NVOCC stads for Non-Vessel Operating Common Carrier. NVOCCs operate as an intermediary in the global logistics and shipping industry. Vessel Operating Carriers are the companies that actually own a fleet of vessels that they operate, for example MSC, Maersk and CMA-CGM. Whereas, NVOCCs will purchase space in bulk from from these ocean carriers then on sell it to shippers, effectively managing the transportation of goods without owning the vessels themselves.
The role of a NVOCC is mixed, blending the functions of a carrier and a freight forwarder. A NVOCC becomes the carrier of goods and assumes the responsibility for the cargo it handles, issuing its own House Bill of Lading (HBL). The Bill of Lading document is serves as a contract of carriage between the NVOCC and the shipper, outlining the terms under which goods are transported. It also acts as a receipt for the cargo and a document of title, enabling the transfer of ownership of the goods being shipped.
What is a Freight Forwarder?
A freight forwarder is a company that specialize in arranging all aspects of a global trade shipment, from origin to destination. The global supply chain involves so many complex processes and involves dealing with multiple parties in different countries. Freight forwarding companies will act on the behalf of shippers or consignees to provide a wide range of services, including International seafreight transport, customs clearance procedures, import duties & taxes, port handling services and last mile trucking delivery.
Read about how to choose the freight freight forwarder for your import export business.
What is the difference between a NVOCC and a Freight Forwarder?
To become a NVOCC, first the company must already be a licensed freight forwarder. Not all freight forwarders are NVOCCs.
A NVOCC’s primary role is as a carrier, they usually specialize in on-selling seafreight in bulk, from port to port. They have close relationships with various shipping lines and can offer competitive rates to move freight in bulk via sea transport. Whereas, a freight forwarder will usually specialize in a wider range of services and will offer various modes of transportation, via road, rail, air or sea.
NVOCCs may only focus on selling seafreight in bulk, whereas freight forwarders usually specialize in providing tailored freight options to move shipments from origin to beyond the port of destination.
How does a NVOCC operate?
A NVOCC operates by purchasing freight space from the Vessel Operating Common Carrier (the vessel owner).
NVOCCs will negotiate rates and secure space based on anticipated volumes, then on sell the space to shippers. With shippers, they offer a direct line to a network of shipping options and routes, often providing more flexible and cost-effective solutions than the shippers could secure on their own. This arrangement allows them to offer cargo space to their clients, even during peak shipping seasons when space is at a premium.
Similar to a freight forwarder, a NVOCC can also offer the other supply chain services, such as cargo consolidation, shipping documentation, customs clearance and inland transportation.
How do NVOCCs make money?
Primarily, NVOCCs negotiate contracts with vessel-operating carriers (VOCCs) to purchase space on ships in bulk at discounted rates. They then sell this space to shippers at a markup. The difference between the bulk rate paid to the carrier and the rate charged to the shipper constitutes a significant portion of an NVOCC’s revenue. By leveraging their relationships and negotiating power with carriers, NVOCCs can secure competitive rates that are attractive to shippers while still allowing for a profitable markup.
NVOCCs can also make money by providing the various other supply chain services to their shippers, such as cargo consolidation, documentation, customs clearance and inland transportation. Each of these services represents an additional revenue stream for NVOCCs, often with higher margins than the basic transportation service. By offering a one-stop-shop experience, NVOCCs can increase their revenue per shipment while providing added convenience to their clients.
How to choose between a NVOCC vs Freight Forwarder
Choosing the best option usually depends on your freight volume and level of understanding of the import export process.
A freight forwarder will usually provide you with a higher level of service and a wider range of services. If you’re wanting a tailored logistics solution, usually freight forwarders will work with you closely to provide various options to move your cargo through to your final location.
If you already have a very high level of understanding of the import export process and you have a relatively high level of volume of cargo, dealing with a NVOCC could be a more suitable or cost efficient option.
