Many businesses depend on the daily import and export of goods. International shipping can improve the profitability of a business, whether through reaching more consumers or through the opportunity to purchase goods or raw materials at a lower cost. However, the regulations, paperwork, manpower and other factors associated with international trade can be daunting, and most businesses are not equipped to handle the complex logistics of such tasks. Businesses can solve this problem by contracting with a cargo forwarder that manages the cargo and the hassle associated with the shipping process.

Services provided by cargo forwarder

cargo forwarder arranges safe, efficient and cost-effective cargo transportation on behalf of importers, exporters and other cargo forwarders. cargo forwarder executes a complex and evolving set of services. From an insurance perspective, underwriting needs may vary based on the services provided by each cargo forwarder and the associated risks.

The basic services provided by cargo forwarder include but are not limited to:

Quote and secure shipping for shippers
Book a shipment with a common carrier
Prepare all documents required for export/import
Use own trucks or arrange for third-party trucks for domestic and international inland transportation
Provide their customers with "all risks" insurance for shipping and warehousing through their insurance company
Handling logistics for efficient international trade and resource allocation
Extended (now common) services include:

Customs Clearance Services: Services provided primarily to importers include clearing goods, calculating taxes and duties, completing necessary paperwork, communicating with government authorities, and arranging inland transfers to final destinations.
NVOCC (NVOCC): There used to be a distinction between NVOCC and cargo forwarder, but today, cargo forwarders often play the role of NVOCC (license required). During this process, the cargo forwarder will provide the customer with an internal bill of lading and coordinate the efficient and cost-effective transportation of the shipper's cargo directly with ocean and inland carriers. In this role, the cargo forwarder exposes itself to the responsibilities (and positive limitations) of the common carrier. cargo forwarder becomes the shipper's carrier and the carrier's shipper.
Indirect Air Carriers: Some cargo forwarders will provide international air trade services by providing air waybill and arranging transportation with common air carriers accordingly.
Consolidation: The cargo forwarder receives shipments of goods from many customers to many destinations. When there is not enough cargo to fill a container, a common practice is to combine merchandise with other cargo into a single container, especially when the cargo shares a single destination.
Warehousing: cargo forwarder is expanding its range of services to provide customers with storage in owned or leased warehouses, or in third-party facilities through agency or negotiation.
Fulfillment Services: In many cases, shippers work very fast and deliver goods directly to their customers. They contract with cargo forwarder to develop their distribution line and arrange for all goods to be delivered door-to-door. This operation requires freight forwarders to retain custody of the goods for an extended period of time (directly or indirectly), thereby increasing the risk of loss they may take.

Risk and Exposure

An accurate analysis of an individual cargo forwarder's exposure depends on the services it provides and historical losses. cargo forwarder's legal liability is not a specified risk coverage policy, but a specified service coverage policy. cargo forwarder arranges all shipments, and even if the shipment is not performed directly, it can be dragged into legal trouble if the shipment is lost or damaged in transit.

Determining the extent of an international freight forwarder's liability in a claim is not an easy task. When cargo is damaged in transit and there is no all-risks cargo policy or the shipper does not want to file a claim, the shipper will try to recover from the parties involved in the transportation of its cargo. In some cases, many entities own the goods in transit, including ocean, inland, and air carriers, warehouse managers, and freight forwarders.

In most cases, ocean, inland and air carriers are covered by the Convention, which limits their liability to a certain amount per package or weight. For example, ocean carriers include in the wording of their bills of lading that their liability is limited to $500 per unit under the Carriage of Goods by Sea Act (COGSA). Regarding air cargo, there is an act similar to the Warsaw Convention (later amended by the Montreal Convention), which stipulates that the carrier's liability and compensation are based on the weight of the cargo.

Where there is an all-risks policy and the insured is covered, the shipper will not hesitate to subrogate if legal costs qualify for possible recovery. The amount recovered from the carrier may not be sufficient to cover the shipper's losses, causing the shipper to pursue the unpaid party.

Coverage to address cargo forwarder risks
The responsibility of cargo forwarder depends on the role it plays. These roles will determine the coverage and forms required for a cargo forwarder insurance policy.