McGraw-Hill purchases L.A. customs brokerage.

McGraw-Hill purchases L.A. customs brokerage

One of Los Angeles' biggest customs brokerages next month plans to join a nationwide chain of international-trade shops being welded together by New York publishing house McGraw-Hill Inc.

Castelazo & Associates, founded in 1945 and based in the LAX-area, was bought late last month and will be run under a new McGraw-Hill subsidiary called Tower Group. Tower will be one of the largest customs brokerages in the nation.

Castelazo was chosen because it "was one of the premier companies" doing customs work in the L.A. area, said McGraw-Hill Executive Vice President Robert W. Mooney. The price was not disclosed. Industry sources said the purchase, unusual for a publisher, was understandable considering McGraw-Hill's previous acquisitions of customs brokerages, as well as data services, some of which brokers use.

Since 1986, the publisher bought W.N. Proctor in Boston, W.G. Carroll in Atlanta and C.J. Tower in Buffalo, with about 25 regional offices all together.

The Castelazo buyout, however, was also motivated by the consolidation trend among customs brokerages, sources added.

"Castelazo will be able to provide much greater service to their customers in ports outside of Los Angeles," said Mooney. "In addition they'll be able to offer some of the information services and products, such as our Tradelinx software," added Mooney, who will head up the Tower Group unit.

Tradelinx is a custom networking system used among the Tower offices, making their logistics data available to importers' personal computers.

Customs brokers advise their clients - largely importers - on customs duties owed, trade restrictions and many other trade barriers. Castelazo fields 18 customs brokers and about 60 other employees who offer freight-forwarding and other services.

"Three years ago, the vast majority of transactions involved face-to-face filing of documentation" with U.S. Customs officials, said Arthur Litman, who sold his ownership stake to McGraw-Hill but will remain as Castelazo's president. Now more than 90 percent of trades are punched on a computer to manage "a morass of paperwork" endemic to the business.

Investing in large-scale electronic services costs a lot of money, Litman said. "Individual firms, like ourselves, didn't have the money to do it," he explained. Litman also predicted more "family-type" customs houses will sell to conglomerates.

"I can see the writing on the wall," said rival broker James G. Wiley, who runs James G. Wiley & Co. in Los Angeles with his two sons. He did $3 million in revenues last year, compared with $4.2 million of Castelazo. Wiley, 76, who did his first deal in 1936, said he feared for the long-term. "The trend is going to bigness. The big, big boys go with the big customs brokerages, and personalized service is going out the window."

Mooney of McGraw-Hill said to prevent a declie in personal service, he has retained key managers at the firms McGraw-Hill has brought since 1986. Mooney claimed that when Castelazo is linked with their two dozen offices and to a central data base, it will be capable of offering "single-source" services to global trading companies, yet "keep it personal."

"By putting our firms together, I can give (importers) one report for all of their shipments nationally.

As the United States hiked imports and exports in the last decade, opportunities opened to serve some of the giant foreign-based trading companies. Litman says he counts some big Japanese concerns among his clients, but declined to offer names.

Mooney declined to speculate whether administrative duties of Castelazo will be rolled into other Tower operations. "There's no short answer to that."