M&A transactions involving companies engaged in foreign trade require rigorous customs review. Compliance with customs obligations can determine the viability of the business and its exposure to sanctions. A proper analysis allows for identifying risks and structuring clauses to address potential contingencies.
What risks should be considered when performing customs due diligence?
El due diligence Customs officers seek to verify that the target is acting in accordance with the legal framework of customs. Any noncompliance could affect the viability of the transaction.
The analysis should begin by identifying the nature and frequency of your operations, and focus on the last three years for customs declarations, except for authorizations, contracts, or permits with effects beyond that period.
Once the relevant documentation is available, ongoing or closed administrative or judicial investigations must be verified to observe customs compliance discipline and contracts with other customs users to detect clauses that transfer excessive risks.
In addition, discrepancies in import declarations and their supporting documents (invoice, transport document, and Andean declaration of value) must be detected by verifying that they match the description, origin, value, and conditions of the transaction.
Finally, the analysis should include a review of foreign exchange declarations to confirm the consistency of the amounts channeled. This provides a complete view of customs and foreign exchange risk, taking into account that not every finding poses a risk to the transaction, except for those that may lead to the cancellation of authorizations or significant penalties.
What representations, warranties, and indemnities should be included in these transactions?
The seller must declare that the target is complying with its obligations to the DIAN and the MinCIT; that the transactions have been carried out in compliance with the legal framework; that current authorizations and qualifications, such as the Free Trade Zone or the Vallejo Plan, are maintained; and that there are no sanctions or investigations at the time of signing.
Guarantees must ensure the accuracy of the information and provide for compensation to the buyer for violations, adjustments, or loss of profits. It is common practice to agree to an escrow or price retention period for the limitation period for penalties.
What precedent conditions must be verified before closing a transaction involving companies with foreign trade regimes?
The buyer must confirm that the target maintains its valid authorizations and has fulfilled its investment, employment, or export commitments. It must also verify that there are no sanctions or pending proceedings before the DIAN or the MinCIT.
As closing conditions, it is recommended to require updated inventory certifications, compliance reports, evidence of the absence of litigation, and a risk level certificate issued by the DIAN according to its risk management system. This, in addition to being a customs user right, is a key element in evaluating its compliance record.
By: Nicolás Gómez, Senior Associate – Corporate and M&A to Legal Affairs: M&A in foreign trade operations
