The Benefits of Using A Customs Broker
by Neil Johnson
The task of physically transporting goods across international borders is relatively straightforward in most cases. Ensuring the correct customs documentation is in place can be much more complex.
Aside from reducing possible delays at customs border points, having the necessary customs clearance formalities covered is a strict legal requirement, and there are often very different rules on either side of the border, or either end of the international transit route for importers and exporters to be aware of.
A capable customs service provider, or customs broker as they are often called, provides assistance in the movement of goods across international borders by ensuring that customs clearance procedures are followed diligently and efficiently. The right customs service provider will be an asset to the business through their familiarity with the customs laws of the particular country from which you are importing, or to which you are exporting.
Before we delve into the wide range of benefits to using a customs broker for your business, let’s first look in detail at the kind of customs brokerage services that are available.
Firstly, all customs brokers will provide the basic customs declaration process whereby the correct harmonized system code, or HS code, is selected along with the mode of transport, import or export location, and customs duty and GST or VAT will be calculated, and the customs declaration procedure is followed for that particular territory or jurisdiction.
Some customs brokers specialise in import declarations, some in export declarations, while others may focus on special declarations such as those for bonded warehouses or free trade zones. Many customs brokers provide customs clearance services across the range of customs activity types.
Depending on the jurisdiction, customs clearance may be performed online through a cloud-based service, or using special software which must be installed for transmission to the national customs agency or, on an increasingly rare basis, by paper forms submitted manually.
Beyond the basic customs declaration process, the customs service provider may also assist with certificates of origin, usage of preferential taxation schemes for imports, declaration of dual-use goods or strategic goods, assistance with import or export licences, or provide help with accessing the benefits of free trade agreements.
On top of the day to day customs clearance work that customs brokers perform, they may also offer consulting services to clients in the area of product classification, import licence management or even route optimisation for customs efficiency.
Now let’s look at the benefits of using the services of a customs broker, and we’ll see why, despite the proliferation of free trade agreements, the role of the customs broker has never been more important in completing customs clearance processes in cross-border movement of goods.
⦁ It’s Cheaper!
Let’s start with a really easy one. Using a specialist customs service provider will almost always be cheaper than buying such services in a bundle through a freight forwarder or shipping broker.
There will be one of two reasons for this. The first is that freight forwarders charge for the convenience of managing this aspect on behalf of customers but they actually outsource the activity to specialised customs brokers. Like any business which buys in services for resale, freight forwarders, logistics companies or 3PLs have to generate a margin on all of their activities and to do this they put a mark-up on services provided by the customs clearance service provider they are using. Sometimes these mark-ups can be 400-500%!
The other reason may be that the freight forwarder or shipping broker manages the process in house with their own staff but do not have sufficient volume of customs clearance activity to generate the same economies of scale which a specialised customs broker is able to.
As a specialised customs service provider has a much narrower focus but deals with far higher volumes of customs declarations, and perhaps has more efficient processes or more advanced customs declaration technology, the customs provider will be more competitive than other service providers such as freight forwarders or shipping brokers.
⦁ It’s More Secure
When you work with a customs broker or customs service provider your business is secure from the increasing number of threats to your trade data. The reason for this is that with a properly configured data connection, critical information on your trading relationships and the prices at which you buy and sell will move securely between you and your customs service provider’s system in structured data format and with full encryption, and then between their system and the national customs agency.
Where there is no such secure transmission, such as where hard copy paper documents are in use or where unencrypted pdf documents are sent, data security audit is almost impossible and your trade data could be severely compromised.
⦁ It’s Faster
With the globalisation of trade there is now more external cross-border trade in goods than ever before, and this requires constant policing by national customs during the declaration process and at the physical border.
Customs brokers are usually connected directly to the national customs service within a particular country, and are therefore best placed to submit documents on time and receive approval back in the shortest possible time thereby allowing goods to move as quickly as possible. If national customs raises any issues or, worst case scenario, rejects the customs declaration, then the customs broker is able to respond immediately and rectify the situation.
This is particularly important in the case of sensitive goods which require temperature control or other special handling, such as pharmaceuticals, chemicals, cosmetics, foodstuffs and biological products. Customs delays could result in goods being rendered unfit for sale, and result of loss of market share.
⦁ It Makes Your Business More Competitive
As countries’ economic priorities change, so do their customs and trade compliance regimes, and particularly the tariffs they apply to imported goods. An experienced and capable customs broker provides timely and comprehensive advice on these changes as they happen, and is therefore able to advise clients accordingly.
On the other hand, many importers and exporters of goods are either not aware or do not feel able to take advantage of customs concessions which are available to them, such as Free Trade Agreements which would allow reduced duty on imports of certain goods from certain countries of origin, or streamlined customs treatments which might allow for, for example, GST or VAT suspension, or remove the need for physical checks.
A qualified, experienced and knowledgeable customs service provider keeps their client abreast of any such opportunities, and will almost certainly be able to administer such schemes on behalf of clients.
⦁ You Can Be Assured Of Compliance
Failure to complete customs paperwork accurately and on a timely basis, or failure to secure import licences for the goods to be imported or exported will lead to delays in cargo being released, and may also lead to imposition of fines and other penalties.
Many national customs agencies rank importers and exporters on their track record of compliance. Where a particular importer or exporter regularly fails to comply with customs rules, they run the risk of more frequent customs audits, goods being more likely to be inspected, or import or export licences being denied.
Customs brokers not only keep abreast of current customs laws and how they are applied but will also be updated by their national customs agency and other government departments on possible changes in customs regulations which might be coming down the line, thus allowing them to give the most up to date customs information to their clients.
Custom clearance service providers are in the know about the changes in the rules and regulations worldwide before they happen. They obtain this knowledge through attendance at events, conventions, specialised training courses and networking with other customs brokers around the world, and pass on this knowledge to clients. They also have close contacts and connections with government agencies to gather knowledge around likely changes.
⦁ Speaking The Language Of Customs
As supply chains become more and more complicated and include one or more border crossings, customs brokers have the ability to ensure that the necessary customs clearance processes are embedded in the overall supply chain process, and that information is communicated to external stakeholders accurate and on a timely basis.
Customs service providers have the knowledge and expertise to communicate effectively with the international trade specialists within the importers’ and exporters’ organisations in order to ensure that cargo is cleared and delivered in a timely manner and in full compliance with customs regulations.
An experienced customs broker or customs service provider will check trade documentation thoroughly before declaration takes place and ensure that any errors are spotted and corrected.
By working with TNETS, customers can be assured that their customs declaration processes are appropriate for the goods being transported and that the declaration process is carried out thoroughly, speedily and cost effectively.