Customs brokers juggle new responsibilities
Importers are asking their customs brokers to take on new roles as educators, security specialists, and information managers. Can they keep all those balls in the air?
By Toby B. Gooley, Senior Editor -- Logistics Management, 6/1/2003
Not so long ago, customs brokers spent most of their time filing entries for imported merchandise and submitting them to customs authorities. But the nature of the job changed in the late 1980s when former U.S. Customs Commissioner William von Raab made his famous "Automate or perish" declaration. Since then, brokers have been under pressure to change not only what they do, but also how they do it.
In the last few years, that pressure has become even more intense as government agencies and importers have imposed a growing list of requirements on the broker community. To meet those new demands, customs brokers have to be more flexible, efficient, and tech-savvy than ever before. Brokers say they're ready and able to meet those requirements, even though they are bringing profound change to this tradition-bound business.
Data Demands
Customs brokers have always processed and provided information for importers and government agencies. What's changing is the nature and the frequency of that information. For example, because there's more pressure on importers to ensure that security and trade compliance data are consistent among their subsidiaries and facilities, many now ask their brokers to take on responsibility for coordinating that information, says John Ferguson, corporate marketing manager at PBB Global Logistics in Fort Erie, Ont. "The customs broker is acting more as a quarterback or central focal point for managing trade data," he observes.
Importers also rely on brokers for periodic reports on import activities, says Peter H. Powell, Sr., CEO of Boston-based C.H. Powell Co. and chairman of the National Customs Brokers and Forwarders Association of America. These reports include entry information broken down by tariff number, duty payments, customs district, and so forth. Large importers have come to expect such reports as a matter of course, Powell says. "Before, this kind of report was virtually non-existent, but now it's a major part of our job."
C.H. Powell customer Bette Little, import manager at New England Pottery in Foxboro, Mass., says the quarterly reports she receives from the broker and its entry-status database help her analyze and manage her costs. Those resources also let her provide updates to other departments within her company. Some importers, she notes, also use broker-provided data to calculate their total landed costs so they can accurately price their products.
For Steven M. Kott, director, customs operations and regulatory compliance for Thomson Multimedia in Indianapolis, Ind., weekly activity reports from his customs brokers are invaluable analytical tools. Like Little, he uses them to calculate and manage costs. But they also help him identify and respond to changing shipping patterns. If, for example, the reports showed that more shipments were arriving through the West Coast, that might indicate a need to change staffing requirements. "Maybe we have to stagger our hours to accommodate the time difference," he says. "If nobody's here to answer a question or make a decision, we may not be able to get a shipment released the same day it comes in."
Demand for greater supply chain visibility is leading more importers to ask their brokers to provide data at the purchase order or stock-keeping unit (SKU) level, information that previously was not available or was gathered and disseminated by the importer, Powell says.
Such requirements are becoming more common, but it's not a simple matter for brokers to comply, says Ferguson. "Just about every contract that comes our way says we have to provide trade data, and it has to fit [the customer's] model," he says. "Companies are saying 'we need it packaged in a certain way, we need it visible worldwide, we need it in everything from Excel to ERP to Web-based technologies.' There's a high degree of customization. It seems like no two [importers' requirements] are the same anymore."
Broker as Educator
Educating the customer has always been part of the service mix for brokers, especially for local companies that serve smaller clients, says Karin LaFreniere, president of Quality Customs Brokers in St. Francis, Wis. "We've always trained them, held their hand, and explained the regulations for smooth transactions," she points out.
Ever since the 1993 Customs Modernization Act made importers responsible for a host of tasks that previously had been handled by customs personnel, though, importers have increasingly relied on customs brokers for help with compliance issues. As customs authorities have cracked down on trade compliance and increased enforcement over the last five years, brokers have seen their customers place more value on compliance than ever before.
"In the '90s, people looked for the lowest transactional costs," says Ferguson. "Now they're looking at relationship issues, credibility issues, and they want a broker whose core competency is understanding trade regulations and compliance, as opposed to a freight company that just dabbles in it," he says. "There's too much risk associated with [compliance] right now."
"Without question the compliance aspect has become a much larger part of the interaction between brokers and importers," agrees Powell. And it's not just importers who are looking to the broker to be the expert in compliance, he says. Under the Bureau of Customs and Border Protection's Broker Account Management program, account managers work with brokers to improve their internal operations and that of their clients.
The trend toward smaller staffs also is pushing importers to rely more heavily on their brokers for information, Little says. "Five or 10 years ago, if you were an import manager or a traffic manager or a contract negotiator, that's all you did. With downsizing, everyone wears multiple hats, so you really need a good broker to help you." Little relies on e-mail alerts and newsletters from her broker to help her keep on top of changing regulatory requirements. "I read as much as I can, but I can't keep up with everything on my own. ... They tell us, 'this is what you need to be aware of, this is what's important in today's world.'"
Kott sees another role for the customs broker as educator. With more businesses placing responsibility for exports and imports worldwide in the hands of managers at company headquarters, the need for accurate trade information is growing.
"We could decide to ship product from China to Argentina, so I would need to know what are the export requirements from China, and what are the import requirements into Argentina—not just the tariffs, but other kinds of restrictions," he says. "So many people forget that brokers have that information, and that they can ask them for help."
Focus on Security
Brokers are on the front lines when it comes to implementing trade security measures. All brokers large and small, therefore, have had to change their approach to conducting daily business since Sept. 11, 2001, says LaFreniere.
"You can't process entries anymore like you're on an assembly line," she says. "You have to come to a stop and scrutinize every one to make sure that every document and every detail that Customs requires is there. And we're more on the alert for anything that looks out of the ordinary." When alert levels are high, moreover, even the most routine tasks can take extra time. "We take all that into consideration and build in additional hours to make sure we stay on track with the customers' shipments," she explains.
Brokers are finding that in today's business climate, they must be deeply involved in government security programs like the Customs-Trade Partnership Against Terrorism (C-TPAT) in the United States and Partners in Protection (PIP) in Canada. Although participation is voluntary, "as with most things in life, what is voluntary almost becomes mandatory," Powell observes.
Many importers, in fact, won't do business with customs brokers unless they are certified under these and other trade security programs. "All of our brokers have to be in C-TPAT," says Kott. If they haven't already been accepted and certified, then they at least must have filed an application, he says.
Kott is far from alone in imposing this requirement on customs brokers. So many importers now mandate C-TPAT participation that some industry observers predict that brokers who don't participate will lose clients and will be ineligible to bid on new business.
Powell notes that C-TPAT certification also is becoming a condition for participation in other customs programs that offer expedited clearance or reduced scrutiny of shipments. "The initial one is ISA—the Importer Self Assessment program—but there will be more coming down the road," he says.
Integral Part of the Process
As a service business with an obligation to ensure compliance with the nation's laws, customs brokers are more than willing to change to meet their clients' and government's requirements. Powell, for one, predicts that brokers will continue to adapt to whatever requirements come along. "The broker is an integral part of the process and will always have to react to regulatory and business conditions," he says. As LaFreniere puts it, "If you're going to stay in this business, you have to be flexible."
Still, there's some question as to whether brokers can afford to continue absorbing the substantial costs of complying with those demands. Powell believes brokers will have to find ways to streamline their processes to contain rising costs. "Obviously, they can't just keep heaping on expenses. They will have to find a better way to meet those needs with the least amount of cost escalation," he says.
For his part, Kott says that even if future policy and technology developments further redefine the relationship between importers and brokers, there will always be a need for brokers' specialized knowledge. "You can't beat their experience," he says. Little agrees: "There's always going to be a need for their expertise. I'm a licensed customs broker, and I would never bring all that in-house."
Ultimately, the customs broker's future success hinges on something that hasn't changed: the personal relationship and service these trade professionals provide to their customers.
"In today's world, where everyone's so busy, we're fortunate that we can still call and ask questions of our brokers—and get an answer!" Little says. "We still have that day-to-day contact, they know all about your account, they make themselves available. They are there when you need them."
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