Understanding the Role and Importance of Customs Brokers in International Trade in India

[raghunandhaanan rvi]

Introduction

In today's globalised world, international trade is crucial to many businesses. However, navigating the complex web of regulations and laws governing trade can be challenging. Customs brokers play a pivotal role in understanding and interpreting these regulations. They act as a vital link between traders and Customs, bringing a wealth of expertise in customs laws and a deep understanding of the supply chain industry. In this article, we will explore the role and importance of customs brokers in international trade.

Background

The Revised Kyoto Convention (RKC) is an international agreement that allows importers and exporters to work with Customs directly or through a third-party broker. It also sets out the conditions under which third-party brokers can act on behalf of importers/exporters and specifies their liability for duties, taxes, and compliance irregularities. Notably, the RKC ensures that Customs cannot impose stringent requirements on those who deal directly with them instead of using a third party.

Licensing Criteria

Customs brokers are required to meet a variety of licensing criteria. These typically include a comprehensive understanding of Customs and other laws related to border regulatory requirements, trade-related transport and finance matters, compliance history, financial capacity, educational qualifications, work experience, written/oral examination, training hours, electronic transmission capability, financial guarantees, and incorporation or establishment in the country/citizenship or residency. These criteria are in place to ensure that duties, taxes, and fees are collected accurately and that compliance with Customs and other regulatory requirements is maintained. The licensing process should be fair and transparent, with a standard set of criteria for all regulated Customs brokers. To promote fair business practices, it may be beneficial to require evidence of financial stability and a payment guarantee on clients' behalf. Conflict of interest conditions may also be imposed as policy. The license, granted under Section 146 of the Customs Act, 1962, by the Customs Commissioners, is a testament to their competence. To obtain this license, they must pass a qualifying examination administered by the National Academy of Customs and Indirect Taxes and Narcotics, a part of the Central Board of Indirect Taxes and Customs in the Finance Ministry. Furthermore, the revised Kyoto Convention stipulates that customs broker licensing requirements must be transparent, non-discriminatory, and reasonable.

Customs Broker's Scope or Practice

Customs brokers are intermediaries between importers and exporters and the relevant Customs authorities. They provide various services such as processing refunds and adjustments, completing and submitting Customs declarations, and liaising with other government agencies. Licensed Customs brokers have a specific scope of practice, which includes preparing import and export documents, submitting Customs declarations, filing duty and tax refund requests, and consulting on matters related to imports and exports. Customs brokers are required to comply with strict rules and guidelines outlined in the Customs Brokers Licensing Regulations 2018. They play an essential role in ensuring their clients' goods are imported and exported legally and efficiently by obtaining necessary customs clearances, submitting relevant paperwork, and making payments to customs and other stakeholders. Customs brokers remain vital in facilitating international trade, and their contributions must be understood and appreciated.

Training

They must provide a training program to ensure customs brokers have the knowledge and expertise to carry out their duties effectively. The program should equip entry filers or brokerage personnel with a comprehensive understanding of customs procedures and practices. The program aims to foster better communication, compliance, and comprehension among broker employees. Instead of a static curriculum, the program should offer a comprehensive overview of what brokers need to know about Customs operations, leaving no room for ambiguity.

Managing Customs clearance

Customs brokers are essential professionals who play a vital role in international trade. They are responsible for ensuring that goods are cleared through customs in compliance with all laws and regulations. Their expertise and knowledge of local and international laws enable the smooth movement of goods across borders. They work tirelessly to represent importers and exporters, preparing and submitting necessary documents and communicating with government agencies, clients, and other stakeholders involved in international trade. Their dedication to their work ensures that businesses can thrive in the global market, and their impact on the world of commerce is immeasurable.

Compliance and Risk Management

Risk management is integral to every business, particularly in customs trade. Customs brokers must manage compliance and risk to ensure a smooth and efficient trading process. They must ensure that all customs regulations are followed and that there are no errors in customs documentation. Customs brokers are also responsible for managing risk associated with customs compliance, including the risk of penalties and fines. They play a vital role in ensuring businesses can trade internationally with confidence.

Broker's Obligations –Regulation 10 of CBLR 2018

Customs brokers who are licensed have responsibilities towards traders, which they must fulfil. Brokers must follow certain licensing obligations prescribed by some administrations regarding business ethics and professional conduct. They work under proper authorisation from the trader and must comply with Customs and other regulatory requirements. They advise their clients on different compliance requirements and take reasonable measures to follow the principles of 'Know Your Customer' (KYC). They must ensure their information is correct and not submit false claims or documents. They are also responsible for paying duties, taxes, and other charges based on the documentation provided by their clients. They must maintain high professional standards, transparency, and business ethics, ensuring high service delivery standards and discharging their duties with speed, efficiency, and integrity. They must cooperate with Customs and other government agencies to improve compliance and meet all terms and conditions mentioned in the contract between the customs broker and the trader.

Customs Brokers' Knowledge Base

Customs brokers play a vital role in ensuring the smooth clearance of goods and adherence to regulatory requirements while contributing to the collection of duties and taxes. To perform their duties, customs brokers need specialised education and knowledge of various topics such as import and export regulations, Harmonized Tariff Classification System, tariff treatments, trade agreements, valuation, product quality, origin-marking of goods, corrections, refunds/adjustments, etc. Businesses providing customs broker services should also be aware of licensing legislation, agency and contractual agreements, financial and human resource management, and ethical business practices to meet the industry's high standards.

Ensuring adherence to laws and regulations

Customs brokers have specific responsibilities outlined in Regulation 10 of the CBLR 2018 that they must follow as per the Customs Broker Licensing Regulations 2018. These rules are strict, and if customs brokers do not follow them, they can face severe penalties, such as losing their licenses. For instance, if a customs broker takes on a job without verifying their client's KYC or proper authorisation, they may face suspension or revocation of their license. To avoid such harsh punishment, customs brokers must submit KYC documents to the Customs Department as per Circular No. 9/2010-Customs dated 8.04.2010. If a customs broker or F/G cardholder violates these rules, the Principal/Deputy Commissioner or Commissioner/Assistant Commissioner of Customs can penalise them. The penalty can range from Rs. 10,000 to Rs. 50,000 and may not exempt the violator from any other legal action that may be taken under the Customs Act, 1962 or other applicable laws.

Conclusion

In conclusion, customs brokers play a crucial role in international trade as a vital link between traders and Customs. Their expertise and knowledge of local and international laws enable the smooth movement of goods across borders. They ensure that goods are cleared through customs in compliance with all laws and regulations. They provide various services such as processing refunds and adjustments, completing and submitting Customs declarations, and liaising with other government agencies. Customs brokers remain essential professionals facilitating international trade, and their contributions must be appreciated and understood.