Expensive Lesson for Sales Manager

A sales manager with PPG Industries was charged with violation of two export control laws relating to one export transaction.  The Bureau ofIndustry & Security charged the manager with a violation of15 CFR 764.2(d) Conspiracy and 15 CFR 764.2(b)  Causing, Aiding or Abetting a Violation of the Regulations.  The violations were related to the export of epoxy paint and paint thinner to a nuclear power plant under construction in Pakistan, without the required export license from the Department of Commerce.  In furtherance of the conspiracy, the manager directed another sales representative to make the order appear to be a domestic transaction to avoid internal export compliance review and arranged for the freight forwarder to transship the goods through Hong Kong.   The sales manager knew that the goods required a license and that export without a license through Hong Kong would be considered an intentional violation, which would result in fines and jail time.   The manager was ordered to pay the maximum civil penalty of $250,000 per violation, but was not ordered to serve any time in jail; however, the civil fine was reduced to $15,000, payable by an initial payment of $5,000 followed by four installments of $2,500 each. 

Moral of the Story:

Think of the consequences before you act.  You could be personally liable for payment of an export penalty.   

Did You Know....

Did you know that U.S. Immigration and Customs Enforcement “ICE” is authorized under 19 U.S.C. 1401 to cross-designate other federal, state and local law enforcement officers to enforce customs laws?

Officers must complete a rigorous training program before the authority is granted. Once granted, the officers can enforce customs-related laws, perform searches, make arrests and perform other federal law enforcement activities such as apprehending drug smugglers and money launderers.  After completing the training course, cross designated officers are authorized to

·         execute and serve search or arrest warrants, subpoenas and summonses in compliance with customs laws;

·         conduct customs searches at the border for merchandise being imported into or exported from the U.S. and to effect seizures and arrests of persons or articles in violation of U.S law; and

·         carry firearms in compliance with the ICE firearms policy.

The cross-designation status is valid for two years.  Recertification is required after two years and the designation can be revoked by ICE at any time.

This system is more efficient because it saves gas and time while, allowing the designated officers to take action without interrupting  the workload of ICE officers.

FATCA: It’s Not Another FTA

Seeing FATCA associated with trade, the first assumption would be that the government has another free trade agreement on the table; however, there is nothing free about this acronym.  In fact, the act was designed to generate revenue. The Foreign Account Tax Compliance Act “FATCA” originally required businesses to collect tax identification numbers for vendors and submit documentation to the IRS when those vendors did more than $600 worth of business.  This turned out to be an administrative nightmare and was repealed; however, the international version of FATCA has not been repealed.

The portion of FATCA that remains will require foreign financial institutions to report certain information about financial accounts held by U.S. taxpayers to the IRS.  Starting in 2013, the foreign financial institutions will be required to

(1)  “undertake certain identification and due diligence procedures with respect to its account holders;

(2)  report annually to the IRS on its account holders who are U.S. persons or foreign entities with substantial U.S. ownership; and

(3)  withhold and pay over to the IRS 30-percent of any payments of U.S. source income, as well as gross proceeds from the sale of securities that generate U.S. source income, subject to some additional guidelines.”  

Obviously, the foreign financial institutions are not pleased with the onerous reporting requirements.  These foreign institutions are likely to start denying accounts to U.S. persons to avoid the new reporting requirements. A U.S. citizen living and/or working in Italy may have difficulty obtaining credit or a banking services if the bank is going to be required to track and report information to the IRS.   Since implementation is still over a year away, it’s always possible that the U.S. will repeal this provision of FATCA too.  

International Trade Acronyms

Welcome to our weekly list of acronyms used in international trade. The acronyms found here represent terms used in logistics, imports, exports, government agencies and more. This week we review acronyms that start with “N.” Please feel free to contribute additional acronyms to the list.

NAFTA	North American Free Trade Agreement
NAICS	North American Industry Classification System
NCBFAA	National Customs Brokers & Forwarders Association of America
NDA	Non-Disclosure  Agreement
NGO	Non-Governmental Organizations
NHTSA	National Highway Traffic Safety Administration
NLR	No License Required
NPRM	Notice of Proposed Rule Making
NTB	Non-Tariff Barriers
NTC	National Targeting Center
NTEU	National Treasury Employees Union
NVOCC	Non Vessel Operating Common Carrier
NTR	Normal Trade Relations (formerly MFN)

Hooked on Hangers

What’s so great about hangers?    Well, we use the inexpensive plastic or metal contraptions to hang our clothing in the closet so we don’t have to pick out our work clothes out of a pile of wrinkled fabric and iron them each morning. 

Hangers must be pretty important.  Last year a U.S. importer of steel write garment hangers was arrested and charged with fraud, smuggling and other charges related to the importation of the hangers.  The “other” charges were related to an attempt to circumvent payment of customs duties by claiming the hangers were made in Mexico and subject to NAFTA.  To make matters worse, metal hangers from China are subject to antidumping duties. 

Arturo Huizar-Valazquez, admitted purchasing the hangers from Chinese companies, shipping to the U.S without the country of origin, then shipping them to Mexico where they were fraudulently labeled “Made in Mexico," and returned to the U.S.

Recently, Huizar-Velazquez was ordered to pay more than $3 million in restitution to the U.S. government and to forfeit over $4 million in proceeds gained through the illegal activities.

CBP and ICE agents worked together on this case and the punishment should serve as a warning to others who are currently violating U.S. trade laws or just thinking about ways to circumvent the system.  When you are caught, the government is going to swoop down, take your profits, demand restitution and find you a place to stay in the prison system.  

Culture Quiz Answer

We hope you enjoyed the most recent culture quiz.  Here is the question and answer from the poll.  

You are visiting a customer in Spain.  Your host takes you to a snack bar for lunch.  What do you do with your napkin, straw paper and other trash?

A.    Take it with you and dump it in the trash can outside of the restaurant.

B.     Wait for the server to remove it before leaving.

C.     Toss it on the floor.

D.    Push it to the center of the table.

Answer:  C

In Spain, the floors are swept at the end of the day and customers are expected to toss trash on the floor.

International Trade Acronyms

Welcome to our weekly list of acronyms used in international trade. The acronyms found here represent terms used in logistics, imports, exports, government agencies and more. This week we review acronyms that start with “M.” Please feel free to contribute additional acronyms to the list.

MAWB	Master Air Waybill
MFN	Most Favored Nation
MFTA	Morocco Free Trade Agreement
MID	Manufacturer's Identification Code
MPF	Merchandise Processing Fee
MRP	Manufacgturing Resources Planning
MSDS	Material Safety Data Sheet
MTA	Miscellaneous Trade & Technical Corrections Act
MTB	Miscellaneous Trade Bill
MTSA	Maritime Transportation Security Act