Some thoughts about Customs brokers: the WCO survey and beyondBy the International Federation of Customs Brokers Associations
This is a time when there is a high level of interest worldwide in the use of Customs brokers, especially the value of Customs brokers in creating efficiencies for moving goods across borders in a cost effective way, and in securing revenue while protecting the public interest.
Yet, Customs brokers around the world spend a considerable part of their time explaining what they do. It isn’t that the explanation is difficult, but it is certainly not universal, since the requirements to become a Customs broker and the services provided by them often vary from country to country, and are prescribed by national legislation.
The definition of a Customs broker depends on many things, such as national regulations (if any), a country’s business marketplace, the role of other logistics service providers, and something as fundamental as geography.
The International Federation of Customs Brokers Associations (IFCBA) has thrived; not because of the differences among Customs brokers, but because of what they have in common.
Welcoming the WCO Survey
Customs brokers welcomed the news last year that one of the WCO’s priorities was a survey about Customs brokers. We were then delighted to learn that a very significant number of WCO Members participated in the survey, enthusiastically sharing their knowledge and experience on the regulation and practices of Customs brokers in their countries.
The survey responses and analysis contribute to the body of knowledge about Customs brokers, and confirm the importance of the subject for Customs administrations and the private sector alike. They also raise rich questions for further exploration. And, from an IFCBA perspective, we were pleased that the survey results were consistent with feedback from, and the priorities of, IFCBA members in some of the largest trading countries in the world, including our members in developing countries.
Customs brokerage licensing frameworks
In fact, the analysis of the WCO survey results and the commentary in the report reinforces the principles outlined in the IFCBA best practices model on Customs broker regulation which was first endorsed seven years ago after considerable research and discussion. At the time, there was an important conversation about the mandatory use of Customs brokers at the World Trade Organization (WTO) as the WTO Trade Facilitation Agreement (TFA) was being crafted.
In 2009, the IFCBA articulated the principle that “the IFCBA supports the establishment of transparent, accountable and consistent broker licensing regimes by relevant government agencies,” and provided guidance in the following key areas, critical to the development of effective Customs brokerage licensing frameworks:
- scope of practice (what only licensed Customs brokers can do that other third parties cannot);
- regulation of entry (development of knowledge through education and examination);
- regulation of practice;
- the role of national Customs broker associations.
Each of these areas is multi-layered, but at the heart of the detailed regulatory framework is the belief that the public interest is best served by government regulation of Customs brokers.
Benefits of using Customs brokers
Governments in many countries are going through periods of dramatic change, with comprehensive regulatory review and modernization programmes, coupled with the challenges posed by global financial weakness and pressures to reduce deficits as well as cut spending, resulting in demands to do more with less.
More than ever, it is recognized that Customs administrations do not have the capacity to deal with thousands of individual companies which import or export goods, and most of those companies do not have the necessary capacity to deal directly with the requirements of Customs and other government agencies in moving goods across borders.
The existence of licensed Customs brokers not only allows governments to allocate scarce resources more efficiently, it also saves governments money. There are many examples of how Customs brokers represent a net transfer of costs from the public to the private sector by taking on functions like data entry, management and analysis, and communicating information about complex regulatory requirements to thousands of clients.
Customs brokers are uniquely placed to help Customs administrations achieve improvements, including efficiencies in the application of regulations, the development of programmes that optimize the use of technology, and the provision of support for the application of supply chain security standards.
As the agenda and priorities of Customs administrations have expanded to include border security, Customs brokers can be seen as the original ‘trusted traders,’ regulated by government through such things as security background checks, review of financial viability, and examination of expert knowledge. In addition, as early participants in authorized economic operator (AEO)/trusted trader programmes, Customs brokers can assist in building a safer and more secure supply chain.
Knowledge, capacity and strategic alignment
Over the past decade, little has remained the same in the international trade environment. The marketplace has expanded beyond expectations as a result of the proliferation of free trade agreements (FTAs), and the fact that traders are facing competitive pressures which require them to focus on their core business, and make strategic decisions about how to best manage their businesses in this changing environment. How borders ‘work’ is an important consideration in investment decisions, in profitability outcomes, and in a country’s competitiveness on the global stage. From a Customs broker perspective, three areas are especially important as we look forward:
- building knowledge;
- building capacity;
- strategic alignment.
Knowledge is an important asset for Customs brokers, and is critical in providing value to clients. The IFCBA is trying to better understand how knowledge is delivered, as an entry level requirement and in ongoing professional development. We see the potential for partnerships with Customs administrations in developing and delivering training, and believe that this provides benefits beyond Customs broker licensing to areas like compliance management and risk management. In addition, we believe that there is an important role for national associations of Customs brokers in this area – building capacity and strengthening the knowledge base. We also recognize that there is more that we can do in building capacity around Customs brokers and their regulation.
The IFCBA has worked on capacity building initiatives in Latin America and Asia, in partnership with the Canada Border Services Agency (CBSA), the World Bank and the WCO itself. Through this work, we have learned how important it is to improve the understanding of national challenges and differing priorities, and to offer insights and support in areas such as training, business tools (for example, agreements between importers and brokers), stakeholder engagement models, and border processes, including coordinated border management (CBM) and the Single Window concept. The WCO survey results provide many ideas for future work that we can do to build and strengthen the capacity of WCO Members in these areas.
There is also the question of the strategic alignment of the objectives of the WCO, its Members and Customs broker associations – both national associations and the IFCBA – that is a positive way forward. In many countries, Customs brokers are the original trusted traders. They are regulated by government and one of the objectives of that regulation is, as we have said, the protection of the public interest.
Stakeholder engagement and Customs-business partnerships
Customs brokers are also a natural starting point for work on stakeholder engagement. Customs brokers in many countries have a strong bilateral relationship with their Customs administration, but they also have relationships with other government agencies and with other stakeholders. This multilateral positioning and reach can be of great value in opening and facilitating dialogue, and in building political will.
The interaction of Customs brokers with Customs administrations is another area of exploration which has delivered useful insight in the area of stakeholder engagement and Customs-business partnerships.
Future research and collaboration
Because things are constantly changing in the world of WCO Members, and in that of Customs brokers, the IFCBA is strongly in favour of future research activities. A collaborative effort with the WCO would provide additional insight and guidance related to good practice. The following areas have been identified in the WCO survey and in discussions with WCO and IFCBA Members as possibilities:
- distinction between registration and regulation of Customs brokers;
- Mechanisms providing authority to act on behalf of importers/exporters;
- scope of practice of regulation – i.e. what functions Customs brokers are licensed to perform;
- rationale for Customs broker regulation;
- consequences if unauthorized third parties perform Customs broker functions;
- the regulatory authority – i.e. should it be Customs or another government agency;
- mandatory use of Customs brokers;
- requirements for companies which clear goods themselves and do not use third parties;
- components of licensing – i.e. knowledge, financial capacity, and automation;
- requirements for licence renewal;
- trends in numbers of Customs brokers and the use of Customs brokers;
- exploration of the linkages between the use of Customs brokers and compliance;
- Customs brokers and stakeholder engagement.
The chance to take regular snapshots of Customs broker practice is always informative, and the IFCBA does this from time to time. We also constantly strive to better understand the business needs of Customs brokers and their clients, so that we can help to meet those needs. We always remember that Customs brokers provide a window to the needs of small and medium-size enterprises (SMEs), and, in fact, many Customs brokers are SMEs themselves.
A final area of inquiry is the value of the Customs broker in the marketplace, and continued development of the Customs broker as a knowledge expert and business innovator. The value proposition of the use of Customs brokers is particularly important and intriguing for future research. There is additional work to be done to better understand why most importers around the world use Customs brokers, and how Customs brokers can directly contribute to trade facilitation and national prosperity.
The road ahead
The IFCBA celebrated its 25th anniversary last year, which happily coincides with renewed interest in Customs brokers on the part of the WCO and among its Members. We look forward to continued collaboration to explore rich areas of inquiry, and further develop areas of good practice. We encourage those countries without a well-developed Customs brokerage community to consider the establishment of one. The IFCBA exists to meet the needs of its members, and to support and promote the value of Customs brokers. By doing that, our members facilitate economic growth by making the flow of goods across borders more efficient and compliant for all parties.