In the world of mergers and acquisitions, successor liability is one of those legal concepts that can drive buyers crazy. Simply put, it means that the acquirer can be responsible for past sins of a company it bought, even if they aren’t spelled out in a purchase agreement. Most often, these liabilities have to do with lawsuits, supplier disputes or taxes, but import-export issues can trip up buyers as well. Last year, for example, an unidentified company got hammered with a $20 million penalty from US Customs on a successor liability claim. The acquired company had falsely claimed NAFTA exemptions for a decade before the acquisition, explained Mark Segrist, managing partner at the Chicago office of customs and international trade law specialty firm Sandler, Travis & Rosenberg P.A.  With back duties and penalties levied for gross negligence, “it can really add up,” Segrist said. Despite these kinds of dangers, the investigation of import and export practices and possible liabilities is only slowly becoming a more common practice in the high-stakes art of figuring out a company’s worth before buying it, according to merger advisors. But that kind of due diligence can be beneficial on many levels, especially in this age of global trade, and demonstrates that not all import-export regimes are created equal. To begin with, accurately assessing import and export-related business can put a more accurate valuation on the target company. Segrist recalled another client about the same time as the customs decision. In this case, a company wouldn’t put a price tag on a potential target until they determined any import liabilities, including possible anti-dumping duties and free-trade usage.  In addition to running afoul of duty-free regulations, another big concern is violating export controls. For example, a target for acquisition may have done business with companies from countries on a restricted list or have sold products without obtaining proper export licenses. These can result in sanctions, possible fines and a public relations nightmare. A more general concern is that import-export policies of a target company – especially one based outside the US – need to adhere to compliance standards of the acquirer. This can take many forms, everything from insuring there’s no corruption in foreign ports or the employment of dishonest customs brokers to following laws and regulatory practices in countries where goods are imported or exported. Trade-related due diligence can result in lasting benefits as well. One recommended practice is to scrub and analyze import data of the company being acquired. That may reveal areas in which practices can be tweaked and duties reduced. One example, Segrist cited, is a concept known as “first sale.” The lawyer used this illustration: An apparel company imports garments from Hong Kong and pays duties based on the purchase price. But those garments may, in fact, be made in China and the Hong Kong company is merely the middleman. If an importer can demonstrate that the factory charged less, customs duties can be assessed on that lower price. An importer that buys tens of millions of dollars’ worth of shirts from the Hong Kong distributor “might be able to save considerable amounts of customs duties,” Segrist said. Another example involves US-based foreign trade zones. Retailers with stores in Canada and Mexico can ship goods to the US, store them in these secure sites duty-free before shipping them on, avoiding a kind of double duty that requires significant effort and bureaucratic hassles to get clawed back. Many smaller companies aren’t well versed in this practice. Finally, an acquiring company can piggyback on import-export expertise of the acquisition, through either personnel in customs compliance or actual procedures. For example, some importers are certified as “Customs-Trade Partnership Against Terrorism,” or C-TPAT. This government certification allows everything from access to fast lanes at border crossings to moving to the front of inspection lines. An acquired company involved in C-TPAT provides the acquirer with on-the-ground experience.