Freight forwarding contract

What it means

A freight forwarding contract is an agreement under which a forwarder undertakes to arrange, in its own name and on the client's account, the carriage of a consignment from one place to another, together with related tasks where required. The client undertakes to pay a commission. The contract is governed by the Commercial Code.

The key point is that the forwarder need not carry the goods itself. It concludes a contract of carriage with a carrier in its own name, organises loading, transhipment and unloading, and provides related services such as customs clearance, cargo insurance, storage or document preparation. A forwarder may also perform the carriage itself, in which case it has the status of a carrier.

The forwarder is liable for damage to a consignment it has taken over and for choosing the carrier properly. If it chose the carrier with professional care, it is generally liable for damage caused by the carrier only if the parties agreed so or if it carried the goods itself. To secure its claims, the forwarder has a right of retention over the consignment.

How it works in practice

Companies use a forwarder mainly for international transport, multimodal carriage or imports from third countries, where several carriers and authorities must be coordinated. The forwarder knows the routes, prices and documents, such as the CMR consignment note or customs declarations, so the company can focus on trade. The scope of services is best defined precisely in the contract.

When ordering transport, it is important to establish who bears costs and risk under the Incoterms agreed with the trading partner. That determines whether the seller or buyer books the transport and who pays for insurance. The forwarder should receive clear instructions consistent with the sales contract.

For imports from outside the EU the forwarder often acts as customs representative. The company should know whether this is direct or indirect representation, since that determines who is liable for the customs debt and import VAT. The forwarder's documents, above all the release decision, support the deduction of import VAT.

What to watch out for

The most common mistake is assuming the forwarder automatically insures the consignment for its full value. Carriers' liability is capped at limits that often do not cover the value of the goods. If a company wants full protection, it must order insurance explicitly and know who is insured and on what terms.

Watch the forwarders' standard terms, which often limit liability, shorten claim deadlines and set out the right of retention. Read them before placing a larger order. Damage to a consignment must be claimed without delay and documented on receipt, otherwise the claim is hard to prove.