Whether you’re new to the international shipping business or have been an experienced player, understanding the industry’s nuances and regulations is essential to ensure your shipment reaches its destination successfully.
There are two crucial entities you have to deal with in international trade– freight forwarder and customs broker. A freight forwarder handles the logistics and shipment aspects, while a customs broker deals with customs-related matters like customs regulations. You can consult these experts to make the shipping process more seamless.
While both the entities are important to an exporter/importer, their roles are quite different, and it’s vital to understand these differences to eliminate any roadblocks in your workflow.
What is a Customs Broker?
A customs broker is an individual or a company that acts as a bridge between you (the trader) and the government’s customs department. They assist other exporters and importers in clearing the customs regulations to facilitate customs clear of their goods for import and export.
Such a broker must be licensed and regulated by the United States Customs and Border Protection (CBP). They can be a private, association, partnership, or a licensed corporation but must conduct their business as per the CBP rules.
What does a Customs Broker do?
A customs broker will help you submit the crucial information required to complete the customs clearance of goods. These professionals are experts in submitting the mandatory paperwork and payments to the customs , so if you’re unaware of the regulations or find matters to be complex, reaching out to a customs broker will be the perfect solution.
Here’s a gist of a customs broker’s responsibilities:-
- To deal with the government and port authority officials on your behalf.
- To look into customs valuation, customs clearance, and tackling entry procedures.
- To provide tariff classifications and consultations for international trade.
- To handle freight management and other such requirements.
Besides all this, a customs broker is also an expert in calculating the duty rates and associated taxes to transport goods. Their support is excellent for all businesses, especially those just dipping their toes in the industry.
How a Customs Broker can Help Traders
A customs broker wears many hats besides handling complicated regulations and paperwork. Here are the duties of a customs broker.
1) Represents your business:-
When you hire a customs broker for assistance, they will immediately become the representatives of your business. In this sense, they will handle all the necessary regulations and activities to ensure a particular trade transaction complies with the government rules.
Moreover, they understand your business objectives and inform you about the latest rules/regulations you need to understand and comply with.
2) Making payments:-
Customs brokers pay duties on your behalf to the government and send you the bill later. As you have to pay these duties within 10 days of entry of the goods, the broker might also pay it directly from your clearinghouse account if you have one.
The customs broker will request a refund if you have overpaid the duties. They also charge you for a status report and an annual user fee.
3) Handling documentation:-
Customs brokers manage the documentation and paperwork required to complete your import/export. They store the transaction documents in an organized manner, five years from the entry date. Besides this, they maintain copies of the active powers of attorney, revoked powers of attorney, and associated letters. In addition, they’ll handle all the confidential documentation required for customs inspection.
4) Supervision:-
Customs brokers oversee all the operations related to the shipment so that you can consult them on any issue you might be facing on shipping clearance. Also, they’ll monitor the goods during the customs process to see if all regulations are being adhered to. Some customs brokers will even help you manage your staff associated with the trade.
What is a Freight Forwarder?
A freight forwarder is a professional or a company that takes care of the transportation logistics of a cargo. They are a vital component of the supply chain and handle everything related to the physical transportation of goods.
These individuals help organize shipments effectively so they quickly reach their destinations. Needless to say, they’re well aware of all the ins and outs and the compliance procedures associated with all modes of transportation.
Freight forwarders act as intermediaries between transporters and shippers. While they aren’t responsible for shipping your goods to another place, they know all about the transportation issues that may lead to further complications. Consulting these individuals will help you avoid such problems.
What does a Freight Forwarder do?
You can consider freight forwarders as the shipment travel agents. These professionals have helped customers prevent delays in shipping goods on many occasions.
Besides being up to date on the different laws governing shipping and transportation, freight forwarders are reliable for helping shippers or businesses find a quality carrier for their goods. Plus, they can negotiate the lowest price for cargo transportation.
If you don’t have sufficient human resources to look into shipping, freight forwarders are the go-to option. Their most important responsibilities include the following:-
- To create bulk shipments by consolidating the smaller ones.
- To assemble and disassemble shipments as per the requirements.
- To handle the documentation work and compliances for exporting the cargo on your behalf.
- To supervise the cargo transportation and arrange its booking.
They will also handle the logistics needed to transport goods internationally. By availing of their services, you can get the best cost-effective deals on your cargo shipment and have them take care of all the burdens associated with the procedures.
How a Freight Forwarder Can Help Traders
Freight forwarders help track your goods while it travels from one destination to another. They also assist you in warehousing and preparing the perfect strategy for cargo transportation.
Listed below are the roles of a freight forwarder:-
1) Tackling logistics:-
The primary responsibility of any freight forwarder is to maintain the supply chain activities and associated logistics on your behalf. These professionals or companies are experts in managing port charges, freight expenses, insurance costs, and charges for specific documents. They coordinate all the supply chain activities and provide consultancy for better transportation. In short, they’ll handle all the shipping-related formalities.
2) Transportation arrangement:-
Any custom broker /freight forwarder will help you arrange the best means of transportation as per your requirements. They’ll help you select the shipping lines, airlines, rail, and road transportation systems to dispatch your goods.
Some freight forwarding organizations assist according to your requirements and company size. Moreover, they’ll talk to the carrier and arrange things on your behalf so you can stay worry-free. The company will use the best transportation system according to the quantity of goods and locations.
3) Handling paperwork:-
Along with logistics, freight forwarders also handle the variety of documentation required during cargo transportation. They take care of the port/customs/booking documents, bills of lading, etc.
Moreover, freight forwarders arrange insurance paperwork for you along with the letters of credit and other documents. They will provide you with constant guidance at every stage of the shipping.
Differences between Freight Forwarders and Customs Brokers
Freight forwarders and customs brokers are crucial for any successful import or export process. Even if their roles seem similar, there are some differences in terms of the following:-
1. Responsibilities:-
Freight forwarders work as the bridge between the transport carrier and the export business looking to ship goods. But, customs brokers work as intermediaries between the company and the customs department.
The responsibilities of a customs broker are limited to handling customs formalities, whereas a freight forwarder can manage transportation requirements and provide brokerage services.
2. Nature of business:-
If you’re new to international shipping, a freight forwarder will arrange the goods, handle most of the transportation logistics for you, and ensure everything is within the budget. They also provide support for warehousing and goods storage.
On the other hand, the services of a customs broker will be more suitable for you if you already have a solid logistics strategy and are well-versed in international customs. In short, a well-experienced professional business might opt for such services.
3. Cost efficiency:-
Freight forwarders will help you develop the perfect logistics strategy according to your budget. They will get a cost-effective deal by utilizing their vast network of carriers.
Customs brokers will also help you with your finances by preventing customs duty complications and legal issues.
Conclusion
The selection of a freight forwarder or a customs broker will depend upon your business requirements. You must carefully look into your logistics strategy to understand the services you need. You must consult with a freight forwarder or customs broker in detail to map out your plans. Remember that customs brokers focus on the import side of any export transaction, and freight forwarders work with exporters and importers.