What Is Freight Forwarding In Ecommerce?

Expanding into international ecommerce markets is exciting, but it also means having to handle customs clearance, route optimization, and regulatory compliance on their own. For a growing ecommerce business that isn’t sure where to start when navigating these responsibilities, outsourcing to a freight forwarding company might just be the best solution. If you’re wondering ‘What is freight forwarding?’ or are unsure of what it looks like in action, keep reading.

This article explains what freight forwarding is and the specific services that freight forwarding companies offer so you can determine the best shipping solution for your growing ecommerce business.

What Is Freight Forwarding?

Freight forwarding is a service that involves the coordination and shipment of goods via long-distance modes of transport such as sea, air, rail, and road. The role of a freight forwarder is to act as an intermediary between the shipper and transportation service providers, arranging the most efficient and cost-effective way to move cargo from Point A to Point B. 

For example, imagine a U.S.-based ecommerce company that sells weighted blankets wants to ship a large amount of inventory to the United Kingdom. The company would hire a freight forwarding service to identify and book the best routes and transportation methods, handle all required UK-bound shipping documentation, and ensure compliance with both United States and UK regulations. 

The freight forwarder would also manage the logistics of transporting the goods, which might involve moving the blankets from a warehouse in the U.S. by truck to an ocean freighter and then back onto a truck in the UK. Throughout this process, the freight forwarder would oversee the entire journey to ensure that the order arrives on time and in pristine condition.

What Is a Freight Forwarder Responsible For?

Freight forwarders handle many key responsibilities to ensure shipments arrive at their destination intact and on time. While specifics can vary between individual contracts, providers typically offer the following core services.

Customs Clearance: Freight forwarders prepare and file commercial invoices, packing lists, certificates of origin, and the other forms of customs documentation required to clear goods in both origin and destination countries. 

Coordination of Transport: Freight forwarders find and secure the most efficient routes and modes of transport for cargo via ocean, air, rail, or truck. 

Warehousing and Storage: Many freight forwarders offer warehousing solutions for their clients’ shipped goods. They provide the storage capacity needed to increase inventory as customer orders increase during peak seasons or promotional events.

Tracking Shipments: Freight forwarders employ advanced tracking systems to monitor shipments from pickup to delivery, providing updates to their clients in real time.  

Arranging Shipping Insurance: Freight forwarders can assist with arranging cargo insurance to financially protect goods while they are in transit. 

Goods Classification and HTS Codes: Freight forwarders are responsible for classifying goods correctly according to Harmonized Tariff Schedule (HTS) codes, which affect customs duties and compliance with trade regulations.

How the Freight Forwarding Process Works

From the outside, shipping seems like a straightforward, one-dimensional process. But it’s far more complicated than simply packing boxes and paying for postage. International cargo must go through the multi-phased import and export process before reaching its final destination.

Export Haulage

The freight forwarding process begins with export haulage. Cargo is acquired from the client company’s manufacturing facility, storage warehouse, or fulfillment center and brought to the freight forwarding company’s warehouse, usually via truck.

However, if a client company – whether the manufacturer, ecommerce business, or its distributor – has the necessary resources and capabilities, this step can be streamlined. Such companies might directly prepare the cargo for international shipment, allowing it to bypass the freight forwarder's warehouse and be loaded directly onto a truck, plane, or ship from the client’s premises.

Items Checkpoint

Items go through the checkpoint stage to ensure safety, security, and compliance after initial export. Usually, a third-party inspection company is contracted to compare the types and quantities of pallets received against booking documents. Border officials verify the goods have been packed and prepared in accordance with applicable regulations. 

Export Customs Clearance

Next, the freight forwarding company must file for clearance to transport cargo outside the country of origin. Federal customs agencies review their bill of lading, commercial invoice, and other relevant documents when deciding whether to issue an authorization to export. This process can require additional documentation depending on the nature of the goods and the specific regulations of the exporting country.

Import Customs Clearance

Once an authorization to export has been obtained, the cargo is allowed to leave the country of origin via road, rail, air, or sea freight transportation. However, it must receive import clearance before entering its destination country. Authorities in that jurisdiction also inspect the goods before assessing import duties and taxes based on applicable HS Code tariff classifications. Fees are paid upfront but can also be deferred if the freight forwarder is an Authorized Economic Operator. 

Destination Handling

The last phase of the journey, destination handling, involves obtaining the cargo from the receiving country’s customs agency so it can be loaded onto a prearranged freight provider’s local fleet and brought to the destination facility. Quantity and integrity are verified once again, this time by warehouse or fulfillment center staff, before the goods are sorted for storage or repacking. 

Freight Forwarding vs. Freight Brokerage

It takes a lot of resources and expertise to execute the process explained above, let alone do so in a timely and cost-effective manner. That’s why there’s such a large industry specifically focused on making freight forwarding easier – valued at $176 Billion in 2024.

But freight forwarding shouldn’t be confused with the similar but distinct service of freight brokerage. While freight forwarders and brokers both serve as middlemen between shippers and carriers, there are some key differences.

Freight forwarders are more hands-on and directly involved in the shipping process. They handle the goods, arrange transportation, prepare documentation, and provide additional services including warehousing, customs brokerage, and cargo insurance. Clients enjoy the simplicity of having a single point of contact for all their logistics needs. The convenience is even greater with a third-party logistics (3PL) company that offers freight forwarding in addition to ecommerce order picking, packing, and shipping. 

Freight brokers, on the other hand, focus on connecting shippers with carriers and do not physically handle cargo. Brokers negotiate prices, book shipments, and track delivery statuses, but the shipper and carrier are still responsible for other logistics tasks.

While freight brokerage services offer flexibility and cost-effectiveness in finding transportation solutions, ecommerce businesses may need to assume greater responsibility for coordinating other aspects of the shipping process, such as documentation, customs clearance, and cargo handling. It’s often easier to work with a freight forwarder capable of handling all of these responsibilities when needed.

It’s also more cost-effective in many cases. Well-established freight forwarders can secure competitive pricing due to their volume of business and relationships with carriers. 

The Value of Working With a Freight Forwarding Company

What is freight forwarding in logistics worth to the average ecommerce business? In short: A lot of time, money, resources, and peace of mind. Learn how working with a freight forwarder can benefit your operations below.

Cost-Savings

Freight forwarding companies save their clients money in multiple ways. The first is through the strategic selection of freight shipping modes and routes. No two options in either category are made equal in terms of cost, speed, or service value. Freight forwarders know which arrangements are the cheapest for specific case scenarios.

For example, a freight forwarder may choose to ship goods by rail instead of truck if the delivery deadline allows for the slower transit time. That would save money considering rail is generally cheaper than trucking for long distances. For cargo headed overseas, ocean freight would be a comparably slow but more affordable choice over air freight. Clients get a list of choices in consideration of their individual priorities so that every dollar spent on freight charges goes as far as possible. 

A freight forwarding company’s aforementioned ability to directly negotiate lower transport costs with freight carriers has the potential to make a big difference in international shipments, which are more complex and prone to costly delays. 3PLs that offer freight forwarding can also help minimize dimensional weight charges by ensuring each shipment is packed with space efficiency in mind. 

Avoid Costly Penalties

Freight is subject to a wide range of rules and regulations that vary by country and transportation mode. Handling freight without the knowledge of an experienced freight forwarder can result in a range of negative consequences.

Delays in Customs: Customs authorities may hold incorrectly classified shipments until they’re provided with the correct information. This can disrupt expected delivery schedules and impact supply chain timelines.

Increased Costs: Improper duty assessments often result in either the overpayment or underpayment of customs duties and taxes. Underpayment, in particular, can lead to penalties and additional charges once the error is discovered.

Penalties and Fines: Significant misclassification is viewed by customs regulations as fineable non-compliance. In severe cases, it can also result in the confiscation of goods.

Compliance Issues: Continuous issues with classification might flag an ecommerce business for more frequent audits and inspections, increasing operational hassles and costs.

Freight forwarding companies provide the peace of mind that comes with professional oversight and extensive knowledge of customs standards. They can offer expert advice on everything from packaging to coordinating DAP and DDP shipping to paperwork. The resulting time and stress savings puts business owners in a better position to focus on sales and customer satisfaction. 

Cargo Insurance

While you can't be there as your packages change hands between shipping carriers, inspectors, and authorities, you can financially protect them should something go wrong. Cargo insurance is designed to cover losses if freight is damaged or lost in transit. Policies vary, but most reimburse up to the full value of goods, minus any deductibles.

Freight forwarders can advise on the type and amount of coverage that makes sense for your business. They may also have access to competitive cargo insurance rates through their industry connections. If you do need to file a claim, freight forwarding partners can help manage the paperwork and process to make things go as smoothly as possible.

Agility Amidst Delays and Disruptions

Contingency planning is a critical part of both domestic and international freight shipping. Unfortunately for smaller businesses, however, it's hard to be agile in the face of change without robust industry connections. Freight forwarders' relationships with common carriers allow for the quick arrangement of alternatives if shipments are delayed or canceled.

When unexpected events like natural disasters or labor strikes disrupt supply chains, freight forwarders can similarly leverage their network of connections for up-to-date information and interim solutions.

Modern Technology

Freight forwarding companies with modern technology provide their clients with additional value in the form of insight and control. Real-time visibility into freight shipment progress, as well as available carriers and pricing, enables businesses to make well-informed decisions on the fly. 

Today's advanced systems can even generate custom quotes and route plans in consideration of cost and transit time preferences. The result is an optimized and resilient supply chain that can adapt to market conditions as they change.

Use a 3PL for Freight Forwarding

With the benefits of freight forwarding being so extensive, you might wonder why a company would need anything more. The truth is, freight forwarding is just one piece of the supply chain puzzle. Many businesses find they require additional support to achieve and sustain optimized operations.

Third-party logistics providers with freight forwarding services offer additional value by consolidating ecommerce inventory management, picking and packing, order management, supply chain KPI reporting, and reverse logistics solutions into one package.

Well-established 3PLs are also in a position to negotiate better rates for their clients – not just with freight shipping carriers, but smaller truckload and last-mile delivery companies as well. Partnership with a qualified logistics service provider is the best way to build an integrated logistics system that delivers the benefits of cost-savings, industry expertise, efficiency, compliance, and so much more. 

You have better things to do than handle the movement of goods from Point A to Point B. Save time, money, and effort by delegating them to Shipfusion. We’re more than just a 3PL – we offer freight forwarding services, too. Our solutions support efficiency across entire supply chains while promoting cost-savings. 99.9% order accuracy is one of the many benefits clients reap when working with us. Contact a fulfillment specialist to get started today.