Managing Your Customs Brokers
by Ruth Rodriguez, Attorney

If you are an importer, you probably rely heavily on customs brokers. You may not have the inclination or the resources to clear your own entries. Customs brokers can be indispensable for classification and other compliance areas. Some brokers also provide other services, including logistics and shipping. Brokers are highly trained professionals, having been vetted and licensed by US Customs and Border Protection (CBP). Using customs brokers (or other professionals, like customs attorneys) can help convince enforcement authorities that you are using reasonable care. Customs brokerage has existed as a profession for centuries, preceding the founding of our nation and proving itself essential to international commerce.

But none of this means that you give your customs broker carte blanche. A customs broker is your agent. When the customs broker makes a mistake, it is your mistake. When the customs broker violates the law, the law presumes that the customs broker is acting at your company's behest.

Hiring a customs broker does not insulate you from liability. It only extends the avenues for enforcement officials to tag your company for errors and violations. If errors and violations are uncovered, the importer-broker relationship may turn adversarial, with one party blaming the other. Some customs brokers feel that they owe a greater allegiance to CBP than to the importer. In the end, if you chose the wrong broker, you (not your broker) can lose out on the duty-free savings from programs that you did not know about, you are likely to pay hundreds of thousands, or even millions of dollars, in fines and penalties, and you are likely to pay similar amounts in administrative costs and fees to resolve the violations.

Thus, a hands-off approach is calamitous. You must remain actively involved with everything your customs broker does on your behalf. The best way to do this is to limit the number of brokers you hire, restrict the terms and duration of the powers of attorney you grant, create Standard Operating Procedures (SOPs) for your brokers, and supervise and audit broker performance.

Limit the Number of Customs Brokers. Use a customs broker as liberally as you need to, but limit the number of brokerage firms you hire. Having too many brokers is a sign that you do not control your brokers.If you do not know how many brokers you are using or who they are, you may be in even bigger trouble. There are ways, with the help of an attorney, to find out who is making entries on your company's behalf.Once you know who your customs brokers are, trim them to a manageable number. Find out what each broker is doing on your company's behalf. You may discover that you are paying more than one broker to do the same task. You may also find a disparity in the fees you pay different brokerage firms. You may find out that there are individuals and departments within your company that hire customs brokers when they have no authority to do so. All this information will enable you to negotiate for better terms with the brokers you do retain, and to create company policies limiting who can hire brokers.With all this information in hand, start revoking the powers of attorney of customs brokers that you do not need.

Sign Better Powers of Attorney. Revisit the contracts and powers of attorney for those brokers you intend to retain. It is tempting to sign the "industry standard" power of attorney or contract, but the terms and conditions may not serve your company well. There may be exculpatory clauses, limitations of damages, and other language that is suspect. Many importers sign unlimited powers of attorney. That is a big mistake. This is your power of attorney. You are the principal. You decide what the customs broker can and cannot do when representing you. Also consider limiting the duration of your powers of attorney. Avoiding "standard" forms will benefit both parties. It will force you into a dialogue with your broker, and the expectations of both parties will be revealed with clarity and reduced to writing.

Create Standard Operating Procedures (SOPs) for your customs brokers to follow. Make sure that your brokers are contractually obligated to follow your SOPs. How much, if at all, you involve your broker in developing your SOPs is a matter of choice and comfort level.

Audit your customs brokers for compliance with your SOPs. No one in your company should ever say anything like, "We don't worry about that (e.g., classification). That's what we have a broker for." There are many ways to audit your customs brokers, and your review does not have to be incredibly intrusive or prolonged. But in the end, be brutally honest in grading your customs brokers. Your customs brokers should certainly not be reluctant to cooperate, having agreed to your SOPs.

Get a good lawyer Hire a seasoned lawyer to help your company foster a mutually beneficial relationship with your customs brokers, someone who is responsible primarily for protecting your company's interests.

---------------------GRVR Attorneys has represented both customs brokers and importers for two decades. Several of our attorneys have also passed the customs broker exam and have worked in logistics and transportation.