Freight Forwarders can act as either a Principal or Agent. Describe in your own words the differences between each. Under what circumstances might a Freight Forwarder want to act as either a Principal or Agent?

When Freight Forwarders act as principal, they assume all responsibility and liability for the pick-up, handling, transporting and delivery of the shipment as a regular common carrier would. Their name is on the BOL.

When a Freight Forwarder acts as an agent, their liability ends once they hand over the shipment to the carrier. They facilitate the movement of goods. Their name is not on the BOL and therefore is not held liable under that contract.

A Freight Forwarder may want to act as a Principal or Agent when and if they are part of a logistics group that provides through their own fleet or sister fleet access to carrier moves.

Another scenario would be when handling of cargo by water.

Most often when they act as principal they are referred to as either an NVO (non-vessel owning) carrier or an NVOCC (non-vessel owning common carrier). In these instances freight forwarders will issue a properly recognized carrier contract of carriage for the movement of cargo.

The freight forwarder when acting as principal will generally issue one of two types of contracts of carriage. The most common is a formal bill of lading with their company name on it and identifying that the terms and conditions are those of the Canadian International Freight Forwarder Association (CIFFA). The other type is identified as a FIATA (International Federation of Freight Forwarders Associations) bill of lading. These bills of lading must be purchased by the freight forwarder from FIATA either directly or through CIFFA. These bills of lading have official recognition by the banking community worldwide as a valid substitute for an ocean carrier’s bill of lading.

In most instances where freight forwarders are acting as agent they will issue their own House Bill of Lading, which will make reference to the contracts of carriage the forwarder has made with the various carriers, rather than issue a contract of carriage as a carrier.

The other instance would be as air freight forwarder. An air freight forwarder can act as agent or as principal of the shipper or consignee. To act as official airline agents, however, air freight forwarders must be registered with the International Air Transport Association (IATA).

As principal, the forwarder provides each shipper with a “house” bill of lading (the contract of carriage between itself and the shipper) and arranges for consolidation of various small shipments into airline-approved “unit loading devices” (airline containers), air transport, deconsolidation, and final distribution. On the bill of lading issued between the forwarder and the air carrier, the forwarder is shown as shipper.

As agent, the air freight forwarder acts on behalf of the air carriers with whom it arranges flights and from whom it receives a commission for the international movement of freight (excluding Canada-U.S. transborder shipments). The carrier, not the forwarder, assumes liability for the shipment.

If dangerous goods are shipped, the forwarder may act only as agent. The consignor must certify the shipment and appear as shipper on the bill of lading.