CHOOSING A FREIGHT FORWARDER

CHOOSING A FREIGHT FORWARDER

You must first choose a freight forwarder before you can manage one. Even in this economy, do not let cheap rates and low logistics costs wrongly influence that choice. The old adage rings true: you get what you pay for. Selecting the best forwarder for your business is critical to smooth supply chain operations.

At the beginning of the freight forwarder selection process, it is wise to create a requirements list. The freight forwarder must have knowledge of and experience in your product, desired shipment method, and destination country. The freight forwarder’s staff must be trained in documentation, record keeping, reporting, and licensing requirements.

The freight forwarder must also demonstrate willingness and the capability to communicate regular status updates and problems, and maintain records on export transactions, including the depletion of licenses in order to provide comparative internal audits.

Even in this economy, do not let cheap rates and low logistics costs wrongly influence your choice of freight forwarder. You get what you pay for.

Depending on the business requirements, companies should keep their forwarder relationships to a manageable number. In general, you should choose no more than two or three freight forwarders, as managing multiple forwarders requires more manpower and can ultimately create more problems than it solves.

Put in place a power of attorney (POA) with each authorized forwarder, clearly defining its role and responsibilities in your supply chain. And while there are certainly times when a company must grant limited authority to other agents, this should be a rare exception— never the rule.

Your evaluation process should also include meeting with each potential forwarder’s operational staff so you can gauge their capabilities. Don’t let the forwarder’s account representative keep you from interfacing with operational staff during the evaluation process.

A MISSION TO MANAGE

After you have selected a forwarder, your challenge and responsibility becomes managing the service effectively. The following forwarder management activities are all critical to maintaining best-practice standards. Give them high priority.

Establish and maintain clear communication guidelines 

Creating and maintaining an open dialog with your freight forwarder is vital. You should discuss and document needs and expectations up front. Provide detailed documentation to support any potential staff turnover that may occur. Hold regular conference calls or face-to-face meetings to discuss problems and identify solutions that will improve compliance and shorten timelines. Keep metrics of your shipping activity to monitor progress and problems— both yours and the forwarder’s.

It is essential to have a reporting structure for any potential non-compliance issues or government inquiries relative to the transaction. This may seem like a lot of work, but your compliance department will function more smoothly, and you will have better control of your shipping activity.

Be sure the communication process includes prior notification of shipments

For exports, use a Shipper’s Letter of Instruction or its equivalent to ensure that shipment details are communicated clearly and accurately. Many mistakes occur because a forwarder has insufficient or inaccurate shipment information.

In addition to the required logistic information, such as weights and dimensions, export-related documents should include compliance information such as Classification, License Authorization, and AES Internal Transaction Number. For imports, require that forwarders notify you of all incoming shipments. This allows time for verifying shipment details, such as consignee and correct harmonized tariff schedule classification, and ensuring supporting documents are provided.

Get a complete copy of the transaction 

A common complaint from exporters and importers is that they are unable to get a copy of their shipping records. Establishing communication guidelines makes this much easier. A checklist of required documents will help ensure that the entire transaction has been received. Giving a copy of the checklist to the forwarder can help limit the number of requests.

Audit documents after receiving them

The audit doesn’t have to be complete, but your compliance department should establish a threshold to maintain a good compliance rating. In general, you should conduct a weekly audit for a smaller threshold and a quarterly audit for a larger threshold. If you find errors, you can correct them as soon as possible to limit potential penalties and fines. As you find and correct errors, research each occurrence so that the problem is solved for future shipments.

Maintain strict controls on AES filings

To avoid mistakes, it’s best for the exporter to directly file AES. Mistakes are less likely to occur when you have more control over your shipment documentation; you’ll also spend less time managing your forwarder.

If you opt to have the forwarder file AES, put strict controls in place. Your best defense is to outline clear Service Level Agreements. If possible, get a copy of the transaction before it is submitted. Changes to the AES record will result in a compliance alert message to the filer, meaning your shipment violates export reporting requirements. If a filer consistently receives compliance alerts, the business practices that led to them must be identified and corrected. The filer will otherwise be subject to delays, fines, and/or penalties.

Make compliance your business

You know your transactions better than anyone. A freight forwarder will never be able to effectively run your compliance program, and you cannot outsource liability. The onus is always on the exporter and importer. When a government agency comes knocking, very little blame for violations can be laid on the forwarder.

The more control you give up, the more likely you are to increase regulatory noncompliance risk. With the exception of AES, companies should control their own jurisdiction determinations, classifications, license determination, license authorization, and screening.

Qualify your own transactions

Don’t let forwarders qualify your transactions for preferential trade agreements. Often, improperly trained shipping personnel are responsible for filling out the certificates of origin. Only the trained personnel in your company’s compliance department should perform the cumbersome, detailed qualification process.

Limit POAs, written authorization, or signed authorization granted to agents

The more POAs and authorizations you give forwarders, the harder they are to manage. Many companies— both importers and exporters— aren’t even sure how many authorizations they have granted, and therefore are unable to manage their forwarders.

Importers who have granted POAs to several customs brokers discover that shipments clear Customs without their knowledge; the freight just arrives. No import documentation is provided, making it nearly impossible to audit the transaction. Are qualified experts performing the classification? Do you audit for accuracy? Are you overpaying duty or, worse, underpaying? Do you have all the documents required for a complete transaction file?

These are just a few common problems experienced when you lose visibility into your supply chain and control over your brokers. Limiting authorizations limits errors— and, just as important, your workload.

Keep talking

It’s important to keep your forwarder aware of new regulation enforcement and new technology development. When an open dialog is maintained, you can more readily share, plan, and act upon information. A proactive approach will limit your errors— which will limit the time you spend correcting them and reduce the likelihood of penalties and fines.

Make LOGICAL MARITIME SERVICES LIMITED your preferred Freight Forwarder today!!

Call us on 0243026201 or visit our website at www.logicalmaritimegh.com.