How Customs Brokers Improve Supply Chains—GEODIS Insights

In recent years, managing global supply chains has become increasingly complex. The interconnectedness of global trade presents significant challenges across countries and continents, making these networks difficult to control. Unforeseen disruptions, such as geopolitical instability, natural disasters, and cybersecurity breaches, can easily impact transportation and production.

These realities are prompting organizations to reassess their supply chain strategies, prioritize resilience, and mitigate volatility. Despite the pandemic receding, predicting market conditions remains exceptionally difficult due to the unreliability of recent historical data and current volatile circumstances.

Here's a summary of key insights:

Supply chain restructuring is challenging, but customs brokerage services can facilitate smarter foreign trade decisions.

Persistent issues like a lack of visibility, high inflation, and unpredictable demand continue to fuel volatility.

Implementing reshoring and near-shoring strategies is often a slow and complex process.

Customs brokers are essential for helping companies understand total landed costs and regulatory requirements across intricate supply chains.

"Consumer demand isn’t the only metric that matters. Inventory decisions should also be made based on the parts a product contains and where those parts are sourced.” - Dennis Unkovic, Business Advisor, Author, and International Attorney at Meyer, Unkovic & Scott LLP

Supply Chain Volatility Remains High

The year 2023 saw consumers on edge due to a slowing economy and recessionary signals. Inflation, rising interest rates, and geopolitical issues continue to shape the business landscape, forcing companies to adapt quickly in the post-pandemic era.

"Companies’ stock on hand is increasing, and their costs are going up,” said James Miller, senior supply chain consultant at Sikich. “And companies can’t just raise prices to offset these challenges in an environment where customers are cutting back.”

While the widespread supply chain disruptions of the pandemic have largely subsided, high demand and low supply persist in sectors like electronics and automotive. This ongoing volatility is particularly challenging in an age where customers expect rapid deliveries. Meeting these expectations is hampered by a lack of supply chain visibility. “Right now, importers are really struggling with the lack of accurate information on both estimated times of arrival and landed cost data,” Miller noted.

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Customs Brokers Help Companies Understand Total Landed Costs and Regulatory Requirements

Customs brokers and freight forwarders add significant value by providing accurate landed cost data for every shipped item. This allows importers to assess profitability and make informed adjustments, such as raising prices, discontinuing products, or strategically lowering margins to compete.

Working with these professionals also enables companies to navigate the myriad regulatory requirements impacting importers. This ensures compliance, allowing organizations to focus on core operations.

“Working with a reliable customs broker who has that knowledge base of what’s happening in a specific country today — and that provides recommendations based on that firsthand knowledge — translates into real benefits for importers and other shippers,” said Chin Quee.

Customs brokers employ legal experts to prevent missing data points and immediate flags for incomplete documentation, permits, or other requirements. For instance, many importers are unaware of the need for a fish and wildlife permit for products containing feathers.

“If you didn’t know that, you really don’t get a second shot at it,” Miller explained. “Customs will just destroy the product.” Companies can avoid such issues by partnering with a customs broker well-versed in relevant regulations and laws. They proactively address EPA concerns, for example, to avert costly delays like container fumigation upon arrival at U.S. ports. They also ensure pallets are properly marked as "pre-treated" and take other precautions to prevent surprises during transit or upon arrival.

Customs Brokers Help Companies Navigate Complex International Supply Chains

Just as companies hire law firms for legal representation, smart organizations engage customs brokers who are experts in customs law. “With a customs broker working on your behalf, you have someone who is constantly looking out for you in places where you could potentially make mistakes,” said Miller, highlighting the Consolidated Screening List as a frequently overlooked compliance area.

This list compiles individuals, entities, and corporations with denied export privileges or sanctions. Any dealings with these parties that violate sanctions or denial orders are prohibited. Even accepting a sales order from an organization or individual on these lists can constitute a violation.

“Most companies don’t have a solution in place to check their trading partners against the Consolidated Screening List when they’re making agreements to buy products from companies overseas,” Miller stated. “Well, guess what? If you sign a contract with one of these companies that’s on the list, you are suddenly open to investigation by the IRS and U.S. Customs.”

To safeguard clients, customs brokers maintain updated Consolidated Screening Lists and conduct regular checks on their behalf. This is crucial for companies that exercise the privilege of importing and exporting goods. “That privilege can be revoked at any time,” Miller warned. “If you source a lot of product globally and aren’t paying attention to the most updated lists, you may find yourself out of business.”