Customs Broker vs. Freight Forwarder

But, What is a Customs Broker?

A Customs Broker is a person authorized by the Tax Administration System (SAT) through a license that allows them to clear goods entering and leaving the country in accordance with the different regimes established by the Law.

The SAT tells us that a Customs Broker has the following obligations when clearing goods:

• Accuracy and truthfulness of the data and information provided
• Determining the customs regime for the goods and their correct tariff classification
• Ensuring compliance with other non-tariff regulations and restrictions applicable to the goods, in accordance with the Customs Law and other relevant laws and regulations

Definition of a Freight Forwarder

Also known as a Logistics Integrator, a Freight Forwarder not only performs customs clearance but also handles the entire operation. Depending on the type of operation and INCOTERM agreed between the buyer and the manufacturer, a plan is developed to deliver the goods on time and at the destination indicated by the buyer.

Services Provided by a Customs Broker

Since a Customs Broker focuses solely on customs logistics, their services are geared toward the legal representation of importers and exporters before customs, ensuring the clearance of goods.

In the customs clearance process carried out by a Customs Broker, activities are performed to ensure the payment of taxes and compliance with Non-Tariff Regulations and Restrictions, thus allowing the product’s release in an efficient, legal, and cost-effective manner.

Services of a Freight Forwarder

A Freight Forwarder integrates several services to manage your supply chain, ranging from:

• Packaging of the goods
• Transport of goods from the origin to the departure port (air, sea, or land, as applicable)
• Export clearance and handling at the origin
• Main freight (air, sea, or land)
• Import clearance and handling at the Mexican customs
• Transport of the goods from the Mexican customs to the final destination

How Much Knowledge in International Trade Do I Need to Hire a Customs Broker?

The services of a Customs Broker require a certain degree of expertise from the client, as knowledge of international trade is necessary to prepare and provide the necessary documentation to clear the goods.

Additionally, there are considerations to take into account, such as the handling required both at customs and for the freight to move the product. Since the Customs Broker only handles the clearance of the goods at customs, the cost of the service is economical.

How Expert in Trade Do I Need to Be to Hire a Freight Forwarder?

Due to the nature of a Freight Forwarder, no prior experience is required, as they are responsible for guiding and managing the import process from start to finish.

Although their cost is higher compared to a Customs Broker, a Freight Forwarder guarantees the security of a comprehensive customs clearance, significantly reducing the risks of non-compliance with non-tariff regulations and ensuring the timely arrival of the goods.

Does the Destination of My Goods Influence Whether I Hire a Customs Broker or a Freight Forwarder?

It is important to consider that Article 161 of the Customs Law states that a Customs Broker is only authorized to operate at the customs where they were granted the license and at three additional customs, as long as they are up to date with their tax obligations.

In contrast, a Freight Forwarder has a broader scope and can typically perform customs clearance and handling at any Mexican customs.

When Do I Need a Customs Broker or a Freight Forwarder?

Every importation is unique, and only you know the conditions under which you need your product in Mexico. Below are five scenarios based on the INCOTERM chosen for the operation and considerations for selecting the service most suited to your operation.

Case 1: INCOTERM CIF

CIF (Cost, Insurance, and Freight) makes the seller responsible for delivering the goods to the agreed Mexican customs and securing them. In this case, hiring only the service of a Customs Broker is convenient, as long as there is domestic transport to move the goods to the final destination.

Case 2: INCOTERM EXW

Ex Works represents a greater responsibility for the buyer. Once the goods leave the factory, it is necessary to consider freight from the factory to the origin port, export clearance, the main freight to Mexico, followed by customs clearance and transportation to the final destination.

Since the activities for importing the product are more extensive and specialized, we recommend consulting an expert Freight Forwarder, ensuring that you receive the goods on time and in the correct manner.

Case 3: INCOTERM FOB

For a Free On Board (FOB) agreement, responsibility shifts at the origin port after the goods are cleared. In this case, you need to consider the main freight, followed by import clearance in Mexico, and transporting the goods from Mexican customs to the final destination designated by the client.

In these cases, considering a Freight Forwarder as a strategic partner is advisable for a smooth and successful customs clearance process.

Case 4: INCOTERM CFR

Under a Cost and Freight (CFR) agreement, the manufacturer delivers the goods to Mexican customs via sea freight. The buyer is then responsible for the import clearance and transportation to the final destination.

Here, the buyer’s expertise in documentation and logistics management will determine whether to choose a Customs Broker or a Freight Forwarder.

Case 5: INCOTERM CPT

In a Carried Paid To (CPT) agreement, the goods are transported by air, but the buyer is responsible for import clearance and national freight to the final destination.

The buyer must assess their level of expertise in the import process and national transportation management to choose the most effective service for their operation.

Conclusion

After reviewing the profiles of a Customs Broker and a Freight Forwarder, we can conclude that a Customs Broker focuses only on representing the buyer for the customs clearance of goods, so the buyer must have some experience in logistics and customs. Their reach is limited to their assigned customs, and their service cost is lower compared to a Freight Forwarder.

On the other hand, a Freight Forwarder develops a comprehensive plan that includes transportation, handling, and goods release, with coverage across all Mexican customs. In this case, the buyer does not need advanced knowledge in logistics and customs, as the Freight Forwarder handles all the necessary activities to deliver the product on time and to the final destination. Consequently, their service cost is higher than that of a Customs Broker.

Choosing between a Customs Broker and a Freight Forwarder is not always easy, but with 13 years of experience in imports to Mexico, we recommend selecting a service that guarantees effective importation with minimal risks.

If you need more information to make an informed decision, our Commercial Advisors are here to help you navigate your importation successfully.