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Tips To Selecting A Customs Broker

If your company's declarations to Customs are incorrect, Customs will likely look to you, not the broker, to resolve these problems. It's critical your company select the right broker to ensure you are making the right determinations about the value of goods, their individual tariff classification, as well as complying with other declarations to Customs. Here are a few guidelines and insights to help you select the best customs broker.

by Edward "Corky" Jordan

So you need to select a Customs broker? Well, the first thing to understand is that the broker functions as your legal agent for declarations to Customs and other government agencies regarding imports. As such, those agencies consider their actions to be yours, and you bear responsibility. Thus, there are a number of considerations that should influence your decision.

All brokers provide the fundamental service of getting shipments released by Customs and, if necessary, other government agencies that might have jurisdiction over your goods, such as Food & Drug, Department of Transportation, Environmental Protection Agency and Fish & Wildlife. They file information declaring what the goods are, their value, the tariff classifications believed to apply, the quantities being imported, and an estimate of the applicable duties and processing fees.

This sounds straightforward. But those determinations are not necessarily that easy. For example, what is the proper value to be entered while still taking advantage of all non-dutiable charges? The Harmonized Tariff has 22 sections and 98 chapters, each with its own interpretive head notes - in addition to the general head notes to be applied throughout - all culminating in more than 23,000 individual tariff classifications, each of which is subject to different duty rates depending on whether any one of about a dozen special tariff preference programs might apply.

So what is the proper classification for each item you're bringing in? Most importers don't have the resources or expertise available themselves to provide the broker with the proper value, classification and other declarations to be made. Instead, they depend on the broker to determine those entry elements. But is the broker equipped to do this correctly? Improper declarations can bring some pretty unpleasant after effects such as additional duty bills after you've already priced and sold the products, demands for re-delivery or penalties or liquidated damages for mistaken declarations. And, as already mentioned, Customs will look to you, not the broker, for reconciliation. Therefore, it's vital to gauge how good the broker really is.

Here are Some Points for Consideration and Questions to Ask

Knowledge

How many licensed brokers do they employ? Do they handle other importers who bring in what you do so there's familiarity with your product line? How long have they been transacting business in the port(s) where you import (they need to know the local idiosyncrasies)? What classification and valuation tools do they have available to help them make the proper declarations for you? Also, look for a broker who is a member of both their local community, the National Customs Brokers association of America (NCBAA) and the Canadian Society of Customs Broker (CSCB).Valuable information and training are conducted by those organizations, and by participation in their various committees, it's often possible to help shape local and national Customs and carrier positions

Account Management

How will they organize themselves to handle your transactions? Will they be doing the entries themselves or sub-contracting to someone else? Will one or more of their licensed brokers be actively involved in your clearances? Will they be allocating sufficient staff resources to handle your volume? Will their team be available on weekends and holidays - either for regular attention or emergencies?

IT Capabilities

Are they on-line with Customs for entry filing? What is their rejection rate (Customs publishes these monthly)? Does their system support keeping classification, valuation and other government agency data electronically in a file by part or model number, or description, so entry declarations can be consistent in their content? Can they provide reports to help you manage your business? Can they accept information from you and/or your suppliers via EDI?

Service Offerings

In addition to basic entry services, does the broker offer subsidiary or value-added services such as writing your Customs bonds, placing cargo insurance so your goods are not left to the limited liability of the various carriers and/or warehouses, arranging warehousing and direct distribution, forwarding services for returned goods, and their own ocean and air transport services to meet all of your size and transport time requirements? Do they offer consultation on transport and logistics solutions - and on meeting Customs marking and other requirements? A tier-one broker has a well-rounded and comprehensive service offering.

Financial Stability

The preferred way to handle duties and fees is to pay them directly. If you do choose to ask the broker to advance them for you, you are still responsible to Customs if the broker doesn't do it - even if you can prove that you already paid the duties and fees to the broker. Also, if the broker pays collect freight charges on your behalf, the failure to have the necessary funds or to establish sufficient credit will delay delivery and, somewhat like duty, you may still be held responsible for those costs even if you can show payment to the broker. So a prudent importer will ask for a broker's most recent financial statement and some credit references. A poorly run business is a sign of disorganization and instability. Low rates and lax collection procedures, while seemingly a "plus" to some importers, are actually caution flags to be recognized.

Integrity

While integrity is usually confirmed by action, you can certainly gain some insight by asking for references from other import customers of theirs, carriers, warehouses, their Customs attorney, perhaps even a call to Customs to see if any complaints had been filed. Also, you can ask the broker if he's been audited by Customs and, if so, what were the results.

Relationships

The Customs release is just one ingredient in the transport and logistics chain. But it is an important one. Faulty declarations, and delays in payments and document submissions, can bring the movement of your goods to a screeching halt.

In today's business environment where everyone seeks to streamline the order-to-delivery process (both time-wise and cost-wise), delays can interrupt or shut down production, expose companies to late-delivery penalties, increase costs, and adversely impact an importer's reputation with their customers by suggesting they're an unreliable resource or materials provider. So a good broker maintains a sound business relationship with you to make sure they're up-to-speed on your needs and requirements. They need to be available for regular meetings with comprehensive agendas on current performance, anticipated changes in your brokerage, transport and logistics requirements, new products you intend to import, new vendors you're introducing and a mid-to-long range look at where you, and they, are going.

Once those meetings are accomplished, the broker needs to interact with the various carriers and contract logistics companies to make sure their capabilities are known and that the lines of communication are open and understood.

Price

This element was intentionally placed last, because that's really where it belongs. Economically priced brokerage services should certainly be sought. That's just good business. But a low rate by itself, without addressing the noted criteria, is not good business. It's a recipe for slight short-term benefit at the cost of long-term disaster.

About 70 percent of import transactions are handled in an entirely paperless manner. The broker transmits the data and the Customs computer validates it. Then the shipment is released and finalized (liquidated) - all without Customs ever touching a piece of paper or performing one manual task.

When comparing brokers, make sure you're selecting a slate of candidates in whom you have the confidence to authorize them to be "you" before Customs. Then negotiate rates with those candidates. A sign in a motorcycle shop read, "If you've got a $10 head, buy a $10 helmet." You need to choose a broker who values your business as you do.

Summary

By following these steps, you should be able to select a competent and competitively priced broker with whom you will be able to develop a fulfilling relationship - an agent in whom you can have confidence that your importing destiny will be secure.