Target favors new broker model,but legal challenges remain.
Target Corp., the second-largest U.S. importer of containerized freight, endorses Customs and Border Protection's effort to tighten professional requirements and to institute a flexible regulatory framework that helps licensed brokers expand into new lines of business, said Ted Sherman, the company's director of global trade services.
Meanwhile, best-in-class brokerage firms are already providing many higher-level services to clients, according to industry experts.
The complexity of import and export rules from various agencies has mushroomed in the past 20 years, and they say the modern broker has to orchestrate compliance activities to meet those disparate requirements. Brokers, among other things, now make sure proper packaging materials are used, labels are in place, import safety rules are followed and food products are registered in advance with the Food and Drug Administration ' in addition to shepherding goods through the customs process.
Target has moved beyond the traditional transactional relationship, in which brokers simply focus on filing accurate and timely customs entries, to more of a strategic relationship that places value on the advice brokers provide to improve operations such as sourcing or supply chain management, as well as deal with emerging regulatory, legislative and other issues that impact its business, Sherman said during a presentation at CBP's annual Trade Symposium in mid-April.
That type of 'thought partnership' is important because the giant retailer can't afford compliance glitches that delay getting apparel and other products to market quickly, Sherman said.
The company's senior management considers customs compliance and trade management core competencies that are critical to maintaining Target's brand reputation and efficient operations. Target is one of 212 companies in CBP's Importer Self-Assessment program and is a founding member of the Customs-Trade Partnership Against Terrorism, an industry partnership that celebrated its 10th anniversary this year.
ISA allows volunteers with a history of closely following trade rules to assume responsibility for managing their own compliance, in exchange for less CBP oversight. C-TPAT, which has grown from seven original members to more than 10,000, entrusts importers with securing their international supply chain and holding their business partners to the same standards in exchange for fewer security exams of containers.
Target belongs to a small minority of importers that self-file entries, but Sherman said the retailer uses one external broker for more complex customs declarations or for ones from smaller-volume countries that don't present the same familiar pattern of data requirements. While large importers typically use multiple brokers, Target fixed on a single provider for ease of execution and systems integration. He would not identify the outside brokerage, but a separate source familiar with the Target's trade operations said the outside firm is Seattle-based Expeditors International.
'Speed is what we expect from our brokers,' but compliance always comes first, Sherman said.
There are 100 people in Target's trade operations team, including 30 licensed brokers. Expeditors also has on-site personnel at Target's office to jointly resolve any issues that crop up.
Target's diverse product mix from all parts of the world makes for a complex import model that must account for a bevy of antidumping rules, free trade agreements, rules of origin, tariff-rate quotas on apparel and requirements from other U.S. government agencies.
'So when we look for a business partner like a broker we need someone who can really bring a lot of expertise to bear on all of those issues,' Sherman said. 'It's anything but plain vanilla.'
Target requires its compliance personnel to take refresher courses once a year on topics such as antidumping, classification, rules of origin, reasonable care and recordkeeping, and expects its broker to have a similar continuing education program 'just so they can stay abreast of what is really a dynamic trade environment,' Sherman said.
Broker-generated cost savings may lead to lower broker fees in the short term. 'But bringing those ideas to the table is great in the long term and I think that the best brokers don't oppose change, they embrace it,' he added.