U.S. Tensions With Iran Require Stricter Controls From Exporters To Remain In Compliance

U.S. Tensions With Iran Require Stricter Controls From Exporters To Remain In Compliance

As it navigates a post-9/11 world and continues to engage enemies abroad, and as tensions escalate with Iran, the United States government is more focused than ever on export enforcement.

Companies - especially those that export products to the Middle East - need to take special precautions to remain in compliance with export law and avoid federal investigations.

“Iran is just the latest in this saga of how the government uses its resources to enforce its laws in pursuit of national and international trade policies,” said Peter Quinter who is a shareholder and chair of the Customs and International Trade Law Group at GrayRobinson, P.A.

These efforts have far- reaching impact for U.S. companies as well as companies that U.S. companies do business with, including banks and insurance companies, said Quinter.

“If a U.S. company is asked to ship cargo to the United Arab Emirates or Dubai, that is an alert to the U.S. government because the shipment is destined to a place so close to Iran and because Dubai is an in-transit point for shipments to Iran. And if the U.S. company knew or should have known of the final destination then it would be subject to penalties and or criminal prosecution,” said Quinter.

He said that these penalties have also been greatly increased over the past several years.

“Just a few years ago the maximum penalty was $11,000; now it’s $250,000 for a violation,” he said.

Current Trends

Other than Iran, there are a number of areas that are under scrutiny from the U.S. government, including money-laundering schemes by drug traffickers, said Quinter. He also has seen a good number of customs fraud schemes, such as the intentional mis-description of merchandise in order to avoid higher customs duties, as well as the falsification of the country of origin in order to avoid “anti-dumping duties” applicable to products from a country such as China.

“If I’m a U.S. buyer and I want to buy from China I’m going to pay a lot more money in anti-dumping duties to customs. So what I do is I’ll buy the product and pretend it’s from Malaysia or Vietnam or some other country. It’s not, it really is from China but if I can avoid that extra payment by just saying that it’s from another country then all the paperwork is false,” said Quinter.

Another major issue plaguing international trade is the intentional mislabeling of food, especially seafood and fish, said Quinter.

“When you go out to a restaurant and you order some kind of fish, you probably have no idea if you’re sure it is indeed the fish you ordered. It’s been filleted and it’s been flown all over the world and it has sauce on it so it’s very common that some will serve you a cheaper fish than the one you think you ordered,” said Quinter.

Best Practices

Quinter recommends first that all companies have a written international trade compliance program as a best practice.

“It usually starts with some kind of statement by management—the president of the company—about how important export controls are. Then there are guidelines on what the actual procedures are and a checklist used before something can be shipped overseas,” he said.

The export checklist should be detailed and establish the responsibilities for each department in the transaction.

“So, one department double checks what another department is doing, and eventually the idea is that before a violation occurs someone is aware of it and stops the transaction,” he said.

“For example, when an agent from the government begins an investigation, one of the first things they’re going to ask for when they meet the company is their written compliance program. If the company does not have one, it’s already a red flag. If they have one, that’s a really good sign,” said Quinter.

He also recommends that companies make sure that all of their communications go through one person.

“Sometimes the president is doing the talking; sometimes the human resources person is doing the talking; the public affairs person is doing the talking; the lawyer’s doing the talking. It should not be that way. There should be one voice from the company and that’s usually the general counsel or its outside counsel,” said Quinter.

“Any sizeable import or export company should have a legal expert knowledgeable in customs and trade do a review or audit of its processes,” he said.

“I guess one of the mistakes I see general counsel make is that they say, in the presence of the government, ’let’s just handle this in house.’ That’s generally a mistake. It delays me getting involved or another expert getting involved, and the thing is I could have fixed the problem from the beginning. Sometimes it gets so far that now it’s hard to fix. So, instead of someone paying a $100,000 penalty, by the time I get involved it’s months later after the investigation has begun, the government has already made up its mind as to who did what wrong and now I have an uphill battle to try and persuade the government that there really wasn’t any criminal intent here and the monetary penalty really should be lowered,” he said.

Review the recording from the April 12 Webinar “Understanding Trade Controls and Sanctions in the 2012 Global Economy” at the following link.