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How Brokerage and Duty Overpayment Hurt Your Bottom Line

Jun 30, 2021 12:30:00 PM

It should be a simple equation: you transport goods from point A to point B — safely, on time, and without incurring unexpected fees — and earn trust and loyalty from clients.

For this equation to work, you must estimate duties, taxes, and brokerage fees accurately. And as the customs landscape grows more complex due to complications like Brexit, making correct estimations is becoming increasingly difficult. As a result, customs errors have, unfortunately, become business as usual — and they’re costly.

Here, we’ll take a look at a few of the common, interrelated issues surrounding duties, taxes and brokerage fees that may be hurting your bottom line and how you can prevent them.

Incorrect duty estimates

It’s imperative to provide duty estimates that are as close to the actual amount as possible. Every country has its own tariffs, duties, and taxes, along with a unique set of customs procedures, rules, and forms, which can (and do) change frequently. Therefore, you need a reliable system to stay on top of these fees and maintain proper customs compliance.

Shippers and their customers want maximum transparency around pricing, so you may damage your relationships and your reputation if you provide incorrect estimates. If the burden is placed on the buyer, they may refuse to pay, and the shipper will lose money; but no matter who foots the bill for the unexpected amount, someone will be unhappy, and you’ll lose credibility.

To avoid this situation, do your due diligence and provide precise duty estimates. Otherwise, it’ll create budgetary headaches, impact your ability to plan, and, worst of all, damage your client relationships. 

Customs paperwork errors

Duty rates are determined according to HTS (Harmonized Tariff Schedule) codes, and U.S. importers must use these properly for accurate commodity duty rates. Otherwise, you’ll face border delays, non-compliance penalties, confiscated cargo, or even revoked import privileges.

HTS codes are notoriously tricky. The first six digits come from the international Harmonized System code and are followed by four digits that further classify the product. Some countries require the addition of other nation-specific codes as well.

Entering just one number incorrectly when inputting HTS codes can result in inaccurate payments. And whether you overpay, underpay, use the wrong forms, or have improper documentation, you’ll cost your organization time, resources, money, and reputation.

Unfortunately, you can’t assume shippers will use the correct codes, either. But, even if it’s the shippers’ mistake, freight forwarders can still be held responsible for incorrect codes — so it’s up to you to get it right and remain above board.

On a more general note, it’s important to file and store all your paperwork properly. Having easily accessible documentation when it’s requested shows everyone you work with that you’re dependable. Also, it makes things much easier in the case of a customs audit (and less costly).

Delays

Consumers don’t just expect timely shipping; they demand it, so it’s crucial that goods clear quickly and efficiently through customs. Expect serious delays, additional customs fees, and unhappy clients if your paperwork is incomplete or incorrect.

Imagine this scenario: you’re shipping perishable goods, which spoil due to a (preventable) customs delay. Your shipper and their customer are understandably upset. Due to your specific contract, insurance coverage, and laws in your region, you’re financially liable for those lost goods.

You can avoid this kind of fiasco — and the resulting damage to your reputation and bottom line — with customs brokerage processing that keeps you abreast of every rule, regulation, code, and calculation you need to know.

How to prevent unexpected costs

Understandably, unexpected costs may crop up during the shipping process. In addition, it can be challenging to keep up with all the necessary laws, customs requirements, VAT rules, duty rates, HTS codes, and more — which all vary from country to country — especially if you’re operating in multiple regions.

Even if your in-house team doesn’t make frequent mistakes, it’s still an immense administrative burden to manage all that paperwork, and it requires resources dedicated to staying informed about the latest changes.

Working with an experienced customs brokerage processing partner can take the burden off your in-house team and ensure that you have seasoned experts managing your customs paperwork. A good business process outsourcing (BPO) partner will take care of all the details with services like origin data capture, import/export rating, invoice matching, customer contact, adherence to strict procedure compliance, and reports on accurate tax and duty rates.

Conclusion

Customs processing is complex, and it’s easy to make errors that have an outsized impact on your bottom line. For example, incorrect duty estimates, paperwork errors, and shipping delays can all wreak havoc on your business and create an unmanageable workload for your in-house teams.

Working with a business process outsourcing (BPO) partner with extensive international shipping and customs brokerage processing experience is one way to ensure your customs paperwork is accurate, your bottom line is minimally impacted, and your reputation is one of reliability and outstanding service.

Looking for a trusted BPO partner to support your organization’s success?

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