In international shipping, the terms “customs broker” and “freight forwarder” are often used interchangeably, or even confused for one another. However, there are subtle and important differences between each of these services.
In this article we’ll break down what a customs broker and a freight forwarder are, how they differ, and explore which of the two will best meet your shipping needs.
What is a Customs Broker?
A customs broker is a person or company that is licensed and regulated by U.S. Customs and Border Protection (CBP) to aid importers and exporters in meeting U.S. government requirements which affect international shipping.
Customs brokers are hired to organize and submit the appropriate information and payments to CBP so that clients adhere to all pertinent regulations. These brokers are well versed in entry procedures, rates of duty, taxes, fees, admissibility requirements, and valuation for imported goods. Their job is to make customs clearance easy. They’re there to ensure nothing goes wrong with CBP when shipments come into the U.S.
What is a Freight Forwarder?
A freight forwarder is a person or company who organizes international shipments and ensures that they get from the manufacturer to the final point of distribution. Forwarders contract with one or more carriers to transport goods safely and effectively overseas.
Freight forwarders don’t personally transport anything; they act more as a coordinator or facilitator. Much like a travel agent, they strategize the best way to transport goods from one place to another, then contract with the appropriate carriers. This can include arranging ocean, air, rail, or truck transport, depending on what’s best for each specific client.
Although hiring a freight forwarder incurs a cost, they often reduce overall transportation expenses by organizing the most cost-effective transportation plan. Forwarders also understand regulations and requirements and can ensure all shipping standards are being met. Additionally, they may assist with paperwork preparation and recommend the best way to pack and insure cargo.
Customs Broker vs. Freight Forwarder
From these definitions, it should be clear that a freight forwarder is more of a general term for a shipping facilitator, while a customs broker is a more specific type of agent that focuses on adhering to customs regulations. Customs brokers and freight forwarders also differ in the following ways:
- A freight forwarder can also be a customs broker (if they are licensed and prepared to handle customs for the shipment in question). However, a licensed customs broker is less likely to be a freight forwarder (prepared to organize and arrange every aspect of an international shipment).
- There are no formal requirements to be a freight forwarder, but customs brokers must be licensed. They must pass the Customs Broker License Examination, submit a broker license application (including fees), and have that application approved by the CBP.
- Customs brokers are appropriate for importers, but not exporters. They specialize in goods coming into the U.S. and are experts in U.S. customs regulations. You would need an expert in the regulations of the foreign country you are shipping to if you are exporting out of the United States. Conversely, freight forwarders are equipped to arrange for imported or exported shipments.
Do I need a Customs Broker or a Freight Forwarder?
Deciding whether a customs broker or a freight forwarder is going to be more helpful for your shipping needs depends on what those shipping needs are. Are you importing goods from overseas into the US? If you’re only shipping domestically, you want a freight forwarder; a customs broker will be of no help to you whatsoever.
However, say you’re importing from overseas and already have a handle on the transportation of your shipment. In that case, you may hire a customs broker to ensure that you’re meeting CBP regulations, but don’t need the logistical expertise of a freight forwarder.
Really identify what, exactly, you need this facilitator to oversee. You might discover that the best choice is to hire both a freight forwarder and a customs broker. It’s entirely possible (and often useful!) for freight forwarders and customs brokers to work together to navigate the issues that sometimes arise with an international shipment.
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Gabrian International connects you with quality international manufacturers and can offer support as you make critical decisions about your shipping process. Reach out to discuss your shipping needs with Gabrian International today.