Role and importance of forwarder in international trade

Role and importance of forwarder in international trade

Foreign trade (or, if somebody prefers, international) is almost as old as mankind. In antique times already people exchanged different goods among themselves, purchasing what they needed and disposing of what was needed by others.

This exchange of goods was goaded by development of work and production specialisation. Obviously, until modern times nobody even talked about foreign or international trade, due to this simple reason that there were no borders and no nations in the present meaning of these words. Nations, and consequently borders among national states came relatively newly. Nevertheless, the essence of trade remained the same – exchange of goods versus goods or versus money. The essence and conditions of trade development were explained by Adam Smith and David Ricardo, and it is difficult to add anything to these explanations.

Similarly, it was relatively newly when a forwarder appeared in international trade.

Who is a forwarder?

A forwarder is an entrepreneur professionally offering a service of transport organisation of goods which are to be carried from a supplier to a consignee. In international trade the supplier is an exporter, and the consignee is an importer. Both can order to a forwarder the organisation of transport of goods sold or bought by them, depending on conditions of trade transaction. After receiving an order, the forwarder finds a right carrier and – being all the time in contact with the owner of goods and the carrier – coordinates all necessary actions and prepares necessary documents, taking a responsibility for a choice of a right carrier.

The first forwarder at present Polish territory appeared in 1858 in Poznan. His name was Carl Hartwig. He was active in land forwarding, particularly road, having in possession some horse carriages to carry goods.

Interesting thing is that the name Hartwig survived until after 2nd World War and was used as a name of state-owned forwarding companies in after-war Poland – C. Hartwig in Gdansk, Gdynia, and Szczecin (sea forwarding), C. Hartwig in Katowice (land forwarding) and C. Hartwig in Warszawa (land and air forwarding).

After political and economical transformation in our country and liquidation of state monopoly of foreign trade, hundreds of privately owned forwarding companies were established, both of Polish and foreign capital. Activity of majority of them has also been transformed, specifically widened. The simple organisation of transport has been complemented by additional services – customs clearances, storage of goods in ordinary and customs warehouses, value added services like promotional sets or labelling, distribution to final consignees. A lot of companies have also included in their activity scope different kinds of forwarding, adding to e.g.sea forwarding also land or air forwarding. Such companies offering a wide range of services are presently named logistic companies. The name however does not change the fact that they still ORGANISE transport and other different services accompanying the process of carrying the goods, including raw materials and semi products, including also quickly developing e-commerce.

What is the difference between a forwarder and a carrier?

The answer should easily come from what was said above. Nevertheless, it is worth to put it clearly. The forwarder ORGANISES the carriage of goods basing on order from buyer or seller. The carrier performs the carriage, so – physically carries the goods from point A to point B. Does it mean, that a forwarder cannot perform carriage by himself? Yes, he can, but then he acts by law as a carrier not as a forwarder. So far, we have talked about what results from a strict definition of a forwarder’s profession and function. It is time to talk about what does not clearly result from the definition but what is an essence of forwarder’s activity and what should decide whether a forwarder’s services should be used or not. Thus, a forwarder represents his principal towards a carrier. Represents means he takes care about his principal’s interest against a carrier and/or anybody who represents a carrier.

What does it mean in a real life?

It means a.o., that a forwarder is expected to watch and supervise that goods are transported with a proper care, at a proper mean of transport, in proper time and conditions. He supervises that a carrier is performing his duties in a right way. He negotiates with a carrier price and conditions of transport. In case of any dispute, on behalf of his principal he discusses with a carrier aiming at protection of his principal’s interest. He takes all possible efforts not to allow any external factors to influence the transport process. Generally speaking, he takes care that interest of his principal is always more important than the interest of carrier.

Apart from taking care about interest of the principal (what, let us admit, is quite far from forwarders duties resulting strictly out of definition which is limited just to transport organisation), the second, extremely important forwarder’s task is advising. A forwarder is supposed to advise to his customer in practically all matters related to whole transport process. For example, a forwarder is expected to advise which INCOTERMS clause the principal should choose. True – presently this choice is taken customary by agreement between exporter and importer, depending on way of transport. Nevertheless, a forwarder should advise to his customer, having appropriate knowledge of transport market, whether at given transport route it is better to choose e.g., CIF or FOB and why.

The knowledge of transport market is for a forwarder both a necessity and daily job – he works at this market everyday yet – but not for his customer. He works at trade market and not transport market, so his knowledge of the latter is limited.

Going further, the forwarder’s duty is advising in customs rules and customs law, including arranging of customs clearance. This is done by a forwarder’s customs agents.

It was mentioned above, that at present many logistic companies have their own warehouses at disposal, including customs warehouses and stores. Some logistic companies specialise themselves in providing warehousing services for different kinds of goods. Different goods need different storage conditions.

In a warehouse, logistic companies offer a lot of value-added services. As an example, companies specialized in handling textiles offer ironing, labelling, button sewing as well as transport to final consignees like shops in conditions securing against damages, getting dirty and crumple.

Transport of goods from warehouse to final consignee (distribution) is an inseparable part of warehousing service and is being offered by all logistic companies.

As mentioned already above, a modern logistic company is able to handle traditional trade as well as e-commerce goods.

So, why it is worthwhile to take advantage of forwarder’s services?

Let us summarise:

  • A forwarder thanks to his deep knowledge of transport market where he works everyday can give advice regarding transport route, choice of carrier, transport conditions and – what is often forgotten, however most important – regarding the right INCOTERMS clause
  •  A forwarder thanks to the fact that he is handling goods of many shippers can negotiate with carrier better transport rate and better transport conditions than a single shipper can do
  • A forwarder arranges customs clearance, storage in warehouse, performs other accompanying actions and finally delivers goods to ultimate consignee
  • A forwarder takes care so that interest of cargo owner is properly secured and is always more important than carrier’s interest, short – or long-term, and in case of dispute represents his principal against carrier. There is nothing more important for forwarder than interest of cargo and its owner.

So, let us think twice before we are influenced by persuasion and suggestion that a forwarder is not needed.


Author:

The Council of The Polish International Freight Forwarders Association

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