Why NVOCC License is Important for Freight Forwarders?

Non-vessel operating common carrier (NVOCC) licenses are critical to successful shipping. Learn the difference between an NVOCC and a freight forwarder.

Being in possession of a licensed NVOCC from the Federal Maritime Commission (FMC) is proof that your organization is professional and reliable. Yet, procurement of a license in this category is often challenging as the procedure is not often clear.

NVOCCs are transport corporations that independently organize shipments for clients. They don’t own any of their own vessels and issue documents such as a bill of lading. Furthermore, they sign contracts to transport goods and containers. This is achieved through the leasing of space from other carriers on the ocean.

As such, they behave similarly to that of a courier, who is responsible for the stuffing, sales, and transport of cargo from one location to another.

These companies function as ocean carriers, minus the actual vessel. Unfortunately, they tend to be compared to freight forwarders.

Although the general tasks are identical in terms of negotiating contracts, organizing the movement of cargo, and more, they also process, consult, and prepare relevant documents.

Here are the major differences between NVOCCs and freight forwarders:

NVOCCFreight Forwarder
Issue a House Bill of Lading.A Bill of Lading is issued depending on the standardization of the FIATA document.
They serve to profit from leasing the space in addition to selling operational services.Only allowed to collect profits for services, surcharges, and handling.
Act as the in-between for shippers and carriers.Act as shipping agents.
Can own many containers.No ownership of equipment.

The FMC is the United States agency that regulates transports that are ocean-based in the territory. US-based corporations that act as NVOCCs or freight forwarders are required to obtain what is known as an Ocean Transportation Intermediary (OTI) license. NVOCCs that are based outside of the US do not have to obtain this license but instead must register directly with the FMC.

Why It Is Essential to Have a NVOCC License

From the perspective of companies, holding an FMC license allows NVOCCs to negotiate with shipping lines. Furthermore, it lets them generate the necessary house bills of lading. This has the recognition of a carrier bill.

From the perspective of clients, working with an NVOCC that is FMC-licensed establishes a certain degree of reliability and trust in the company. This ensures:

  • Pricing – FMC inhibits NVOCCs from charging unfair costs to customers through the monitoring of agreements, including acquisitions and mergers among carriers.
  • Regulations – NVOCCs are fully regulated by their FMC licenses. This provides you with a certain degree of security as a shipper. There is a place to go if you have been unfairly treated.
  • Reliability – Shippers tend to work with NVOCCs that have FMC licensing because it allows a safety net. There are numerous problems that can affect an NVOCC. It can go out of business or suffer damages while having the cargo in possession. There is a probability that the cost can be recovered.