Differences Between Freight Forwarders and Customs Brokers

Do you know what a freight forwarder and a customs broker are, the role each one plays in foreign trade, their functions, and how they differ?

A freight forwarder, or logistics agent, is a company or individual responsible for planning and managing the logistics involved in the importation process. Acting as an intermediary between the client and service providers, a freight forwarder ensures the goods reach their final destination.

Freight forwarders and customs brokers are two key facilitators in international trade. According to expert projections, the global logistics and transportation market is expected to reach $15.5 trillion in value by 2023, with forwarders playing a significant role in this growth.

In other words, freight forwarders facilitate the import and export supply chains. In addition to handling transportation and complementary services like loading and unloading, they often coordinate with customs agencies, insurance providers, and others.

Functions of a Freight Forwarder

A freight forwarder can support the international trade process at various stages, performing key logistical activities such as:

• Customizing transportation routes and methods.
• Negotiating agreements with suppliers and carriers.
• Preparing and completing customs documentation.
• Conducting customs clearance procedures.
• Arranging insurance, when applicable.
• Advising on freight rates, special documentation costs, and customs clearance expenses.
• Managing the organization, loading, unloading, and storage of goods.

Advantages of Hiring a Freight Forwarder

• Experience: Their knowledge of contractors, suppliers, and international carriers allows them to secure the best rates and reliable service providers, simplifying the process.
• Personalized Service: With an extensive network of contacts, they can handle any process, regardless of the type of goods or destination.
• Time Savings: Freight forwarders streamline supplier and carrier selection, saving importers valuable time.
• Cost Savings: By avoiding errors that lead to extra storage fees or fines, they help importers and exporters stay on schedule and within budget.

Then, What Is a Customs Broker?

A customs broker is a commercial intermediary responsible for managing the exportation process. They also assist companies with business preparation, document submission, and compliance with required regulations.

According to the U.S. Customs and Border Protection (CBP), customs brokers may be individuals, partnerships, associations, or corporations that help importers and exporters meet federal requirements governing imports and exports.

They have expertise in entry and exit procedures, shipping regulations, tax policies, tariffs, and the classification and valuation of imported goods.

Functions of a Customs Broker

• Gathering information from importers and exporters.
• Classifying goods for customs purposes.
• Advising exporters on international business opportunities.
• Consolidating goods into a single shipment.
• Promoting clients' businesses abroad.
• Serving as a contact between sellers and buyers.
• Guiding and registering potential buyers.
• Training sellers and buyers on foreign trade to close deals effectively.

Differences Between Freight Forwarders and Customs Brokers

1. Scope of Services
   Freight forwarders handle a broad range of international transportation functions, while customs brokers provide specialized services.
2. Dual Role
   Freight forwarders may also act as customs brokers, but customs brokers typically do not perform freight forwarder duties.
3. Focus
   Customs brokers focus on import compliance for a specific transaction, while freight forwarders work with both importers and exporters.
4. Collaboration
   An exporter’s freight forwarder can work alongside a customs broker to resolve shipment-related issues.
5. Regulation
   Customs brokers are licensed and regulated by CBP, acting as intermediaries between businesses and the U.S. government. Freight forwarders, on the other hand, connect businesses with transportation companies.
6. Responsibilities
   Customs brokers manage goods entering and exiting U.S. borders, while freight forwarders oversee the entire logistics chain.

Who Needs Their Services?

Freight Forwarders

Work on behalf of shippers to organize travel and logistics for shipments.

Customs Brokers

Represent importers, ensuring shipments comply with legal and regulatory standards. They act as intermediaries between their clients and CBP.

Understanding the differences between a freight forwarder and a customs broker allows you to choose the right partner for your import and export needs.

This decision can save you both time and money. Learn more about this topic with the experts at Aduaeasy.