What is NVOCC and its Importance in the Shipping Industry?

What is NVOCC and its Importance in the Shipping Industry

In order to move goods across the globe, numerous entities take part in international shipping and logistics. An example of such an entity is an NVOCC or a non-vessel operating common carrier. In this section, we will explain what is NVOCC in the forwarding industry and its significance in the shipping industry.

What is NVOCC?

NVOCC stands for "Non-Vessel Operating Common Carrier." It's like a middleman in the shipping world. Unlike big shipping companies with their own ships, NVOCCs don't own vessels. Instead, they help move stuff from one place to another, especially between different countries.

Here's how they work:

  • They collect and group cargo together. They collect and group cargo together.
  • They take care of the paperwork. They take care of the paperwork.
  • They provide important services to make sure shipping goes smoothly. They provide important services to make sure shipping goes smoothly.

Importance of NVOCC in the Shipping Industry

NVOCC, in the shipping industry, plays an important role. Their advantages include cost-effective shipping, simplified logistics, and flexibility in cargo handling. In addition, NVOCCs make international trade more accessible to businesses of all sizes, helping them expand their markets and reach global customers.

As we delve deeper into this guide, you will gain a comprehensive understanding of NVOCC operations, regulations, and their impact on global trade.

NVOCC Licensing and Regulation

NVOCCs have to follow certain rules and get permission to do their job. Here's what you need to know:

Licensing Requirements: NVOCCs must get special licenses or permits to operate. These licenses show that they are allowed to work in the shipping business.

Regulatory Bodies: There are organizations and government agencies that watch over NVOCCs to make sure they follow the rules. They keep things fair and safe.

Compliance and Rules: NVOCCs need to play by the rules. They must follow laws and regulations to protect the cargo they handle and the people they work with.

Licensing and regulations might sound boring, but they're important. They make sure that NVOCCs are trustworthy and responsible when it comes to handling your stuff.

NVOCC License and Who Needs It?

To get into the NVOCC business and understand who needs licenses, let's break it down:

NVOCC License: If you're running an NVOCC, you might also find yourself working as a freight forwarder at times. In the United States, whether you're a company or an individual handling these roles, you must secure something called an Ocean Transportation Intermediary (OTI) license. This license is issued by the Federal Maritime Commission (FMC).

US vs. non-US NVOCCs: If you're operating in the United States and handling NVOCC or freight forwarding tasks, the OTI license is a must. It's like an official approval, assuring that you're qualified and reliable in the business. However, if you're not located in the United States and you aim to be an NVOCC, you don't need a license. Instead, you can opt for a simpler registration process with the FMC.

These licenses and registrations serve as important validations, confirming that you're well-versed in the industry's regulations and practices, ultimately ensuring the smooth operation of shipping and logistics activities.

NVOCC and Freight Forwarder Licenses in the US

In the United States, both NVOCCs and freight forwarders are required to apply for a license from the Federal Maritime Commission (FMC). There are three types of licenses to choose from, depending on your specific needs:

OTI-NVOCC License: This is the most common and versatile license. With this license, a company can do a wide range of things, such as creating its own bills of lading, setting prices for shipping services, and signing contracts with ocean carriers to arrange transportation.

OTI-OFF License: If a company holds an OTI Ocean Freight Forwarder (OFF) license, it can't perform all the activities allowed under the OTI-NVOCC license. However, they are permitted to collect a commission from carriers for handling documentation and arranging shipments.

OTI-NVOCC & Forwarder License: This license gives a company the flexibility to operate as either an NVOCC or a forwarder. However, the FMC does not permit the company to act as both a forwarder and an NVOCC for the same shipment. You can choose the role that suits your business needs for each shipment.

These licenses are like official permissions that determine the scope of services your company can offer, ensuring that you comply with the regulations set by the FMC.

NVOCC vs. Freight Forwarder

Understanding the Differences:

When it comes to NVOCCs and freight forwarders, they might seem similar, but they have distinct roles:

NVOCC (Non-Vessel Operating Common Carrier):

  1. NVOCCs primarily handle ocean shipping.
  2. They often lease space on ships and consolidate cargo from multiple customers into containers.
  3. NVOCCs can issue their own bills of lading.
  4. They can set prices for shipping services and make contracts with ocean carriers.
  5. They usually work with international cargo.

Freight Forwarder:

  1. Freight forwarders manage the entire logistics process, including land, air, and sea transport.
  2. They don't lease space on ships but can help with all modes of transportation.
  3. Freight forwarders typically don't issue their own bills of lading.
  4. They arrange shipments and handle documentation.
  5. They work with various types of cargo and can be involved in domestic and international shipping.

What are NVOCC charges?

NVOCC charges can differ between ports and are influenced by the specific shipping line you use. These charges cover various services, including:

Terminal Handling: These are fees related to the handling of cargo at the terminal, where it's loaded onto or offloaded from the ship.

Seal Charges: These charges are associated with securing the cargo containers with seals to prevent tampering or unauthorized access.

BL (Bill of Lading) Charges: These fees are for the creation and processing of the Bill of Lading document, which is essential in the shipping process.

Delivery Order Charges: These charges are linked to the preparation of delivery orders, which instruct where and to whom cargo should be delivered.

Survey Charges: Survey charges are incurred when cargo inspections or surveys are required, typically for assessing the condition of goods or resolving disputes.

Cleaning and Washing Charges: These charges cover the cleaning and washing of cargo containers to ensure they meet cleanliness and hygiene standards.

It's important to note that NVOCC charges can vary, so it's a good practice to understand and discuss these charges with your chosen NVOCC or shipping line to ensure transparency and cost clarity for your specific shipping needs.

NVOCC in the Bill of Lading

When you see NVOCC in the bill of lading, it means that NVOCC is like a shipping company. They're in charge of moving the goods and keeping them safe. They also make their own Bill of Lading paper to keep track of the stuff they're moving. This is often used when they put many people's things into one big container to make shipping easier. So, NVOCC in the bill of lading means they're the ones taking care of your stuff during the journey.

Advantages of using an NVOCC

Exporting through an NVOCC is a smart choice because:

Transparency: With an NVOCC, you always know where your goods are during the shipping journey. They keep you informed about when your shipment will reach important points, so you're well-prepared.

Flexibility: NVOCCs are better at accommodating changes. They have connections with various carriers, so they can help you, even if you need to make last-minute adjustments. This saves you from costly surprises.

Safety First: Once you hand your goods to an NVOCC, it's their job to make sure your cargo gets to its destination safely and on time. They become your main point of contact for all things related to your shipment, making the process simple and secure.

Disadvantages of using an NVOCC

While NVOCCs have their advantages, they come with some drawbacks:

Limited Authority: Since NVOCCs don't own ships, they might have limited control over last-minute changes. This could be an issue if you need quick adjustments to your shipping plans.

Delayed Information: When you work with an NVOCC, you get updates about your cargo through them, not directly from the shipping company. Sometimes, there might be delays in getting this information, especially if there are changes in the shipping schedule or routes. This delay could lead to issues.

Lack of Notification: Occasionally, cargo might get damaged during loading, unloading, or transport, and the NVOCC might not be promptly informed. This can have serious consequences for the shippers, as they might not be aware of any issues until it's too late.

Conclusion

In the global shipping scene, NVOCCs are like helpful middlemen. They make shipping easier for businesses of all sizes. They come with benefits, but there are also some things to watch out for. All in all, NVOCCs are important players in making sure things move smoothly in international trade.