August 2000; Vol. 9 Issue 8  
  
The Resource for Small and Emerging Businesses
www.kcsmallbiz.com     www.thebizstream.com
    
In Focus International Business: 
  

Selecting Your Key Export Service Providers, Part Two:

Your Foreign Freight Forwarder

By Brian Gauler

Getting products from your door to that of your overseas customer requires the shipping and documentation expertise of a professional freight forwarder.

In the May issue, this series introduced the importance of forming a "team" of export service providers when starting to enter the global markets. The concept is really no different than what a firm does to support its domestic sales-the same needs exist for reaching and servicing international markets, and generally can be categorized into four areas: marketing and sales; shipping and documentation; banking and finance; and legal aspects.

The previous installment described the role of the international banker. Here we'll address the role and importance of the foreign freight forwarder.

What Is a Freight Forwarder?

A foreign freight forwarder (generally referred to simply as a freight forwarder) is "an independent business that handles export shipments for compensation." This definition comes from the U.S. Department of Commerce's A Basic Guide to Exporting (available from the Kansas City DOC Commercial Service office or the Superintendent of Documents for $14.95).

Basically the forwarder takes care of all the details for getting the goods from your plant to the final consignee destination. These professional services can be extensive. They include key items such as arranging for the shipment, obtaining all the necessary documents required for the country of destination and preparing the documents. Forwarders also can provide export quotations, advise on U.S. export regulations (what type of export license will you need?) and assist with other shipping-related services-packing and labeling, consolidating and containerizing, warehousing and insurance. In other words, whatever is needed to get the product from door to door.

Sounds wonderful, and it is. It also sounds expensive, but usually it isn't. Fees for these services are generally established charges for the individual documents plus associated costs for expediting the shipment (faxes, telephone calls, counselor fees, etc.). However, the shipper pays only a portion of the total fees earned by the forwarder. The shipping companies pay a commission for booking their freight, which provides the major portion of the forwarder's income.

On a relative basis, forwarding fees are generally very inexpensive. Since they are mostly set fees, the larger the value of the shipment, the lower the relative cost. In any regard, unless the exporter has qualified people to assure the correct documentation and shipping procedures are followed, forwarder fees are generally considered reasonable and of greater value than their cost. Most exporters regard their freight forwarder one of their key resources.

Locating a Freight Forwarder

To learn more about freight forwarders and their complete services, there is a wealth of printed information to assist the new-to-export firm. The Basic Guide noted above has a complete chapter explaining the various aspects of shipping your product. Another way to learn about forwarders is to ask them.

They better ones tend to be aggressive in promoting their services (that's a part of what makes them "better") and are generally very willing to have a sales representative call on you to explain what they offer. Who do you call? You can start by simply checking the Yellow Pages of a metropolitan telephone directory. To find out what the "real deal" is regarding forwarders that have the best reputation, try contacting other companies who export and ask them who they use, and their opinions.

Working With a Forwarder

Establishing a working relationship with a freight forwarder involves more than just asking them to handle your shipments. A basic rule is that a service company is only as good as the people providing the service. This is particularly evident with forwarders, since they all use the same transportation services for ocean and airfreight deliveries. One of the best ways to develop your working relationship is to invite them to visit your plant and get to know your people, and do the same at their facilities with their staff. The salesperson starts the process, but the people handling your actual shipment are the ones that you want to get to know.

Forwarders are experienced in handling shipping and documentation problems. They can be very helpful in solving whatever might arise, whether or not it is specifically related to packing, shipping or documentation. Don't hesitate to ask for assistance. Often they will have seen or been through the type of problem you're having and know the best way to handle it. Experienced export managers know they can turn to their forwarders for help, and you can do the same.

One final thought: Since your relationship with your forwarder helps assure continuing success overseas, it's often good to concentrate on working with just one for all your shipments. You can still check around when determining rates, and you should always remain open to what others are willing to offer. Some may have an excellent person doing ocean shipments but not have the same degree of qualifications for airfreight. You might consider using two different forwarders if you find this situation. You may also find some firms have more documentation expertise in select countries than others (e.g., documentation to Arab countries can be much more difficult than for European ones). This may result in a mix, but it's still probably practical to have one "main" forwarder with others for special needs as determined.

(Editor's note: In future issues, this occasional series will look at filling all the seats on your team of export service providers.)

Brian Gauler is Program Coordinator for the Export Development Program, University of Missouri Extension, in Columbia, Missouri.