Buying a customs brokerage in Canada

A customs brokerage may not be a business you can simply buy and start running. The work it does is described in the Canada Border Services Agency’s guide to importing commercial goods as finding the tariff classification and value for duty, calculating duties and taxes, making declarations and making changes afterwards. Ask the agency what qualifications that work requires. Before the price matters, you need to know whether you, or people you will employ, can stand behind that work from the first day. Only then does it make sense to compare firms, so the sequence below starts with you and moves to the business.

Start with what you must personally qualify for

Ask the Canada Border Services Agency directly what an owner or controlling shareholder must hold, what the firm itself must hold and what must be in place on closing day. Do not rely on the seller’s summary. If you are a new entrant with no background in customs work, ask what you would need to put in place and how long it takes, and whether the seller’s key people will cover the gap while you do. If you are an existing brokerage buying a competitor, ask the same questions about the combined entity. A deal that looks attractive can fail at this step, so settle it before you spend money on advisers.

What a sound brokerage looks like

Look for a client book that is spread across several importers, with no single account the firm could not survive losing. Look for staff who each know specific clients and specific kinds of goods, written procedures that do not depend on one person’s memory and a record of few corrections. Ask for fee history by client over several years. Ask whether the work is documented well enough for someone other than the seller to run it through a transition. Also test how the firm handles its own errors. Ask to sit in on a normal day of work, if the seller agrees, and watch how files move from intake to release and who checks them along the way.

What the seller may not volunteer

Ask directly rather than waiting for the seller to volunteer problems. Which clients have complained or threatened to leave? Are any fees under negotiation? Has the firm received notices, reviews or penalties from the border agency? Which relationships exist only because of the seller? Does the firm carry unresolved corrections, disputes over fees or amounts owed to or by clients? Ask also about the extent to which the owner personally performs the technical work, because that is the part a buyer must replace. See customer concentration for how to read a client list.

Compare the offer with your own plan

Write down how you would run the firm in its first year: who handles each major client, who signs off on filings, what you would change and what you would leave alone. Then check that plan against what the seller has shown you. BDC’s business purchase loan page lists a clear transaction structure, asset or share, and an agreed price, including how it was determined, as things to have in place before you apply. If the plan depends on a person who has not agreed to stay, or on a client who has not been told, it is a hope, not a plan. A specific first-ninety-day plan gives you something concrete to bring to a negotiation about a transition period, a price adjustment or a protective condition.

Who will stay, and who is buying alongside you

The people who hold the firm’s qualifications are part of what you are buying. Ask whether they intend to stay, what retention terms would make that likely and what the plan is if one leaves. Our answer on how to keep key employees after you buy covers the mechanics. If you are a larger brokerage or logistics group, ask counsel whether the Competition Bureau’s merger review applies; the Bureau says the Commissioner may review any merger regardless of size, and whether notice is required before closing depends on financial thresholds and other criteria, including certain exceptions, in the Competition Act.

• Written answers from the border agency on what you and the firm must hold at closing
• Fee history by client, with the share each major client represents
• A list of the people holding qualifications and their written intentions
• The firm’s record of corrections, notices and penalties from the border agency

Handling client information responsibly

A brokerage holds business and sometimes personal information about its clients. While you are still evaluating, receive it only under a written agreement. Under section 7.2 of PIPEDA, parties to a prospective business transaction can share personal information without the individual’s knowledge or consent in certain circumstances, which include an agreement that restricts its use to the transaction, requires safeguards and requires its return or destruction within a reasonable time if the transaction does not proceed, and the information being necessary to decide whether to proceed. Your lawyer can confirm how that applies here.