The 6 Stages of Freight Forwarding (+ Insurance Claim Examples

The freight forwarding process is complex and challenging, which is why your supply chain management needs to be rock solid.

However, accidents can happen at any time while you’re hauling goods across borders. Understanding each stage of the freight forwarding process is the first step to avoiding complications that could interrupt your business’s operations.

In this article, we’ll discuss these stages in detail, outline the risks involved in each one, and explain how freight forwarding insurance can help prevent financial losses.

Stage 1: Export Haulage

This freight forwarding stage refers to the transfer of goods from the shipper’s premises to the freight forwarder’s warehouse. The export haulage stage involves packing, booking, and preparing cargo to be shipped both domestically and internationally.

During the export haulage stage, the shipper is vulnerable to theft and other liabilities such as damage or physical loss. If issues arise, they can be liable to pay thousands in settlement and reimbursement fees to recoup the value of the items lost.

However, once these goods are delivered to the warehouse owned by the freight forwarding company, they become liable for them.

Claims Example

Freight forwarders must have at least some carrier liability insurance to legally operate in the country. This policy covers basic damage to goods and compensation for delays, as well as instances of theft during the transfer of goods.

For example, imagine the warehouse where you’ve stored the products you’re about to ship catches on fire and burns to the ground. Nothing is salvageable. Purchasing a cargo insurance policy beforehand could save you by covering the cost of the destroyed goods.

Stage 2: Items Checkpoint

At this stage of the process, the freight forwarders receiving the shipment from the shipper inspect the products to ensure they’ve arrived in good condition. They also check to be sure the items match the booking documents.

Just like in the previous stage, items being delivered are at risk of being stolen, damaged, or lost while in transit. Freight forwarding companies that ship dangerous goods are especially at risk given the potential consequences of an accident.

During this second stage, the freight forwarders also ensure that the final destination of the items will accept the shipment. This matters because some items have restrictions, especially if the destination is overseas.

Potentially restricted items can include:

• Flammable liquids such as gasoline, lighter fluid, and perfume
• Drugs, especially those required to be in climate-controlled areas
• Alcohol, as laws vary per country and province/territory
• Dangerous items such as knives and other sharp objects
• Perishable goods and fresh food

Claims Example

Here’s a scenario: imagine a shipper transporting temperature-sensitive items from their place of origin to your warehouse reports that the perishable goods inside the vehicle have spoiled, rendering the shipment unusable.

Transportation insurance can help protect your business against the loss of goods while they’re being transported from one location to another. It includes coverage for the value of the goods that have spoiled or expired during transit.

Stage 3: Export Customs Clearance

Before the shipment can enter another country, the freight forwarding company must bring the items to customs brokers in the product’s country of origin to be approved for departure.

This stage of the freight forwarding process ensures that the goods meet the legal requirements needed for entry into their destination. They may get specific licenses as needed to ensure there are no issues when importing the goods.

Claims Example

The main risk here is shipment delays due to invalid or incomplete documentation, as well as problems with clearance from the country of origin.

When this happens, expect the cost of delays to reach hundreds (if not thousands) of dollars, which could be detrimental to your business’s financial health. Having an insurance policy can help cover the costs of these delays!

Stage 4: Import Customs Clearance

At this point in the freight forwarding process, the goods have arrived at the country of destination. Local authorities will then check whether the import customs documents match the order and if the goods have been damaged. Customs agents charge a fee, which is initially covered by freight forwarders and later billed to customers.

Claims Example

Similar to export customs clearance, losing important documents, shipping restricted or dangerous items without proper documentation, and damage or physical loss of items can cause delays and hefty fines.

You can prepare for these risks by having an insurance policy in place. Depending on the policy you obtain, the insurance you carry could also cover damages to goods during transportation due to improper packaging by the initial shipper.

Stage 5: Destination Arrival and Handling

Freight forwarders then receive and manage all of the relevant documentation upon arrival of the cargo. From there, they (or a freight broker they’ve enlisted) will prepare the newly arrived product for shipping to its final destination.

Claims Example

Truck cargo theft and damage during transit are the main risks associated with this stage of the process. With the shipment now having cleared customs in the new country, there aren’t any regulatory bodies overseeing its safe travel.

Now, with that in mind, imagine the truck transporting these goods getting robbed. The good news is cargo insurance can help protect against financial losses incurred for accidents, delays, and failures by carriers to deliver that can disrupt the supply chain.

Stage 6: Import Haulage

The sixth and final stage of the freight forwarding process is when the shipment finally arrives at its destination.

The responsibility to ensure the shipment and its components arrive safely and intact falls on the freight forwarder. However, a local transporter can handle this process as well—it will depend on the agreement stipulated in your contract.

Claims Example

The truck transporting your goods to their final destination is struck by a speeding car, damaging most of the contents inside.

While this would be devastating and certainly create issues, insurance can once again protect you from this no-fault accident by covering the damage to the company’s vehicle, any medical bills, and reimbursing the costs of the damaged goods.

Streamline the Freight Forwarding Process With KASE Insurance

As you’ve learned, the freight forwarding process is complicated. With so many people involved across borders, the risk potential is too great not to secure your operations with comprehensive insurance policies—and KASE Insurance can help with that.

We are a top commercial insurance brokerage based in Ontario that specializes in providing clients with personalized insurance solutions. By providing freight forwarders with protection against accidents and unforeseen circumstances, our policies protect them across all stages of the process. You deserve peace of mind.

If you’re looking for freight forwarder insurance, contact us today!