A Framework for the Selection of an Optimal Custom House Agent by Exim Firms Using the Analytic Hierarchy Process

Topics: Decision theory, Decision making, Decision making software Pages: 19 (5039 words) Published: May 16, 2012
A Framework for the Selection of an Optimal Custom House Agent by Exim Firms Using the Analytic Hierarchy Process V Kannan*
This paper aims at providing a framework to exim firms for the selection of an optimal Custom House Agent (CHA) by using the Analytic Hierarchy Process (AHP). For the study, two focus groups were conducted. One for exploring the criteria which contribute to the selection of an optimal CHA and the other for bringing out the relative importance of these criteria. The moderators of the focus groups were selected by using judgment sampling and the members by quota sampling and snowball sampling. On analysis, it was first found that Service Charge (SC) is the most important criterion in the selection process and Updated Knowledge (UK) is the least important criterion. Then, three decision choices (CHA X, Y and Z) were assumed for illustrative purpose and how the optimal decision choice is selected by using AHP was explained in a step by step manner. This paper has not incorporated the Consistency Ratio (CR). It is concluded that in real life situations, the exim firms shall select the optimal CHA with ease by applying this framework based on AHP.

Exim firms often face the problem of how to select the optimal CHA for clearing their export/import goods from customs. This is a vital decision because delay in customs clearance will halt the goods at port and thus the goods will lose their time utility. An optimal CHA will ensure timely clearance of goods from customs and thus contribute to the time utility of the same. In some countries, CHAs are called as Customs Brokers. The secondary data collected from Indian custom houses show that more than 75% of the export and import goods are cleared from customs by CHAs and less than 25% is cleared by exim firms themselves. It is also ratified by Gutierrez et al. (2005) at the international level. They report that the vast majority of formal import entries in several trade-intensive economies are handled by customs brokers. It is because of the reason that customs clearance of goods warrants for some infrastructure and also expertise over various acts/rules like the * Ph.D. Scholar, Department of Management, Birla Institute of Technology, Mesra 835215, India. E-mail: kannanv_bit@yahoo.co.in A FrameworkIcfai the Selection of an Optimal Reserved. All Rights Custom © 2008 The for University Press.Hierarchy Process House Agent by Exim Firms Using the Analytic 47

Customs Act, the Central Excise Act, Foreign Trade Policy, etc. So exim firms, instead of setting up the infrastructure and gaining expertise over these acts/rules, depute CHAs to carry out customs clearance of their export/import goods by paying them their service charge. At present, CHAs render the following services (Gutierrez et al., 2005):

• Traditional services like product classification, export and import trade compliance, trade documentation, landed cost calculations, record keeping on clients’ behalf, etc.;

• Logistic services like warehouse management and distribution, arranging international transportation and managing reverse logistics;

• Consulting services that include trade consulting, free zone consulting, legal services, etc.;

• Intermediary services like intermediary in financial products, intermediary in insurance products and services on behalf of other CHAs;

• Inspection services like product valuation services and physical inspection services; and

• Other services like trade automation services and managing supply chain security. It is realized that firms that are already in international trade use their judgments formed out of their past experience for the selection of optimal CHAs but firms which are new to international trade have to select optimal CHAs without using any rational judgment due to lack of experience. Unfortunately, in both the cases, the accuracy of the decisions is highly questionable because firms take these decisions based on...

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58 The Icfai University Journal of International Business, Vol. III, No. 4, 2008
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