Customs Brokers Explained: Who They Are, What They Do, and Why It Matters

Customs: the critical gate keeping authority that controls your freight’s entry to, and exit from, a given country. Next to drayage, customs is one of the most challenging parts of your cross-border shipment. There’s documentation, language barriers, bureaucratic complexity… and that’s before your freight arrives at the border!

Customs brokers help you navigate this piece of your cross-border journey. But before you allocate your hard-fought budget to this service or that one, make sure you understand what’s going on behind the scenes. And, more importantly, know what to look for in a high-quality customs brokerage.

 

What is customs?

At the highest level, customs is a government agency that controls whether your freight leaves or enters a country. Your freight goes through two customs agencies during a border crossing. First, there’s the country of export’s agency. Next, there’s the country of import’s agency. Each agency has different procedures, requirements, and paperwork based on three major facets of trade: taxation, security, and how you legally move freight across the border.

Money, safety, and laws – not exactly casual conversation topics, are they? Even the savviest logisticians can struggle to understand what’s going on. That’s where customs brokers provide value.

 

What does a customs broker do?

A customs broker is a professional licensed by the government to help importers and exporters move their goods into and out of a country. While they’re only paid by their customers, they really work on behalf of two groups: their customer (the business or individual that’s shipping) and their government. Customs brokers help their customers navigate the ever-changing regulations and tariffs for their given commodity. They ensure smooth facilitation of trade, which is in the best interest of their licensing government.

Customs brokers can work for large brokerage companies or boutique firms that specialize in a region or on a specific commodity. They could even be individuals!

Here are a few more details on what a customs broker does:

  • Acts as the liaison between you and the customs authority
  • Ensures your commercial documents comply with regulatory requirements
  • Prepares and electronically files relevant paperwork
  • Makes sure your goods are correctly classified, so you’re charged the right duties and taxes

 

US Customs Brokers

Almost 11,000 customs brokers operate in the US today and any US citizen over 21 can become a licensed US customs broker. To become a customs broker, citizens apply to the US Customs and Border Protection (CBP), pass an exam, and undergo a background check. The broker exam covers everything from the Harmonized Tariff Schedule of the United States, to the Right to Make Entry Directives, to the Ace Entry Summary Business Process.

 

What to expect when you import into the U.S.

Documentation. Lots and lots of documentation.

Importers to the US don’t have to have a physical presence in the United States, but they do need to register as an importer of record (IOR). A US customs broker helps with that process. The broker also helps the IOR maintain a customs bond which CBP requires for every import. Importers use single transaction bonds for one-time importation. Continuous bonds cover multiple shipments and are usually 10% of the duties and taxes the IOR anticipates paying CBP for the year.

After those two pieces come the regular shipment documents. Along with the truckload’s standard Bill of Lading, there’s the Commercial Invoice, the NAFTA Certificate of Origin (you can learn more about NAFTA and USMCA here), the Import/Export form, and more. It used to be important to find a brokerage near a port of entry so the broker could physically hand off the US customs entry on behalf of the importer. However, electronic filing now expands businesses’ brokerage options.

While US customs brokers are responsible for ensuring the accuracy of US entry declaration, the IOR is ultimately responsible for compliance. The importer is liable for inaccuracies in filing and the CBP will fine the importer if there are any errors.

 

Mexico Customs Brokers

Mexico customs brokers operate similarly to their United States counterparts, but unlike in the US, the Mexican government has a finite number of brokerage licenses. There are approximately 1,000 licensed Mexico customs brokers operating today. That means there are fewer options for businesses looking to import goods into Mexico. Prospective brokers go through a similar application and examination process, as well as a psychological or polygraph test.

 

What to expect when you import into Mexico

Mexico doesn’t recognize foreign importers, so only registered Mexican companies can import into Mexico. Mexico customs brokers require Articles of Incorporation, as well as verifiable evidence of a Mexican address, before they can work with a prospective customer.

Once the initial paperwork is squared away, Mexico customs brokers file, you guessed it, more documents. Mexico customs requires a Commercial Invoice (Factura Comercial), Bill of Lading (Conocimiento de Embarque), Mexican Entry Form (Pedimento Aduanal), Certificate of Origin (Certificado de Origen), and Packaging List (List de Empaque). However, these are only the basic pieces of documentation. Depending on the commodity or scenario, more support may be needed from the broker.

Unlike in the US where the customs broker and the importer share the responsibility for compliance, Mexican customs brokers assume all responsibility for each shipment. Brokers incur penalties and fees if they make mistakes, and the government can revoke their license if there are too many discrepancies in their trade documents. As a result, Mexican customs brokers must sign all import documents, and importers must pay all customs broker fees and duties before any freight can enter the country.

 

Things to look for in a great customs broker

All that paperwork means opportunities for errors, delays, and added cost. Brokers are a great solution, but with literally thousands of options, how do you choose the right one? Like any service, there are a few key attributes to consider as you vet your candidates.

  • Communication: Border crossing is an involved process, but it doesn’t need to be confusing. Good brokers will keep you updated each step of the way so you can avoid costly delays and fees.
  • Consultative approach: You’re hiring a broker so you have a customs expert in your corner. That means your broker should ask questions, offer advice, and share insight on decisions. If they’re not advising you, you’re not getting what you paid for.
  • Operational infrastructure: If you’re interested in a long-term relationship and know that you’ll often have rushed or last-minute shipments, see if your broker has the infrastructure to handle these scenarios as they arise.

A great broker eases your cross-border journey and alleviates some of your border-crossing anxieties. And, with a little bit of know-how, you can make the best choice for your business. But if you’re still not feeling confident, Forager can always help you find the best match for your commodity and your supply chain. It’s always nice to have an expert in your corner.

It’s your freight, so the choice is yours.