Trade Compliance

Are Customhouse Brokers Obsolete? Part 2.

I believe that the traditional Customhouse Broker is fundamentally obsolete - they and the industry just don’t know it, yet.

Ned Blinick

August 11, 2020

My colleague, Dan Gardner, wrote a blog last week taking the position that the Customhouse Broker still has a central role to play in helping the import community interface with CBP and PGAs, provide compliance know-how, and support the move of shipments from the point of entry to the final delivery point. (See: Are Customhouse Brokers Obsolete?)

My view is diametrically opposed to Dan’s perspective. I believe that the traditional Customhouse Broker is fundamentally obsolete - they and the industry just don’t know it, yet. I want to make it clear that from a 3rdwave perspective whether the Customhouse Broker survives or doesn’t is not an issue. Either way, 3rdwave is about providing the importer with the toolset to entirely manage and control the customs and PGA entry process. 

Ultimately what 3rdwave delivers to our clients is choice. The Choice to use a Customhouse Broker…or not. 

Why the Customhouse Broker is Obsolete

Today, the Customhouse Broker provides several important functions: 1) preparing entries and clearing shipments on behalf of the importer, 2) advisory services on product classification, Account profiles, and as a specialized knowledge source on import and export practices and 3) coordinating and synchronizing the delivery of shipments with 3PLs, freight forwarders, and carriers.

For these services, the Customhouse Broker charges a fee or fees depending on the SOPs in place. Today, a good GTM solution can execute, support, and replace all the functions of a Customhouse Broker.

  1. By seamlessly and electronically capturing, synchronizing, and managing master data, transactional shipment (ASNs, ISF, BLs, Commercial Invoices, Packing Lists) data, and fusing the data into a customs and PGA entry importers gain all the visibility, reporting and analytics they need to fully control the shipment entry process. With this capability, they can confidently file the Customs and PGA entries through a certified ABI package. NO Customhouse Broker required.
  2. The importer and exporter know their products and accounts way better than the Customhouse Broker. With well-designed GTM technology, the importer or exporter can easily create product class profiles that define their products and profile their Accounts at a level that is appropriate to support Trade Compliance activity. With that information they can easily classify products, capture the related regulatory data, associate country of origin details, and manage BOMs. On top of that, they can easily store all required e-documents supporting the entry. This is only getting better with the assistance of AI and Machine Learning capabilities.
  3. By direct filing, the importer has immediate visibility into the entry clearing process. They have visibility to the status of the entry so that they can understand if there is a problem and respond more quickly. 
  4. With direct status clearance access, they are better able to coordinate the delivery process. With tools that provide visibility into the entry point (pier or terminus) the importer is better able to coordinate the delivery process with their freight forwarders, drayage companies, or delivery services. 
  5. With the right GTM technology, record management is exemplary. The information is logically and digitally stored on your system. It is retrievable on demand. No more relying on your broker.
  6. If you need expertise you pay for what you get. It is not hidden in other entry fees.
  7. You save 80-90% on entry fees. No line charges, refiling charges, or other hidden fees.
  8. You can run reports based on your comprehensive information. You don’t need to ask your broker for their generic reports.

Most of the costs related to the service provided by the Customhouse Broker are covered in the entry fee. A good percentage of these Customhouse Broker costs are to cover the overhead required to prepare the entry.

With today’s GTM technology the preparation, filing, and tracking of the entry can be totally managed by the importer.

Oh, one last thing. As the importer, you do not need to be a licensed customs broker. You need to understand basic customs practices, know your products and accounts so that you can classify them appropriately, and practice Reasonable Care.

Most importers have the knowledge and understanding of their products and accounts. They can get a “right” GTM solution that will support and guide them through the compliance process. What they currently lack is the understanding and the confidence that they can do the import process without a Customhouse Broker.

That is changing and the speed of change is increasing. For medium and large importers this is already happening. For smaller importers it is still problematic but not out of the realm of possibility.

Whether the Customhouse Broker disappears or not is something that only time will tell. However, the technology exists today to enable the importer to be completely independent of the Customhouse Broker.