Logistics Terms What are the differences? Freight Forwarder vs Customs Broker

In the international trade and the logistics industry, freight forwarders and customs brokers are plying a crucial role. Forwarders, an agent handling overall transportation of freight, play a broker role between shippers and carriers. On the other hand, customs brokers are an expert acting as a proxy to address customs clearance processes of freight, based on their deep knowledge about governmental regulations and customs clearance tasks. These two agents are indispensable for safe and efficient international trade.

Let’s take a look at freight forwarders and customers brokers who complement each other.

Freight forwarders are intermediary companies with specialized logistics services between shippers and carriers. Their main role is to figure out requirements of shippers, select optimal routes and ways to deliver goods safely and efficiently to the destination.

More specifically, forwarders process tasks, like booking of transportation modes, customs clearance, cargo tracking and management, and taking out an insurance, as a proxy.

In addition, with expertise regarding the complex international logistics environment, they can provide customized solutions and identify problems in advance to promptly respond to issues.

Plan and Adjust Transportation: They transport cargo with optimal routes by using diverse modes of ocean, air, rail or land. Also, their management services include packing, stacking, loading and unloading of cargo, etc.

Manage Transportation Documents: Forwarders draw up and manage documents, like Bill of Lading, Air Waybill, Packing List, Commercial Invoice, etc.

Logistics Service: Forwarders offer cargo consolidation or deconsolidation and cargo tracking services.

Customs Clearance: Forwarders help shippers go through processes of documents preparation, tax and tariff calculation, e-customs declaration, etc.

Operation methods and legal status of forwarders are essential in the global logistics industry. As they are the key players handing complicated international transportation and customs clearance, they should strictly comply with relevant laws and regulations.

The operation is under international carriage law, ocean transportation law, air transportation law, etc. and forwarders should buy appropriate insurance for safe transportation to protect shippers’ rights. Moreover, it is necessary for forwarders to be well-acquainted with the Customs Act for customs clearance processes and customs clearance regulations for export and import.

Forwarders cooperate with diverse carriers and partners through global network and provide optimized solutions to customers. Plus, they maximize efficiency with logistics management software and autonomous systems and prepare plans for every possible risk (delays, damage, loss, etc.) during transport.

Customs brokers are experts or specialized companies dealing with customs clearance of import and export cargo.

They address customs clearance based on their in-depth knowledge about relevant customs regulations and laws. They mainly cover tasks, such as writing up import/export declaration documents, paying duties, responding to customs inspection, or resolving issues related to customs clearance.

Today, customs brokers are one of important pillars of the global logistics industry. As customs clearance processes are getting more complex, shippers tend to rely on the expertise of customs brokers. Customs brokers are well aware of customs law, import/export regulations, origin regulations, etc., that they can guarantee rapid and smooth passage of customs clearance.

Customs Clearance Tasks: Customs brokers implement all procedure of customs clearance, including import/export declaration. They manage complicated relevant regulations and documents professionally to make sure cargo go through with no issue. With their services, companies can save time and expenses and can contribute to robust international trade.

Customs Duties and Taxes: They also handle tasks like paying tariffs, VAT, or other taxes and apply for import tax exemption or tax refunds.

Consulting: They provide consulting services for customers concerning all documents required for import and export.

The operation of customs brokers is mainly regulated by tariff laws and customs-related restrictions. The former specifies standards for their mandatory tasks, such as export and import declarations, customs duty payment, and customs clearance; the latter stipulates customs clearance-related regulations that customs brokers must comply with. These legal requirements play a role in ensuring expertise and reliability of customs brokers. By being well-informed of and abiding by the relevant laws appropriately, you can preemptively prevent and effectively deal with issues that might occur during the customs clearance procedure.

Key characteristics of the operating method are meeting qualifications of the particular country and being well-informed of the regulations through regular license renewal and training. Moreover, an electronic system for customs declaration and regulatory compliance must be utilized to ensure swift and efficient work processing.

Forwarders and customs brokers cooperate with each other based on their expertise to facilitate international trade and provide relatively high-added values to customers. The main commonality of the two is to enable customer's import and export process efficient and safe.

Require expertise and experience: Both forwarders and customs brokers require expertise and experiences related to international trade and logistics; utilize their expertise to provide the optimal solution to customers.

Function on behalf of customers: They perform work on behalf of shippers (importers and exporters).

Reduce costs and improve efficiency: They contribute to time and cost savings of customers so that customers can conduct complicated international trade more efficiently.

Comply with regulations: They prevent issues from occurring by abiding by international and national regulations.

Manage risks: They minimize all risk factors that may occur during transportation and customs clearance.

The relationship between forwarders and customs brokers is partnership cooperating with each other in international logistics industry, but each of them plays a different roles and functions. The main differences between them lie mainly in scope of work, main roles, and service targets.

Work Scope

Forwarders: They plan and manage cargo transportation and physical movement of cargo (e.g., vessel booking, transport routes optimization, and in-transit cargo tracking). In addition, they do not handle customs-related work themselves; but rather let customs brokers handle customs clearance work.

Customs brokers: They perform export and import declarations on behalf of clients, and manage customs declaration procedures so that cargo can pass through customs. (e.g., customs documentation, tariff calculation, and customs inspection)

Key Roles

Forwarders: They mainly coordinate transportation management and logistics.

Customs brokers: They handle legal/administrative customs clearance procedures.

Service Targets

Forwarders: They are mainly importers/exporters (shippers) or logistics managers.

Customs brokers: They are mainly importers/exporters (shippers), forwarders, or trading companies.

Legal Requirements

Forwarders: They are equipped with logistics experiences and expertise; FMC (Federal Maritime Commission) license is required only for international maritime transportation when it comes to U.S. legal qualification.

Customs brokers: Legal qualification is needed because they can work as brokers once they acquire a customs brokers license.

The two jobs are complementary to each other based on their different areas of expertise, and the importance of their roles will grow further in the complex international logistics environment. As global trade expands and the logistics environment becomes more complicated, expertise and capabilities of the two are essential to boosting competitiveness of companies. If you clearly understand the differences between the two and utilize them appropriately, you’ll be able to build a more efficient and safe process when operating a global business.

Forwarders are partially in charge of customs-related tasks but the primary focus is on managing and coordinating the overall logistics flow. They provide services such as logistics planning and execution of the plan, cargo transportation booking and schedule coordination.

Customs brokers have to take administrative and legal liabilities and must obtain license from the customs authority of the corresponding country.
Registering FMC is mandatory when providing US related ocean transportation services so FMC license is needed only for this case.

Forwarders don’t carry out customs procedure themselves but mainly focus on managing transportation and coordinating logistics. Accordingly, expertise of customs brokers is mandatory when handling all the legal and administrative tasks related to customs clearance.