No law says you must hire a customs broker to help you clear imports into the US. But a smart importer, whether large or small, usually engages with an expert for customs brokerage services.
Following is a primer on customs brokerage and how a licensed broker can help you clear shipments quickly through Customs, keep you compliant with all regulations, and help you avoid costly mistakes.
What is a customs broker?
A customs broker is a licensed professional who represents importers in their dealings with customs agencies.
As an importer, ultimately you are responsible for completing the necessary documentation, providing accurate information and paying the duties and fees that apply. But your broker does the actual work on your behalf.
And the customs broker has your back. Intimately familiar with import procedures and regulations, a licensed broker makes sure you provide all the data for your filings, double-checks that information for accuracy and meets deadlines for transmitting documentation to Customs and Border Protection (CBP).
What does a customs broker do, step by step?
When you form a relationship with a customs broker, your first step is to sign a power of attorney, authorizing the broker to act for you in future transactions with CBP. If this is your first import, the broker can also help you register with Customs as an Importer of Record (IOR).
Then, when you bring a shipment into the US, the customs broker does the following:
- Helps you choose the right HS code – For each product you import, you’ll assign a 10-digit Harmonized Tariff Schedule (HS) code, which identifies the product so Customs can determine what duties, if any, apply. Selecting an HS code is a complicated process. If you get it wrong, that could trigger an inspection, which comes with extra expense. A licensed customs broker understands how to make the right choice.
- Completes and transmits the Import Security Filing (ISF) – This electronic document provides information about the shipment, including the first six digits of the HS code. ISF filings let customs agents at each port know what products to expect, where they’re coming from and when they’re scheduled to arrive. The ISF must be filed at least 24 hours before the shipment leaves the port of origin. Miss that deadline and you could incur a $5,000 fine.
- Obtains an ISF bond – The broker purchases this bond from a surety company to guarantee that Customs will receive the ISF filing. The document will contain the required data about the shipment.
- Obtains a customs clearance bond – Also purchased from a surety company, this bond guarantees that Customs will receive all required duties and fees.
- Transmits the customs clearance documentation – This is usually done about a week before the vessel arrives at the destination port. This documentation includes much of the same information as the ISF but in more detail, including the complete 10-digit ISF code(s) and all the commercial invoice details. When you import product that’s regulated by a federal agency, such as the Food and Drug Administration (FDA), US Department of Agriculture (USDA) or Environmental Protection Agency (EPA), this filing also includes any data such agencies require.
- Interfaces with government agencies and customs authorities – As a part of a customs brokerage services, brokers act as intermediaries between importers and customs agencies. They assume the time-consuming task of coordinating with Customs and other government agencies and supply chain partners to resolve issues, provide documentation, and ensure trade compliance.
- Arranges for necessary payments – These include standard customs clearance costs – the Merchandise Processing Fee (MPF), and the Harbor Maintenance Fee (HMF) for entries by ocean – plus any duties you owe and any agency fees. Depending on the arrangements you’ve made, the customs broker might pay this money on your behalf and then include that sum in the invoice it sends you, or it might initiate an Automated Clearing House (ACH) transaction to transmit the money directly from your bank account to CBP.
- Maintains records and documents – These records (things like invoices, bills of lading, and customs declarations) need to be accurate and organized to quickly respond to questions from Customs.
Can I do my own Customers Brokerage Services?
Yes. Any company, as long as it has a licensed Customs Broker on staff, can assume the duties just described with an in-house team. Large companies are likely to have their own trade compliance teams. But in smaller businesses, trade compliance is often an added responsibility for the logistics director, the CFO, or even the owner – all of whom have full plates already.
As we point out in our Guide to International Shipping for Small Business, the simpler answer may be to source customs brokerage services from an experienced customs broker that you trust.
Handling the Customs aspect of importing and exporting goes well beyond the tactical execution issues we’ve covered. Laws, regulations and Customs requirements are changing constantly. Customs brokers must constantly update their knowledge to stay up to speed on trade agreements, customs procedures and tariff rates. It’s tough to commit to this level of ongoing education in a part-time role.
And remember, your company is legally responsible for all customs declarations. Since incorrect declarations can lead to fines and even sanctions, it’s wise to have declarations verified by a licensed customs broker who is 100% focused on the task.
Perhaps the biggest benefit of outsourcing customs brokerage services is that it lets you focus your time and energy on your core business. By delegating customs clearance tasks to an expert broker, you free up your time for other aspects of your import/export operations, like building stronger relationships with suppliers and customers.
What do customs brokerage services cost?
The fee a customs broker charges varies with the size and complexity of the work it performs. For the simplest entry and ISF filing – say, one that includes up to three HS codes or three commercial invoices with one HS code – you’ll pay about $175. If the broker needs to file data for one or more regulatory agencies, that could add $30 or $40 per agency to the bill.
In exchange, you get a professional service that processes a Customs entry in minutes, rather than the hours or even days it might take an inexperienced importer. The broker submits those filings electronically, helping to ensure that Customs will get them on time. Because it knows the process well, a customs broker reduces the risk of errors that could otherwise delay your shipment and increase your costs.
You’ll also have a much easier time securing bonds when you work with a broker. Surety companies prefer to work with customs brokers or freight forwarders. Unless you, as an importer, can offer a great deal of ongoing business, most sureties will refuse to work with you directly.
Customs brokers may charge for services in various ways:
- Flat Fee: Some charge a flat fee for each shipment, regardless of its value or complexity.
- Per-Entry Fee: This fee is charged for each customs entry or declaration processed.
- Percentage of Transaction Value: Some customs brokers charge a percentage of the total value of the goods being imported or exported.
- Hourly Rate: In some cases, customs brokers may charge an hourly rate for their services, especially if the work involves more complex tasks.
- Additional Charges: There may be additional charges for specific services, such as handling special types of shipments, dealing with certain commodities, or providing expedited processing.
How to choose a customs broker
Every company that offers customs brokerage services must have at least one person on staff who holds a customs broker license. Other employees can perform data entry and similar services for clients, but the licensed broker must oversee their work.
If you’re evaluating partners for customs brokerage services, look for people/firms with the following characteristics:
- Experience – through research, it’s possible to gain the knowledge needed to provide customs brokerage services, but there’s no substitute for years of experience working directly with Customs to handle a wide variety of commodities. When it comes to trade compliance, “street smart” beats “book smart” every day.
- Attention to detail – customs brokers must meticulously review and complete various documents that require details on volumes, weights, costs, and codes. Inaccuracies will slow your freight down, leading to unhappy customers and possibly even fines.
- Organizational and time management skills – customs brokers manage many shipments and tasks at once, often against tight deadlines. Look for partners with in-place systems and process disciplines to manage high-volume import/export operations. Systems proficiency should include expert-level knowledge of the Automated Commercial Environment (ACE) system used by the US Customs and Border Protection.
- Good communication and interpersonal skills – If these skills seem lacking, you might want to steer clear. Customs brokers must coordinate constantly with clients, customs authorities, forwarders, and government agencies to communicate important facts and to resolve issues. Without strong communication skills, things will go wrong.
- Scrupulous with money – a broker that doesn’t pay your duties as expected or on time could get you in trouble with Customs agencies, the surety company, or both.
Word of mouth is a good way to locate a reliable customs broker. Your freight forwarder or NVOCC might also provide a referral. In fact, if your forwarder has its own close relationship with a reliable customs clearance agent, as I.C.E. Transport does, you won’t need to search for a broker or worry about the day-to-day details of the import process. The forwarder and its trusted partner will manage the whole process seamlessly.
The Vital Role of Customs Broker Services
The pivotal role of a customs broker in facilitating international trade cannot be overstated. By meticulously navigating the labyrinth of customs regulations, overseeing clearance processes, and offering invaluable guidance to businesses, they serve as the linchpin for seamless global trade.
Success in this role demands a unique blend of expertise encompassing customs regulations, keen attention to detail, effective communication, analytical prowess, and adept problem-solving skills. Further, a background steeped in international trade, logistics, or related disciplines, coupled with proficiency in the right software tools, confers a distinct advantage.
Looking for advice on how to arrange for efficient, worry-free customs clearance? Contact I.C.E. Transport to learn more.