What is a Customs Broker?

What is a Customs Broker? A Customs Broker is an individual, partnership or corporation licensed, regulated and empowered by the U.S. Customs and Border Protection (CBP) to assist importers in meeting Federal requirements governing imports into the U.S. Customs Brokers are considered an “expert” and should be knowledgeable in the laws, rules and regulations that govern importing into the U.S.

There are over 11,000 active licensed Customs Brokers in the U.S. today. Some work for partnerships or corporations while others operate in their own name as an individual or sole proprietor. Many brokers are nationally licensed allowing them to handle import shipments at ports throughout the U.S.

Customs Brokers must have expertise in the entry procedures, admissibility requirements, HTS classification, valuation and the rates of duty and applicable taxes and fees for imported products.

Customs Brokers work closely with U.S. Customs and over 40 other U.S. Government Agencies in handling import shipments. Much of their contact with these agencies is now done electronically though some still require actual documents for regulatory oversight.

The History of Customs Brokers It has been said the collection of Customs duties helped in the founding of our nation since duties were the main source of government revenue for many years. It may seem hard to believe but the duty rate on many items could be 60-80% of the product’s value at the time of import. Thankfully duty rates have declined significantly by today.

Customs regulations originally stated that only the owner of the imported goods or the U.S. consignee could arrange the Customs entry (clearance) of their import shipment. The actual owner or consignee would have to travel to the port of arrival and arrange the clearance of their goods. This was quite cumbersome for growing businesses and a better method was needed.

By the mid 1850’s many owners or consignees were contracting with individuals who knew the “ins and outs” of the port and Customs to take care of their import shipments. This was an informal arrangement and these “agents” were not regulated or licensed. Problems resulted and Customs realized that they needed to take action.

In 1857 new regulations allowed a “duly constituted agent” to act on behalf of the owner or consignee. This helped better regulate this practice but still was not sufficient to prevent errors and even fraudulent practices. A better way was needed and from this realization came the decision to license “Customshouse Brokers” to fulfill this vital role.

Beginning in 1894 Customshouse Brokers were licensed by the U.S Government and regulations were put in place to control these brokers and help control the services these brokers provided.

While there have been changes along the way today’s Customs Broker has a long history of serving the importing community and helping the U.S. Government collect the duties that are due on imports into the U.S.

What Does a Customs Broker Do? Some might say that a Customs Broker wears many hats. The broker’s primary function is to arrange the Customs clearance of imported goods, that is to file entry with U.S. Customs so that Customs can review the data and the shipment to determine if it can be released to enter the U.S. But there is much more to the day-to-day work of a Customs Broker.

Customs Brokers communicate with many parties involved in the international shipping process including air and ocean carriers, freight forwarders, foreign suppliers, warehouse operators, truckers, government agencies and more.

Communication can be via electronic means or telephone calls and oftentimes it takes communication with multiple parties on each shipment they handle.

A Customs Broker acts as an “agent” for the importer, with their services provided under the authority of a Customs Power of Attorney from the importer to the Customs Broker. Any declaration or document submission made by the Customs Broker is treated just as if the importer themselves made the declaration or submission.

Customs Brokers often provide advice to their clients regarding HTS classification, duty rates, rules and regulations and even international and domestic transportation questions.

The Customs Broker is a valuable part of your company, acting on your behalf to help facilitate the timely release and delivery of your imported products.

The Importer of Record is Fully Responsible As we mentioned in the section “What Does a Customs Broker Do?” the broker acts as an “agent” for the importer. The broker operates under the authority of a Customs Power of Attorney from the importer granting the broker authority to act on the importer’s behalf in dealing with U.S. Customs and other government agencies. What this means is that anything the broker does, he or she does as if they were working for the importer’s company. Any mistakes made are the full responsibility and liability of the importer.

I’ve heard it said many times, “I don’t worry about that, my broker handles it for me.” This is a dangerous attitude considering the legal responsibilities the importer faces due to the actions of their broker. Importers are strongly advised to take an active role in their imports, in fact U.S. Customs fully expects every importer to review their broker’s work and make certain it is accurate.

It is wise to audit your broker’s work and ask questions if you see anything that doesn’t look right. It is wise to go to the U.S. Customs website and get information about importing so you can be knowledgeable enough to understand the rules and regulations that apply to your imported products and take action where needed to ensure all your Customs business is accurate.

More information for importers can be found at the below link: https://www.cbp.gov/trade/basic-import-export

The Risk of Paying Duty to Your Customs Broker Every year almost $40 billion in duties is paid to U.S. Customs for products imported into the U.S. A sizable percentage of this money is paid to Customs by Customs Brokers on behalf of their clients, meaning the clients’ money must pass through the broker’s hands before it is paid to Customs. Though most brokers are reliable and trustworthy a number of brokers go out of business or lose their licenses every year for questionable practices.

Remember the importer is legally liable for the payment of the duty to U.S. Customs. Even if an importer pays the duty to their Customs Broker this does not relieve the importer of responsibility to U.S. Customs for the duty if their broker fails to pay the duty to Customs. I personally know of cases where brokers absconded with thousands of dollars in duties that importers had to pay (again) to U.S. Customs.

There is a better and safer way to pay your duties to U.S. Customs. The ACH duty payment program allows the duty for your shipments to go directly from your bank account to U.S. Customs safely and efficiently. Best of all importers who take part in the ACH payment program can also pay their duties to Customs on a once monthly basis, allowing a free “float time” on your money.

Some Important Points to Consider

“What we’ve got here is a failure to communicate” is a famous movie line (from Cool Hand Luke) but it could also apply to the relationship between many importers and their Customs Broker. Communication between the two parties can be spotty at best, and this lack of communication can lead to errors that cost money. Talk to your Customs Broker. Help them to understand your business and your imported products. Answer their questions. Ask questions of your own. Communication is a key to a compliant import program.

Paperwork! Yes while much of the communication between Customs Brokers and U.S. Customs is now done electronically the broker still needs the shipment documents in order to prepare the electronic data to submit to Customs.

Documents such as commercial invoices, packing lists, bills of lading, air waybills, manifests, certificates of origin, etc, etc the list goes on. Having complete and accurate (and legible) documents is key for the Customs Broker to help your company ensure the accuracy of their declarations to U.S. Customs.

Do you audit your broker’s work? Do you receive copies of the Customs documents for you to review for accuracy? Do you have a process in place to make certain that you are compliant with all U.S. Customs and U.S. Government Agency rules and regulations? If you answer no to any of these questions you need to act now to fix those problems before Customs comes to you.

Congress has instructed Customs to “facilitate trade” and at the same time to “increase enforcement” of all trade rules and regulations. Now more than ever every importer needs to make sure they are exercising reasonable care and due diligence in their import transactions. Working with your Customs Broker you can navigate the ever-changing regulations and keep your company compliant.

For More Information

Please contact us today at info@tradelogicintl.com if you have any specific questions.