Five Key Roles to Know in Import and Export Trade for More Efficient Operations in Import, Export, and Supply Chain:
Introduction:
International trade and supply chain management are complex fields that involve numerous roles, regulations, and constraints. Despite the long-standing development of global trade, many companies still struggle with the tasks of import and export trade.
This article aims to provide an overview of several common intermediaries in international trade. The services they offer enable many companies to expand their international sales more easily. For companies or individuals facing challenges in international trade, this article can serve as a guide for selecting suitable partners.
Freight Forwarders:
Freight forwarders, also known as forwarding agents, are asset-light roles. Their main function is to assist clients in arranging transportation services for goods import and export. Their related business activities include preparing import and export documents (bills of lading, customs documents, etc.), selecting insurance, arranging land and international transportation, and last-mile delivery. Since most freight forwarders do not own transportation vehicles, they primarily collaborate with carriers such as shipping or airline companies after receiving small orders.
The main sources of income for freight forwarders are threefold: charging clients for document handling fees, receiving referral commissions from cooperating shipping or airline companies, and earning the difference in freight rates after consolidation. It is evident that the primary function of freight forwarders is to provide order referral services, which can save clients a lot of trouble and time compared to finding transportation companies on their own.
For transport providers, engaging freight forwarders can ensure the smooth flow of goods import and export and facilitate more efficient transportation services. Sometimes, using the services of freight forwarders can even be more cost-effective compared to finding transportation companies independently. A reputable freight forwarder possesses extensive international connections, solid import-export knowledge, and relevant industry links. Therefore, even multinational companies heavily reliant on import and export would utilize freight forwarder services.
Non-Vessel-Operating Common Carriers (NVOCC):
Similar to freight forwarders, NVOCCs do not own their transportation vehicles but lease space from shipping companies. One can think of them as sub-lessors.
The origin of NVOCCs lies in the imbalance of container transport. In land transportation, the cost of returning empty containers to the port is the same as when they are full. Hence, the NVOCC business model was designed to reduce expenses. Over time, this business model extended to the maritime sector.
The roles of NVOCCs are similar to freight forwarders, and one can distinguish between the two based on the "bill of lading." The bill of lading must be issued by the provider of transportation services. Therefore, freight forwarders are not responsible for issuing the bill of lading; it is done by the cooperating shipping company. In contrast, since NVOCCs are transport service providers themselves, they issue the bill of lading.
Another key aspect is the responsibility for goods during transportation. As NVOCCs act as transporters, they bear the responsibility for any accidents or incidents that may occur during transportation. Conversely, freight forwarders, who are only responsible for booking cargo space, pass on the responsibility for the goods to the cooperating transport company.
Export Management Companies:
Export Management Companies (EMCs) differ from the aforementioned intermediaries in their primary function. While the previous entities primarily provide transportation services, EMCs assist domestic companies in establishing distribution and marketing networks in foreign countries. They also help in evaluating the creditworthiness and financial flow of foreign buyers. In short, EMCs are companies that can help manage international channels and provide advice to clients on operating in local markets.
Companies with limited overseas experience or firms unfamiliar with new markets can benefit from the services of EMCs. Different markets require localized knowledge, and EMCs possess the expertise to provide highly valuable services. Some businesses may choose to outsource export activities to EMCs to avoid the need to cultivate relevant talent or the risk of default by foreign customers.
Export Trading Companies:
Export Trading Companies (ETCs) are similar to EMCs, but the key difference lies in whether they take ownership of the goods. Traditional EMCs do not purchase goods outright; instead, they facilitate connections between domestic producers and overseas buyers, acting as a bridge to establish trust.
In contrast, ETCs purchase goods outright, assuming ownership of the merchandise. This provides an opportunity for smaller exporters with limited resources to export overseas without having to handle distribution and logistics issues. However, a drawback of relying on ETCs is that if the company wishes to independently operate in foreign markets in the future, negotiations with these trading companies will be necessary. Additionally, maintaining control over the brand image in foreign markets can be challenging when relying on ETCs.
Customs House Brokers:
Customs House Brokers primarily deal with customs and government authorities. With their extensive knowledge of customs regulations and import-export taxes, they facilitate the swift clearance of goods through customs. Engaging the services of a customs house broker reduces the risk of customs delays compared to individuals or companies handling customs clearance independently. However, since most freight forwarders now offer customs brokerage services or collaborate with customs house brokers, customers who use freight forwarding services usually do not need to find a separate customs house broker.
Conclusion:
Despite the increasing skepticism surrounding global trade under recent protectionist measures, international trade continues to progress. For companies engaged in export trade, the value provided by these intermediaries can enhance the smooth circulation of goods in the international market.
Of course, if the complexities of international trade are overwhelming, companies can seek the assistance of third-party logistics companies to help resolve all related issues.
References：
Managing Supply Chains: A logistics Approach (ISBN: 987-111-53392-2)
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