TT Talk - What's in a Name?

The April 9 Edition of ForwarderLaw E-News carried an interesting article by Steve W. Block, entitled "Misleading Monikers of the Middleman". Steve Block is an attorney with the US firm of Betts Patterson and Mines, P.S based in Seattle. Extracts from the article are set out below. (For those not familiar with the slang word "Monickers", it means 'name' or 'title')

"Okay, so what exactly is a "freight forwarder"? A "transportation broker"? A "non-vessel operating common carrier," a/k/a "NVOCC"? Do those sound like easy questions? Would you be surprised to learn there are at least four questions bundled into those three queries that are the source of some ongoing confusion and occasional heartburn in our industry? Part of the confusion derives from the term "freight forwarder" being defined one way in ocean transportation, and another way for surface and domestic water carriage. This is compounded by relatively recent statutory classification [in the US] (for administrative purposes) of freight forwarders and NVOCCs cumulatively as "ocean transportation intermediaries." Not enough muddle? Most of these players wear different hats, operating as a freight forwarder here, a transportation broker there, and an NVOCC in the other place - often within related transactions. They can also function as "indirect air carriers" on the aviation side....

The gastronomical upset follows when liability against a middleman is asserted by a disgruntled shipper or carrier. The difference between the various species of intermediary can be significant, and how a transportation facilitator holds itself out to the public can be a factor in determining how the law will treat it. If a company calls itself a "freight forwarder" to a surface shipper and its activities support that nomination, then it can find itself stuck holding the bag for a damaged freight claim, even if it really meant to say it was a "broker."

A related point is that the law doesn't countenance industry-created categories of service provider. You can call yourself a "transportation consultant," "consolidation agent," "shipper agent," or any of several other legally undefined terms we've heard, but your self-proclaimed designation doesn't control your legal rights and obligations. The law defines a player by the activities it undertakes, notwithstanding what that player might call itself.

So here's the deal. An ocean freight forwarder is the legal (and roughly the operational) equivalent of a surface transportation broker. These entities do not issue bills of lading taking responsibility for the safe transportation of cargo. They are "travel agents for freight," finding appropriate carriers for their shipper customers, putting the two together and sending them on their merry way. They typically are liable for their own negligence or breach of contract only; if they pass along incorrect shipper instructions or pair a shipper with an incompetent carrier, they can be on the hook. However, they usually walk when the actual carrier loses or damages the shipper's stuff as a result of the carrier's fault.

NVOCCs are largely the equivalent of surface freight forwarders. These entities are "carriers to shippers and shippers to carriers." They consolidate cargo, issue bills of lading to their customers taking responsibility for safe delivery, and are subject to cargo liability regimes in the event of a loss. They stand to make bucks based on fulfillment of their contracts with carriers, but often take the economic fall when they don't have the freight they've committed during a contract's term.

A third category of ocean transportation implementer is the "ocean freight broker," an unregulated (but defined) entity whose role is limited to sales for another entity.

The term "freight forwarder" has become part of the shipping industry's every-day vernacular, but whether you're a "freight forwarder" under the law depends first on what mode of transportation you participate in, and second on what you actually do. Similar pitfalls too numerous to list here await service providers who use a one-name-fits-all designation in their marketing and business activities. Entities in this business should understand the different roles they are playing; how those roles change with different activity, and the liability that potentially lies when changing hats."

Staff Author

TT Club