If your business involves you exporting or importing products, you know that getting your shipment through the customs stations is always an elaborate task. The paperwork seems cumbersome, especially if you do not necessarily possess the technical know-how of the regulations.
To ease the process, the Government of India provides a 'Customs House Agent (CHA)' or 'Customs Broker' license to individuals who help the traders take care of all their documentation and other customs-related obligations.
Who is a Customs House Agent or Customs Broker?
In the Indian context, a Customs House Agent (CHA) or a Customs Broker is a license holding individual that helps exporters and importers with their shipments at the customs station. They act as a liaison between their clients and the customs authorities and help their clients with all the necessary documents for their cargo. CHAs ensure that the shipment passes through the customs without any hassles and reaches the destination on time.
When do you need a Customs Broker?
The ideal time to contact a customs broker is before you sign any international trade, for the very fact that a qualified broker is highly equipped to guide you through the entire process and plan the customs clearances well in advance. They will advise you on what terms and conditions to keep in the agreement. If you are an importer, even if you choose to visit the international facility to administer your cargo, it is always preferable to keep your broker in the loop during the process.
Doing so mitigates the risk of your cargo running into any trouble at the customs station because of lack of documentation or other technicalities. Having a customs broker represent you or just by your side from the time of initiation of the contract pays off in the end.
What does a Customs Broker or CHA do?
As per the Customs Act 1962, IATA regulations, and the Customs Broker Licensing Regulations of 2018, the three main activities of a Customs Broker are:
Inward and outward processing of vessels and carriages. This means that a customs broker can undertake the clearance of conveyances, inwards and outwards entries of all the different types of carriers like ships, railway trains, and aircraft.
Import and Export of goods.
An audit of the same at any customs station that has endorsed the broker.
Benefits of having a customs broker
1. Make Informed Trade Decisions
Staying aware of all the regulatory and policy changes can often be a cumbersome task, especially when you have an entire business to take care of. This can be avoided by hiring a CHA to represent you in front of the customs department. Their technical know-how ensures that your paperwork holds like a fort and that there are no last-minute complications with the cargo.
2. Get the Best Out of Global Trade Scenarios
Countries enter into trade agreements all the time to boost the export-import business between them. A CHA keeps a close eye on all such changing scenarios and alerts you when a lucrative window opens up. You can get the most out of such opportunities with an alert, hands-on customs broker by your side.
3. Never Run Out of Steam
Customs brokers are professionals who are trained to process an enormous amount of paperwork in record time because that is their core competency. They have all the tools of the trade, all the resources at their disposal. Their resource pool is quite extensive, and they can dip into them when required. You can leverage all of these by hiring a competent CHA or a customs broker.
4. Sail Smoothly Through Compliance
A customs broker or a CHA is well versed with all the regulations and compliance of all the major countries. Once you hire a competent CHA, you no longer have to lose your sleep over filing important paperwork for your shipment. Your CHA guides you through all the necessary processes and gets you the clearances required to import or export the cargo.
CHAs are also well equipped with the customs jargon and can prove to be a vital asset during the entire export/import process.
How much does a Customs Broker cost?
A customs broker or a CHA generally charges around INR 4000 to 5000 for a small or a regular-sized shipment. The brokerage charges are over and above the fees charged by the government and the customs department.
How to choose a Customs Broker or CHA?
Here are some of the factors that you should keep in mind while choosing a customs broker for your shipment(s):
1) Domain Expertise
Here is the thing: No customs broker or CHA can claim that they have the perfect grasp of each domain and industry. You need to check whether the one representing you knows the ins and outs of your niche. Only then can you truly benefit from hiring them?
For example: If your shipment consists of pharmaceutical APIs, you need to search for a broker who specializes in processing shipments carrying pharma and medicinal products. Not doing so may result in complications at the time of customs clearances.
2) Port Expanse/Coverage
If you are importing through several ports, you should hire a broker with their own offices in those ports. Your local one-office broker may give you great service in their homeport, but they will have to use sub-agents in other ports and thus will lose a great deal of control. By the same token, if you are only importing through one port, the smaller, one-port broker may be perfect for you since they can often give you much more personalized, hands-on service.
3) Business Reputation and References
Before hiring a broker’s service, invest some time in carrying out preliminary market research about them. Ask them about their previous projects and if they can provide you any references.
Talk to multiple references, understand how the broker handled their shipments and if there were any hiccups. While it’s understandable that no broker will ever be able to have a 100% happy clientele, they should be able to get good reviews from most of them.
4) Competitive Pricing
While there is a standard range in which the brokers usually charge, you are still likely to find some cost variations if you inquire with multiple brokers. However, it isn’t always about who provides the cheapest services, but how can you get the right services at the cheapest prices.
Is it mandatory to hire a Customs House Agent?
There is no law that states that it is mandatory for an exporter or an importer to hire a CHA or a customs broker. However, it is advisable that you hire one, especially if the cargo movement is critical, urgent, or carrying high-cost goods.
Customs House Agent vs Freight Forwarder
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Customs House Agent in India
As per the regulations made under sub-section (2) of Section 146 of Customs Act, 1962, a Custom House Agent (CHA) is a person who has been licensed by the government of India to perform the duties enshrined in the license.
In order to obtain a CHA license, an applicant should:
- Have a master’s degree in Law, or be an MBA/CA
- Have a pass in the Form ‘G’ as an employee of the organization
- Should hold at least 3 years of experience in the domain of customs.
- Should hold a minimum of 5 lakhs worth of bank certified assets.
- If there are more applicants than licenses, the Commissioner selects by seniority of holding a G pass. If two people have equal seniority, the older person will be preferred.
Does a Customs broker work for the government?
A customs broker does not work for the government. However, anyone who seeks to become a customs broker or a CHA has to go through the necessary licensing procedure. Once received, the broking license is valid across all the customs stations across the country. However, there is a catch here.
As a customs broker or CHA, you need to collect endorsement from the station(s) that you want to operate from. Without it, the CHA or a customs broker cannot undertake any of his/her activities.
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