Category Archives: Trade

Spring cleaning

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Over the last few weeks the rhetoric regarding the global trade environment has increased dramatically. Less than a month after he declared to the World Economic Forum that India was open for business, Prime Minister Narendra Modi has raised import duties to their highest in three decades, setting the stage for a protracted trade war. The U.S. administration announced it would look at reciprocal tax treatment.
The administration has also announced a 25% duty on steel and aluminum products to counteract what are considered unfair trade practices affecting those industries. This has caused allied trading partners to look at various U.S. made products for retaliation.
The renegotiation of the trilateral North American Free Trade Agreement continues and the Administration is taking another look at the Trans-Pacific Partnership agreement and discussing a possible model free trade agreement with an unnamed country in Africa.
The stage was set at the State of the Union address, when President Trump reiterated his position on trade. He stated “we expect trading relationships to be fair and to be reciprocal. We will work to fix bad trade deals and negotiate new ones. And we will protect American workers and American intellectual property, through strong enforcement of our trade rules.”
The pendulum is swinging sharply toward enforcement. Customs is using terms like intelligent enforcement and consequence delivery in order to effect deterrence.
With increased enforcement just around the corner, a good spring cleaning may be needed. Now is a good time to reorganize, clean up, and ensure that all systems are in good working order.
The compliance team should be asking the following questions:
Are corporate compliance manuals up to date?
Have all training materials been refreshed and have new employees been trained?
Have all employees been trained on any compliance changes within the company?
When was the last time the company did an internal audit to check that compliance procedures are working effectively?
Are vendors and suppliers knowledgeable about the importers compliance requirements?
When was the last time corporate internal controls were reviewed and updated?
When was the last time we talked with our broker about changes in sourcing, use of trade preference programs, and the introduction of new product lines?
Clearing out the compliance cobwebs now will undoubtedly pay off in the long run.

CCC: Some Comments from Brent Snyder, former Antitrust Division Criminal Deputy, as he Heads to the Hong Kong Competition Commission

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Some Comments from Brent Snyder, former Antitrust Division Criminal Deputy, as he Heads to the Hong Kong Competition Commission

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If you ever wanted to sell a student on pursuing a career in antitrust because of the interesting possibilities, Brent Snyder’s career (which is far from over) would be a good case in point.  Mr. Snyder graduated with Honors from the University of Texas School of Law, where he was an Associate Editor of the Texas Law Review. After completing a federal judicial clerkship, he began practicing as a private commercial litigator and in 2001 became a partner at Perkins Coie, a large Seattle law firm.  Mr. Snyder joined the Antitrust Division United States Department of Justice in 2003.   In June 2017 Mr. Snyder stepped down from the Antitrust Division and will be heading to Hong Kong.  On June 19, 2017, the Hong Kong Competition Commission announced the appointment of Mr. Snyder as its next Chief Executive Officer (CEO) for a term of three years commencing 4 September 2017 (here).

Mr. Snyder had a remarkably successful career with Antitrust Division.  He started in 2003 as a trial attorney.  He was involved, both as a trial attorney and as a supervisor, in many successful cartel investigations and prosecutions.  He was part of the team that conducted the TFT-LCD international cartel investigation, which culminated in a conviction and a $500 million fine against AU Optronics.  Several AUO executives were also convicted and sentenced to lengthy prison terms.  From 2013 until his departure, Mr. Snyder served as the Deputy Assistant Attorney General for Criminal Enforcement overseeing all of the Division’s criminal investigations, prosecutions, leniency and other policy work.

Mr. Snyder is known to his friends as someone whose career has always focused on positions that would be interesting, provide new challenges and allow him to make a meaningful contribution.  On these scores, his going to Hong Kong is not surprising.  Hong Kong has a relatively new but robust competition enforcement regime. Full enforcement of the Hong Kong Competition Ordinance began only a little over 18 months ago and the Competition Commission has had positive results already.  Some of these results are outlined in the Commission’s March 2017 newsletter, “Competition Matters.”  The Competition Commission also has a very helpful website.

The Hong Kong Competition Commission has been very innovative during its short history.  The Commission created an educational video on “Fighting Bid Rigging Cartels,” which can be viewed here on You Tube.  The Commission’s “Fighting Bid-rigging Cartels” Campaign was named a winner in the category “Engaging through results: Successful experience in planning, implementing and monitoring advocacy strategies” in the Competition Advocacy Contest organised by the International Competition Network (ICN) and the World Bank Group (here).

Mr. Snyder will bring a great deal of valuable experience and perspective to the Hong Kong Competition Commission. Before heading off to Hong Kong, Mr. Snyder kindly agreed to answer a few questions about his experiences to date.

Q.     Can you talk about an experience you had in the Antitrust Division that might be your fondest memory?

First, thank you for the opportunity to contribute to Cartel Capers!  Your blog has been a great and influential addition to the antitrust landscape and facilitates discussion and thinking on important topics in our field. I appreciate your interest and am happy to answer your questions.

I suppose I should have an easy answer to this question, but it is hard to pick from so many great experiences over the years.  Anyone who has worked in the Division understands what a special place it is and the exciting things its attorneys get to do.

Running through the Honolulu airport to serve a grand jury subpoena on someone trying to hightail it out of the country, the excitement of trial wins, a karaoke celebration party with the AUO team, kayaking on a bio-luminescent bay in Puerto Rico with the Peake trial team, any number of memorable drop-in interviews, planning a successful undercover operation, and, most recently, a surprise farewell party complete with a hula dancer, ukulele player and Aloha-attired Division friends (people seem to think I have a thing for Aloha shirts for some reason ?) all come to mind.

They all have one thing in common — that I was fortunate to be part of great teams. I can’t separate any memory from the fantastic people with whom I shared the experiences and accomplishments. Experiencing those things with people I like and respect are my fondest memories. I was just so fortunate to work for and with talented, hardworking, dedicated public servants who also are fun and have a great sense of humor (and/or high tolerance for mine). Anyone who knows me knows that I value that last part especially highly!

Q.     You’ve had several different positions in the Division, starting out as a trial attorney, rising to Criminal Deputy and even being Acting Assistant Attorney General for a time.  For the trial staff, what do you think are the biggest challenges they face today in cartel enforcement?

It is a great time to be a Trial Attorney because the Division has a number of really exciting investigations and plenty of cases going to trial.  But, as always, there are challenges.  I think some of the significant ones are:

  • Keeping up with the work, especially while the Division has so many cases in litigation, which pulls resources away from investigations;
  • The complexity of several of the schemes and industries under investigation, such as LIBOR and the foreign exchange spot market;
  • Coordinating and harmonizing investigations with an increasingly greater number and variety of enforcement and regulatory agencies, especially non-competition enforcement agencies; and
  • Keeping up with ever evolving technologies that cartelists are using to communicate and that are difficult to detect and penetrate.

I have been proud to see the Division’s attorneys overcome every challenge with determination and dedication and fully expect them to have a continued track record of great success in the future.

Q.     Overall, what do you think is the biggest challenge facing the Antitrust Division in its primary mission of cartel enforcement?

You raise one of them below — keeping the incentive strong to seek  leniency.

Another challenge is that the Division has lost many of its most experienced attorneys through retirements, office closures, and other attrition over the past several years.  Although the Division was able to hire a large number of exceptionally talented attorneys, the lost experience cannot immediately be replicated. The good news is that this challenge should be short term in nature. Recent trials and investigations have provided opportunities for the new attorneys to get tremendous experience, and the Division is on its way to having a really deep pool of accomplished prosecutors to go along with a skilled group of managers.

Finally, as I mentioned above, there is a much more crowded enforcement landscape today than there was even a few years ago. I am referring less to the emergence of new competition enforcers than to investigations involving a greater number and variety of other domestic and foreign enforcement agencies and regulators.  This results in greater harmonization challenges, and these investigations no doubt complicate the leniency calculus for companies that may face non-antitrust exposure from those regulators and enforcers for the same or related conduct.

Q.     Is there any one area of international enforcement harmonization or cooperation you’d hope to see improvement in among the world’s cartel enforcement agencies?

I think the quality and quantity of international cooperation is better than it has ever been. The Antitrust Division now routinely communicates and coordinates with enforcement agencies that it had little or no interaction with just a few years ago. I think this is testament to the rate at which agencies around the world are maturing and becoming involved in international investigations.

If there is one area that I would like to see improved, it would be in the area of witness interviews. As I have said at other times, I think enforcers can do a better and more efficient job of coordinating the timing of and approach to witness interviews among enforcement agencies. This would not only benefit our investigations but also be more cost effective and efficient for the witnesses and cooperating companies.

Q.     Do you think “leniency” has lost some of its appeal to potential cooperators? If so, can/should anything be done about that?

I don’t think leniency has lost its appeal. For a company confronted with exposure to a cartel offense and the resulting large fines, civil liability, and incarceration for executives, it is still a great opportunity.  And, I believe that companies and their counsel still see it as one.

But, as I mentioned above, the decision to seek leniency is undoubtedly more complicated than it has ever been as a result not only of the proliferation of competition enforcement agencies but also the more frequent involvement of other types of enforcement agencies and regulators in parallel investigations of the same conduct.  The proliferation of enforcement agencies increases the potential cost and burden of seeking leniency, and the involvement of other enforcement agencies and regulators increases the risk of liability not covered by leniency.

I think the expense and burden of multi-jurisdictional cartel investigations can be addressed through greater coordination and efficiency enhancements among competition enforcement agencies. I think that harmonizing leniency with non-competition enforcement agencies and regulators presents greater challenges, but I believe it will become easier as they have more experience with leniency and see its results.  I saw improvements in this area during my years as DAAG.

Finally, the best way to make leniency attractive is to prove you can and will detect and prosecute cartels even without a leniency applicant. The Antitrust Division has an excellent track record of doing so, and cartelists who choose not to seek leniency face a real risk of detection and prosecution.

Q.     As mentioned above with “Fighting Bid Rigging Cartels” video the Hong Kong Competition Commission has been innovative and active in public outreach.  Do you think that kind of outreach can be duplicated in the United States?

I have been really impressed by innovative public outreach efforts in other jurisdictions, such as Hong Kong, and have often wondered if they can be replicated here. Unfortunately, I am doubtful that they can be replicated here because the U.S. is so large and the channels for communicating to the general population are diffuse or prohibitively expensive.

Nonetheless, the Antitrust Division has prioritized making public outreach more systematic and diverse than in the past. I don’t think we’ll see any national ad campaigns or public service announcements from the Division, but I do think it will be finding ways to get in front of a greater number of groups and constituents than in the past.

I think this outreach is very important not only from the perspective of developing investigative leads but also to educate the public regarding the illegality of cartel offenses.  In 2015, Prof. Andreas Stephan of the University of East Anglia published an interesting survey of public attitudes to price fixing in the UK, Germany, Italy, and the U.S. which showed that the U.S. lags behind the other jurisdictions in knowledge that cartel conduct is illegal.  Outreach can certainly help with this.

Q.     You no doubt had many possible very lucrative opportunities upon leaving the Department of Justice.  Why did you chose to go to work with the Hong Kong Competition Commission? 

I thought it was an incredible and interesting opportunity to go from one of the most established and experienced agencies in the world to one of the newest. You’ve already noted that the Hong Kong Competition Commission has shown itself to be innovative and thoughtful during its relatively short existence. I am excited to get to contribute to what Stanley Wong, Rose Webb, and others have already begun to build there and hope to make good use of my experience at the Antitrust Division.

It should come as no surprise that I think the Antitrust Division is the finest competition enforcement agency in the world, but I jokingly told Acting Assistant Attorney General Andrew Finch that we’re going to try to knock them back to second best. ?

*****************************************************************************

Thanks Brent.  Best of luck in the new position in Hong Kong!

The CBP Officer of the Future

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by [email protected]

At the recent U.S Customs and Border Protection (CBP) west coast trade symposium, a panel titled “Global Innovation,” which included representatives from the Department of Homeland Security’s Office of Science and Technology, CBP’s National Targeting Center [It is not clear if this is one or two organizations.] discussed innovations in software applications and data usage that enhance supply chain security.

 

One question raised by the panel was, what would a future port look like?  The question I raised, in return, was what will a future CBP officer look like? The question remained unanswered, but is one that needs to be considered seriously.

 

As CBP continues to seek and use innovative technologies, it is the officer who needs to understand the technology as it will serve as his/her partner in both the agency’s enforcement and facilitation missions. Ultimately, the officer will need to become a savvy data analyst.

 

In addition, the operational personnel, i.e., Customs and Border Protection officers, import specialists, and trade analysts must be grounded in a solid understanding of the import and export dynamics of international trade. This includes production, sourcing, and logistics trends.

 

In order to be able to maximize the use of available technology, strategic and critical thinking skills must be in the officer’s tool box. Being able to identify, address and prioritize problems will be essential. The days of continuing to focus on low-hanging fruit that fails to bring positive returns to both the agency and the trade community will be over.

 

The mere accessing of data is a waste of time if the ability to evaluate it does not exist. Effective evaluation is critical to enabling supervisors and managers to make decisions on the optimal deployment of limited resources.

 

In general, the officer must be flexible and nimble as global trade trends shift along with the potential risk. Continuing to hold onto historic trends and patterns will only cause the officer to be reactive, instead of proactive, as new challenges emerge. In addition, quick communication by analysts to officers at the port is vital. There is nothing worse than acting on inaccurate or old data. If your efforts do not produce results you must swiftly react to make necessary adjustments.

 

Corporate compliance officers need to have the same skills and approaches to be effective and provide a value-added service across company operations.

 

Janet Labuda on Trade by the Numbers

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By [email protected]

Recently, President Trump sent a memo directing Secretary of Commerce, Wilber Ross, to initiate an investigation of steel and aluminum products. The rarely used investigative authority found under section 232(b)(1)(A) of the Trade Expansion Act of 1962 (19 U.S.C. 1862(b)(1) determines any detrimental trade activity affecting U.S. national security.

In addition, the Presidential memo lists other “core industries such as…vehicles, aircraft, shipbuilding, and semiconductors. The administration considers these as “critical elements of our manufacturing and defense industrial bases, which we must defend against unfair trade practices and other abuses.”

The Secretary of Commerce reports to the President, within 270 days of initiating the investigation and focuses on whether the importation of the article in question is in such quantities or under such circumstances as to threaten to impair the national security. The President can concur, or not, with the Secretary’s recommendations, and take action to “adjust the imports of an article and its derivatives,” or other non-trade related actions as deemed necessary.

Another trade remedy is found in Section 301 of the Trade Act of 1974. This law provides the United States with the authority to enforce trade agreements, resolve trade disputes, and open foreign markets to U.S. goods and services. It is the principal statutory authority under which the United States may impose trade sanctions on foreign countries that either violate trade agreements or engage in other unfair trade practices. When negotiations to remove the offending trade practice fail, the United States may take action to raise import duties on the foreign country’s products as a means to address the trade imbalance.

Under section 332 of the Tariff Act of 1930 (19 U.S.C. 1332), the U.S. International Trade Commission (USITC) conducts investigations into trade and tariff matters upon request of the President, the U.S. House Committee on Ways and Means, the U.S. Senate Committee on Finance, either branch of the Congress, or upon the Commission’s own initiative. The USITC has broad authority to investigate matters pertaining to the customs laws of the United States, foreign competition with domestic industries, and international trade relations.

The USITC can also conduct investigations using section 337, to determine whether there is unfair competition in the importation of products into, or their subsequent sale in, the United States. Section 337 declares the infringement of a U.S. patent, copyright, registered trademark, or mask work to be an unlawful practice in import trade. It also declares unlawful other unfair methods of competition and unfair acts in the importation and subsequent sale of products in the United States, the threat or effect of which is to destroy or substantially injure a domestic industry, prevent the establishment of such an industry, or restrain or monopolize trade and commerce in the United States.

Section 337 investigations require formal hearings held before an administrative law judge. If a violation is found, the USITC may issue orders barring the importation of certain products into the United States. In addition to requesting long-term relief, complainants also may move for temporary relief pending final resolution of the investigation based on a showing of, among other things, irreparable harm in the absence of such temporary relief.

Subtitle A of title VII of the Tariff Act of 1930, as added by the Trade Agreements Act of 1979 (19 U.S.C. § 1671 et seq.) and subsequently amended, provides that countervailing duties will be imposed when two conditions are met: (a) the U.S. Department of Commerce (Commerce) determines that the government of a country, or any public entity within the territory of a country, is providing, directly or indirectly, a countervailable subsidy with respect to the manufacture, production, or export of the subject merchandise that is imported or sold (or likely to be sold) for importation into the United States and (b), in the case of merchandise imported from a Subsidies Agreement country, the USITC determines that an industry in the United States is materially injured or threatened with material injury, or that the establishment of an industry is materially retarded, by reason of imports of that merchandise.

If Commerce determines that a countervailable subsidy is being bestowed upon merchandise imported from a country that is not a Subsidies Agreement country, a countervailing duty can be levied on the merchandise in the amount of the net countervailable subsidy without a USITC determination of material injury.

In addition, Subtitle B provides that antidumping duties will be imposed when two conditions are met: (a) Commerce determines that the foreign subject merchandise is being, or is likely to be, sold in the United States at less than fair value, and (b) the USITC determines that an industry in the United States is materially injured or threatened with material injury, or that the establishment of an industry is materially retarded, by reason of imports of that merchandise.

Sections 201 to 204 of the Trade Act of 1974 (19 U.S.C. 2251 to 2254) concern investigations conducted by the USITC to determine if a product is being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to a domestic industry.

If the USITC makes an affirmative determination, it recommends to the President the action that will address the serious injury or threat and facilitate positive adjustment by the industry to import competition. The President makes the final decision on remedy, including the form, amount, and duration.

There is no doubt that the current administration will use every available tool to initiate investigations and take action where such investigations determine injury to U.S. domestic industry by foreign imports. Continue to keep track of the announcements by the White House, Commerce, the USITC and CBP, and don’t get tripped up on the numbers.

Labuda on Fake News and Trade

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Former CBP Official, Janet Labuda at FormerFedsGroup.Com, provides us with her take on the importance of verifying the accuracy of news information in an emerging world news can longer be taken at face value.

 [email protected]

Over the last few months the fake news dilemma has featured prominently in the media. Day in and day out we receive bits and bytes of information through social media and other electronic sources that many read and take to be the truth, the whole truth, and nothing but the truth, regardless of how outlandish the claim or the source.

Such bits of information are rarely vetted either through our own personal “common sense” filters or through other reliable filters . This usually happens because we are pressed for time and simply can’t find the few minutes needed to verify and validate the information presented to us. What is even more problematic is that many of us pass on such unfiltered misinformation through broad electronic social networks thus perpetuating and exacerbating the problem.

The same holds true for the data we collect in the area of international trade. Customs uses data to drive every element of its trade facilitation and enforcement programs. Data collection and its subsequent crunching, dicing and slicing is the bedrock of their risk management processes. Decisions by Customs to focus on certain areas of potential non-compliance, on shifting resources to contain  perceived risk, and on pinpointing companies and their transactions for audit, and further scrutiny are made on what data is reported.

The key questions for companies are: how reliable is the data that is reported, and who is responsible to ensure that the data is accurate and reliable? In addition, what internal controls are followed to vet information. Compliance means reporting accurate information on the transaction to substantiate adherence to legal and regulatory requirements. U.S. Customs and Border Protection enforces strict record keeping requirements, which state “the accuracy of import (and export) information is important not only because it affects the revenue, but because accurate trade information and statistics are important in determining trade policy, the future eligibility of certain goods or goods from certain countries for special programs, the impact of imports on domestic industries, and the effectiveness of various trade agreements and programs.”

Companies need to established sound practices of filtering data received as well as   self-generated. If data is not regularly tested and validated it leaves your company in a vulnerable position. By reporting incorrect data to regulatory agencies, whether you yourself file, or you use a broker to file on your behalf, your company may be subject to unnecessary enforcement reviews, and penalties.

When it comes to data reporting, garbage in, garbage out is not acceptable anywhere in the supply chain. Only accurate and reliable data can help to keep your company insulated from risk.

Labuda on trade risks

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Compliance: what are the trade risks (part 1)

by [email protected]

Over the last few weeks, I have written a series of short articles discussing the need for developing a compliance-based approach to transacting international trade. This will help to prepare your organization to effectively deal with the risks inherent in importing.

What are these risks that continue to be the focus of U.S. Customs and Border Protection (CBP)? There are various operational policies and programs that give insight into the agency’s concerns. The most important is the identification of Priority Trade Issues (PTIs). Currently, CBP considers the agency’s trade enforcement priorities to be:

Antidumping and Countervailing Duty case administration and enforcement;

Import Safety;

Intellectual Property Rights protection;

Revenue;

Textiles; and

Trade Agreements.

In CBP’s own words “Priority Trade Issues (PTIs) represent high-risk areas that can cause significant revenue loss, harm the U.S. economy, or threaten the health and safety of the American people. They drive risk-informed investment of CBP resources and enforcement and facilitation efforts, including the selection of audit candidates, special enforcement operations, outreach, and regulatory initiatives.”

* * * * * Click here for the rest of the story * * * * * 

 

Compliance: it starts at the top

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GeyerGorey LLP draws upon Janet Labuda’s contacts and experience to understand trade enforcement trends.  Here she is with her latest on the importance of compliance. Janet can be reached at the FormerFedsGroup.

By [email protected]

Whether you are a small to medium sized enterprise, or a large multinational corporation, creating a culture of compliance starts at the top. This compliance culture should permeate your entire organization starting with the Chief Executive, the Chief Financial Officer, and the corporate counsel.

Compliance is not something that can be compartmentalized, rather, it must be ingrained in the consciousness of every employee from the executive suite to the shop floor. This is one area where a top down driven process is vital. The compliance officer is responsible for implementing the compliance focused program that is established by the corporate ownership and top management.

However, all aspects of the company, whether sourcing, transportation, production, marketing, or sales must work together to support the compliance operation. Leaving just the compliance office to establish the ethic and carry the entire company is an accident waiting to happen.

I often hear that various departments in a company do not understand the compliance aspect of the operation, which sometimes leads them to negate the guidance of the compliance department.  This can lead a company down a slippery slope.

The corporate culture must embrace compliance across the entire company and all must understand the risk of potential regulatory violations.  A once a year training program is not going to cut it.  Compliance is something that everyone must  live, day in and day out.  Workplace evaluations should include a compliance segment for each and every employee. Every department head needs to understand and communicate compliance procedures to their direct reports.

The compliance department must keep a finger on the pulse of risk.  The compliance officer should be responsible for communicating these risks throughout the organization and information should be refreshed and disseminated as often as necessary.  To this end, the CEO must make time for compliance officers, and not leave this critical function on auto-pilot.

Once a vibrant internal compliance driven operation is rooted in the day-to-day operation, companies must push their ethic out to their entire supply chain.  This includes interaction with foreign suppliers, agents, and transporters.  Everyone in the supply chain needs to understand that by doing business with your company, they accept the strict standards that support adherence to the laws and regulations governing trade and all aspects of how the business conducts itself.  This should be reflected in all corporate negotiations, contracts, and purchasing agreements.

By taking this position, senior corporate management supports the highest levels of business ethics and integrity throughout the supply chain.  Compliance is not a skate on thin ice, or a fly by the seat of your pants exercise.  A culture of compliance provides that  sure footing needed when regul

Trade compliance–why bother?

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by Janet Labuda

I worked in Customs for over thirty years and met regularly with importers to discuss trade risk, compliance, and enforcement. Often, companies would express their concerns about the cost of compliance–the proverbial cost benefit analysis. If money is spent to create a compliance department, what will the benefits be? Do the risks of possibly getting caught by Customs outweigh the investment in corporate trade compliance? How can there be an effective response to risk without the associated high costs?

Just as with most things, there are rules that govern our behavior. When we drive to work there are lane markings on major thoroughfares, and traffic light systems, and posted speed limits to guide us in an orderly fashion. The same can be said for international trade rules. They are meant to make order out of potential chaos. No person or company can operate successfully in an atmosphere of chaos. Business seeks out predictability, and stability. The rules and regulations governing trade provide a needed stable structure that can help companies weather shifts in the global economy or changes to the legal or regulatory framework.

More importantly, the rules help to level the playing field, and enhance and improve the competitive business dynamic. When companies fail to operate using these rules the underpinnings of trade policy collapse. Trade preference program become endangered, national economies become threatened, sourcing models get upended, business relationships are uprooted.

In addition, companies can get swept up in enforcement actions. Customs assesses risk using somewhat broad parameters. It could be driven by product, country of origin, manufacturer, preferential trade program usage, or combinations of these elements. There are also those instances when very specific information reaches the agency.

The better question to ask is what price is paid if my company does not invest in a culture of compliance? Getting enmeshed in Customs or other regulatory enforcement actions can tarnish your brand, lead to expensive law suits and penalty actions, and divert your resources away from your corporate mission and goals.

Ensuring a strong compliance structure in your organization ensures greater facilitation of product entering the commerce which supports just in time inventory practices. Costs are reduced for both government and business by focusing limited resources to enhancing productivity. A compliance driven operation is a win-win.

Who’s driving your trade compliance bus?

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We are including a column by Janet Labuda of the FormerFedsGroup which has supported GeyerGorey LLP with investigative and compliance resources and helps FormerFedsGroup clients on compliance issues involving international trade and Customs matters. I will oversee FormerFedsGroup trade compliance training programs and set the protocols of the PerfectShield (TM) certification process.

By Janet Labuda

The short answer to the question who’s driving the compliance bus is your corporate compliance department. The driver’s seat, should not be filled with personnel from your transportation and logistics operation, the sourcing, or import management groups. All parts of your organization need to be involved in your culture of compliance, but the compliance department is where the rubber meets the road, so it should be staffed with highly focused compliance experts. Companies also should ensure that Customs is not in your driver’s seat.

In 1993, the U.S. Congress amended the Tariff Act of 1930 by enacting, as part of the North American Free Trade Agreement, the Customs Modernization Act (Mod Act). Inherent in the legislation was a shift of responsibility, to the importer, to ensure that imports are compliant. In addition, a series of recordkeeping requirements with tough penalty provisions were established. The Mod Act also introduced the two concepts of informed compliance and reasonable care into the legal and trade lexicon. Customs must explain the rules, and importers, and others in the trade community, must take care to understand and follow the rules.

The legislation gave the bus key to the importers. But, an important thing to remember is that although, the importers are driving the compliance bus, the route is dictated by Customs. Most times importers find that they do not travel on the most direct route. Often, there are bumps in the road and unexpected detours. You must be prepared for these inevitabilities.

Over the last few weeks, it has become obvious that international trade will be a priority for U.S. policy makers. The trade community can expect a greater emphasis on the enforcement of laws and regulations, and possible changes to current trade legislation, especially as it relates to preferential access to U.S. markets. Our traditional trade relationships will be tried and tested, and may see unexpected changes to the current norm.

From past experience, the federal government pendulum tends to swing in wide and sweeping arcs. Establishing a predictable balance can be difficult to achieve as guidance and focus shift. Often, the importing community gets caught in the middle.

The time for doing some critical introspection is now. Do not allow your company to be caught off guard. The following recommendations are ways your company can engage in upgrading your bus’s safety and navigation systems:

  1. Put yourself in Customs shoes and do a complete review of your operations and document how you believe your company is meeting a reasonable care standard.
  1. Enhance your corporate internal controls, as needed.
  1. Ensure a transparent and understandable supply chain for all phases of your overseas production.
  1. Don’t fly under the radar screen. Develop a regular outreach to Customs and other federal regulatory agencies.
  1. Review your business relationships to guarantee that there is an understanding that compliance is key to working with your company.
  1. Become a CTPAT tier three partner or an Authorized Economic Operator, and keep abreast of Customs Trusted Trader programs.
  1. Work closely with a professional broker to navigate complex trade issues. A broker dedicated to compliance is a force multiplier for your company.
  1. Understand the nature of any perceived risk, e.g., forced labor, anti-dumping circumvention, trade preference non-compliance, and how your products and partners might be affected by such risk.
  1. Review your sourcing strategies in light of the potential risk you identify.
  1. If you uncover a problem seek legal advice on the best way to move forward to mitigate any potential downstream penalties.
  1. Ensure that all corporate departments are pulling in the compliance direction.
  1. Provide regular compliance training throughout the company.
  1. Work through industry associations to have your voice heard when changes in government policies and procedures affect your business model.

Start your engines, buckle up, and try to enjoy the ride.

Labuda on The Role of Customs in National Economic Growth

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The Role of Customs in National Economic Growth

By Janet Labuda**

Traditionally, Customs Services have  been tasked with the collection and protection of revenues generated from the importation of goods into their respective countries. Declared valuation of the imported goods is the basis for the collection of duties and value added tax for the national budgets. However, as the global economy is gravitating toward various free trade and duty-free preference partnerships and regional economic integration the traditional role of Customs is evolving.

Most Customs Services will readily admit that the growth of import trade and resulting complexities are often overwhelming for current personnel numbers, training, and abilities. The World Customs Organization has advocated the use of various risk management programs to identify the highest risk transactions, and therefore direct limited resources to addressing only these risks, while absorbing lower risk situations. Various countries have also established trusted partnerships with members of the supply chain using the business community as a force multiplier for compliance. Modern Customs Services must be on the leading edge of building a culture of compliance within the global trade community.

The international trade community has embraced the concept of just in time inventory procedures and Customs must embrace a just in time response to the needs of business. The lack of timeliness in regulatory decisions, and addressing legal issues, e.g., protests, the inability to create clear and concise regulations to elucidate new legal requirements, and failure to understand the business of business has a detrimental effect on corporate prosperity and subsequently a nation’s economic growth. Customs must see itself as an economic growth engine and compliance partnerships need to be expanded to include economic growth partnerships.

Generally, companies that reach out to Customs are seeking to enhance their compliance footprint, not to engage in questionable trade practices. There is no doubt that there are those in the trade community who engage in undervaluation, circumvention of anti-dumping duties, the introduction of goods that violate intellectual property rights, and in introducing products that adversely affect the health and safety of consumers. In these situations, Customs should take swift and effective enforcement action. Violations such as these also have a dampening effect on economic growth. However, for those companies seeking to be compliant players in the global economy, Customs Services need to step up and engage in collaborative solutions and ways forward.

Customs has a duty to remove unnecessary roadblocks affecting international trade transactions. Creating policies that are the antithesis of global economic partnerships is unacceptable. Customs Services should recognize their role in national economic growth by taking steps to ensure that Customs officials are trained in the complexities of international trade and the legal requirements necessary for a seamless facilitation of legitimate trade. Customs needs to develop programs that enable the highest level of integrity among Customs human resources and to develop strong risk management programs that address serious violations, rather than just seeking to pluck low hanging fruit which have little risk to compliance or which impede the flow of compliant trade. Of course, it is critical to ensure that adequate resources are in place to quickly address requests from the trade community regarding legal advice and rulings. Mutually developed compliance programs must take into account business needs, and provide quick and effective communication with the trade community. Customs must guarantee consistent and uniform treatment of issues across various ports and government agency offices to ensure predictability.

For import/expert issues, Janet can be contacted at Vandegrift Inc.  Janet can also be contacted at FormerFedsGroup.