Customs Broker Essay ⋆ Business Essay Examples ⋆ EssayEmpire

A customs broker is a company or individual licensed by the host country to act on behalf of importers and exporters. The broker handles the formal paperwork to assure legal compliance and speed in the importing process. While brokers are involved in expediting imports, they are often hired by the exporter to assure that all work is done in compliance with local law and to speedily meet the conditions needed to receive payment for their products. The broker prepares import documents and calculates client payments for duties, tariffs, excise taxes, and any other special fees. The broker performs this work at the local customhouse—the government specified location where customs duties and import transactions are managed. In the United States, customs brokers are a licensed profession.

When goods reach a foreign destination, the customhouse performs a series of steps before allowing them to enter the country. These steps typically include checking to see if entry documents are properly completed, verifying any necessary markings related to the country of origin, making sure the goods are not on a prohibited item list, checking the goods against the tariff schedule (a price list of tariffs organized according the Harmonized System), checking the inventory of goods, and determining the value of goods in terms of customs duties and tariffs. When all of these steps are completed, the government customs agent clears the goods for entry into the country and posts the results to a public space (typically an electronic space). Because of the sheer volume of goods that pass through a port of entry, shipments without an expediter move more slowly. The slower the goods move through the entry process, the more cost is accrued for warehousing and storage.

The customs broker expedites the customs clearing process, assisting the customhouse to clear goods for entry. The broker, for example, reviews the tariff schedule and prepares a customs invoice for the client. The customhouse need only verify that the broker selected properly. In some ports, the broker certifies that the client has met the obligations for country of origin markings. If markings are incorrect, the customs broker will act as an intermediary, securing the correct documentation and markings and affixing them to the goods while in customs. To accelerate the customs clearing process, clients often provide their customs broker with power of attorney, a legal document that empowers the broker to act on behalf of the client in all customs clearing issues. The customs broker is a valuable source of knowledge for the exporter, staying current on all issues related to import documentation and duty and tariff changes.

Certain customs clearing tasks require notification and/or approval by government agencies other than the customhouse. For example, aquaculture importers into the United States need approval of the Fish and Wildlife Service of the U.S. Department of Agriculture to ensure that imported fish are not on the invasive species list. Because of these unique requirements, many customs brokers specialize in particular industries. Because of the relationship of customs clearing to overall delivery efficiency, many freight forwarders employ their own customs brokers.

Importing firms often bring in goods that they transform for export. In most cases, the local government allows a refunding of the duties when the goods leave the country after transformation. We call the refunding of duties a “duty drawback.” Customs brokers who maintain contractual relations with clients often manage their duty drawback programs to ensure the client receives full refunds for duties paid.

In the earliest days of customs clearing, brokers and customs officials would post their findings on bulletin boards in the local customhouse. Brokers would read the bulletin board and telex their findings to the client. The current state of the art is to have sophisticated electronic data interchange systems (EDI). With each change in status, the broker instantaneously transfers information to the client’s account. Brokers also provide document imaging services, scanning processed documents for immediate retrieval by their clients. Similarly, modern brokerage services interlink with freight forwarders to provide documentation that the exporter has met transportation security standards. Often, this includes the sophisticated integration of global position (GPS) data with accounting information.

To become a licensed customs broker in the United States, candidates must meet experience requirements and pass a proctored standardized examination. In developed countries, the preponderance of all import transactions are managed by customs brokers.

Bibliography:

Alexis and M. Pavlos, “On the Development of a Web-Based System for Transportation Services,” Information Sciences (2006);
M. J. Carr and M. R. Crum, “The U.S. Customs Modernization and Informed Compliance Act: Implications for the Logistics Pipeline,” International Journal of Logistics Management (1995);
A. Haughton, “Information Technology Projects by International Logistics Services Providers: The Case of Canada’s Small Customs Brokers,” Canadian Journal of Administrative Sciences (March 2006);
Ianchovichina, “Are Duty Drawbacks on Exports Worth the Hassle?” Canadian Journal of Economics (2007);
International Business Publications, US Customs Broker Handbook Regulations, Procedures, Opportunities (International Business Publications, 2008);
Scott W. Taylor, Introduction to Customs Brokerage (Boskage Commerce Publications, 2005).

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