Customs Brokers: A Primer on How to Protect Your Business

Aerial view looking down at a waterfront shipping port with stacks of colorful shipping containers, cranes, and a barge.

As consumer access to the global marketplace increases, a customs broker can help in more ways than you might imagine. A customs broker—distinct from the role of a freight forwarder—can help smooth out and network with new partners in the supply chain, as well as protect a business from delays and costly errors in importing. This primer reviews the roles of customs brokers and how they can protect your business.

A Customs Broker’s Main Role: Clearing Shipments

Customs brokers are instrumental for businesses importing goods via air, land, and sea. Put simply, they are the intermediary between the government customs department and the goods importer. Customs brokers clear shipments of imported goods manually or through government-sponsored automated customs clearance programs. The agency U.S. customs brokers work with most commonly is U.S. Customs and Border Protection, though they may also work with other regulatory agencies like the USDA, the Department of the Treasury, and the EPA.

Part of the clearance function involves mitigating potential issues in entry procedures. Customs brokers can advise on entry classification for goods using the U.S. Harmonized Tariff Classification System. They can also advise on admissibility requirements for various products, and determine where goods fall within international trade agreements and foreign trade zones. They stay abreast of current tariffs and product valuations, in addition to duty assessments, refunds and drawbacks. As part of the clearance role, customs brokers advise on anti-dumping and countervailing duties, and keep paperwork current, ensuring shipments have the proper import licenses.

While it’s not required that importers use customs brokers, the brokers they use must be licensed by U.S. Customs and Border Protection. This ensures that the broker has the necessary knowledge and has passed the qualifying test administered by the government.

Beyond Clearance: Other Roles for Customs Brokers

Getting shipments through the customs process can be a complicated task in itself—but some customs brokers offer additional services even beyond that. Such services can include reselling freight rates to clients, after buying them in bulk. This can provide a savings to importers. Some customs brokers also offer cargo insurance packages for an added level of protection.

Once goods are cleared from customs, they’re typically sent on their way through other channels and providers. That might be through a freight forwarder, a service that some customs brokers add to their menu. Importers may also be offered warehouse and distribution services from the customs broker, in addition to inspection and storage of goods once they’ve arrived in the country.

Given the level of expertise provided by customs brokers, importers can often rely on them for individualized advice to help a business succeed. Consulting may be built into the brokerage agreement, or may be a separate line item. Customs brokers often specialize in an import area or a transportation mode, making them key partners with deep knowledge to provide additional value to the importer.

Smoothing Out the Supply Chain

A key benefit of using a customs broker is that importers have one point of contact, rather than potentially dealing with multiple agencies. Plus, that contact is focused on the business’s best interests. Without a broker, the cargo is just one shipment of many. And the importer needs a designated person to stay on top of the process, with the necessary knowledge to move it through the system.

Customs brokers can help smooth out the supply chain by solidifying relationships with the importer’s freight forwarders, if separate freight forwarders are used. Some customs brokers play dual roles, which eliminates another person or company from the flow of goods. By keeping the information in one place, there’s less chance of error or delay due to a handover or miscommunication.

What then is the difference between a freight forwarder and a customs broker? While the customs broker specializes in getting goods cleared at customs, the freight forwarder focuses on logistics and transportation. Just as a travel agent handles the paperwork and booking for the transportation portion of a journey, the freight forwarder does the same for cargo. Utilizing a customs broker who can fulfill both roles can maximize efficiencies along the route.

Both customs brokers and freight forwarders can help arrange for customs brokerage services in other countries. In fact, given the contacts these experts have, they may help make valuable connections with new partners in the supply chain, expanding the importer’s network, which can in turn expand the business market. This might be done through a formal consulting agreement, or an informal connection or advice.

Preventing Errors and Decreasing Delays

The complexity of customs means changes-- in regulations and tariffs, valuations or other assessments—can happen frequently. It’s difficult for businesses to stay on top of these changes if they’re not immersed in the field full-time.

Misclassifying a product can be costly. Delay means materials needed for production can be detained, and goods destined for the shelf can sit in a box, losing value by the day. But customs brokers have relationships with government agencies and other gatekeepers to eliminate or shorten these delays. In that way, the fees that customs brokers charge can pay off in spades.

A good broker increases the efficiency and predictability of the shipments’ release. The added usefulness of forging relationships with other players in the importer’s supply chain and providing expert advice makes a customs broker a valued member of an importer’s team of advisors.

The views expressed by the author are not necessarily those of Fifth Third Bank and are solely the opinions of the author. This article is for informational purposes only. It does not constitute the rendering of legal, accounting, or other professional services by Fifth Third Bank or any of their subsidiaries or affiliates, and are provided without any warranty whatsoever.