Importing and exporting stock is the cornerstone of many businesses involved in manufacturing and distributing goods both nationally and internationally.
If you are a freight forwarder or are considering engaging a freight forwarder, a Freight Forwarding Agreement sets out the terms of the arrangement, including the services the freight forwarder will provide, payment schedules, and what happens if something goes wrong in the import/export process.
What Is Freight Forwarding?
Freight forwarders provide a key role in the import/export process, as they take on an intermediary role between a shipper (a party requiring goods to be shipped) and transportation services (such as cargo shipping companies and air carriers).
While freight forwarders don’t actually transport the goods themselves, they act as an agent on behalf of the shipper. They negotiate the most commercially effective deal for their clients, advise on import and export regulations, assist with any documentation required, advise on the storage of goods and insurance, and deal with other logistics involved in the transport process.
Engaging a freight forwarder isn’t strictly required when transporting goods from one destination to another. However, as the import and export process is highly regulated and can be complex, many businesses decide to use a freight forwarder to take out the stress of transporting goods to the next destination.
What To Include In A Freight Forwarding Agency Agreement
Freight Forwarding Agreements contain clauses addressing matters including the below.
As the services provided by a freight forwarder can vary, it is important to clearly define exactly what services will be provided.
As set out above, the freight forwarder is involved in various aspects of the transport process, from advising and organising the mode of transport and which carrier will be transporting the goods, to assisting with customs and regulatory requirements and planning the storage of goods.
For a client, stipulating the services to be provided ensures all steps involved in the job will be completed. For a freight forwarder, having a services clause is about managing expectations with the client and making sure they know what they’re paying for to avoid disputes arising down the track.
A Freight Forwarding Agreement will include clauses relating to how and when the client is to make payment.
Usually, payment will be due on the time specified on the invoice issued by the freight forwarder to the client. Interest is often charged by the freight forwarder for late payment, and third party expenses incurred by the freight forwarder are usually billed to the client.
A Freight Forwarding Agreement will sometimes allow a freight forwarder to take a “lien” over their clients goods for any money the client owes to the freight forwarder. This means that the freight forwarder can take ownership over and sell the client’s property in the event that the client fails to meet any debt owed by the client to the freight forwarder.
As freight forwarding involves managing the movement of goods, on occasion goods are unavoidably damaged in transit.
A Freight Forwarding Agreement will often limit the liability of the freight forwarder for any damage, except if the damage occurs as a result of the freight forwarder’s negligence in taking care of the goods.
Alternatively, a Freight Forwarding Agreement can be drafted so that it reflects the interests of the client, and may require that the freight forwarder is liable for any damage caused and any costs incurred by the client in repairing damage to the goods is payable by the freight forwarder.
Freight forwarding companies usually arrange the transport of goods from one destination to another.
For this reason, the Freight Forwarding Agreement will usually include clauses which state that any delay in the delivery of the goods is beyond the control of the freight forwarder and they are not liable for any loss suffered as a result of the delay.
However, the Agreement will usually require that the freight forwarder uses their best efforts to meet any delivery schedules agreed between the parties and minimise the impact of any problems that occur along the way.
Obligations Of Parties
Freight forwarding agreements should be clear on what each party is responsible for.
Generally, the shipper or shipping company will be responsible for the actual goods and making sure they are prepared to be shipped. The freight forwarders, on the other hand, would be responsible for the relevant insurance, schedules, tracking details and warehousing arrangements.
Benefits Of A Freight Forwarding Agreement
Having a Freight Forwarding Agreement in place is beneficial for your business because it secures your arrangements in writing.
The shipping process carries several risks, especially if it’s done internationally and in an unpredictable environment.
A Freight Forwarding Agreement can mitigate these risks by ensuring there is a process for potential disputes or issues that may arise, and ensure that the goods are delivered as promised.
Further, this kind of arrangement can secure a business relationship. It strengthens your connections in the market which, in turn, is great for your business .
Freight forwarding can be complicated, but a properly drafted Freight Forwarding Agreement ensures that both the freight forwarder and client are on the same page.
If you need help getting a freight forwarding agreement drafted, we’re here to help! You can reach us on 1800 730 617 or firstname.lastname@example.org.
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