The other day I had the pleasure to spend an afternoon in the office a customs broker I know. While I was there, he told me the incredible story of how he came to the United States from South American and landed a job in the shipping department of a typewriter company.He left after 10 years to create his own customs brokerage. Since its founding 14 years ago, its provided a stream of income that allowed him to purchase a sizable office building, with rents more than covering the mortgage.
An immigrant from South America, he came to the US in 1986. He describes himself as a real over-achiever within the typewriter company, and he was curious enough about the shipping industry to become a licensed customs broker in his spare time.
In reading the 19 CFR, the holy bible of Customs Brokering, he discovered the section on customs duty drawbacks. If you buy something purchased overseas and then later export it to one of your customers overseas, the U.S. Treasury then owes you a refund on any tariff paid when the products were imported. Even if you did not import the goods yourself, the price of that tariff was baked into the price you paid. So just you give your customs broker the HS Code for your products, and the commercial invoice / receipt you got when you purchased them. My friend also discovered that you could file this retroactively for shipments you’ve already brought in. This discovery saved his company $35,000 in his first year, and $35,000 per year thereafter. (Read more about duty drawbacks.)
It’s neigh impossible to judge a man’s true performance record in a job he last held 14 years ago, when your only data points are his own words on the subject. Yet numbers don’t lie, and saving your company $35,000 per year that drops straight to the bottom line would be praised and rewarded in every successful company on earth.
He was an overachiever who had managed to turn the shipping department from a pure cost center, to a revenue center as well. Yet during his decade with the firm, they consistently overlooked him for promotions. After his boss, the Chief Operating Officer, hired his own friend as the head of shipping, he ended up practically doing the job anyways because the guy was not qualified or competent.
Now that he was a licensed customs broker, the idea of setting up his own shop as a brokerage became attractive. His love of numbers, evidenced still by the Precalculus text book on his bookshelf, came in handy. He made a dead simple presentation to the CEO, CFO and his boss, the COO, in which he showed them the price they were paying for customs brokerage services. And the price he was going to charge them for the same thing–about 25% less–if they would give him the contract when he went out of his own. No brainer right?
Side Note: Why don’t more companies offer this kind of incentives for employees to become lower cost vendors of the firm. In all liklihood, a skilled employee would more money running their own business to provide the service to the company (provided they could also find 1-2 other clients who wanted similar services), and the company saves money on shipping. In fact, there are companies that do that, and the most famous case, SEMCO, experienced more than 27% compounded annual growth for more than a decade. They are famously open, to the point of having 19 employees of their direct competitor working out of the firm. I digress.
The typewriter company jumped at the opportunity to save money on their customs entries, and he was in business. It took a few years, but by delivering excellent service to his only customer, he eventually one referrals to a view others. Gradually he built up a book of 20-30 customers that brought in a steady income stream.
A woman, obviously undergoing some deep emotional trauma, called him several times during our chat. Weeping and sobbing, the woman appeared to be really leaning on him for emotional support. Unfortunately his portable phone, whose only setting was “speakerphone at full blast,” would have made it inconvenient for him to really have that conversation with him while I was in the room.
The broker calmly deferred the lady’s impassioned pleas for a shoulder to cry on, explaining only that he was in a meeting — never letting on that there was somebody else in the room who was very much involved in this conversation, even if I did not speak.
In between her desperate calls, a trucker also dialed in. He was pretty heated because a customer’s error meant that he couldn’t pick up a container before the onset of the huge Noreaster pounding the region. He wasn’t taking his rig out into that mess. Nothing stirs up a shit storm in the shipping business like 32 inches of snow. In fact, one of the most common causes of demurrage is weather related shipping delays.
Because the phone was still on speaker, I got to listen to this trucker say some pretty mean things about the importer they shared as a customer. He didn’t blame the weather for the $270 charge he was going to eat, but instead took it all out on his customer, an importer whose been in the trade for years.
In this case, the extra day of weather related delay was covered by the trucking company, which is a pretty big risk for them to take on, in my opinion. I presume that most trucking companies have found some form of insurance policy on the weather, to offest these direct costs of demurrage charges caused by large storms. If demurrage charges are highly correlated with the weather, there may be markets where a company could hedge that risk away, simply ensuring they received payments from that policy whenever a large enough storm hit the markets they serve.
As the trucker shared his agony over the demurrage charges, I started to realize that this guy is so much more than just a customs broker. He seems to be an emotional pillar holding together his entire network, almost a therapist willing to serve unselfishly in the name of love and commerce.
In general, customs brokers do not have much face to face conversation. Everything is done by phone, or electronic transmissions of an endless stream of emotionless documents. The telephone conversations may be what kept him sane, working in that office all by himself all day. The trucker too must spend most of his time alone, and you can’t talk on the phone when you are driving a truck, your conversation with the customs broker might be the only one you have for a while. Better nurse it for all the emotion you can suck out of the guy.
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