by Anthony Paik Jr., Yusen Logistics (Americas) Inc.
For the past couple of years the ocean import market has been very volatile to say the least. In the last twelve months alone rates have spiked upwards of $6,000 per 40' container to the East Coast to as low as $1,500 per 40'. As such, customers are now considering carrying both carrier direct contracts (BCO's) and working with NVOCC's/Freight Forwarders or just working without a carrier contract. The difference between the two is that with carrier direct contracts you deal directly with the carrier of the steamship line (SSL) whereas with an non-vessel owned carrier contract (NVOCC) you work with a company that has a license to carry ocean freight but does not own any of the vessels.
There are multiple benefits of working with an NVOCC versus carrier direct. The biggest difference is once you sign a contract with a direct carrier your rate (price) is fixed for that contract period – usually twelve months for the TPEB trade, which is typically from May 1st through April 30th. With an NVOCC you don't sign a contract and you get rates that are fixed for as little as thirty days to twelve months.
Another difference is the need for additional space in excess of your agreement. If you complete your minimum quantity commitment (MQC), you might be subject to higher prices for the space depending on demand.
In addition to the fixed price, you typically only one sailing a week. If your vendors don't get the production completed on time, you miss the sailing and you have to wait another week. That could mean missed deadlines, opening yourself up to compliance chargebacks.
Working with an NVOCC you have multiple carrier options with anywhere from 6-7 carriers and sailing options. So if production is delayed a day or two, you still have options. NVOCC's also don't just sell a rate, they sell service. Associates are on hand to ensure your freight is moving when you need it to move. Customer service works directly with the carriers to place your bookings and track your freight, allowing you to focus on your supply chain and other duties.
The last difference is pricing. As the market moves up and down, the pricing can be adjusted based on spot market rates. If demand is low, the price moves down; conversely, when demand is up, pricing goes up.
These are all options you have with working with an NVOCC that can provide you with additional flexibility when you need it most.
Anthony Paik Jr. is the National Sales Director of Yusen Logistics (Americas) Inc. International Division, an NYK Group Company. Commercially responsible for the Ocean Freight Forwarding Sales for the Americas based in Secaucus, NJ, Anthony has been in the Freight Forwarding industry for 10 years and 10+ years with previously held positions on a national level.
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