Customs broker integration

Integration is the future in customs management

Three options for customs management and key aspects for broker selections. Understanding involved risks and why integration is the key to success and future competitiveness.

Customs management options: what you can do

Smart people know their limitations. An experienced customs manager in a company that trades across borders needs a well-trained team and powerful IT support to run efficient customs operations. This includes directly interacting with the customs authorities to manage imports and exports in, for example, the Netherlands. And a really good in-house customs department may even be able to handle customs procedures outside of this – for other major markets and large production sites abroad.

But what if your company exports to 10, 20, or 50 countries – and has to stay on top of all those countries’ varying customs regulations? Or if you are active in countries with customs laws that make it all but impossible to get by without local customs brokers, despite World Customs Organization rules to the contrary? There are two possibilities to manage the challenge successfully and efficiently:

  1. Either negotiate incoterms with your trade partners that compel them to handle customs clearance on their end.
  2. Or hire a customs broker to manage the customs formalities for you.

The first alternative is not always practical. Many customers insist on receiving goods that have already cleared customs. And often, newly imported goods do not yet have a buyer and must first be marketed by your sales representatives in the country of destination. In such cases, there’s almost no way around a customs broker.

External expertise relieves burden but risks remain

There are lots of other reasons to work with a customs broker, of course. If, for example, the quantity of imported or exported goods is too small to justify the expense of maintaining your own in-house customs department.

The math seems simple at first glance: Outsourcing to a customs broker means that you don’t need to accumulate specific knowledge of customs processes for each relationship with a foreign business partner. Customs brokers also take a lot of administrative work off your hands.

We’ve discussed this topic with CATTS B.V., a Netherlands-based specialist for international customs and compliance processes, and I’d like to share some insights. These arguments for customs brokers are not lost on Peter Bulters, the Managing Director at CATTS. Peter is a customs expert and he also warns against seeing outsourcing to a customs broker as a simple, worry-free solution.

If only for one reason alone: The company submitting the declaration, not the customs broker, is responsible for ensuring its accuracy. And in many countries – in the Asian-Pacific region, for example – providing incorrect information on customs declarations is a crime.

Key aspects: knowledge, integration, performance

Based on this responsibility alone, no one who is in charge of customs management can afford to be indifferent about how a customs broker operates. But it’s not just about getting goods through customs quickly. It’s also about optimizing customs duties to make a business more competitive in a particular market.

Bottom line

Three key aspects need to be carefully considered before selecting a customs broker:

Key aspects
Key aspects

Merely selecting a customs broker in a new market can involve a lot of work already. In addition to independent brokers, who may be active in just one or two countries, many international logistics service providers offer customs services. Then there are providers that boast a broad international or even global presence.

Customs expert Peter Bulters recommends to also take a look at a customs broker’s operational network: Does this broker really do the work with their own people or do they work with a partner network of subcontractors in the various countries?

Industry knowledge should also be a key factor in making your selection: Customs brokers that offer premium services in the automotive industry are not necessarily the best partner for a company in the chemical industry. Often, references and recommendations from foreign chambers of commerce or industry associations can help narrow the choice down to the truly good candidates.

Catching up with the digital age: broker communication

Another factor determining the success of your relationship with a customs broker is the efficiency of your day-to-day interactions. In my personal experience, most businesses have a direct link to the IT systems of the customs authorities if they manage self-filing of customs declarations with in-house teams.

But when it comes to communicating with customs brokers, there are almost invariably gaps in the digital flow of information. Typically, the declarant company sends the customs broker an email with instructions for customs clearance and attaches the necessary documents, such as a pro forma invoice.

Most brokers employ a small army of data entry clerks to manually input the necessary data into their own system so that they can generate the customs declaration. This interruption of the digital data stream is relatively labor-intensive and increases the risk of errors.

Clearly, linking brokers directly to their customers’ IT systems would provide the basis for a greatly streamlined process.

Risk-based auditing: the future lies in IT integration

The lack of integration between customs brokers and their customers creates difficulties in the post-clearance processes as well. Brokers notify their customers when the customs office has cleared the goods, how much they owe in duties, and which accompanying documents are required for each country.

But Peter Bulters explained that customers often have no idea what exactly the broker declared, whether the broker followed the customer’s instructions (and if not, why not), and how long it took for the goods to clear. This comes with risks, especially in countries outside the EU, since in-house customs departments don’t have the expertise to monitor the services provided by the brokers. What’s missing is risk-based auditing.

Peter’s vision for efficient management depends on integrated IT between customs brokers and their customers. An automated synchronization between the customer’s instructions and the broker’s declaration would make it possible to identify and analyze any discrepancies. Aside from accelerating the customs processes, this would greatly reduce the liability risks of importers and exporters for errors made by their service providers.

Peter is convinced that this is where the future lies. And I must say, I very much agree with him. What is your view on this and how do you currently manage your customs processes? Is your trade and customs operation affected by developments under Brexit and what is on your digital agenda for global trade development in 2018? I look forward to hearing from you on LinkedIn.

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