By Adrienne Braumiller (Braumiller Schulz PLLC)
Republished with permission; World Trade Executive: Practical Trade & Customs Strategies 8/2013

Like potential suitors, acquired companies can come with a lot of baggage. However, when it comes to mergers and acquisitions, we are not talking about separation anxiety or personality disorders; we are talking about liability, which can cost companies millions of dollars. This is why it is crucial for companies to understand the liabilities they face when acquiring or merging with another company. While companies often understand liability when it comes to tort litigation, taxes, and contract disputes, companies often overlook liability for violations of import and export laws. A look at enforcement actions for import and export cases should lead companies to two conclusions; first, successor liability is a concept that is alive and thriving in import and export law and second, enforcement agencies are not afraid to use it.
The Growth of Successor Liability
One reason that companies may overlook successor liability is that it is a relatively recent import to international trade law. And while companies may wish for its export from this field, successor liability only seems to be gaining more traction. Successor liability for violations of the import and export laws was first explored in the late 1980’s. The events on 9/11 marked a new era for national security programs, which sought to expand their domains and increase their flexibility. While successor liability was not exactly a newcomer to the import/export regulations, it was not until post 9/11 that it hit its stride as a tool for fighting non-compliance.

Another reason companies may overlook successor liability in international trade law, is that successor liability is not codified in customs and export laws, with only a few exceptions on the export side. Instead, you have to look to the courts. Successor liability in the 1990’s was largely driven by decisions in environmental and labor laws. Looking to ensure compliance with international trade, governmental agencies began to build upon the common law principle of successor liability and use it as a way of enforcing international trade law. This means that if you are looking in the Code of Federal Regulations for the authority of Customs and Border Protection (CBP) or the Bureau of Industry and Security (BIS) authority to impose successor liability, you are looking in the wrong place.

Check back next week as we continue the discussion of Successor Liability in Import and Export Matters – picking up with Defining Successor Liability and Successor Liability in Action.