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About NVOCCs & Their Benefits
NVOCCs Explained
Non-Vessel Operating Common Carriers, commonly referred to as NVOCCs or NVOs, are regulated by the U.S. Shipping Act of 1984 and U.S. Federal Maritime Commission (FMC) regulations contained in 46 CFR. NVOCCs must be licensed if they are located in the United States and must be registered if they are not located in the United States.
According to the FMC, an NVOCC acts as a carrier and assumes responsibility for transportation of cargo from a port or place of loading or receipt to a port of place of discharge or delivery. Read more
Like other carriers, an NVOCC issues its own
house bill of lading to shippers and charges freight for movement of the cargo.
As an NVOCC does not operate vessels, it books cargo on a vessel operated by another
carrier (called a Vessel-Operating Common Carrier or “VOCC” or “VO”).
The NVOCC is a shipper in its relationship with the VOCC (receiving a
master bill of lading from the VOCC) but is a carrier in its relationship
to the cargo owner (issuing its own house bill of lading to the cargo owner).
A lawful NVOCC must not only be licensed or registered but also submit proof of financial responsibility to the FMC (usually in the form of a bond), and publish a tariff (which includes rules and/or rates, depending on whether the NVOCC is licensed or not). Like VOCCs, NVOCCs are required by law to publish a tariff setting forth their rates (with some exceptions due to a new law which exempts publication of rates for licensed NVOCCs) and terms of service. NVOCCs are also permitted to enter into privately negotiated contracts with their shipper customers called “NVOCC service arrangements” or “NSAs.” NVOCCs make their profit from the difference between the rate the NVOCC pays to the VOCC and the rate the NVOCC charges the shipper. The Federal Maritime Commission’s Office of Transport Intermediaries (OTI) regulates the activities of NVO’s (http://www.fmc.gov/bureaus_offices/office_of_transportation_intermediaries.aspx). The Office of Transportation Intermediaries (Office) is responsible for the review of applications for OTI licenses, investigation of the applicant and qualifying individual and recommendation for the issuance of the OTI licenses for ocean freight forwarder and non-vessel-operating common carrier (NVOCC) OTIs. Applications (Form FMC-18) are filed by entities requesting a license for the first time as well as licensees reporting or requesting changes which may result in the issuance of amended licenses. Changes include alterations to name, business type or structure, change or addition of a qualifying individual, changes in address, and addition of a service to an existing license, e.g., adding NVOCC service to an ocean freight forwarder license. Licenses are issued to a business entity and not to an individual, except in the case of a sole proprietor. Every licensee is required to have an individual identified as the Qualifying Individual (QI) who is of good character with a minimum of three years experience in OTI services and who is an active officer of the entity. Licensees are required to provide proof of financial responsibility for $50,000 for an ocean freight forwarder license and $75,000 for an NVOCC license. An additional $10,000 in coverage is required for each unincorporated branch office in the United States that performs OTI services. Once licensed, OTI NVOCCs are required to file a Tariff Registration Form (FMC-1) with the Commission, which notifies the Commission of the location of the NVOCCs electronically accessible tariff (CATS). The NVOCC must publish its tariff at that location in compliance with Commission rules at 46 CFR Part 520. If the NVOCC is a shipper party to a service contract with a vessel operating common carrier, it must comply with the requirements of 46 CFR Part 530.
OTI licenses are issued pursuant to the Commission's rules at 46 CFR Part 515 and section 19 of the Shipping Act of 1984, as amended.
A lawful NVOCC must not only be licensed or registered but also submit proof of financial responsibility to the FMC (usually in the form of a bond), and publish a tariff (which includes rules and/or rates, depending on whether the NVOCC is licensed or not). Like VOCCs, NVOCCs are required by law to publish a tariff setting forth their rates (with some exceptions due to a new law which exempts publication of rates for licensed NVOCCs) and terms of service. NVOCCs are also permitted to enter into privately negotiated contracts with their shipper customers called “NVOCC service arrangements” or “NSAs.” NVOCCs make their profit from the difference between the rate the NVOCC pays to the VOCC and the rate the NVOCC charges the shipper. The Federal Maritime Commission’s Office of Transport Intermediaries (OTI) regulates the activities of NVO’s (http://www.fmc.gov/bureaus_offices/office_of_transportation_intermediaries.aspx). The Office of Transportation Intermediaries (Office) is responsible for the review of applications for OTI licenses, investigation of the applicant and qualifying individual and recommendation for the issuance of the OTI licenses for ocean freight forwarder and non-vessel-operating common carrier (NVOCC) OTIs. Applications (Form FMC-18) are filed by entities requesting a license for the first time as well as licensees reporting or requesting changes which may result in the issuance of amended licenses. Changes include alterations to name, business type or structure, change or addition of a qualifying individual, changes in address, and addition of a service to an existing license, e.g., adding NVOCC service to an ocean freight forwarder license. Licenses are issued to a business entity and not to an individual, except in the case of a sole proprietor. Every licensee is required to have an individual identified as the Qualifying Individual (QI) who is of good character with a minimum of three years experience in OTI services and who is an active officer of the entity. Licensees are required to provide proof of financial responsibility for $50,000 for an ocean freight forwarder license and $75,000 for an NVOCC license. An additional $10,000 in coverage is required for each unincorporated branch office in the United States that performs OTI services. Once licensed, OTI NVOCCs are required to file a Tariff Registration Form (FMC-1) with the Commission, which notifies the Commission of the location of the NVOCCs electronically accessible tariff (CATS). The NVOCC must publish its tariff at that location in compliance with Commission rules at 46 CFR Part 520. If the NVOCC is a shipper party to a service contract with a vessel operating common carrier, it must comply with the requirements of 46 CFR Part 530.
OTI licenses are issued pursuant to the Commission's rules at 46 CFR Part 515 and section 19 of the Shipping Act of 1984, as amended.
Differences Between An NVOCC and an Ocean Freight Forwarder
An NVOCC is a common carrier that holds itself out to the public to provide ocean transportation, issues its own house bills of lading or equivalent document, but does not operate the vessels by which ocean transportation is provided. Companies, such as Nova Shipping, may obtain both licenses and may act in both capacities even on the same shipment. Read more
The U.S. legal distinction between the two is that a freight forwarder acts as the agent of a principal (typically a shipper or consignee or carrier) and the NVOCC is a transportation company (carrier) that is physically responsible for the carriage of goods and acts as its own principal.
Companies acting strictly as an Ocean Freight Forwarder typically do not issue their own contracts of carriage (bill of lading) and as agents are generally not liable for physical loss or damage to cargo except in cases of errors in judgment or paperwork or fiduciary responsibility. NVOCC's act as ocean freight carriers and issue their own bills of lading and are legally responsible for physical loss or damage in accordance with the terms and conditions of their bill of lading and tariff.
Companies acting strictly as an Ocean Freight Forwarder typically do not issue their own contracts of carriage (bill of lading) and as agents are generally not liable for physical loss or damage to cargo except in cases of errors in judgment or paperwork or fiduciary responsibility. NVOCC's act as ocean freight carriers and issue their own bills of lading and are legally responsible for physical loss or damage in accordance with the terms and conditions of their bill of lading and tariff.
Benefits of dealing with an NVOCC & OFF
By combining our activities as an NVO with our activities as an OFF, Nova Shipping takes care of the total shipment at a level that an OFF alone is unable to. Read more
For example, whereas an OFF must wait for the bill of lading from a steamship line, Nova Shipping issues its own house bill of lading. This is especially important when dealing with Letters of Credit where time is of the essence and changes can be costly. As Nova Shipping has the ability to change its own bill of lading, a degree if control over a shipment is possible that an OFF alone cannot exert.
