Choosing and managing freight forwarders
Accurately documenting and keeping trade-related data has become a compliance necessity due to regulatory developments. Although data entry has been mostly automated, reducing paperwork and facilitating information access, this “improvement” also increases the visibility of mistakes to regulators, increases taxes and penalties, and places a greater burden on the trading community. Lack of knowledge of regulations and inadequate training lead to compliance issues.
The burden of categorization, reporting, accuracy, and recordkeeping is frequently placed on freight forwarders in the contemporary economy, where many businesses find it difficult to understand rules and keep up with obligations. This strategy is not advised, especially for companies with operations in Nigeria.
Forwarders rely on the exporter’s information. Forwarders often require the exporter to supply correct information even when they have signed consent to represent a firm. In addition, if the information is inaccurate, authorities will hold the exporter accountable rather than the forwarder. A company’s compliance staff should not be expected to perform the core function of a forwarder, which is to plan and oversee the shipment of products.
SELECTION OF A FREIGHT FORWARDER
Before managing a freight forwarder, you must first select one. Don’t let low prices or low logistical costs sway your decision, not even in this economy. You truly do get what you pay for, as the old saying goes. Making the right forwarder choice for your company is essential for efficient supply chain operations.
It is advisable to make a list of needs before starting the selection process for freight forwarders. The freight forwarder has to be familiar with your goods, the preferred shipping mode, and the country of destination.
Additionally, the freight forwarder must have the capacity and desire to regularly convey status updates and issues, as well as the ability to keep records of export transactions, including the loss of permits, to conduct internal audits that can be compared.
Companies should limit the number of their forwarder relations to a tolerable amount, depending on the business requirements. In general, you should pick no more than two or three freight forwarders because handling more than that can be labour-intensive and lead to more issues than it fixes.
Create a power of attorney (POA) with each approved forwarder that outlines each party’s obligations within your supply chain. And although there are undoubtedly instances where a business must delegate limited responsibility to external agents, this should never be the norm.
Meeting the operational personnel of each prospective forwarder as part of your evaluation process will allow you to assess their qualifications. During the review process, don’t let the forwarder’s account representative prevent you from speaking with operational employees.
A GOAL TO MANAGE
After choosing a forwarder, your task and duty shift to successfully administering the service. All of the ensuing forwarder management procedures are essential to upholding best-practice guidelines. Give them top consideration.
Create and uphold clear communication standards: It’s crucial to establish and have an open line of communication with your freight forwarder. You should talk about and write down needs and expectations right away. Provide thorough supporting documentation for any prospective personnel churn that could take place. Hold routine conference calls or in-person meetings to review issues and find solutions that will increase compliance and cut down on processing times. Keep track of your shipping activity metrics to keep track of your own and the forwarder’s progress and issues.
A reporting system is necessary in case there are any possible non-compliance problems or government enquiries regarding the transaction. Although this may seem like a lot of effort, it will improve the efficiency of your compliance department and provide you with more control over your shipping operations.
Make sure that the communication procedure includes advance shipment notice: Use a Shipper’s Letter of Instruction or its equivalent for exports to make sure that cargo information is provided precisely and unambiguously. Because a forwarder lacks or has incomplete shipping information, many errors are made.
Export-related papers should include compliance information like Classification, License Authorization, and AES Internal Transaction Number in addition to the necessary logistic information, such as weights and dimensions. Demand that forwarders notify you of any incoming cargo for imports. This gives time to check that supporting documentation is given and that shipping information, such as the consignee and the right categorization according to the harmonized tariff schedule, is accurate.
Get a copy of the transaction in its entirety: The inability to obtain a copy of their shipping records is a regular complaint from importers and exporters. This is made considerably simpler by establishing communication standards. It will be easier to verify that the full transaction has been received if there is a list of necessary papers. The number of requests can be decreased by providing the forwarder with a copy of the checklist.
After getting the papers, audit them: Although the audit does not need to be finished, your compliance department should set a threshold to keep a high compliance rating. In general, you want to do a weekly audit for thresholds under $5,000 and a quarterly audit for those over $5,000. To avoid penalties and fines, you should fix any inaccuracies as quickly as you can. Investigate each fault as you find it and fix it to ensure that it won’t happen again with subsequent shipments.
Keep tight restrictions on AES filings: It is recommended for the exporter to directly file AES to prevent errors. When you have more control over your shipping documents, mistakes are less likely to happen, and managing your forwarder will take less time.
Put strong restrictions in place if you decide to have the forwarder send files using AES. Having well-defined Service Level Agreements is your greatest line of protection. Obtain a copy of the transaction before submitting it, if at all feasible. If the AES record is altered, the filer will get a compliance alert message informing them that their cargo doesn’t comply with export reporting regulations. The business practices that caused compliance alerts must be found and changed if a filer routinely gets them. Otherwise, the filer will experience delays, fees, and/or penalties.
Recognize your role in the transaction: Companies are too frequently designated as exporters of record without their knowledge. Regardless of the circumstances of the sale, everyone involved is still responsible for adhering to the different Nigerian export laws.
Knowing your role and contribution in the transaction is crucial. Do not presume that you are the exporter of record just because the export is Ex-Works. It happens frequently that you are linked with the AES record if the products are departing your pier.
Make compliance your priority: You are the expert on your transactions. You cannot outsource liability and a freight forwarder will never be able to manage your compliance program successfully. Always, the exporter and importer are responsible. Very little of the responsibility for infractions may be placed on the forwarder when a government agency shows up.
The danger of regulatory noncompliance rises according to the amount of power you cede. Companies should oversee their own jurisdictional decisions, classifications (including Schedule B and HTS), license selection, licensing authorization, and screening, except for AES.
Keep forwarders from submitting your transactions for preferential trade agreements qualification. The certificates of origin are frequently filled up by poorly qualified shipping staff. The lengthy qualifying procedure should only be handled by the qualified staff in your company’s compliance department.
Make your own transactions eligible: Keep forwarders from submitting your transactions for preferential trade agreements qualification. The certificates of origin are frequently filled up by poorly qualified shipping staff. The lengthy qualifying procedure should only be handled by the qualified staff in your company’s compliance department.
Limit the number of POAs, written permits, or signed permits given to agents: It becomes increasingly difficult to monitor forwarders as you provide them with additional POAs and authorizations. Many businesses, both importers and exporters, are unable to control their forwarders because they are unsure of how many authorizations they have issued.
When importers offer POAs to many customs brokers, they learn that shipments transit Customs without their knowledge and that the freight just shows up. The lack of import documentation makes it extremely difficult to audit the transaction. The categorization is done by certified professionals. Do you do accuracy audits? Do you pay taxes in excess or, worse yet, insufficiently? Do you own all the records necessary for a full transaction file?
These are just a few of the issues you can encounter if you lose control of your brokers and insight into your supply chain. Limiting authorizations reduces workload and, more importantly, mistakes.
Continue talking: It’s crucial to keep your forwarder up to date on new laws being enforced and technological advancements. You can communicate, plan, and act on knowledge more easily when there is an open dialogue. A proactive strategy can help you make fewer mistakes, which will cut down on the time it takes to fix them and lower your risk of receiving penalties and fines.
THE SEAT OF THE COMPLIANCE DRIVER
However, the importer or exporter is ultimately accountable. If you are a passenger rather than a driver, it is far more difficult to prevent a collision. Be the leader in your compliance department to handle your freight forwarders and brokers efficiently. Participate in your account actively. Understand the legal obligations. The always shifting and developing compliance environment, including freight forwarders, becomes much more manageable when you assume control.
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AMG Logistics is a Lagos-based TRACE certified logistics company. Our services include Freight Forwarding, Customs Clearance, Trucking, Distribution, and Warehousing within Nigeria.
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