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Home Industry Opinions NVOCC, the underrated service provider in global logistics

NVOCC, the underrated service provider in global logistics

Non Vessel Operating Common Carrier (NVOCC or NVO) or sometimes called Box Operators are those carriers who offer port to port services similar to Main Line Operators (MLO), by issuing their own Bill of lading, but at the core, they do not operate vessels, but rather own the fleet of containers and fill the slots with Vessel Operators (VO).

NVOs have played a major role in logistics history, as one of the central players in carriage of goods, by sea, among other service providers, i.e. Main Line Operators & Freight Forwarders (FFs).

The highest number of NVOs are most likely in the US market; according to Federal Maritime Commission (FMC) database, there are approx. 6000 registered NVOCCs operating in USA and a large number of them are active in Asia Pacific, Europe, Africa and Middle East regions.

Although NVOs acts as carriers and freight forwarders while at the same time offer the variation of services to customers they are yet to be considered as a reliable mode of service providers, especially in Asia, where the shippers prefer to get their cargo loaded by MLO, rather than to obtain NVOCC services.

The main reason of this unrealistic belief is actually a set of “clichés” i.e.

  • NVOs are expensive and they offer high freight levels.
  • NVOs transit time and sailing frequency are uncertain.
  • NVOs local tariff is very high.
  • NVOs charge high slabs of detention.
  • NVOs take unjustified charges under different heads.
  • NVOs do not offer quality services.
  • NVOs are aimed at making high revenues & the most lucrative one and so on….

If all these assumptions are analyzed you will learn that the reality is different from the assumptions and Clichés that float around NVO’s.

Being in the NVOCC industry for the last several years and running my own NVO, I will not only defend but also like to clarify all these elements which presumable project an NVO to be a non-stable entity, more so in current global situation of shipping & logistics.

NVO’s have to compete not only with large number of freight forwarders but with MLOs in different areas and have proved their mettle by taking up a firm & large share in the logistics market.

If a shipper goes to any main carrier to know their route and Transit Time (TT) for a particular port, many of the MLOs may offer fixed route, which is likely to include long TT; whereas NVOs on the other hand offer different routes with the variation of Transit Time including the shortest one in order to serve shipper/customers as per their requirements.

Similarly, in terms of local tariff including detention slabs NVOs are the most flexible with their rate, they find the middle ground & offer feasible packages to customers which you will not commonly experience with MLO. Moreover, it is an Era where customers prefer to finalize the Destination tariff (before loading) and that is what they will pay, as per their own convenience, so there is no question of overcharging at all.

As far as freight levels are concerned, if you review the global market, you will come to know that it is the NVOs who literally offer the most competitive rates, considering the Win-Win approach, with the variation of numerous services;  for if they offer high & out of market rates, they will be wiped out by the competitors.

In fact, apart from all common routes which MLO offers, NVOs exclusively propose ad-hoc and special routes, which are not served by MLOs, due to certain limitations; further many formalities in documentation & operations, for specific needs are also offered, by NVOs, which MLOs do not particularly like to provide.

NVOs are the most affected entities in the current scenario due to high freight & slot rates, shortage & high prices of containers, space allocations & port congestions where every single entity is trying to get the maximum advantage of the recent unpredictable situation.

To give you a quick scenario in the current circumstances, in many port pairs NVOs have to work with negative cost structure means their cost is higher than the recoveries but they have to sustain their services in order to be a part of competition thus,

  • They have to pay fix handling charges to terminals/depots despite what they will recover.
  • They have to pay higher slot charges but get meager recovery in a form of freights in most of the Ports due to high competition.
  • They have to pay the General Rate Increase (GRI) which is implemented by VO with no surety even for the partial recovery.
  • In the current situation, they have to buy containers at the highest price offered by container traders, at times even thrice the amount of the earlier value.
  • In addition, when vessels are full, NVOs have to struggle to get space from VOs who prefer to load their own boxes rather than accumulate SOC containers but on the other hand, it is NVO who also supports VOs when they are in desperate need of boxes to be loaded on their vessels.
  • Last but not least, NVOs sometimes have to compromise on some of their basic revenues by offering waivers/discounts which the major MLOs do not even consider or think of.

So to sum up, NVOs are successfully catering to the industry and doing a lot for their survival in the current situation, where they are supposed to maintain their potential customers, by any means, in order to sustain their presence, in the logistics world. One cannot deny the crucial role and importance of NVOCC, as a dynamic service provider, in the current scene of the global shipping industry.

Author of the article: Rehan Khan, Director and Co-Owner of VMR Lines

Rehan Khan is one of the Directors  & Co-Owners of VMR Lines Ltd; with an extensive professional experience of 18+ years in Shipping & Logistics, having firsthand knowledge in the NVOCC Industry & Management Scale.

He is a pioneer at introducing a Pakistani-based entity, to commence regular NVOCC services in Europe, UK & Mediterranean regions.

Apart from his engagement in the Shipping Business, he is also active on social media platforms wherein he expresses his experiences and ideas and also shares his views on the Global Shipping Industry in a form of business articles/blogs.

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