Customs Broker selection – First step to ensure compliance (part-1)

Exim Vidya

In International Supply Chain Customs Broker is an important link. If a customs broker becomes a weak link in your international supply chain, it will result in the stoppage of business and carry additional risk of violation of compliances, which may result in fines and penalties. The selection of a Customs broker is important in international trade and if done correctly, will avoid such violations and add value to business.

Global Scenario

It is important to understand the global scenario before getting into Indian requirements. As per the Revised Kyoto Convention (RKC), Customs broker services are ‘Optional’. In a few countries, the use of Customs brokers is mandatory, however, the majority of countries follow the ‘Free Market’ principle where the importer/exporter takes commercial decisions.

The General Annex (GA) of RKC (standard 8.1 to 8.7) gives clear direction. Additionally, Article 10.6 of the WTO Agreement on Trade Facilitation (TFA) specifies each country has transparent and objective rules for licensing of Customs brokers. WCO published elaborate Guidelines in 2018, which cover all points and guide countries across the globe.

Indian Regulations

As per Customs Act 1962, Section 146 specifies a license for a Customs broker, and sections 147 & 148 cover ‘Liability of principal and agent’ and ‘Liability of agent appointed by the person in charge of conveyance’. The Customs Brokers Licencing Regulations, 2018 covers definitions, processes, conditions, security, surrender of license, validity, obligations and suspension and revoking of licenses etc.

The decision to use Customs Broker or handle self-clearance

If using the services of a Customs broker is not mandatory, why should we engage Customs brokers? Why cannot customs clearance be done using in-house resources? What is the Indian market scenario? Even with simplifications, automation, and digitization, why is self-clearance still not popular?

A market study in India shows that 99.99% of companies are using Customs brokers. Further, global trends shown by the WCO Study report on Customs Brokers done in June 2018 show a similar trend. The advantages that substantiate the decision to use Custom brokers in India are listed below:

This is an abridged version of the EXIM Vidya segment that was published in the June issue of Logistics Insider magazine. To read the complete version, please click here.

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