DIFFERENCE BETWEEN A FREIGHT FORWARDER AND A CLEARING AGENT

There are several entities involved in the successful transportation of a shipment. However, in a big or small shipment; two entities stand out due to the importance of their roles in a shipment. These entities are a Freight Forwarder and a Clearing Agent.

It is very important to understand the functions of a freight forwarder and a clearing agent and their role in a shipment as this is often confused.

For smooth shipping, experienced companies like valuehandlers international offer both services of a freight forwarder and clearing agent. This post will explore the similarities and difference between a freight forwarder and clearing agent.

Who is a Freight Forwarder?

In the most succinct and layman terms, a Freight Forwarder is a multi-function agent/operator who handles the movement of goods from point to point on behalf of the cargo owner. The essence of freight forwarding is to ensure that the cargo is picked up from the seller and delivered to the buyer at the required place, at the right price and in the same condition that it is picked up from origin using the most suitable resources and routing possible.

A well established and experienced freight forwarder is expected to have below capabilities (either owned or outsourced);

·         Experienced in all modes of transportation – road, rail, air and sea.

·         Able to provide cost-effective and efficient cargo shipping solutions based on the customer’s requirement.

·         Ability to arrange storage for the cargo (usually all big forwarders have their own warehouses).

·         Ability to arrange the distribution or “forwarding” of the cargo as per the instructions of their client.

·         Capability to negotiate freight rates with the shipping line.

·         Ability to book cargo with the shipping line as per the requirement of the client or under their own contract

·         Ability to process all relevant shipping documents such as certificates of origin, customs and port documentation, bills of lading and associated shipping/negotiating documentation.

·         Arrange transportation of the cargo from/to the customers’ premises and port.

·         Have a thorough knowledge of over border cargo movement.

·         May or may not also do Customs Clearance.

·         May or may not be accredited to customs, port etc and cannot do customs clearance if not accredited.

·         Acts as a carrier in cases where they issue house bill of lading.

r

 Read: How to Import Schedule Container Importation From Asia to Avoid Delay

Who is a Clearing Agent?

A clearing agent is essentially an agent who specifically takes care of the customs clearance aspect of the business.

Every country has its own set of regulatory requirements relating to customs but one common requirement is that the clearing agent or customs broker (as they are referred to in a few countries) have to be accredited with the local customs authorities, border agencies, port and other authorities relevant to the shipment of goods. They should have a valid clearing license at the time of clearing the goods on behalf of the customer. A few countries have very strict licensing requirements which are regularly reviewed and the agents that don’t follow these may have their licenses revoked.

Apart from the obvious function of lodging documentation with customs, a well established and experienced clearing agent is expected to be able to do the following:

·         Accredited with the local customs authorities, border agencies, port etc.

·         Arranges to pass the relevant documents at customs.

·         Has in-depth knowledge of the Harmonized System (HS) Code, the calculation of Duty and VAT.

·         Organizes payment on the duty and VAT applicable.

·         Assists customers with duty drawback etc.

When compared to a freight forwarder, a clearing agent is more specific to the country where they are based, as they deal directly and extensively with the local customs authorities and are au fait with the local requirements. Freight Forwarders have more of a global presence since they may be present in a lot of countries compared to Clearing agents or Customs Brokers who tend to be more localized.

A Freight Forwarder may be able to generate more revenue than a Clearing Agent, the big advantage that a Clearing agent has over a Freight forwarder is that, their services will be required by the shipper and consignee for every shipment, whereas the shipper or consignee might not use the services of a freight forwarder for every shipment.

So a customer necessarily needs the services of a clearing agent. 

One of the common goals/functions of these two entities is to advise their customers on the requirements to ensure a smooth shipment and arrange the same on behalf of the customer. So while two entities may have some overlapping activities, both are essential cogs in the wheels of global trade.

About the Blogger: Valuehandlers is a Supply Chain Management Company Specializes in Air & Sea Freight Shipping, Customs clearing & cargo servicing from and to 80 countries.

Get Quote now