Trade Compliance

Are Customhouse Brokers Obsolete? Part 1.

Dan Gardner
October 21, 2020
min read
Are Customhouse Brokers Obsolete? Part 1.Are Customhouse Brokers Obsolete? Part 1.

There’s been some buzz in trade circles recently about the future of the Customhouse Broker (CHB). Precipitated by the digitization of many import-related functions, some folks believe that technologies like Artificial Intelligence (AI) and Machine Learning (ML) will relegate Customs Brokers to the scrap heap of trade history. I’m of a different opinion and this blog is dedicated to explaining why.

Before launching a defense of the Customhouse Brokerage function, I’d first like to describe a world where brokers no longer exist, and what that absence really means to importers. Bearing in mind that the core function of the CHB is to prepare and submit entries on behalf of its customers, a world without brokers means that importers would have to self-file their entries. In other words, when dealing with customs clearance, importers have two options: use a Customs Broker or “DIY” by self-filing.

Certainly not a complicated drill technologically, there’s more to self-filing than hitting “Send”. By definition, self-filing means that on top of buying and selling goods, importers also need human resources, compliance know-how,  and administrative discipline to manage the entire entry process. While it should be stated that firms have been self-filing in the U.S. for years, the ones that do so will be the first to say that a) it is a strategic decision and b) you’d better be 100% committed to that strategy.

Outside of the core function of the broker, it must be pointed out that CHB’s are involved in many other aspects of importing long before (and after) an entry is filed. From advisory services on classifying new products to helping with protests or explaining the difference between a Container Freight Station and an FTZ, when it comes to the true meaning of “Knowledge Transfer” in global trade, one would be hard-pressed to find a supply chain partner that adds more value than the Customs Broker.

Also, let’s not forget that brokers play a role in the physical movement of goods, too. From dealing with forwarders to tracking the movement of goods, brokers get involved in activities such as working with drayage providers, monitoring customs inspections, advancing charges for cargo release, and minimizing demurrage/detention fees. An often-times thankless job, I’m here to say that for these (and other) reasons, the human element of Customs Brokerage will never completely be supplanted by technology.

There’s no doubt that AI and ML have enhanced and simplified the customs clearance process. Based on those advances, it is likely that some importers will opt for self-filing as a strategic approach to managing their supply chains. And that is precisely what these technological innovations should do…provide companies with options for how to best manage their imports. While acknowledging the importance of having those alternatives, technology isn’t going to replace brokers; it will make them stronger.

So, here’s the deal on technology and the future of the Customhouse Broker. CHB’s make money by clearing entries, but as noted above, they create value by facilitating trade. And in the ultimate expression of supply chain irony, it will be the same technology that some people think is going to replace brokers that ends up making them even more valuable to their customers.

Although never a licensed broker himself, the writer and satirist Mark Twain had a quote that most befits the alleged demise of the Customhouse Broker. Upon reading his own obituary in a London newspaper in 1897, Mr. Twain was noted as saying, “Rumors of my death have been greatly exaggerated.” I’m willing to bet that over time, the same will prove true for the Customhouse Broker.

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