Customs brokers and Customs administrations share many challenges when it comes to collecting and sharing knowledge. This article introduces some of the practices used in this domain by brokers based in Lithuania.
Managing knowledge in the supply chain and the role of brokers
To ensure the smooth cross-border movement of goods, Customs professionals need to understand the specifics of the supply chains they manage and the many actors involved, have an overview of the latest developments in the trade landscape, and maintain a high level of knowledge of Customs and trade-related regulations in the countries and regions they cover.
When doing so, they are faced with many challenges. The international supply chain is a complex environment for knowledge management, as it brings together multiple private and public entities which have no ownership relationship or hierarchy between them[1], and have competing policies and missions as well as different resources. It is also a moving environment, where regulations and procedures change and new ones – including a growing number of non-Customs regulations – emerge on a regular basis.
In such a context, it is not hard to understand why companies often entrust their Customs and trade formalities to Customs brokers. In many countries, the latter play a key role as intermediaries between Customs and business; for example, more than 80% of import and export declarations in Lithuania and Bulgaria are lodged by brokers[2]. The brokers’ role is diverse. As explained in the WCO Study Report on Customs Brokers[3], “there is a wide range of models among countries regarding the use of Customs brokers. The function of a Customs broker also varies greatly, from the preparation of documents related to release and clearance, to the payment of duties and taxes, to providing assistance in post clearance audits, to representing clients in dispute resolutions, and to providing advice/consultancy services to traders aimed at helping them to meet various regulatory requirements”.
About entry level requirements
Brokers navigate through the complexity of international trade thanks to information systems, but there is a limit to what the systems can do, in that they are only as good at problem solving as the people who operate them. As in other professions, knowledge, not just information, is a broker’s most strategic asset.
If the role of a broker is so demanding and the stakes (compliance) are so high, one can wonder why the profession is self-regulated in most countries. According to a survey conducted on LinkedIn, the vast majority (89%) of the 97 individuals who participated in the survey believe that brokers should be licenced and that the licensing scheme should include an examination system for verifying/testing Customs brokers’ knowledge of Customs and related laws and regulations.
In the WCO Study Report, it is stated that certain countries, including some which do not have an examination system, employ additional means for verifying the Customs knowledge of brokers. “A sample of the methods used to verify brokers’ Customs knowledge includes: the conducting of interviews (Australia and the Democratic Republic of the Congo); the completion of an approved course of study (Australia); a Customs diploma programme (Fiji); a specific training programme (Malta); five years of work experience in Customs matters (Mexico); and a “fit and proper person assessment” based on education, work experience, and industry knowledge (Seychelles).” It should also be noted that in the many countries where the activity of Customs broker is not licenced, the obtention of a compliance programme certification (for example, an AEO compliance type status) is often the only formal proof of professional qualification.
Even where there are entry level requirements, or another type of knowledge assessment/verification system is in place, this may not be sufficient or relevant for a number of reasons.
First, to understand what level of knowledge is being validated by an examination, it is necessary to look at what is involved in preparing for the examination. This differs greatly from country to country. In Lithuania, for example, the training courses offered to prepare individuals who have no previous Customs knowledge take two to three weeks to complete. Obviously, in such a short time an individual can acquire some basic knowledge on how to fill out a Customs declaration, but he or she will be far from a professional in the Customs field.
Furthermore, holding a Customs broker license does not necessarily mean that the knowledge acquired is up-to-date. In Lithuania, once the Customs broker’s examination has been passed there are no formal requirements for regular reassessment of knowledge, nor is there any obligation to undertake ongoing professional development.
Finally, compliance certification schemes, such as compliance-oriented authorized economic operator (AEO) or trusted trader programmes, usually require the applicant to prove he or she has a “professional qualification”, but there is often no clear definition of that term. This requirement exists in the EU, for example, but the Union Customs Code does not provide much explanation as to what it actually means. In Lithuania, the proof of “professional qualification” is the Customs broker’s license – so all that is required is to complete two-to-three weeks of training and pass the examination.
In the business community, there are several suggestions circulating with regard to this issue; two of these are of particular interest:
- to establish “Customs consultant[4]” as a licensed profession;
- to create a special compliance certification scheme for Customs representatives, which would assess the applicants’ knowledge of Customs and trade matters.
Interesting knowledge management practices
Thankfully, many Customs brokers have adopted procedures and practices for collecting and sharing knowledge. Members of the Lithuanian Customs Practitioners Association (LCPA) range from very small companies (up to 10 employees) whose main activity is Customs brokerage, to large international ones whose main activity is logistics. We surveyed them on certain aspects of knowledge management, namely recruitment and onboarding of new staff, best practices related to knowledge sharing, evaluation of staff progress, and results. We also asked them for feedback on what the LCPA offers to its members. A short summary of their responses is set out below.
On-boarding new staff: mentorship, training and learning opportunities
Companies drew attention to the shortage of knowledgeable and skilled specialists in the market. They therefore prefer to look for people with the right profile among their current employees, and invite them to join the brokers team. When it comes to on-boarding new colleagues, all respondents indicated that they have a mentorship process in place to ensure informal transmission of knowledge, culture and values. All of them assign experienced colleagues to take care of a newcomer, and some companies have also developed training materials. Respondents emphasized how important it is for new brokers to understand not only their own area of work, but also the activities of the other departments in the company whose tasks will impact on their work as brokers.
The companies surveyed identified several challenges. Young people tend to change jobs, and even profession, frequently; to keep them curious and interested in what they are doing, some companies offer them opportunities to undertake activities such as participating in working groups, organizing events or creating newsletters. Another challenge is remote working, which makes it difficult to build team spirit. Some respondents emphasized the importance of creating a pleasant, positive working environment where colleagues actively exchange knowledge and experiences.
Brainstorming, developing case studies and team meetings
According to the respondents, the most effective way of learning is to analyse practical situations – discussing the issue encountered, the risks it presents, and the impact of non-compliance on all stakeholders. It is good practice to capture the content of such discussions in written form and upload it on the knowledge management system (one respondent called this the “experience capture tool”), so that all employees can have easy access to the information should they need it.
Many respondents also stressed the importance of regular meetings to exchange newly-gained experience and knowledge. One of them explained that he holds monthly meetings which always follow the same agenda. The meetings start with an overview of recent legal changes and a discussion about any mistakes or areas for improvement detected during internal auditing. They continue with presentations by one or two colleagues on certain topics (in the course of the year, everyone has to give at least one presentation). Finally, participants share what they have learned in between meetings, either while working on a client case or through reading specialized journals.
Reporting to colleagues on knowledge acquired while participating in a seminar or event was also deemed to be good practice. The idea is to make the sharing of information among colleagues a habit.
Reviewing work and organizing surveys
One way to measure the impact of knowledge management policies is to look at the quality of the work performed by employees, especially when tasks require a high level of knowledge. With this in mind, some companies review Customs declarations and analyse any errors made. One respondent also explained that his company has developed a questionnaire to find out how the employees evaluate knowledge sharing in the company, and what knowledge they would like to receive.
Joining a Brokers’ Association
Small companies which do not have a formalized knowledge management process in place indicated that they delegate most of this task to their Brokers’ Association. The LCPA organizes conferences, webinars and training, and publishes the Customs Compliance & Risk Management Journal. It makes sure that its members have access to information in a timely manner, and gives them the opportunity to deepen their knowledge of complex topics by working with experts from public and private entities. By fostering exchanges between brokers and representatives of Customs and other relevant institutions, the LCPA also aims to help trade stakeholders to better understand each other’s views and challenges. The Association also actively manages a forum on its website which enables members to share solutions to any issues raised by one of them.
More information
www.lcpa.lt/en
[1] Sartori, Jeanfrank (2021). ‘Organizational Knowledge Management in the Context of Supply Chain 4.0: A Systematic Literature Review and Conceptual Model Proposal’. https://en.jeanfranksartori.com/km-in-sc40
[2] Dr Momchil Antov (2021). ‘The role and importance of customs representation in Bulgaria’, Customs Compliance & Risk Management journal. https://www.customsclearance.net/en/articles/the-role-and-importance-of-customs-representation-in-bulgaria
[3] https://mag.wcoomd.org/magazine/wco-news-81/customs-brokers-an-overview-of-the-outcomes-of-the-wco-study-report
[4] Michael Tomuscheit (2022), co-author of ‘Customs broker’s profession: views and news’, Customs Compliance & Risk Management journal. https://www.customsclearance.net/en/articles/customs-brokers-profession-views-and-news
