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Frequently Asked Questions

What's the difference between a customs broker and a freight forwarder?

What is a customs broker?

A customs broker is an import specialist. Formal entries of foreign made goods representing many billions of dollars in duty collections are filed each year with the U.S. Customs Service and virtually all of them are prepared by customs brokers on behalf of importers. Some brokers are sole proprietors with a single office at one port of entry, while others are corporate firms with branches in many ports throughout the country, but all are licensed and regulated by the Treasury Department.

Nevertheless, the customs broker is primarily the agent for the importer who employs her. She is frequently the importer’s only point of contact with the U.S. Customs Service and advises on the technical requirements of importing, preparing and filing entry documents, obtaining necessary bonds, depositing U.S. import duties, securing release of the goods and arranging its delivery to importer’s premises or warehouse. The broker often consults with Customs to determine the proper rate of duty or basis of appraisement and on many occasions, if she is dissatisfied with either rate or value, she will pursue appropriate administrative remedies on behalf of her importer.

Customs brokers are essential to the U.S. Customs Service. There are over 200 laws that Customs must implement and enforce, and the experienced brokers in all ports constitute a most valuable resource of benefit to the customs service.

In all, customs brokers play a vital role in facilitating the entry, clearance and movement of import cargo and will become even more essential in the future as stated by the U.S. Commissioner of Customs during congressional hearings, “…in my view, the customs broker, the Service’s liason person with the importing public will be needed as long as there are legal requirements and regulations pertaining to the movement of merchandise into the United States.”

What is a freight forwarder?

An international freight forwarder is a “transport architect” who brings together all of the loose ends that must be coordinated if American products are to be shipped to foreign buyers in the course of our nation’s international trade.

They are both small and large firms that have been licensed by the Federal Maritime Commission as fit, willing and able to provide the expert know how and experience needed to arrange for the movement of cargo from inland points to foreign destinations with maximum speed and efficiency and at the least cost to the exporter.

Acting as agent of the exporter, the forwarder must be able to advise on the myriad U.S. government regulations affecting foreign trade, as well as the import rules of various foreign countries. She must have a detailed knowledge of her ports and their facilities and be able to advise the shipper as to the best port of shipment for the fastest transit time. She prepares and/or checks on various shipping documents and necessary licenses. She books or confirms space on the ocean vessel, she arranges transportation of cargo to ship side by rail or truck, she arranges cargo insurance on behalf of the exporter, she pays ocean freight for her principal and generally orchestrates the entire movement of goods from point of origin to seaboard and beyond in the most efficient and cost-saving manner.

The international freight forwarders must have an intimate knolwedge of transportation techniques, both their possibilities and their limitations, and has to know how to advise and act in the best interests of her exporter/principal.

Often called the “Architect of Transport,” the forwarder performs an essential role in America’s constantly growing foreign trade.

What are Incoterms, like F.O.B., C & F, AND C.I.F.?

The initials F.O.B., C & F, and C.I.F. are used indiscriminately in the import/export community. Many don't often know the actual definitions of these terms and what each means with regard to their product pricing and with regard to duty payment. Below are the definitions in simple business terms as used in international trade. A big mistake would be to assume that your supplier is working by the same definitions. Don't assume, show them your definitions and make sure that both parties are "on the same page!" Your experience with the supplier as well as your legal eagles should be consulted prior to signing any contract with these or other technical terms.

F.O.B. (Free on Board)

F.O.B. (Free on Board, also known as Freight on Board) means the seller is responsible for transportation of the goods to the F.O.B. point and for the loading of the goods on the aircraft or vessel at that point. The invoice price includes the cost of this plus the cost of the goods. The buyer is responsible for arranging and paying for transportation of the goods to the final destination, insurance coverage and any other fees associated with the movement of goods from one country to another. Title to the shipment normally passes from the seller to buy at the F.O.B. point. Some suppliers believe that F.O.B. means you are responsible to pick up the goods at their warehouse and deliver to vessel or aircraft. Make sure before you buy the goods at the price negotiated what that price includes and that you both are using the same definition!!!

C & F (Cost and Freight)

C & F (Cost and Freight) means that the price shown on the quotation, order or notice includes the price of goods plus the shipping costs to the named destination. The seller is responsible for obtaining and paying for insurance coverage. The tricky part here is that most believe that destination means port or airport closest to the buyer. It does not mean to the buyer’s door. The cost of customs clearance, duty, bond charges, and delivery to buyer’s door is the buyer’s problem.

C.I.F. (Cost, Insurance, Freight)

C.I.F. (Cost, Insurance, Freight) means that the price shown or quoted includes the cost of the goods, the transportation to the final destination and insurance coverage from the origin to the destination. The seller is responsible for contracting and paying for transportation and insurance. Generally the seller has completed the contract when merchandise is delivered to the buyer’s port, the freight to the destination is paid and the invoice and supporting paperwork (insurance policy, receipts for freight payment, air waybill or bills of lading) has been forwarded to the buyer. The cost of customs clearance, duty, bond charges and delivery to buyer’s door is the buyer’s problem.

More Questions

How do I choose a U.S. customs broker?

Choose a customs broker who has the expertise to always act in your best interest and put your business in the right market. A great customs broker will work closely with you to help maximize your profits by providing expert advice for your business. Read more: How to Choose a Customs Broker.

Do I need cargo marine insurance?

Yes, in most instances you should get cargo marine insurance in order to guard against the risks of damage, loss, theft, acts of God and other types of disasters. Tansey & Riggs can provide this coverage for you. Please refer to this article to learn more: Cargo Marine Insurance.