Why NVOCC License is Important for Freight Forwarders?

NVOCC license is a major player in the seamless movement of goods across borders. It’s a shipping entity that acts as an intermediary between shippers and ocean carriers. 

Shippers seeking to optimize their supply chains and ensure efficient transportation of goods need to understand the role of NVOCC. 

What is NVOCC in shipping?

A Non-Vessel Operating Common Carrier or NVOCC is a shipping company that acts as a carrier without owning or operating its own ships. 

NVOCCs purchase space from ocean carriers and resell it to shippers, acting as intermediaries between shippers and carriers. 

They provide a range of services, including booking space on ships, preparing documentation, and coordinating transportation logistics. 

What is an NVOCC license?

A NVOCC license is a government-issued permit that authorizes a company to operate as a Non-Vessel Operating Common Carrier (NVOCC). 

This license is typically required by regulatory bodies in countries involved in international shipping. 

The specific requirements for obtaining an NVOCC license can vary depending on the jurisdiction. 

Some jurisdictions may require NVOCCs to submit a business plan outlining their proposed operations, financial projections, and management team. 

Regulatory authorities may conduct background checks on individuals involved in the NVOCC’s operations to ensure they have no prior criminal records or other disqualifying factors. 

NVOCCs may be required to pay application fees and submit various forms and documents to the regulatory authority. The application process can vary in complexity and time requirements depending on the jurisdiction. 

Once an NVOCC license has been granted, the company is authorized to operate as an NVOCC and provide shipping services to shippers. However, NVOCCs must continue to comply with all applicable regulations and maintain their financial solvency to retain their license. 

NVOCC Legal Responsibilities and Licensing Requirements

NVOCC License requirements are subject to various legal responsibilities. 

Compliance with Shipping Regulations

NVOCCs must adhere to complex international and domestic shipping regulations, such as the International Maritime Organization (IMO) and the Federal Maritime Commission (FMC) in the United States. 

These regulations cover a wide range of topics, including cargo handling, documentation, safety standards, and environmental protection. 

Financial Solvency

NVOCCs are often required to demonstrate financial stability to ensure they can fulfill their obligations to shippers and carriers. 

This may involve providing financial statements, such as balance sheets and income statements, to the regulatory authority. Additionally, NVOCCs may be required to maintain a certain level of working capital to cover potential liabilities and operating expenses. 

Insurance Coverage

NVOCCs may need to maintain insurance coverage to protect against potential liabilities, such as cargo damage, loss, or delay. 

The type and amount of insurance required can vary depending on the jurisdiction and the nature of the NVOCC’s operations. 

Common types of insurance include cargo liability insurance, marine liability insurance, and general liability insurance. 

NVOCC vs Freight Forwarder: What is the difference?

While NVOCC and freight forwarder often perform similar functions, there are key differences between the two. 

Ownership of Cargo: NVOCC vs freight forwarder have legal ownership of the cargo from the time it is picked up from the shipper until it is delivered to the consignee. Freight forwarders, on the other hand, act as agents on behalf of the shipper and do not have legal ownership of the cargo. 

Issuance of Bills of Lading: NVOCCs issue their own bills of lading, which serve as contracts of carriage between the NVOCC and the shipper. Freight forwarders typically do not issue bills of lading; they may arrange for the issuance of bills of lading by the ocean carrier. 

NVOCC vs VOCC: What is the difference?

Unlike NVOCCs, which are intermediaries that purchase shipping space from ocean carriers, Vessel Operating Common Carriers (VOCCs) are shipping companies that own and operate their own operations, including vessel scheduling, route planning, and cargo handling. 

VOCCs can offer a wider range of shipping services and may have more flexibility in terms of pricing and service options. However, VOCCs may also have higher operating costs due to the significant investment required to own and operate ships. 

What are NVOCC charges?

Ocean freight charges are the fees for transporting cargo by sea. 

These chargers are based on factors such as the weight and volume of the cargo, the distance traveled, and the type of vessel used. 

Terminal handling charges are fees for handling the cargo at the port of loading and unloading. These charges cover the costs of moving the cargo between the ship and the terminal, as well as storage fees if necessary. 

Fees for preparing and processing shipping documents, such as bills of lading, customs declarations, and commercial invoices. These fees are requirements of the destination country. 

Additional fees that may be assessed for various reasons, such as fuel surcharges, security surcharges, and currency exchange surcharges. These surcharges can fluctuate over time and may be subject to change without notice. 

NVOCC in the Bill of Lading

The bill of lading issued by a licensed NVOCC serves as a contract of carriage between the NVOCC and the shipper. It outlines the terms and conditions of the shipment, including the description of the goods, the port of loading and unloading, the freight charges,and the responsibilities of the NVOCC and the shipper. 

The NVOCC forwarder is responsible for ensuring that the cargo is delivered to the consignee in accordance with the terms of the bill of lading. In the event of any disputes or claims related to the shipment, the bill of lading serves as a crucial piece of evidence. 

Advantages of using an NVOCC

NVOCCs offer several benefits to shippers, including: 

Simplified Logistics: NVOCCs can streamline the shipping process by handling various aspects of the transportation, such as booking space, preparing documentation, and coordinating customs clearance. This can save shippers time and effort, allowing them to focus on their core business operations. 

Competitive RATES: NVOCCs often offer competitive rates by negotiating with ocean carriers and consolidating shipments. This can help shipers reduce their transportation costs and improve their profitability. 

Global Network: NVOCCs typically have extensive global networks, allowing them to provide services to shippers in various countries. This can be particularly beneficial for shippers who need to transport goods to or from multiple locations around the world. 

Risk Management: NVOCCs can help shippers manage risks associated with international shipping, such as cargo damage, loss, or delays. NVOCCs may offer insurance options or take steps to mitigate risks through careful planning and execution of the shipment. 

Disadvantages of using an NVOCC

While NVOCCs offer numerous benefits, there are also some potential drawbacks to consider. One of the primary disadvantages is that shippers may have less control over the transportation process when using an NVOCC compared to dealing directly with an ocean carrier. 

NVOCC companies often act as intermediaries, arranging transportation on behalf of shippers. This can limit the shipper’s ability to make direct decisions or negotiate with the ocean carrier. 

There is also a risk of disputes or misunderstandings between shippers and NVOCCs. These issues can rise due to factors such as delays, damage to the cargo or disagreements over the terms of the contract. 

While NVOCCs are generally expected to act in good faith and fulfill their obligations, it is important for shippers to carefully review the terms of the NVOCC agreement and ensure that their interests are adequately protected.