Freight Forwarders Vs Clearing Agents

In logistics there are often blurred lines between disciplines but there are key differences between Freight Forwarders and Customs Brokers that are important to understand. They may appear the same but are legally and technically different.

In a recent maritime stakeholders’ meeting representatives of the two leading freight forwarding agencies in Nigeria, the Association of Nigerian Licensed Customs Agents (ANLCA) and the National Association of Government Approved Freight Forwarders (NAGAFF) were engaged in a war of word over the disparity between Freight Forwarders and Customs Brokers.

The heated debate was ignited while Mr. Emeka Akabogu delivered the lead paper at the event as he tried to differentiate between a Freight forwarder and a Clearing agent/ Customs broker.

“In practice, most freight forwarders in Nigeria are actually customs brokers with only a limited number offering end to end freight forwarding services” Akabogu said.

It was this statement that triggered the debate on the true specification of a Freight forwarder and a Customs broker and consequently, some high profile members of NAGAFF and ANLCA left the venue. The president of Shippers Association Lagos State (SALS), Rev. Nicol had to advise both parties to ignore the differences as a result of “English nomenclature” but come together to settle their differences with “kolanuts and bottles of ogogoro”.

Let’s analyze these sister professions…

Who is a Customs broker?

A Customs broker is an individual or company that is licensed to transact customs business on behalf of others. Customs business is limited to those activities involving transactions related to the entry and admissibility of merchandise; its classification and valuation; the payment of duties, taxes, or other charges assessed or collected.

In other words, an importer hires a customs broker to guide their goods into a country. Like the forwarder, the broker will recommend efficient means for clearing goods through the Customs entry rules and regulations. The broker can also estimate the landed costs for shipments entering the country.

Freight forwarders often partner with customs brokers overseas who will clear goods that the forwarder ships to the overseas port. Conversely, those same foreign customs brokers contract the services of the domestic freight forwarder when the goods are headed in the opposite direction.

Who is a freight forwarder?

A freight forwarder is an agent for the exporter in moving cargo to an overseas destination and can be an integral part of your logistics plan. Their expertise in ocean freight and air freight as well as all of the paperwork involved can make your export and import business run smoothly.  These agents are familiar with the import rules and regulations of foreign countries, the export regulations of their government, the methods of shipping, and the documents related to foreign trade.

Export freight forwarders are licensed by the International Air Transport Association to handle air freight and the Federal Maritime Commission to handle ocean freight.

Freight forwarders can help exporters prepare price quotes by advising on freight costs, port charges, consular fees, costs of special documentation, insurance costs, and their handling fees. They recommend the packing methods that will protect the merchandise during transit or can arrange to have the merchandise packed at the port or containerized.

If the exporter prefers, freight forwarders can reserve the necessary space on a vessel, aircraft, train, or truck. They can even help arrange for warehouse space and storage of products at destination. The costs for their services are legitimate export costs that should be included in the price charged to the customer.

Freight forwarders should review all documents to ensure that everything is in order. This is very important when dealing with letter of credit payment terms. They may also prepare the bill of lading and any special required documentation. After shipment, they can route the documents to the seller, the buyer, or to a paying bank. Freight forwarders can also make arrangements with customs brokers overseas to ensure that the goods comply with customs export documentation regulations.

Legal Liabilities

The area of legal liabilities is very different between a broker and a forwarder. As long as a brokerage does not represent itself as being the actual carrier and does not perform the services associated with a forwarder, it has no legal responsibility for the shipment. The liability if something goes wrong, such as damage or loss, lies with the actual carrier. The forwarder, however, has full responsibility for the shipment from time of initial receipt to final delivery. This is why a forwarder needs to be insured the same as a carrier.

It is also important to understand that there are also firms which offer both freight forwarding and customs brokerage services. In these cases, these firms will typically have completely separate team/departments handling these activities due to the differences in the skill sets and expertise needed.

In a nutshell, Customs brokerage is embedded in the functions or duties of a freight forwarder and Akabogu was smart to have addressed the issue plainly when he had the opportunity earlier in the event. He was also humble enough to apologize to the freight forwarders who perform the end to end freight forwarding services.

However, the truth is that majority of those who currently parade themselves as freight forwarders are at best, licensed customs agents who only scratch the surface of the freight forwarding profession.

There is also no doubt about the fact that more than 70 percent of those who have been registered as professional freight forwarders by the Council for the Regulation of Freight Forwarding in Nigeria (CRFFN) are actually ‘clearing agents’.