Category Archives: Blog

Business Valuation is the process of determining the economic value of a business or company. Although this may seem pretty straightforward, accurately valuing each business takes a great amount of preparation and thought. Establishing what a business is worth is not an exact science, largely due to the way different people view each aspect of a company. An investor will likely base their assessment of the business value solely on how much money the company brings in, while the owner may heavily value its connection to the community it serves. Beyond the possible differences in opinion, economic conditions affect what people believe a business is worth. As job scarcity increases, the number of business buyers in the market follows and that increased competition results in higher selling prices.  Also, low interest rates spur investors to put their money into businesses rather than banks, because returns are so much higher.

When it comes to business valuation, there are three umbrella terms for methods used. Each of the following represents a choice of several methods all grouped into the same approach.

Asset approach: The asset approach views the business as a set of assets and liabilities that are weighed against one another to determine business value. The asset approach is based on substitution by answering this question: What would it cost to create an identical business that will produce equal economic benefit for its owners?   Although this may seem like a fairly simple equation, there are many important details than cannot be overlooked, including which assets and liabilities should be considered, what standard to use to measure their value, and how to set each individual item’s worth.

Market approach:  As one could assume from its name, the market approach relies on signals from the market place to determine what a business is worth.  The market approach applies the principle of competition, asking “What are businesses worth that are comparable to my business?” In assessing the value of a company using the market approach, the fair market value-a value which buyers are willing to pay and sellers are willing to accept-is found by searching the market for the current business price equilibrium. The market approach is commonly used as a way to substantiate one’s offer or asking price. If you determine the “going rate” is a certain amount, why offer any more or accept any less?

Income Approach:  This approach focuses in on a company’s core motivation for existing: profit. It attempts to answer the question “If I invest time, money, and effort into owning this business, what economic benefits will it provide me, and when?”  The income valuation approach centers around a future expectation of economic benefit while also factoring in the risk of the money not being brought in on time – or at all.   This is probably the most common in the Customs brokerage and/or freight forwarding fields, as the companies tend not to be asset based, and market valuations are difficult among closely held businesses which don’t publicly report sales, income, or private sale prices.

With three different approaches, business valuation methods often produce different results.  When deciding which assessment style best fits your needs, it is important to consider the size and age of the business in question, as well as whether what you’re valuing is a start-up or already a cash cow. Although you may find a particular method best geared towards your company (i.e. the income approach with a brand new company that has yet to bring in much profit) it is important to keep in mind that all of the approaches listed above are reliable methods which can be successfully applied to a business of any kind.

Contact us anytime if you have any questions about this topic or would like to speak with a member of our experienced legal team.  In the past year we have performed valuations of roughly a half-dozen logistics firms.  Contact Us

On May 20, 2016, Congress enacted the American Manufacturing Competitiveness Act, a new law to restructure the  process companies go through to obtain temporary duty reductions and suspensions.  Previously, companies would have to petition members of Congress to submit individual bills requesting  tariff reductions, which were then accumulated and piled into one large omnibus bill known as  a Miscellaneous Tariff Bill (MTB). Under the new law, businesses will instead be able to submit their petitions directly to the U.S International Trade Commission, which in turn, shall advise Congress of the merits.

Tariff reductions are a great relief for US companies which import products.  The imported articles are often ingredients or components used to manufacture a finished American product. To qualify for duty relief,

• The item at issue must be exclusively produced outside of the US (If there is any domestic production, there must be no objections by competing US companies);
• The reduction must cost the US Treasury no more than $500,000 in lost tariff revenue per year; and
• The relief must be uncontested by any member of Congress.

New the Process for MTB

Under the new law The International Trade Commission will open the floor for petitions and you will have 60 days to file your petition beginning this fall on October 15, 2016. When this window closes, it will not reopen for another three years in October of 2019.

The following must be included when filing a petition as stated by the  American Manufacturing Competitiveness Act :

1. Name and address of the petitioner.
2. Statement of whether the petition is for an extension of an existing duty suspension or reduction, or for a new one.
3. A certification that the petitioner is a likely beneficiary of such a duty suspension or reduction
4. Descriptions of the article covered by the duty suspension or reduction.
5. Classification ruling and location of the article under the Harmonized Tariff Schedule of the United States (HTSUS) and relevant documentation.
6. Description of the U.S. industry that uses the item.
7. An estimate of the total value (in US dollars) of imports of the item for each of the five calendar years after the petition is filed.
8. If available, The name of each person that imports the item.
9. If available, a description of any domestic production of the item.

Following the submission period, the ITC will publish what was received and there will be a 45 day window for public commentary on the submitted petitions.  After taking public comments, the Commission will submit a preliminary and then final report(s) to Congress on each individual petition for tariff suspension or reduction.  Congress will prepare the MTB legislation based on the recommendations provided by the ITC.  At no point can Congress insert new items on the list given to them by the ITC, but they do have the authority to reject or amend a proposal.  Congress has no deadline for the enactment or introduction of MTB legislation, but given the timeline, it is possible to see it in the latter half of 2017, given the October petition date.

We are very interested in helping you, our friends and clients, apply for relief this year!

Counterfeit goods and other methods of product reproduction that infringe upon the intellectual property of the owner are strictly illegal, and heavily regulated, especially within the US. The gray, or “grey”, market however, enjoys much fewer limitations as the goods are authentic and obtained by legal means. “Gray goods”  are legally manufactured goods purchased from certified distributors, which are then resold, generally, without the permission of  the trademark holder. Though this channel is completely legitimate and lawful, there are some important trade and import restrictions surrounding gray market merchandise that must be adhered to. For example, if an Argentine company has a trademark and participates freely in the US market, there is no CBP restriction on its products’ entry into United States by other importers.   However, if the owner of that trademark is a U.S. entity, any imported product bearing the trademark becomes a restricted gray market article.  Click here to learn more.

A restricted gray market article is a foreign-made article bearing a genuine trademark owned and recorded by a  U.S. entity, imported without the authorization of the U.S. trademark owner.  In other words, gray market goods bear a genuine  mark which has been applied with the approval of the trademark owner, but the approval is limited to sales in a country other than the United States.  Restricted gray market merchandise will be seized for a violation of  19 U.S.C. 1526(b) if discovered by CBP.

Only trademarks which are recorded with CBP are entitled to gray market protection. Whenever a CBP Inspector queries the CBP Intellectual Property database, he or she will check the recordation file screen to determine whether the “Genuine Trademarked Articles Restricted” box states “Y” or “N”. If the box associated with that section is marked with a “Y”, it indicates that no one, except the trademark holder or his designee, may import genuine articles bearing that trademark. So if the goods are genuine, and a “Y” appears in the trademark recordation screen, the goods may not be imported without the U.S. trademark owner’s consent.

If, however, the box is marked with an “N”, this indicates that gray market goods bearing that mark may be imported by anyone, without restriction and regardless of whether the trademark holder consented.   This does not exempt Counterfeit goods from being seized, regardless of whether there is CBP recordation.  Read about the Supreme Court’s ruling in favor of the gray market in a suit against EBay and other discount retailers.

It is imperative to familiarize yourself with the ownership and recordation of trademarks in the U.S. before you attempt to import goods.  More and more often, companies are taking action to protect their product from unauthorized distribution, and Customs continues to strictly clamp down on restricted gray market items. Knowing your rights, and those of the trademark owner, can help you avoid a costly seizure of legally purchased goods.

As any Customs broker can tell you, there are an ever-increasing number of antidumping duty cases filed. It is imperative that importers (and their brokers) understand this topic.  Dumping duties are tariffs imposed by a government when it believes foreign goods are being sold below their fair market value or cost of production.   The whole world does it. This practice of foreign goods being “dumped” below cost both skews the market and cripples domestic competitors.  In the United States it is not uncommon for antidumping duties to be implemented at rates of 100% or 200% of invoice value;  this is in hopes of protecting domestic competitors and insulating the market from below-cost distortion.  Ideally, this raises the goods’ U.S. sale price to something closer to the cost of production with some profit.  For a complete overview of the countervailing duty petition and investigation process please reference the following handbook released by the United States International Trade Commission: https://www.usitc.gov/trade_remedy/documents/handbook.pdf.

Antidumping duties can be crippling to companies who do not realize they are subject to such payments, which is why it is extremely important to be aware of which duties pertain to the products you import. At this time we have people who sold goods three years ago being advised that they owe 214% duty!  Can you imagine the devastating surprise?   The Mooney Law Firm is involved in antidumping cases involving products such as seafood, ball bearings, solar panels, oversized tires, garlic, auto parts, wooden bedroom furniture,  refrigerator parts, and more; this range of products demonstrates that antidumping cases can be brought in virtually all industries.  As the importer, you are responsible for determining which duties apply to the goods you import.  In addition to payment of back duties, the fines for neglecting to pay these antidumping duties on time are significant, which is why it is critical to be attentive and accountable for what you are importing.   You don’t want that 214% duty bill some years after the goods have been sold!  You are able to search by case number in the following database categorizing all of the active antidumping and countervailing duty cases: http://adcvd.cbp.dhs.gov/adcvdweb/ad_cvd_msgs?utf8=%E2%9C%93&commit=View+most+recent+messages.

Note that the agency responsible for enforcing antidumping duties is the Department of Commerce: most mistakenly assume it is Customs.  Under the umbrella of the DOC, the United States International Trade Commission is the federal agency in charge of investigating claims of dumping.  As an importer you have an obligation to be accountable for the product you bring in, and an important piece of this is abiding by the proper duty payments.

Since the summer (2015) there have been penalty settlements announced by the Federal Maritime Commission (FMC) which total in excess of $2,000,000.00.  Its Bureau of Enforcement (BOE) is the arm of the Commission specifically focused on prosecution.  The BOE investigates violations of the Shipping Act as well as enforces FMC regulations, and Bureau attorneys are the ones who act as trial counsel in all formal Commission proceedings.  Often a settlement is reached between violating parties and Bureau attorneys, and detailed below are some notably large cases from the past year.   Settlements generally avoid any admission of wrongdoing, and avoid the extensive time and money expenditure required by administrative trials.

In August, the BOE announced FMC collections of $1,227,500.00.  These collections were made in the form of penalty payments by a variety of different parties, including seven different non-vessel operating common carriers (NVOCCs) and one vessel-operating common carrier (VOCC).  The violations alleged of the NVOCCs included unlawfully collecting forwarder compensation, misrepresenting the names of shipper accounts, allowing improper parties to access service contracts, knowingly obtaining transportation less than applicable rates, and more. The most heavily penalized party was the vessel operator United Arab Shipping Company; it was charged with violating 46 U.S.C. 41104(1) and 46 U.S.C. 41104(2) for allegedly paying unlawful rebates to a shipper and providing transportation at rates inconsistent with their published tariff.  In total, United Arab Shipping Company paid $537,500.00 in penalties to the agency.

In September another announcement was made regarding penalty collections, but this time only one party was involved.  A VOCC based in Norway named Siem Car Carriers was found to be in violation of 46 U.S.C. 41102(b).  In this case the violations were voluntarily disclosed, and an agreement was reached in which Siem paid $135,000.00 in penalties.  The Chairman of the FMC, Mario Cordero, states, “Voluntary disclosures can serve to diminish carrier exposure to very significant monetary penalties.”  Based on this, it is reasonable to assume that Siem would have been responsible for greater penalties if they had not taken the initiative to disclose this information voluntarily.   In January of this year we presented our first seminar on voluntary disclosure to Federal agencies.   It is interesting to see how the disclosed entity paid roughly 25% of what the non-disclosing entity paid above, though of course the facts and extent of the alleged violations may have differed greatly.

In December 2015, still more violations were announced, and this time they involved freight forwarders, NVOCCs, and two unlicensed entities acting as ocean transportation intermediaries (OTIs). The British Association of Removers and Sparx Logistics are both NVOCCs that allegedly violated FMC regulations by obtaining ocean transportation at lower than applicable rates; while neither company admitted to actually doing so, they did agree to settle and pay penalties. Wilhelmsen Ships Services and N/J International are licensed NVOCCs and freight forwarders which were involved in cases charging them with operating without a valid Qualifying Individual for a period of over one year. As a result, both companies were ordered to pay penalties to the FMC. Lastly, Azap Motors and Knopf International are unlicensed entities that were both alleged to be offering OTI services without a proper FMC license. Both companies agreed to pay penalties, and Azap Motors even dissolved as a company.  Collections from penalty violations totaled $334,000.00 for the month overall.

As 2016 has kicked off, so have the FMC collections. It was announced recently that the FMC collected a total of $520,000.00 through civil penalties in the month of February.  These penalties came from four different OTIs (both NVOCCs and freight forwarders) and one VOCC. It is important to note that in that month all NVOCCs were penalized for the same action: they allegedly obtained transportation at less than applicable rates. The FMC takes this seriously, and it is important to ensure you are paying a fair price for transportation as set by tariffs.   Misrepresentation of weight, volume or commodity is dealt with harshly by the agency.

You can learn a great deal from examining past FMC penalties.  When dealing with trade and transportation it is your responsibility to understand the regulations set forth by the FMC as well as the Shipping Act, and to ensure that your actions are in accordance with these guidelines.  Otherwise, as we have seen in these cases, severe penalties may be assessed letting the agency laugh all the way to the bank.

2016 has kicked off with some big changes, many of which pertain to the United State’s relationship with Cuba. On January 27th, 2016, the Bureau of Industry and Security (BIS) and the Office of Foreign Assets Control (OFAC) announced new regulations that further reduce U.S. sanctions on Cuba. Translation: things are looking up in terms of repairing a long-term strained relationship between the two. These modifications relate to financing, exportation, and travel; they further liberalize bilateral access and promote improved relations between the United States and Cuba. Since January, regulations have steadily been chipped away at an effort to slowly dilute the embargo; these include regulations eased as recently as March 15th.

Previously, there were very strict regulations regarding payment and financing terms for non-agricultural exports to Cuba. C.O.D. was the only means of payment allowed: credit was forbidden. However, many of these terms have now been reduced or repealed, allowing for payments of cash in advance, sales on an open account, and financing by a third-party country or the U.S. In support of this, a regulation was promulgated on March 15th to ease the transfer of money between Cuban and American banks. Establishing expanded methods and means of financing helps encourage trade and exchange between the U.S. and Cuba, and it is an important step in growing the relationship between the two.

In addition, regulations regarding U.S. exports were altered. Licenses for exports of food and services which are deemed to aid Cuba have been expanded; this category now includes telecommunications, agricultural, civil aviation safety, and news gathering software items. This expansion allows a larger variety of items to be sent to Cuba, and a case-by-case basis licensing policy has been introduced for even more additional items.

The most drastic changes are those regarding travel. OFAC (the Office of Foreign Assets Control, which regulates embargos) has now approved an expanded number of business-related travel reasons; these include professional conferences, sports competitions, artistic expeditions, humanitarian projects, market research, and sales/contract negotiation. It is important to note that travel blatantly for tourism alone is still banned, but there are an increasing number of ways to circumvent this. As of March 15th individual travel is permitted for “people-to-people missions”; this includes any trip which involves a meaningful cultural exchange with Cuban people. This is a big development, as previously this category was limited to tour groups only. Since commercial flights to Cuba are scheduled to resume in the Fall, it is an appropriate time for these more lenient travel regulations to be taking form.  Given these new “people-to-people ” rules, it seems a foregone conclusion that individuals who make, let’s say, culturally driven sojourns with enjoyable side trips are very unlikely to find themselves under threat of prosecution at this time.

President Obama announced in February his plans to make a trip to Cuba in this month; it will be the first time an American President has visited Cuba in 88 years. The goal to repair and expand relations with Cuba through enhanced communication and travel was originally announced by Obama in December 2014, and this seems to be a big step in that direction. It is sure to be worthwhile keeping an eye out for regulatory chanages regarding import, export, trade, financing, and more as relations between the U.S. and Cuba continue to warm.

The Trade Facilitation and Enforcement Act of 2015 was passed by the Senate on February 11th, 2016 in a 75-20 vote. Now that the bill has been passed by the House and the Senate, the final piece of the puzzle is for President Obama to sign the bill into law. Given that this is projected to be enacted by the President soon, it is imperative for international traders to understand its key provisions.

The Act is split into 9 different sections with an overall focus on facilitating and enforcing trade; this will help to promote U.S. global opportunities while keeping the playing field level and fair. Key provisions of the Act focus on enhancing enforcement of international trade laws, providing stronger protection for international intellectual property, and modernizing U.S. Customs and Border Protection (CBP) processes. According to an article published by The Washington Examiner, “Current customs rules that have not fully embraced technological and trade advances are creating bottlenecks at the border that impede the just-in-time manufacturing process, which is critical to the productivity, efficiency, and global competitiveness of the U.S.” Passing this bill marks the first, long overdue, significant update to CBP processes and policies in over 10 years.

Three aspects of the bill are of particular interest. First, the focus on strengthening anti-evasion procedures is key via establishment of a Trade Remedy Law Enforcement Division at CBP’s Office of Trade. This division will be specifically aimed at preventing the evasion of antidumping and countervailing duty orders. If it is determined that evasion has occurred, CBP is required to suspend liquidation of entries and enforce the appropriate cash deposit rate for the merchandise. Updates streamline the process for investigating evasion and assessing the corresponding penalty.

Another area of focus in the bill is intellectual property protection, manifested through the creation of a greater National Intellectual Property Rights Coordination Center. It will focus on investigating sources of merchandise that infringe intellectual property rights. The thought is to advance U.S. competitiveness globally by identifying those responsible for producing, smuggling, or distributing copyrighted and/or trademarked merchandise, rather than just seizing the end products when discovered.

Lastly, the Act drastically alters provisions regarding duty drawback. Essentially new provisions simplify drawback procedures by extending the deadline for filing drawback claims. It rises to five years while creating more transparency in the calculation of drawback refunds, and establishing a standard for classification of substitution drawback items.

Overall, this seems to be a piece of legislation that will help to advance the American economy when signed into law. While this brief post is only able to focus on certain key highlights, there are many changes proposed within the Trade Facilitation and Enforcement Act of 2015 that are significant and impactful. To view the bill in its entirety, please visit the following link: https://www.congress.gov/bill/114th-congress/house-bill/644/text

If you have any further questions regarding The Mooney Law Firm or the services we provide, please contact us today!