Livingston's compliance deep dive
Thursday, June 28, 2012
Livingston dives deeper into trade compliance with Vastera acquisition.
By Eric Kulisch
Livingston International, the largest pure-play customs broker in North America, in early April significantly increased its capability in the trade compliance arena with the acquisition of the global trade business of J.P. Morgan Chase Bank, best known by its original name Vastera.
CEO Peter Luit said in an interview that privately-held Livingston and Vastera offer very complimentary services with little duplication.
Livingston, headquartered in Toronto, helps customers comply with import and export regulations but its primary business is filing customs entries in the United States and Canada. It also has a modest freight forwarding component to help small importers that typically like to buy customs compliance-service and transportation management from a single provider.
The company has almost 2,900 employees, with a large number of offices in cities near the U.S.-Canada border and air/sea hubs in Los Angeles, New York and Norfolk, Va. Annual sales are about $300 million. It is owned by Sterling Partners, an investment firm based in Baltimore and Chicago, and the Canada Pension Plan Investment Board.
Vastera focuses on managing compliance functions, such as duty minimization, classification of merchandise, and collecting certificates of origin, for clients on an outsourced basis. In that role it hires brokers to do the entry filing for its clients. Vastera also sells its software to companies that want to manage compliance themselves and offers consulting services.
Traders choose companies like Livingston and Vastera to maximize opportunities to lower duties and other cross-border costs, and minimize the risk that customs authorities will delay shipments from entering a country, or issue penalties, because of incomplete documentation or concerns about regulatory evasion.
J.P. Morgan Chase bought Vastera in 2005 to create a one-stop shop for cash management, trade finance and logistics services for importers and exporters. The business case for merging the two functions was based on the fact that logistics and finance divisions within companies require much of the same data to populate the documents and databases used to support import and export transactions. The Vastera compliance software made sure that trade documentation was accurate and complete, enabling J.P. Morgan to speed up processing of credit applications for international transactions and manage vendor payments on an account basis.
But the bank’s Treasury and Securities Services unit no longer considered global trade management a core business and put Vastera on the market, Luit said.
Vastera has about 500 customers, mostly in North America, including a number of Fortune 200 companies. It also has clients in Japan and Europe.
Livingston and Vastera shared many clients, but provided different services. The acquisition expands Livingston’s footprint into Mexico and Europe and helps strengthen customer relations by making more services available, Luit said.
“Plus, they have some clients that we don’t have so we think there may be a cross sell opportunity there,” he added.
Livingston is using the Vastera name for the time being because it is recognizable, but will eventually put it under the Livingston brand, Luit said.
Bringing Vastera’s operations into Livingston requires some transformation of processes on both sides so they interface well, but he said there is no integration required from the standpoint of reducing headcount, transitioning to a common IT platform or adopting common operating procedures for similar functions.
Asked if Vastera will direct customers to Livingston for brokerage services, Luit said: “In the end the client gets to decide who the subcontracting broker should be. They’re free to make up their mind. We think generally speaking we will be the broker of choice given our size and our relationship with Vastera. But it is the client’s choice.”
Livingston has made several acquisitions in recent years, including in May M.G. Maher & Co. of New Orleans as part of its plan to build its forwarding capabilities for small-and-mid-size shippers and round out its geographic presence for brokerage. Maher has about 100 persons on staff and is best known for its nationwide forwarding business.
In 2006, Livingston bought PBB Global Logistics, a Canadian third-party logistics provider and its largest competitor.
“Large importers in general will split the purchasing of brokerage away from transportation. They will tend to use multiple freight companies -- by ocean, air, or trade lane -- but a small number of brokers, ideally one. For large importers, we are singularly focused on them being compliant with regulations,” he said.
Livingston is competitive on logistics services for smaller importers and exporters, but leaves that activity to the big specialist forwarders like Expeditors or UPS Supply Chain Services for large shippers.
“We don’t go after massive accounts for freight forwarding,” Luit said. “We want their brokerage.”
A new growth area for the company is online retailers that need help selling and delivering products in foreign markets, Roy Coburn, president of Livingston USA, said in a separate discussion by phone.
Livingston helps incorporate duties, taxes and other requirements into the pricing an overseas customer sees on the retailer’s Web site.
“Online clients don’t have a lot of tolerance for delays at the border. They expect timeliness, accuracy and transparency through the process,” Coburn said.