Due to the number of steps involved in shipping goods across borders, businesses use various entities to help them navigate the entire process. Among the most utilized entities are freight forwarders and customs brokers.
Although freight forwarders and customs brokers perform similar tasks for inbound and outbound shipments, their services are distinctively different. No matter the size of your business, your cargo's seamless arrival to its intended destination depends on the expertise of the entity you choose.
At IBC, we set ourselves ahead of the competition by providing full-service, in-house customs brokerage solutions customized to your needs. We also go the extra mile by delivering transparent transportation information and streamline processes to save you time and resources on inbound and outbound shipments.
Read on to learn more about the differences between a freight forwarder and a customs broker, and the services they provide to businesses.
What is a freight forwarder?
A freight forwarder is an individual or organization that helps businesses coordinate logistics and transportation solutions for international trade.
They boast meaningful connections within the supply chain and have touchpoints with different shipping industry entities, making them efficient in handling goods transported via train, sea, or air.
They also help businesses circumnavigate bottlenecks in the international shipping industry.
In a nutshell, freight forwarders tasks include:
- Coordinate with clients to find reliable transportation services.
- Understand inbound and outbound shipping logistics requirements, including inventory management and order fulfillment.
- Arrange storage and warehouse facilities that align with the client’s cargo and budget.
- Provide various transportation requirements, such as packing and transporting documentation.
- Offer advice on matters to do with taxes, insurance, regulations, and banking practices.
What is a Customs broker?
A customs broker is a federally regulated and licensed individual, association, or corporation authorized to support the inbound / outbound clearance process of international trade. They boast extensive knowledge of shipping regulations and duty / tax policies, as well as the harmonized tariff code system.
They’re authorized by U.S. Customs and Border Protection (CBP) to deal with port authorities and government agencies within the cargo's jurisdiction.
In a nutshell, brokers tasks include:
- Classify goods.
- Prepare and transmit goods through entry.
- Obtain release from Customs Custody.
- Verify the admissibility of goods.
- Claim for preferential treatment under the Free Trade Agreement (FTA).
- Mitigate or file for petitions for relief.
- Satisfy CBP export requirements.
- Release / Satisfy (PGA) Partner Government Agencies requirements.
Generally, customs brokers help businesses meet the government requirements involved in transporting goods from one location to another. They calculate the necessary duties and fees, and make payments on behalf of the business. When you partner with IBC, you get an in-house brokerage team that offers your business complete logistics services through the entire inbound / outbound process.
How are both services Different?
While freight forwarders and customs brokers are essential to the international shipping industry, a customs broker can do things that a freight forwarder can't.
For example, if you want goods relating to customs, such as duties and fees to be handled by an expert from a central point, a customs broker is the right choice. For more information on what a customs broker can do for your business, read on.
1. Handle Custom Transactions
Goods that enter the U.S. require customs clearance. But for this to happen, businesses are required to submit the necessary documentation.
Customs brokers are the sole entities that can present such information to the U.S. Customs and Border Protection (CBP). They prepare entry forms that contain shipment information, such as country of origin, harmonized classification codes, and overall weight and quantity.
That data is then relayed to CBP electronically through the automated broker interface. Freight forwarders are unable to perform this task.
A customs broker helps businesses secure paperwork that allows them to enter into trade programs. They offer outbound license details and use the automated export system to submit the necessary information.
2. Pay Duties, Taxes, and Fees on Behalf of the Business
While freight forwarders can advise businesses on matters from duties, taxes, and fees obtained from a broker, custom brokers are actually involved in the process of paying these dues. To do so, they’re required to maintain the proper licensing.
The customs brokers at IBC ensure that goods are classified accordingly based on the harmonized tariff codes. They then calculate the fees and duties charged on the cargo to help businesses make payments. To perform these actions, they’re required to maintain a license and permit.
3. Keep Records
Another vital role of a customs broker is record-keeping. They store documents for inbound tractions in a safe and orderly manner, dating as far back as five years from the point of entry. These records are kept private, and shared with either the importer of record, customs or via court order.
Customs can request brokers to produce these documents when performing inspections and audits. Businesses can also ask to see the documents if they discover a problem with the shipment later.
Because freight forwarders focus primarily on logistics and transportation, they do not keep essential records handy.
4. Perform lawful transactions
Since customs brokers are licensed and authorized by CBP, they have the power to perform lawful transactions on behalf of their clients. This gives them the ability to sign confidential documents related to customs as long as they can verify they have an authorized power of attorney.
Unlike customs brokers, freight forwarders don't have a power of attorney to conduct any customs business since they don't operate under the CBP purview.
5. Pursue Appropriate Administrative Remedies
As a representative of the inbound transaction, the broker consults with the relevant contacts to ensure that the business gets the most reasonable rates. They also ask for clarification on the appraisal process. If brokers feel dissatisfied with the estimate, they may look for administrative remedies, whereas the role of a freight forwarder is only to advise clients on such matters.
Streamline Your Shipping Process With Fully Integrated Logistics
Do you have any weak links in your inbound / outbound supply chain? By partnering with IBC, you can eliminate the need for multiple vendors by using our turnkey solution to global logistics.
With a global distribution network, IBC serves as your one-stop-shop for integrated logistics solutions, with an in-house customs brokerage team. Not to mention, we offer a customized approach to cargo services. To streamline your business’ shipping process, contact us today to get started.