Customs house brokerage is a “sticky” service, and that’s what makes it attractive.
Maersk’s purchase of the New Jersey-based customs house broker Vandegrift, announced Tuesday, is just one step in a plan to expand and grow its customs business globally.
Jeff Hammond, the global head of customs for Maersk, said as part of Maersk’s reorganization and expansion of its logistics and service group — the services that Maersk offers beyond port-to-port container movement — the world’s largest shipping company has “a number of products that we’re driving and growing globally and customs brokerage is one of those.”
Maersk has offered customs services through its Damco freight forwarding subsidiary and through “pockets of customs capabilities and activities in countries around the world.” But in the past it “wasn’t a core strategy of the business,” said Hammond (pictured above).
“The strategy moving forward is to create a global customs brokerage offering that we can use to support large multinational corporations, predominately those based in Europe and the U.S. We can develop global capabilities or in-country specific capabilities,” Hammond said.
He said Maersk will expand its customs business through a combination of acquisition of firms such as Vandegrift and as well as investing in organic growth.
“We’ve got a road map in place today that will direct our timing and how we go about this in different parts of the world,” he said.
Every container carried on a Maersk ship, he noted, “has an import customs clearance and most of them have an export customs clearance — not all countries require export customs clearance, but the majority do.”
So customs is “a service that’s in demand 100 percent of the time. Navigating those complexities is something that a customer needs no matter what part of the world or what country we’re operating in. So it’s a natural evolution that we expand our capabilities to be able to seamlessly handle containers in and out of customs jurisdictions around the world.
“We expect to grow this business substantially. We expect it to be an important part of our offering and an important part of our revenue in the years ahead,” said Hammond.
Maersk provides customs services in about 50 countries around the world today and has in excess of 750 employees globally in the customs business, including 250 in the U.S. and Canada following the acquisition of Vandegrift.
“We expect in Europe that we will be looking at some acquisitions and some organic growth in certain countries in Europe,” he said. In Asia there are “a whole different set of challenges with this service in Asia and I expect we’ll be doing more internal investment in Asia with strategic acquisitions that may make sense for us.”
Hammond noted that “customs brokerage is often referred to as a sticky service. It is a trusted adviser relationship. Customers have a tendency of staying with the same provider for longer period of time. That’s part of the other attractiveness for us.”
He said there are different types of buying behavior by container shippers and Maersk plans to offer customs service to all.
At one end of the spectrum are shippers are focused on simplicity and ease of use. For example, an importer that only does business in the U.S. and imports only from China and Thailand and uses a single liner company might be interested in having a single entity responsible for the end-to-end delivery of its containers, including customs work.
In contrast, there are companies such as automobile manufacturers with highly complex supply chains, moving parts in and out of many countries.
“In a case like that, they’re going to use a multitude of transportation providers to move their goods around the world,” said Hammond. But such a company “would likely be interested in having a fewer number of customs brokers that would control all of these activities.”
That decision is often “based on risk and exposure and compliance and the ability to manage various customs brokers around the world.”
Hammond said the customs regulation is becoming more complex. In the U.S. that is partly driven by the trade war with China, changing duty rates and preferential tariff agreements and in Europe the unknowns surrounding Brexit.
There is also the pressure of complying with laws such as the U.S. Foreign Corrupt Practices Act and U.K. Bribery Act, which apply to companies around the world doing business in those countries.
Fines under those laws can be enormous, violators can take a hit to their reputation and executives may even face criminal liability.
“There is a high degree of sensitivity to this in the large multinational companies in Europe and the U.S., and they are placing more emphasis on these services,” Hammond noted.
Maersk lays out global customs brokerage ambitions
