Transportation Brief: M&A Considerations for Air and Ocean Forwarders
February 22, 2022
Freight forwarders that engage in air and ocean moves have become attractive targets for strategic and private-equity-backed acquisitions over the past several years. Buyers should be aware that change-in-control notice and approval processes for these businesses are more complicated when compared to U.S. surface-transportation providers.
For air forwarders registered with TSA as Indirect Air Carriers (IAC), notice of a change-in-control must be provided to the agency. Depending on how the transaction is structured (e.g., changes to corporate form, EIN), a new IAC application may be required. A purchase transaction may also result in the creation of new “Principals” that require Security Threat Assessments and vetting by TSA. Similar considerations apply if the target is registered with TSA as a Certified Cargo Screening Facility.
Many IACs are also registered with CNS as Endorsed Cargo Agents. A specific form of notice must be provided to CNS. That notice triggers an amendment process that must be completed to ensure the target’s information on file with CNS accurately reflects the new ownership.
Finally, in certain situations, IACs may need to be registered with the DOT as foreign air freight forwarders (FAFFs). Sometimes foreign ownership is obvious, such as when a foreign business buys a U.S.-based IAC. But in some cases, an IAC will be deemed “foreign” based on the presence of non-U.S. investors in a private-equity fund. There may be pre -and post-close processes associated with changes in control of FAFFs.
With respect to forwarders engaged in ocean moves, the Federal Maritime Commission (FMC) requires notice of change-in-control, as well as additional information submitted to the agency. FMC also requires that such entities have “Qualifying Individuals” on staff. If a transaction will impact the identity of the QI, the parties will need to plan accordingly. If a corporate conversion is contemplated that would result in a new entity form, prior approval is technically required as opposed to after the fact notice. Where an asset acquisition is contemplated, an entirely new application may be required (or advisable), which can take months to obtain, further complicating and delaying transactions.
Transportation Brief: Unclaimed Property: A Lurking Liability for the Unwary
by Kelli M. BlockThe efforts of many states to disgorge businesses of funds that may be cast as “unclaimed property” have continued unabated into 2022. Read more from Scopelitis about why transportation companies are often affected by this and what they can do to limit its exposure in the event a state unclaimed property auditor comes knocking.
Transportation Brief: Transportation Worker Exemption from the FAA Requires a “Contract of Employment”
by Braden K. Core , Prasad SharmaEmployers have successfully used arbitration under the Federal Arbitration Act (FAA) to resolve disputes on an individual basis. Unfortunately for transportation providers, the FAA does not apply to “contracts of employment” of drivers and other transportation workers who are engaged in interstate commerce. Read more about a recent decision from Massachusetts that reminds us that if the arbitration provision is not in a “contract of employment,” the FAA may still apply.
Transportation Brief: Supreme Court Stays and OSHA Withdraws Vaccine/Testing Mandate
by A. Jack Finklea , David D. RobinsonIt appears that we have arrived at some finality in the on-again-off-again life cycle of OSHA’s COVID-19 Vaccination and Testing Emergency Temporary Standard (ETS). Given the Court’s determination that OSHA had likely exceeded its authority here, large employers have understandably set aside their immediate plans to implement the ETS vaccine/testing protocols. However, important considerations remain because many carriers continue to face customer vaccination requirements as well as the Canadian vaccination requirement for drivers crossing the border into Canada.
Transportation Brief: Spotlight on Cargo Claim Practice
Thomas Gonzalez , Kathleen C. Jeffries , Clifford W. LauchlanMany people assume the Carmack Amendment (Carmack) exclusively controls their cargo claim disputes related to interstate shipments. However, due to certain contract provisions in shipper or broker/carrier agreements, Carmack may take a back seat. Unfortunately, it is often not until a court interprets the contract with conflicting provisions that the parties have a definitive answer to their dispute. Read more from the Scopelitis team that helps clients navigate the cargo claims process, both pre- and post-suit.
Transportation Brief: For the Record, Winter 2022
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