Originally published in Business Digest, November 1998

Borderline Business

by Virginia Lindauer Simmon

Consider yourself an observant traveler? Okay, try this. Where, in St. Albans, is the headquarters of the largest privately held customs broker in the United States (actually in the top five overall)? If you can picture it, your business probably involves international trade. If you can't picture the offices of A.N. Deringer Inc., you're in the majority. Next time you're driving up Main Street in that charming, little, northwestern Vermont city, look left as you come to the northern end of the park, and you might notice a quietly conservative, tidy, red brick front that says Deringer across the top in slanted blue letters. Think it looks like an insurance agency? You're close to the truth.

"If you ask 100 people in St. Albans, they'll say we're an insurance agency, because that's our local business," says John Klinefelter, corporate marketing representative. In fact, the company runs the largest insurance agency in Franklin County, with offices in St. Albans (on the first floor of the headquarters building) and Enosburg, plus one in Milton. Behind that modest brick storefront stretches an operation that covers, just in St. Albans, almost an entire city block, on three floors, plus property elsewhere, housing about a hundred employees.

Three Holzscheiters Ken Holzscheiter (center), president of A.N. Deringer Inc. in St. Albans, oversees 500 employees in 33 offices. In 1919 his uncle, A.N. Deringer, founded an insurance business and later added a customs brokerage. Jacob Holzscheiter (left), is assistant branch manager, Highgate Springs; and John Holzscheiter, assistant vice president, marketing and sales. (Photo: Jeff Clarke)

Nationwide, Deringer has 500 employees working in 33 offices coast to coast, in locations that include not only every major U.S.-Canada border crossing from Blaine, Washington, to Calais, Maine, but also major coastal and inland ports of entry, such as Miami, Hartford, Boston, Cincinnati, Detroit, Chicago and New York. A worldwide network of agents completes the picture.

The helm is right here in Vermont, where it's been since 1919, when an enterprising man named Alfred Neel Deringer decided to open a custom brokerage using the connections and information he'd gained while working for the Raymond P. Lipe Co. Lipe was a wholesale hay and grain dealer, and Deringer managed its operation, taking advantage of St. Albans' rail infrastructure and accessibility to the Canadian border to import hay from Canada for export to our World War I allies in France. "It was actually hay for the horses over there," says Ken Holzscheiter, Deringer's nephew and now president of the corporation.

When the war ended, Deringer went into the insurance business. "But being familiar with bringing hay and products for ourselves from Canada, they were obviously aware of how to get stuff across the border," Holzscheiter says. "In 1930, we became licensed by the U.S. Treasury Department as customs brokers to do that kind of business for others." Deringer's corporate license, number 22, identifies it as one of the earliest licensed brokers.

Today, Deringer provides every imaginable service having anything to do with international trade. From customs brokering to international freight forwarding, from warehousing and distribution to cargo insurance to consulting, it's all there. It includes three USDA meat inspection sites along the Canadian border: one just across the lake in Champlain, N.Y.; one in Niagara Falls, N.Y.; and one in Sweetgrass, Mont., which serves importers of meat from Alberta and Calgary areas, where ranching thrives. "Meat coming into the country can be inspected right on the border," Holzscheiter explains. "If that had to go to a USDA facility or warehouse facility all the way down in Boston and maybe get rejected, then it has to turn around and come all the way back from Boston. In our facility, it can be inspected and released all at the same time, right on the border."

If you're like many people, the complicated world of international trade has the potential for making you glaze over. "That's easy to understand," says Bob Perkins, the company's vice president for customs operations. He also has under his wing the part of the operation dealing with customs compliance, quality, computer operations (the company is a leader in digital automation) and ISO -- International Standards Organization, a quality certification program that sets standards for procedures. Deringer is ISO 9000 certified.

Most of Perkins' function deals with U.S. Customs laws and regulations. "I have oversight of all the regulatory aspects," he says, noting that the growing complexity of laws and regulations has motivated Deringer to begin developing a consulting service for regulatory support. "We're there to provide insight into the details of the customs laws and regulations and to protect companies from getting into trouble because they've innocently violated customs laws, regulations or other government regulations."

Doing customs brokerage work is almost like preparing tax returns, says Holzscheiter. "We take the responsibility on behalf of our clients to file an entry for merchandise coming into the United States with U.S. Customs and pay duties or other assessments on their behalf. Obviously, in order to do that, we have to be familiar with not just U.S. Customs regulations, but also the regulations of various other agencies, such as Fish & Wildlife, Atomic Energy and the Food and Drug Administration. We have to at least know those regulations exist so our clients don't get into hot water because of improper interpretation or not complying with all the laws."

That's just the United States. The rules are different in every country, whether they be duty rates, value-added taxes or other regulatory roadblocks. Deringer's agents throughout the world make sure they can keep abreast of changes, as well as being able to line up transportation for shipments to and from those countries and then from ports of entry to the final destinations. Customer merchandise is insured, usually under Deringer's cargo insurance policy, which offers much more all-encompassing coverage than the client could usually obtain on its own. Deringer has one of the best manager training programs in the industry, and employees from all over the United States come to St. Albans to keep abreast of regulatory changes.

"As I have an expertise on the customs side," Perkins says, "so Wayne Burl (vice president of transportation operations) has expertise on the transportation side, and we blend those together as we move the company forward." Burl's aegis also covers freight and customs logistics (whether by air, sea, truck or rail) as well as warehousing and distribution throughout a wide network of facilities large and small, including the meat inspection sites.

Included in Deringer's services is a program for duty drawback, which involves the complicated tracking of the duty paid on merchandise imported into the United States that becomes part of a product to be exported out of the country. Because the original material did not remain in the country, once it's gone the lion's share of the duty paid to bring it in can be reclaimed. Another service involves consolidations and deconsolidations, in which the company can take products from a group of shippers in the United States, consolidate it at a warehouse and send it as a unit to a particular Canadian importer, for example. "It saves the Canadian importer a lot of the headaches and additional fees getting the merchandise into Canada," says Holzscheiter.

Holzscheiter's leadership has been good for the company. When he was named general manager in 1973, there were 86 employees. Under his leadership, it has experienced tremendous growth, blossoming from a northern-border customs broker to being a nationally recognized logistics provider. The strange thing is, growing up, Holzscheiter never expected he'd be running the company.

Born in Toledo, Ohio, he and his brother, Albert, grew up the children of a restaurateur who was also a real estate appraiser for Toledo's Probate Court. Deringer, their mother's brother, had no children. Looking back, Holzscheiter suspects there was always an assumption (and encouragement) by the older generation that he and Albert, three years his senior, would enter the business, but "I was more into girls and drinking and stuff like that," he says.

It was only as he started applying for colleges that he began to realize where his future might be heading. "My brother and I were invited to participate in the business if we chose to do so." Appreciation is evident in his voice. "I knew that this is probably where I was going to end up, not necessarily in this position -- in fact my assumption was that I would not be in this position -- but I was 'groomed' for this position. It was not anything I had to do, but why would you not do it?" he asks, laughing. By the time he earned his degree in economics with a major in international business from the Wharton School at the University of Pennsylvania, Holzscheiter was ready to follow Albert into the company. "I worked from about September of 1963 until March of '64, when I got my assignment for military duty in the Quartermaster Corps of the U.S. Army." Holzscheiter would marry Judy, a childhood friend with whom he had become reacquainted during college, while he was in the service.

Army life was not Holzscheiter's ideal life, and as soon as his two years were up, he headed to Champlain and Rouses Point, N.Y., to work for his uncle's company, moving, in 1969, to open an office in Alexandria Bay, N.Y.

Tragedy struck in 1973, when Albert was killed in a plane crash at Boston's Logan Airport. "At that time, I was a branch manager over in Alexandria Bay," says Holzscheiter. "My Aunt Helen was still living, and I believe she was president at that time. I was asked to come over and assume the position of general manager."

While Helen was the president, she left the day-to-day operation of the company to others who, he says, were "the true operational leaders. I kind of learned as I went along and didn't assume the presidency until after those folks had decided to retire." His uncle had died in 1970.

Holzscheiter is much like the company -- conservative and quietly capable. "I'm probably pretty dull, when you get right down to it," he quips. Speaking with him, one gets the impression of a man who loves what he's doing and feels a strong sense of responsibility to the company and its employees, the customers and the community.

The company contributes to Franklin County charities and organizations in many ways with little fanfare. A building owned by Deringer was recently given, complete with furnishings in the upstairs apartments, to a local shelter organization. Holzscheiter has been active in community affairs, including serving on the boards of the Northwest Regional Medical Center and the United Way of Franklin County. The company recently joined forces with Franklin Lamoille Bank to buy a Zamboni for the St. Albans Indoor Skating Facility (Collins-Perley Complex), where Bellows Free Academy plays hockey.

Golf is one of Holzscheiter's passions. A large case in the reception area holds a number of trophies won by company people over the years. Deringer's golfers won the St. Albans Men's League title this year, and the company supported the $1 million hole-in-one contest at the United Way's golf tournament fund-raiser.

Following golf but still high on Holzscheiter's list of activities are classical music and reading fiction. Clive Cussler thrillers are his favorites. Still, he confesses that the bulk of his time is spent working. "I'm not a workaholic, I don't mean to imply that, but I'm here between 7 and 8 in the morning until 5 or 6 at night, and I'm pretty well drained and washed out when I get home. Weekends, he and Judy enjoy dinners or celebrations with their friends.

Asked about retirement, Holzscheiter shakes his head. While he's not ready, succession is very much on his mind. He and Judy have two sons: John is assistant vice president for marketing and sales, and Jacob is the assistant manager at the Highgate Springs office. Holzscheiter confesses that, yes, one day it's his expectation -- "hope, I guess -- that the boys will be running the company together in whatever capacities best fit their skills." He doesn't expect them to immediately take over the business upon his retirement. "Between them and me, I have other people who are extremely capable and will help bring them along." It's clear that his uncle's legacy of encouragement and training now operates through him.

"Eventually, retirement's on the horizon" he admits, "but I'm not at the point where I'm ready to just go out there and play more golf! I'll probably be here for a while." He pauses, then laughs. "Until the kids throw me out."