Southern States Forwarding, Inc.

Ocean Forwarding 101

This is one of a group of informative pages on this web site which we are providing for the benefit of people and companies who use the services of Freight Forwarders and Customs Brokers such as ourselves. See also: Glossary Soon to come: Example of OCP vs. IPI shipments

Ocean Forwarding 101

Ocean forwarding for commodities is one of our functions. Here's a brief overview of what we do for ocean shipments.

A forwarder is like a travel agent for cargo. Our job is relatively complicated, and lawmakers usually are not helpful because "cargo does not vote".

A forwarder must be licensed by the Federal Maritime Commission (FMC). This requires a background check covering experience and references, and a bond. (Check the FMC home page for all the details.) According to the FMC, on every shipment we must certify we have no beneficial interest in the shipment, we hold a valid FMC license, and we... "have performed the following services:

  1. Engaged, booked, secured, reserved, or contracted directly with the carrier or its agent for space aboard a vessel or confirmed the availability of that space, and
  2. Prepared and processed the ocean bill of lading, dock receipt, or other similar document with respect to the shipment."
In addition to the above, a forwarder must have power of attorney for his customers so when performing the above services, he can act on their behalf, speaking and contracting as if he were an employee of the customer.

An ocean bill of lading (B/L) is the most important document we handle. The ocean B/L carries title to the goods. Many of the overseas shipments are arms length transactions where you need to be careful. The person who first presents an original B/L, properly endorsed, will receive the goods at destination. Here's an example of how a transaction works. USA company sells widgets to China company. They sign a sales contract. The contract instructs China company to open an irrevocable letter of credit (L/C) in favor of USA company. China company guarantees payment to its China bank, and sends the L/C to USA Company. USA company satisfies the requirements of L/C, and presents all documents including a "bankable" B/L in exchange for cash from its USA bank. USA bank sends all to China Bank in exchange for cash, and China Bank gives China company the B/L so they then take possession (title) to the shipment of widgets.

The second most important document we handle is the Shipper's Export Declaration (SED). A few years ago these had to be typed in triplicate on a special form. Today we do this electronically. Essentially we are reporting who shipped what to whom, all the details of the shipment, and what it was worth.

There are voluminous amounts of additional documentation that can go with a shipment. Depending on what you ship and where you ship it to, there will be government specified documents required. Some of these would be:

Today there are basically two types of shipments: Breakbulk and Containerized. About 90% of the cargo handled today is Containerized. Containers are easier to handle, and they keep the merchandise cleaner and safer. If you enter into a Breakbulk shipment contract, please read the charter agreement carefully.

The terms under which the cargo is transported are complicated. There is contract carriage where you have a contract which essentially is part of a ship charter. The other type of carriage is Common where carriers must offer space to all, and the price charged must be what they have published in their tariff. BEWARE, it does not matter what you were quoted for ocean transport, you will be liable for the rate published in the tariff. Further, regardless of who has a B/L, the carrier should not release the cargo until it has been paid.

A forwarder can do more than documentation. He should be able to shop for rates and give advice. His expertise and document processing should be worth more than he charges.

Southern States Forwarding, Inc.
5269 Brantford Road / Memphis, Tennessee 38120 USA
(901) 763-3044 ~ fax (901) 763-1999 ~

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