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The Forwarder Awakens: Amazon receives NVOCC

Jan 15 2016

Did you feel that? A disturbance throughout the logistics community? Perhaps that was the news that Amazon China – a subsidiary of the Seattle-based e-commerce titan – has been granted a license from the U.S. Federal Maritime Commission to operate as a non-vessel operating common carrier (NVOCC) for cargo shipments between China and the United States. In short, Amazon China is now a freight forwarder.

While the license will allow the Beijing-based Amazon China subsidiary – officially named Beijing Century Joyo Courier Service Co., Ltd. – to purchase and sell block space on ocean vessels for itself and for other companies, Amazon has made other recent moves in the airfreight and trucking industries to suggest that it could use its NVOCC license to provide third-party logistics services in the air and surface markets as well.

The license, first noted by the Flexport Blog, is expected to reduce retail costs for Amazon and give the company more control over the shipping of goods from China to the U.S. "Amazon's oceanfreight services will be far more attractive to Chinese sellers than to American buyers. Chinese suppliers would love direct access to Amazon's vast American customer base," wrote Ryan Petersen, CEO Flexport, on the blog. “By using software to eliminate additional transaction costs associated with government filings, status updates, pricing, booking and more, Amazon will be able to cut their costs significantly.”

However Amazon plans to operate as a freight forwarder, it’s become clear that airfreight will be a large part of its business. Late last year, Air Cargo World’s sister publication, Cargo Facts, broke the news that Amazon was creating a logistics operation that could include overnight air operations in the U.S. domestic market, potentially including the acquisition of at least 20 freighter aircraft. Later, it was revealed that Amazon has been conducting air logistics tests in Europe and the U.S., as well as investing in road delivery networks.

Many in the industry had speculated that Amazon was making the investments in logistics networking merely to avoid future delays in shipping goods during peak season, as the e-tailer had experienced before with integrator such as FedEx and UPS. But the NVOCC license suggests that Amazon is interested in becoming a permanent player in the 3PL market.

Satish Jindel, a logistics consultant and president of SJ Consulting Group, told Reuters that the new license gives Amazon "more and more control over the supply chain of their business and it gives them the ability to squeeze [costs] even further," which can provide an edge over traditional U.S. retailers in terms of negotiating prices for goods.

By Air Cargo World | January, 15 2016 | Randy Woods
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