Choosing and integrating the right customs broker – a key ingredient for global traders

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Does your company export to different countries and is your team struggling to keep up with all local customs regulations?

Are you trading with countries whose customs laws make it almost impossible to manage without local customs brokers? Or is the volume of goods you import or export too small to justify your own in-house customs department? Then you have two options for managing the challenge: you can negotiate incoterms with your trade partners that oblige them to handle customs clearances on their end. Or you can hire a customs broker to manage customs formalities for you.

The first alternative isn’t always feasible, as customers often insist on receiving goods that have already cleared customs.  The second option, outsourcing to a customs broker, means you don’t need to have specific knowledge of customs processes when trading with a foreign business partner, and you save yourself a lot of administrative work. But customs management can never be a topic that’s “out of sight, out of mind”.

Not least because it’s not the customs broker, but the company submitting the declaration who is responsible for ensuring its accuracy. And in many countries, providing inaccurate details on customs declarations is a crime. So nobody who is responsible for customs management can afford not to care about how their customs broker operates.

But what are the key aspects for selecting a customs broker? There are a range of questions to be considered:

Firstly, does the broker have the expertise that’s relevant for your company and your industry? Do they have references from industry associations or foreign chambers of commerce? Do they use their own, qualified staff or do they work with a network of subcontractors? Do they have the necessary contacts with customs authorities?

Secondly, how will you integrate the customs broker into your in-house processes? How will you transmit the information and the documents required for the customs declaration? How will you receive responses, and how will the customs broker provide you with data and documents for your records?

And thirdly, how do you plan to you assess the customs broker’s performance, How fast they are and if customs declarations match your documentation and instructions? How often will you get complaints from the customs office or face penalties because of incorrect declarations?

It’s also important to remember that customs clearance is not just about getting goods through customs quickly, it’s also about optimising customs duties to make your business more competitive in your global markets. Another factor determining if your relationship with a customs broker will work is how efficiently your day-to-day interactions are.

While most companies with in-house customs teams have a direct link to the customs authorities’ IT systems, this is very rarely the case with customs brokers. There are almost invariably gaps in the digital information flow when communicating with brokers. The shipper typically sends an email to the customs broker with instructions for customs clearance and the necessary documents attached. The brokers’ data entry clerks then manually input this data into their own system to generate the customs declaration. This is relatively labour-intensive and error-prone.

Linking customs brokers directly to their customers’ IT systems would ensure a much more streamlined process. An automated synchronisation between customers’ instructions and brokers’ declarations would make it possible to identify and analyse any discrepancies, and also ensure to archive accurate records. Efficient customs management today truly depends on integrated IT between the customs brokers and their customers. In addition to accelerating the customs processes, it would greatly reduce importers’ and exporters’ liability risks for errors made by their service providers.

Iqubal Singh Pannu

Iqubal Singh Pannu is Senior Solutions Consultant at AEB in the UK and has been with the company since 2006. With considerable consultancy and project management experience, spanning several areas of the supply chain, Iqubal is advising companies on solutions for optimising supply chain performance and generating value through automated global trade and logistics processes.

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