How it works is that instead of owning ships, NVOCC’s buy large quantities of space on the large steamship lines’ vessels at wholesale prices and then they sell that space in smaller quantities to its customers at retail prices. They issue their own shipping documents including their own bills of lading, meaning the contract between them and the shipper, and they take on the responsibility of the carrier in the shipment. Much like a freight forwarder, this would be a house bill of lading.

They do, however publish tariff rates without actually owning any ships which is something a freight forwarder would not be able to do. This is a standard part of their global shipping services.

Who can become an NVOCC? In order to create a new company that will be an NVOCC in the United States there is a special license that a company will need to get from the Federal Maritime Commission (or FMC). It is called the Ocean Transportation Intermediary license and is administered by the Bureau of Certification and Licensing which is an area of the Federal Maritime Commission. To get this license, a company must apply and pass through a series of steps that prove that their company’s experience in the shipping industry. They must also prove they will be able to provide customers with the ocean transportation services following the guidelines established by the Shipping Act of 1984 (updated in 2005).

Once established, there can be many benefits to having an NVOCC. Not only do they have the advantage of writing their own tariffs, but they can also go after a completely difference type of niche client as well. By chartering the slots from the carriers, they can act as a carrier without needing to charge as much and they can promote to companies that cannot afford to ship with the larger carriers. The small companies that may not have enough regular shipments to get preferential freight shipping rates from the large shipping lines are looking to save money. An NVOCC will consolidate their cargo with that of another international shipping company and both will benefit from not having to pay the extremely high less than container load (LCL) rates that a carrier would charge. Consolidation is a main point of being an NVOCC and since they take on liability for goods that are lost or stolen in transport, the customer can benefit from their lower rates will still having the security of a direct connection should something go wrong. This is also an advantage that sets them apart from forwarders and consolidators.

Moving from being a freight forwarder to being an NVOCC can be an easy move and can have some true advantages. It can also limit a company in that it will be liable for more issues much alike a carrier.