Set-up and Operation of a global Non-Vessel Operating Common Carrier – A Curse or a Gift?
The Non-Vessel-Operating-Common-Carrier (NVOCC) is an important part of ocean freight business nowadays. Without such an organizational setup/structure, no globally acting freight forwarder/logistics service provider will be able to operate successfully in the worldwide ocean freight market.
There are hundreds of forwarders and other logistics service providers registered with and licensed by the US Federal Maritime Commission (FMC), but only a few are clearly aware of the requirements and risks and have organized and control their documents and processes in such a way that they comply with the rules and regulations of the FMC and their liability risks are covered in case of claims. The FMC is strictly differentiating between an „Ocean Freight Forwarder“ and a “NVOCC”. Often a freight forwarder does not consider that as Ocean Freight Forwarder he is only allowed to charge the customer as per outlays according the vessel operation common carrier (VOCC), i.e. the freight forwarder may not add any profit on top (besides handling fees etc.). Please check further details as per enclosed content of the FMC website (Ocean Transport Intermediaries).
Damages, Claims und fines (potentially millions of US Dollars) imposed by FMC and other governmental bodies, prove that such issues have not been dealt with on a professional basis, often due to cost and time constraints. It may go unnoticed over years until such an “accident” may arise and endanger the running business of a company or even its core substance. It might even happen that former employees give confidential information to the FMC that their previous employer is somehow working illegally.
Therefore each and every freight forwarder should carefully read and check the following questions:
- Has it been enforced that all ocean freight contracts, rates and conditions with the VOCC are concluded as and for the NVOCC and not as freight forwarder? Are all oceanfreight quotations by the freight forwarder issued “as agent” of the NVOCC? This is particularly important in Germany! (Otherwise you have the risk as fixed-cost-forwarder with an unlimited liability as per German law)
- Where is my NVOCC organization registered and licensed? Have all legal and tax aspects been considered? (Example: To which entity will legal volume incentives be paid in case you have negotiated such incentives with the VOCC?)
- Is there a strict separation between the NVOCC entity and the shareholders in view of decision making and management processes? Have you made sure that the separation is sufficiently structured and documented to ensure that a claimant cannot file a claim against the shareholders or mother company (i.e. not to pierce the corporate veil!)?
- Is the risk management organized properly? Do the company structure, working processes and documents cope with cases of substantial claims? Is the insurance coverage strictly separated from the mother company and does it cover expected claims and other liabilities?
- Is the FMC registration valid and is the FMC bond extended/renewed timely? Are all service contracts, NVOCC tariffs and conditions registered and published as per FMC rules and regulations?
- Is the NVOCC registration in P.R. of China done according the law and governmental regulations? Are especially the Branch Offices (Agents) registered and licensed as NVOCC operator too?
- How is your company’s claim management organized and structured in case of substantial claims? (Did you consider the NVOCC carrier’s liability as well as forwarder’s liability?)
- Do you have valid NVOCC agency contracts and are your agents (subsidiaries and third party agents) covered sufficiently by their own insurance for liabilities and errors & omissions?
A comprehensive article has been published by the German newspaper DVZ dealing with those issues too.
We, the company WCL has proven our competences and very special knowledge for advising, assisting and managing a NVOCC organization for logistics service providers in respect of a professional NVOCC setup, registration and/or restructuring, creation of NVOCC cargo documents, contracts and operational procedures as well as advising and assisting the restructuring of internal work flows/ processes in medium size and large logistics service providers.
We are ready to check the current status of the NVOCC setup of your company, propose improvements of shortcomings and execute changes if so requested.
Particularly we are able to offer you a blue print of professional NVOCC documentation, which has been worked out together and confirmed by maritime lawyers in the USA, Europe and Asia and has been endorsed by a large global insurance broker as well.
Please contact us – we will be more than happy to assist you.