Understanding the 4 main terms in international shipping
There is a lot of confusion surrounding the four main terms in international shipping, such as BCO (Beneficial Cargo Owner), VOCC (Vessel Operating Common Carrier), FFW (Freight Forwarder), and NVOCC (Non-Vessel Operating Common Carrier). It is best to break down each of them and discuss the benefits or the disadvantages of using each of them.
Beneficial Cargo Owner (BCO)
A BCO is a registered importer who receives the goods at the destination and is not a third party in the movement of goods. When shipping goods, contracts are concluded through methods such as:
Conclude a contract directly with VOCC.
This contract is used by large retailers such as Walmart, Costco, The Kroger Co., and Best Buy. These shippers have a huge volume of cargo and international transport is needed, so much so that they negotiate directly with carriers, and not through intermediaries. This way they can negotiate lower rates and other discounts.
Small and medium BCOs looking to eliminate the need to maintain an internal logistics team.
These shippers usually do not have enough cargo volume to conclude contracts directly with carriers. According to SeaRates, approximately 63% of all vessel imports in 2018, in terms of TEUs, were imported by a BCO. In 2008, this figure was about 74%. Recently, due to COVID-19, BCO contracts have decreased in their frequency as demonstrated on the graph below.
*Data January-March 13th 2019
VOCC (Vessel Operating Common Carrier)
VOCC is the actual owner of container-carrying vessels.
Since VOCCs have their own logistics park, they sell their services directly and usually don’t work with smaller and less regular shippers. VOCCs include well-known names such as Maersk, COSCO, APL, and Evergreen.
For example, let's say you decide to become an importer. If you have a large volume of imported cargo, it will be beneficial for you to negotiate with VOCC directly and receive discounts for the shipping of your cargo. However, if you have a small volume of cargo, you may contact intermediaries to get a part-time rate, but with a discount from the intermediary. VOCCs have no time for lengthy correspondence, so they are not interested in small volumes of imports. You can use SeaRates Logistics Explorer to find an optimal tariff with the best offer for everyone for carrying your goods.
The next 2 terms, NVOCC and freight forwarder, are related. Many people don't understand the difference between these terms. So let's first understand what the terms NVOCC and freight forwarder mean.
A NVOCC is a non-vessel carrier. This type of carrier is a common delivery method for irregular shippers or with a small volume of goods. Why is it profitable to make deals with this carrier? Because they provide a wider range of services and shippers receive discounts based on bulk shipments and NVOCC contractual agreements.
Also, NVOCCs are fully responsible for the shipping of your cargo, because they give you their bill of lading.
As for the freight forwarder, these are intermediaries in the shipping of goods. They carry out the entire process of organizing the delivery, namely, they organize the shipping, deliver the cargo, prepare the documents for shipping, and conclude an agreement with the carrier of the cargo.
The advantage of concluding a deal with a freight forwarder is the wide range of services they typically offer. They mainly specialize in all types of shipping such as land, air, and sea, and also provide exceptional services such as multimodal shipping. If you are looking for a reliable freight forwarder, you can contact Digital Freight Alliance: an independent freight forwarders association covering more than 190 countries.
- NVOCCs act as carriers, but freight forwarders do not.
- NVOCCs issue the bill of lading, but freight forwarders do not.
- NVOCCs are responsible for loss or damage, but freight forwarders are not
We hope this article helped clarify these terms.
You can also contact us with any questions you may have, and we will help find the best option for you.
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