International logistics companies have long ago understood this situation and took necessary steps.
Growing freight forwarders presence in global transportation sector was the ultimate response.
Freight forwarders’ role is very simple in an international transaction where only single mode of transport is used.
They buy bulk spaces from the transport companies and sell them to exporters and importers in small quantities.
As an example freight forwarders made annual contracts with container liners and sell these spaces to their clients under either FCL (Full Container Load) or LCL (Less Container Load).
Their profit margin is very small on each transaction. They need to make big quantities in order to be profitable. Before starting to explain multimodal bill of lading or combined transport document I need to make clear the mode of transport.
What is a mode of transport?
Mode of transport or means of transport is a term used to distinguish considerably different ways to carry out transport. We can talk about four main types of modes of transport which are frequently used in international trade. These are:
- Sea Transportation
- Land Transportation
- Air transportation
- Rail transportation
Freight forwarders act as a broker in an international business transaction where only single mode of transport is utilized. They are not carriers or agents of the carriers. They do not have a signature right to sign a transportation contract either. That is the main reason why banks do not accept freight forwarders bill of lading in the first place. They buy in bulk and sell in retail freight quotations. That is all. I think this will explain why freight forwarders are called as freight brokers in some countries.
Freight Forwarder’s role in Multi Model Transport:
Freight forwarders role in a multi modal transport is different than single mode of transport. Multimodal transport is the transportation of goods under a single contract, but performed with at least two different means of transport.
As an example let us assume that we are an exporter located in UK and shipping some machinery to USA. We agreed on a door-to-door delivery which covers land-sea-land transportations consecutively and we will be having a single transport document. Under these conditions our carrier performs a multimodal transport.
In multimodal transportations customers get one transport document which covers the entire journey. Carriers are liable for the whole carriage from start to end.
In a multimodal transport freight forwarders act as a Multimodal Transport Operator (MTO). They sign transport documents as a Non-Vessel Operating Carriers (NVOC). Transport documents that freight forwarders issue as a Non-Vessel Operating Carriers (NVOC) are called either as Multimodal Bill of Lading or Combined Transport Document.
Both Multimodal Bill of Lading or Combined Transport Document share the same qualifications. Only their names are different.
This is also confirmed with the ICC publication of International Standard Banking Practices which is called ISBP 2007. ISBP 2007 states that “in all places where the term “multimodal transport document” is used within this document, it also includes the term combined transport document.
A document need not be titled “Multimodal transport document” or “Combined transport document” to be acceptable under UCP 600 article 19, even if such expressions are used in the credit.