Freight forwarder and freight broker terms are frequently heard while discussing the freight shipping and logistics industry. While these two roles can be confusingly close, it is important to understand the differences between how they function and what is given to businesses.
This could be beneficial for companies to develop better strategies that can be used while transporting their products and which service to use.
In this article, you’ll discover the difference between a freight forwarder vs. freight broker and their main responsibilities. We will also look at their roles, what they are entitled to, and what makes the two different.
What is a Freight Broker?
A freight broker is a middleman that connects shippers and carriers in the arrangement of the transportation of products. They are intermediaries who ensure that all the necessary arrangements are made, but they never actually come into direct contact with the freight items. The principal duty is to match shippers with proper carriers who can transport the goods correctly.
This means that because freight brokers interface with most of the above-depicted carriers, they can negotiate better rates for the shippers and keep a constant freight load for the airlines. This is healthy for both parties because while the shippers will be cutting costs, the carriers will be constantly moving cargo.
Main Roles of the Freight Brokers
Freight brokers are responsible for solving the transportation problems of the cargo without actually touching the shipment. Here’s a breakdown of their tasks:
- Negotiating freight rates: In exchange for a commission paid by the carrier, brokers use their contacts to secure the lowest possible shipping prices.
- Tracking shipments: They track the movement, destination, and status of consignments and communicate with both carriers and shippers.
- Facilitating communication: It is the brokers’ responsibility to intermediate all the communication channels so that the message conveyed to the different parties is understood correctly.
- Handling documentation: Even though they do not own the freight, they perform necessary documentation associated with the cargo.
- Managing issues: In the event of any delay or certain problems in the shipping process, the Broker is responsible for doing everything possible to ensure that the problem is sorted out to the satisfaction of all the interested parties.
A freight broker is important in providing logistical solutions but does not carry or own any freight capacity. Their only function is to organize and coordinate the shipping procedure. Freight brokers make their living through commissions, which depend on the percentage of the overall freight price per transaction.
What is a Freight Forwarder?
Freight forwarders, on the other hand, take a more active role in the shipping process. Unlike brokers, they physically obtain the freight or goods and sometimes handle the entire shipping process, right from warehousing, packaging, and organizing for transport.
Freight forwarders are experts in arranging, managing, and executing the physical movement of goods from one place to another within a nation or across nations.
This is because they handle the physical goods and require a license from the Federal Motor Carrier Safety Administration (FMCSA) for shipments both nationally and internationally. This makes them more versatile and better placed to meet many of the shipping needs required by clients.
Freight Forwarders’s Responsibilities
A freight forwarder is responsible for all decisions involved in the shipment process. Here are some responsibilities include:
- Consolidating shipments: Forwarders consolidate shipments from various shippers to create larger volumes and, therefore, develop lower costs per shipment.
- Handling customs: They deal with customs business by ensuring that the imported consignments meet the legal requirements.
- Packaging and labeling: The freight forwarders have to package all goods properly and also correctly label them where they are to be transported across national borders.
- Taking responsibility: Typically, while acting for the buyer or seller, the forwarder assumes legal possession of the goods and, therefore takes responsibility for its shipping carriers and insurance.
- Managing customs documentation: Forwarders assist in customs issues for international goods consignments.
- Providing insurance: Since they deal with freights, forwarders also offer insurance if they get lost or damaged.
Some freight forwarders use what is called door-to-door shipping where they handle all the shipping process starting from the point of origin to the final destination.
Freight forwarders are responsible for many tasks and sometimes provide services that may be greatly important for businesses, as these companies may need multiple kinds of shipping.
Comparing Freight Forwarder vs Freight Broker
The main difference between a freight forwarder and a freight broker can be attributed to the level of involvement in the shipping process. Though both bring about the transportation of goods, a freight forwarder handles the freight, while a freight broker only helps in its organization.
Recognizing these differences is essential when identifying which service is more appropriate for a business.
1. Possession of Freight Fleet
Concerning forwarders and brokers, the brokers never assume the physical movement of goods or cargo, while the forwarders do. Freight forwarders deal with freight, and they offer warehousing, packing, and transporting services. Although operators do not transport the cargo physically, freight brokers do not come into direct contact with the goods.
2. Level of Responsibility
Since a freight forwarder deals with the goods, they take legal responsibility for the state of the cargo. In storage or transportation, if anything happens to the goods, the forwarder will take the blame.
On the other hand, a freight broker does not have legal management of the goods since he does not physically handle them in most of his deals. The ownership of the goods rests with the carrier in the case of a freight broker agency.
3. Licensing and Authority
Freight forwarders and freight brokers require certain registration with the FMCSA, the Federal Motor Carrier Safety Administration. However, since freight forwarders deal with the goods themselves, they must satisfy much higher licensing and insurance standards.
Freight forwarders typically have their bills of lading and must have insurance to guard against any possible damage to the items they are shipping.
4. Services Provided
While freight brokers primarily focus on finding the best shipping rates and coordinating transportation, freight forwarders provide additional services such as:
- Warehousing and storage
- Packaging and labeling
- Customs services
- Freight consolidation
- Insurance of shipments
5. International vs. Domestic shipments
Another important aspect of international shipments is that freight forwarders are more capable of managing these shipments since they possess much more knowledge of transportation laws and international shipping standards. They have a license that allows them to handle both imports and exports.
In contrast to carriers, freight brokers mostly engage in only domestic shipment, and have lesser inclination toward the complications that arise from the international shipment.
Consequently, the role of freight forwarders is wider and more involved, and they are more accountable than the freight brokers’ role which is simply the facilitation of shippers and carriers to find each other.
Advantages of Using the Services of a Freight Broker
A broker means convenience for those businesses that seek to have their products transported but do not wish to get involved with logistics companies. Here are some key benefits of freight brokers:
- Access to a wide carrier network: The brokers have dealt with various carriers to ensure that businesses receive th best shipping rates.
- Cost savings: In this case, brokers can pay lower price fees by engaging with carriers.
- Flexibility: It is easy for the brokers and carriers to locate available trucks to ensure the transport deliveries are done and on time even during busy seasons.
- Time savings: They bear responsibility for these services and let businesses concentrate on other factors.
- No physical responsibility: Unlike transportation companies, brokers do not transport or handle the freight in any way, thus eliminating the risk of getting burned by the goods.
Advantages of Using the Services of a Freight Forwarder
For businesses with more complex shipping needs, a freight forwarder offers several advantages:
- End-to-end shipping solutions: Forwarders oversee the entire shipping process from when the goods go through warehousing to the time they reach the final destination.
- Customs expertise: Freight forwarders specialize in customs procedures so that the delivery of the shipment goes through the international shipment rules.
- Consolidation of shipments: It is good to know that forwarders can consolidate several shipments so that the charges can be cheaper, mostly for international shipments.
- Risk management: Whenever the forwarder takes possession of the goods they offer protection in the form of insurance and assume legal liability for the shipment.
Choosing between a Freight Forwarder and a Freight Broker
Thus the choice of whether to work with a freight forwarder or a freight broker depends on your business needs. Here are some factors to consider:
- Complexity of the shipment: However, if your shipment contains several activities countries, or requires special attention, a freight forwarder is recommended.
- Budget: Brokers are also capable of getting cheaper rates from carriers because of contracts developed and hence recognized as suitable for organizations that cheaply want their products delivered.
- Legal responsibility: Depending on your desire, a freight forwarder will provide you with a complete door-to-door delivery service.
- Level of involvement: Freight forwarders provide even more extensive services for companies that intend to contract most of the shipping functions. Freight brokers, on the other hand, are suitable for those who would like to handle some aspects personally.
Conclusion
If your company deals with export, import, and customs services and overall shipping solutions, then a freight forwarder will be more suitable for your needs. So whether to go with a freight forwarder or a freight broker depends on the circumstances.
However, if your shipping is local or you are not willing to spend much on your shipment, then a freight broker will be suitable for use. Both have significant functions to guarantee that the flow of goods is effective and cheap.
FAQs
- Can a freight forwarder act as a broker?
Yes, a freight forwarder can perform the function of a broker, as you mentioned, but not every freight forwarder is a broker. Some freight forwarders also engage in brokerage where they help shippers find carriers for shipment services.
This enables them to offer comprehensive solutions and manage the goods and the rates. Nevertheless, before working with a certain freight forwarder, it is necessary to ensure they work with brokerage services.
- What do freight forwarders and brokers do?
The main function of a freight forwarder is to coordinate the movement of cargo. They assume responsibility for the physical handling of the cargo as well as the paperwork involved in customs clearance and global shipping laws.
On the other hand, there are freight brokers who are middlemen. They create a link between shippers and carriers, set and fix rates as well as mobilize equipment but they do not ship the freight. They are both vital participants in the shipping business.
- What do you understand by a freight forwarder and a freight broker?
The main distinction between a freight forwarder and a freight broker is found in their tasks. The buyer hires the services of the freight forwarder, events where the forwarder takes physical possession of the cargo and offers more services, including warehousing and containerization.
The freight brokers, however, do not deal with the shipments; they act as intermediaries that work to match the shippers and carriers with the best possible rates for shipping.
- What is the difference between the two basic types of freight forwarders?
Freight Forwarders can be broadly categorized as ocean freight forwarders and air freight forwarders. There are two main types of freight forward, ocean freight forwarders, which offer sea freights, and air freight forwarders, which provide flight freights.
Both sorts take responsibility for daily transportation tasks, customs, and formalities, as well as the general delivery of goods.
- What is the main difference between a freight forwarder and a freight broker?
The only real difference that can be noted between the two is that the freight forwarder assumes physical control over the cargo while the freight broker never does. Freight Forwarders are involved in the movement of goods, Clearance of goods warehousing, and storage, amongst other activities.
Meanwhile, freight brokers do not transport the goods; their job is to match shippers with carriers and then set the shipping prices.
