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Differences between a Freight Forwarder and a Customs Broker

What's in this article?
  1. What Is A Freight Forwarder?
  2. How Do Freight Forwarders Work?
  3. What Is A Customs Broker?
  4. How Do Customs Brokers Work?
  5. Differences Between Freight Forwarders And Customs Brokers
  6. Primary Role In Imports And Exports
  7. Fees
  8. Payment
  9. Locality
  10. Flexibility
  11. Regulations
  12. Customer Service
  13. Insurance Costs
  14. When Is It Best To Choose Freight Forwarders Over Custom Brokers?
  15. #1 Your Time Frame
  16. #2 Shipping Volume
  17. #3 The Type Of Cargo You're Moving
  18. #4 The Size Of Your Shipment
  19. #5 Your Familiarity With Foreign Countries
  20. #6 Your Budget
  21. #7 Upfront Costs
  22. #8 Your Shipping Experience
  23. Tips For Getting The Most Out Of A Freight Forwarder Or A Customs Broker
  24. Ask Around
  25. Check Online Reviews
Differences between a Freight Forwarder and a Customs Broker

Freight forwarders and customs brokers are two types of transportation companies that handle international shipments. As a result, they both play essential roles in global trade.

In this article, we'll compare the differences between freight forwarders and customs brokers to help you decide which is right for your business.

What Is a Freight Forwarder?

A freight forwarder (also known as a logistics company or transportation broker) is an organization that arranges for the shipment of goods.

Freight forwarding companies are usually large businesses, but smaller ones specialize in certain types of shipments and services.

Freight forwarding services have been around since ancient times. Merchants used them to ship their products long before any government regulation was enacted.

How do freight forwarders work?

Freight forwarders are companies that act as intermediaries between shippers and carriers.

Shippers use freight forwarders when they want to send their goods from one place to another. Third-party carriers are companies like trucking companies, railroads, ocean lines, etc., who transport the cargo.

The freight forwarder will find the best carrier for the job based on the type of shipment being sent. The freight forwarder then contacts the carrier and negotiates the rate with them.

Once all parties agree on the terms of the contract, the freight forwarder issues a bill of lading to the shipper. This document shows what the shipment contains and where it is going. It also includes the agreed-upon price.

The freight forwarder then submits the bill of lading and payment to the carrier. When the carrier receives the documents, they know exactly what to expect and can prepare accordingly.

Once the carrier has received the export documents, they contact the shipper to let them know what's happening. The shipper may pick up the shipment at the port or arrange for someone else to take care of it. Either way, once the carrier picks up the shipment, they deliver it to its destination.

differences-between-a-freight-forwarder-and-a-customs-broker-02.jpg

What Is a Customs Broker?

In the U.S., a customs broker is a person who helps people with the importation of merchandise across international borders. In addition, the customs broker acts as an agent for importers and exporters.

The U.S. Department of Commerce regulates customs brokers – the federal government must license them to do business in the United States.

All over the world, customs brokers play similar roles. However, they may not always be required to obtain licenses from local governments.

How do customs brokers work?

Customs brokers are the middlemen between importers and exporters. They act as a liaison between both parties, taking care of all necessary paperwork for import or export transactions.

Customs brokers also help clear goods through the Customs Department at the port of entry.

Custom brokers are responsible for filing applications for import permits, obtaining approvals from government agencies, following entry procedures, preparing invoices, and submitting those to customers.

They also make sure that all necessary documentation is prepared for customs clearance. In addition, customs brokers help importers and exporters avoid delays caused by missing forms or other problems.

When dealing with customs brokers, it is crucial to understand how the process works so you don't end up paying more than you should.

Differences between Freight Forwarders and Customs Brokers

Although freight forwarders and customs agents have similar jobs, the two have some core differences.

Primary role in imports and exports

Freight forwarders are responsible for arranging all the paperwork required by law to ship goods from one place to another.

This includes procuring shipping containers, booking space on ships, preparing bills of lading, and ensuring the cargo arrives safely at its final destination.

On the other hand, customs brokers deal only with the legal requirements governing imports and exports. This means they will file papers with the appropriate government agencies, such as the IRS, the State Department, etc.

Fees

Freight forwarders usually charge a fee per transaction, whereas customs brokers typically charge a flat rate.

The freight forwarder's cost depends on the shipment's size, the distance involved, and the number of documents needed. As for customs brokers, their rates vary depending on where you live.

So, overall, freight forwarders tend to be more expensive than customs brokers.

Payment

A freight forwarder earns a commission when successfully negotiating rates with a freight carrier. In most cases, this means that the freight forwarder gets a percentage of the total cost of shipping.

On the other hand, customs brokers earn money only if they succeed in importing or exporting goods. Therefore, customs brokers usually get paid a flat fee for each transaction.

differences-between-freight-forwarders-and-customs-brokers.jpg

Locality

Freight forwarding businesses specialize in international trade. They take care of everything involved with moving goods across national boundaries, including customs clearance and documentation.

Customs brokers specialize in domestic trade. They handle the paperwork needed to move goods between states.

Flexibility

The freight forwarder must work within the parameters of the carrier's contract with them. In contrast, the customs broker can offer any service they want if it fits into their business model.

For example, a freight forwarder may not be able to provide services that require additional time or effort. If a customer wants an expedited delivery, then the freight forwarder cannot help them.

However, a customs broker may be willing to do something extra. For example, they might be willing to pay for additional insurance coverage for your shipment. Or they might be willing to give you a discount on your fees because they know how much you need the money.

Regulations

Freight forwarders have to follow regulations set by the shippers who hire them. These rules often include restrictions on what they can and cannot do.

However, customs brokers don't have to worry about these issues. They're free to make up their own rules, which is why they can sometimes offer better deals.

Customer service

When you use a freight forwarder, you'll probably have to contact them directly. You won't be dealing with a sales representative. Instead, you'll have to call or email the company if you have questions or concerns.

That said, freight forwarders are generally very good at answering questions and resolving problems. However, some customers find that they aren't available during regular business hours.

On the other hand, customs brokers are always open, even during off-hours. So, if you have a question, you can always contact them.

Insurance costs

Freight forwarders must provide insurance coverage for their clients. If they fail, they could be held liable for any damages caused to their client's merchandise.

On the other hand, customs brokers are not required to provide insurance coverage for their customers. Instead, they are only responsible for ensuring that goods imported into the U.S. meet specific standards the U.S. government sets.

When Is It Best to Choose Freight Forwarders over Custom Brokers?

The following ten factors should be considered when choosing between using a freight forwarder or a customs broker:

#1 Your time frame

Do you need to ship within a short period of time?

If so, then you should probably use a freight forwarder. However, if you have plenty of time, you'll likely do better with a customs broker.

#2 Shipping volume

How much business do you plan to conduct in a year?

If you expect to handle large volumes of shipping each month, then you should consider using a freight forwarder. Otherwise, you may prefer to use a customs broker.

when-is-it-best-to-choose-freight-forwarders-over-custom-brokers.jpg

#3 The type of cargo you're moving

How fragile is the item you're sending overseas? Is it easy to break or damage?

If you're planning to send sensitive products like electronics or machinery, you should probably hire a customs broker. Otherwise, you may do better by using a freight forwarder to move your package.

#4 The size of your shipment

Does the size of your shipment make it challenging to manage?

If you're sending a small number of packages, then you may do better by working with a freight forwarder. However, if you're expecting to spend a lot of boxes, crates, or other more oversized items, you may want to use a customs broker to help you.

#5 Your familiarity with foreign countries

How well-versed are you in customs laws and customs regulations?

If you're unfamiliar with the process, you may do better with a customs agent. On the other hand, if you already know how things work, you might be able to save money by hiring a freight forwarder instead.

#6 Your budget

Is there a limit to how much you'd like to spend?

You could always use a customs broker if you don't mind spending a little extra money. But if you're looking for ways to cut costs, you may want to stick with a freight forwarder instead of a customs broker.

#7 Upfront costs

A customs broker will charge a fee upfront. So, unfortunately, you'll have to pay for his services even if you decide later that you don't want him to help you with your shipments.

On the other hand, freight forwarders usually require you to pay only after the fact.

#8 Your shipping experience

Have you worked with freight forwarders or customs brokers before, and how was your shipping experience with either of them? The answer to this question should guide you in making the right choice.

If you're new to the international shipping process, you may want to try a customs broker first. They can provide valuable advice and guidance as you get started. However, if you've used a freight forwarder before and had good results, you may want to hire one again.

Tips for Getting the Most out of a Freight Forwarder or a Customs Broker

Finding someone to do this for you can be extremely difficult if you're looking to move your goods from one country to another. You need to work with a company that has experience in handling these types of shipments and knows what is required to get them through customs.

If you don't know where to look, we have some tips on how to find a reliable service:

Ask around

Ask people you trust for referrals. Word of mouth is still one of the best ways to find good company.

Check online reviews

You can also search for customer feedback on sites such as Google, Yelp, or Facebook. Read through user comments to learn which companies are trustworthy and which ones aren't.

tips-for-getting-the-most-out-of-a-freight-forwarder-or-a-customs-broker.jpg

Get quotes

Once you have several names, ask each company for a quote. Make sure to compare prices so you can choose the best option.

Choose a company based on its reputation

Look at whether the company has an established track record. A company with many positive reviews is probably going to be reliable.

Find a company that offers multiple services

Some companies specialize in moving certain items between countries. For example, a company that specializes in importing cars might not be able to handle your furniture.

When choosing a company, ensure they offer the services you need.

Final Thoughts

The shipping industry is complicated and requires a lot of knowledge and expertise. Therefore, finding a company that understands the shipping terrain when sending things across borders is important.

A-1 Auto Transport has been shipping cars, trucks, motorcycles, freight, heavy equipment, household goods, and more throughout the domestic USA and overseas for over 30 years.

Don't hesitate to contact us today for a free quote and be assured of reliable, professional cargo transportation.

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Joe Webster began his journey in the auto transport field by attending the University of Southern California (USC), where he graduated with a Bachelor of Business Marketing. 

After college, he started his career in the auto transport industry from the bottom up and has done virtually every job there is to do at A-1 Auto Transport, including but not limited to: Truck Driver, Dispatch, Sales, PR, Bookkeeping, Transport Planner, Transport Manager, International Transport Manager, Brokering, Customer Service, and Marketing. Working with his mentor Tony Taylor, Joe Webster has learned the ins and outs of this industry which is largely misunderstood. 

With over 30 years experience in the industry, we've been helping people ship their vehicles, motorcycles, RV's, heavy equipment, household goods and more across the country or overseas without a hitch. Ask us anything.

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A-1 Auto Transport is a disclosed agent for the following shipping companies:

Trans Global Auto Logistics, Inc.
3401 E Randol Mill Rd
Arlington, TX 76011
NO. 018191NF
CFR Rinkens
15501 Texaco Avenue
Paramount, CA 90723
NO. 013055NF
ABC Worldwide LLC
2840 NW 2nd Ave #105
Boca Raton, FL 33431
NO. 025472F
CSI Logistics
435 Division Street
Elizabeth, NJ 07201
FMC 22206
Intl Cargo
45 Campus Drive
Edison, NJ 08837
NO. 17858N
ShipYourCarNow LLC
1160 South Rogers Circle Suite 1
Boca Raton, FL 33487
NO. 025646
Merco Air & Ocean Cargo, Inc.
6 Fir Way
Cooper City, FL 33026
NO. 021869F
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