized forwarders who specialize in particular services. 

It is useful to use the following points for comparison. 

• Is it a one-stop service including customs clearance, or transportation only?
•  Does the service include domestic delivery? 
• The transparency of the fees (e.g., whether there are additional charges) 
• The level of detail in the quotation, and how easy it is to understand 
• When selecting a forwarder, in addition to the price, it is important to also consider the balance between the price and the service contents and quality. 

Communication and response capabilities

Unexpected problems can occur when conducting international logistics. It is therefore important to choose a forwarder that can communicate information quickly and accurately. 
Specifically, check the following points. 

• The promptness and politeness/careful nature of the response from the person in charge
•  Emergency contact system (24-hour availability) 
• Problem-solving capabilities and past track record of handling problems 
• Ability to communicate in the required languages (English and local languages) 

Selecting a forwarder with whom you can build a relationship of trust as a long-term partner will help your company achieve stable international logistics. 

Reliability and track record 

Other important factors to consider when selecting a forwarder are the reliability and track record of the company. 
It is useful to check the following points. 

• The reputation of the company in the industry and the reviews it receives
• How many years the company has been established and the size of its business
• Clients with whom the company has done business (if possible, regarding companies in the same industry) 
• Certifications and qualifications held (AEO accredited business, ISO certification, etc.) 

Working with a reliable forwarder will enable you to entrust your international logistics with peace of mind. 

Summary 

In international logistics, a forwarder acts on behalf of a shipper and performs complex tasks such as the selection of a means of transportation, customs clearance procedures, document preparation, and on-site coordination. Forwarders are experts who realize smooth and efficient trade. Rather than having their own means of transportation, forwarders flexibly combine multiple transportation companies and services to optimize logistics routes, reduce costs, and manage risks. 

The use of such a forwarder can provide great support and make it possible for a company that is inexperienced in overseas transactions to develop its international business with confidence.

Goto Kaisoten Ltd. is a comprehensive logistics company that has been playing the role of a forwarder for many years. 

• A comprehensive logistics company with over 140 years of history
•  A global network that utilizes around 70 bases in Japan and overseas 
• A one-stop service for everything from marine, air, rail, and truck transportation to packing, storage, and customs clearance 
• Extensive experience in special projects such as liquid transportation and large cargo 
• Superior customs clearance results and reliability as an AEO-accredited customs broker 

Goto Kaisoten offers the optimal logistics proposals from the standpoint of the shipper, and also provides a thorough response to any trouble during transportation and conducts thorough risk management. We will support all the international business of your company, from your first overseas trade to complex multinational logistics. 
Please be sure to contact Goto Kaisoten if you are having trouble selecting a forwarder. 

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