The Department of Commerce Office of Antiboycott Compliance (“OAC”) recently announced a $22,000 penalty against Chemguard Inc. (now a division of Tyco International Ltd.) for 7 alleged violations of the U.S. antiboycott laws The violations included two counts of furnishing an agent-signed certificate in conjunction with transactions in the UAE and five counts of failing to report an antiboycott request. OAC’s new announcement comes on the heels of three penalties it announced in July for a combined $50,900 against Applied Technology, Inc, Lynden Air Freight, and Smith International.

The U.S. House of Representatives may however shortly act on legislation that would change the OAC’s mandate when it takes up voting on the State Department authorization bill, to which Howard Berman (D-CA) was successfully able to attach a boycott-related amendment. In addition to codifying the U.S. antiboycott provisions which have been promulgated solely by Executive Order since 1994, the new legislation includes a number of dramatic changes to the existing law, including giving the Executive Branch discretion to remove existing exceptions (e.g., compliance with primary import or positive certification statutes) and extending application of the regulations beyond the current jurisdictional limit of transactions within “U.S. commerce.” The amendment’s future in the Senate is unclear.

Should the new bill pass the full house and then the Senate, Berman said, “We’re on sounder footing, we codify the higher penalties, and we make it permanent.”

Source: Crowell & Moring LLP

(World Trade Interactive)

An Illinois-based company has agreed to a settlement agreement with the Bureau of Industry and Security under which it will pay a $775,000 penalty to settle charges that it violated the Export Administration Regulations by exporting aluminum alloy to China, Singapore, Malaysia and Mexico without the required licenses.

BIS alleged that the company exported this product, which is controlled under export control classification number 1C202 for nuclear nonproliferation reasons, on 65 occasions between January 2005 and January 2008. As part of its settlement the company also agreed to complete an audit of its export controls compliance program covering the 12-month period beginning Sept. 8, 2011, and to submit a report on that audit to BIS no later than Nov. 8, 2012.

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Assists – Compliance Nightmare and Risk

On January 10, 2011, in Trade Compliance & Strategy, by Nigel Fortlage

managing riskThis article came about because in the course of communicating with a long time friend and experienced and certified trade professional we found a major trailer manufacturer who didn’t know what assists are!

We continue to reference ‘assists’ on every importer meeting as most people don’t appreciate/comprehend the implication. Let’s face it ‘in Canada we all think of assists as something related to reward for the person passing the puck to the goal scorer’ :-)

Seriously though any input to the manufacturing process that an importer provides is to be included in the value of the goods. Most common references relate to tools, die’s, etc. that are provided to a manufacture in order to make a part for an importer. That could even be as simple as a ‘sticker’ applied to a product, where the sticker was supplied by the importer.

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CBSA – AMPS Penalty Risk – Update

On December 22, 2010, in Trade Compliance & Strategy, by Nigel Fortlage
Courtesy of IE Canada

The Canada Border Services Agency (CBSA) has issued a notice to the Border Commercial Consultative Committee (BCCC)’s AMPS subcommittee regarding an update on the proposed changes to the failure to correct accounting trade penalties (C080, C081, C082, C083, C350, C351, C352 and C353) that were discussed at the last AMPS subcommittee meeting on September 27th, 2010.

The following update has been provided:

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wood window

Trade Compliance and the Lacey Act

A large Canadian manufacturer, was able to add value to their organization by utilizing a comprehensive, integrated trade risk management strategy. With the legislation of the Lacey Act in 2008, regarding illegal wood harvesting, additional regulations were imposed on to the organization. Partnering with their customs broker, the company was able to develop a cohesive technological program designed to reduce risk and ensure compliance. By integrating their trade strategy throughout the entire organization with use of technology, this company was successfully able to create flow with trade processes, reduce time and costs, reduce risk, and heighten compliance assurance. The organization was able to save approximately $96,000 a year and reduce their production time by approximately 92%. Also, the organization is able to avoid penalties due to violation of the Lacey Act ranging up to 5 years of imprisonment and a $500,000 fine per violation, as well as forfeiture of merchandise.

The Lacey Act is a very complex program that is designed to manage species and origin of wood materials from cradle to grave to protect the US domestic market. It was a modification to the Farm Act that included a broadening of the definition of plants that the act covered.  To read more about this program and it’s details, click here.

Example of how far reaching this could be: Country Time lemonade that is contained in a plastic bottle, with a plastic cap and covered with a plastic wrapper contains, among other things, glycerol ester of wood rosin. Glycerol ester of wood rosin is a common food additive and is prepared from resin acids of wood rosin harvested from the stumps of the longleaf pine. It would be covered by this law.

Integrated Trade Compliance Strategy Wrap up

The issue is clear that for manufactures of wood products it was of great concern to understand their sourcing trade data and link it to the export (sales) trade data. In this case it was a critical given the fines and penalties extended beyond financial but also prison time.  This is a clear-cut case for an Integrated Trade Compliance Strategy, where the linkages between sourcing and growth were directly related and significant impact on the organization and understanding its tolerance for risk.

ACI e-manifest a compliance opportunity

On November 24, 2010, in Trade Compliance & Strategy, by Nigel Fortlage

Red truck on blurry asphalt road under red sky with clouds and sunset lightThe Canadian government following on the heels of the US government is finally implementing the much talked about ACI e-manifest program. While it is  a tactical program which I tend to stay away from on this blog, there is a positive compliance angle that I did want to highlight. But first a short back grounder on ACI e-manifest.

October 31st was the roll out of the ACI Highway (eManifest) mandate by the Canada Border Service Agency (CBSA).  ACI (Advanced Commercial Information) is Canada’s regulation requiring cross-border shippers and carriers to file electronic manifests for Canada-bound shipments one hour prior to their arrival at the Canadian border. This milestone begins the twelve month optional reporting period combined with six months of Informed Compliance. Once the optional reporting period is closed, the CBSA has indicated it will begin to impose Administrative Monetary Penalty System (AMPS) fines to those shipments that arrive at the border without a prior approved ACI filing. This week, Canadian Transportation and Logistics published an article interviewing Con-way Freight to find out what their experience has been as they were part of the CBSA’s pilot project. To read that interview click here

Alan Dewar, VP Canadian Operations, GHY International share this regarding the implementation of e-manifest in Canada:

eManifest ‘closes the loop’ of supply chain cooperation between CBSA and ‘importers/carriers/custom broker service providers’.  Currently the business systems used by importers, carriers and customs brokers to communicate with CBSA rely heavily individual ‘checks and balances’.  If any single party doesn’t open and close a file from pre-Arrival awareness to final accounting it is possible for trade reporting to slip through the cracks.  Anything slipping through the cracks can attract Administrative Monetary Penalties at a later date when CBSA perform audit samplings.

As Mr. Dewar mentioned the compliance issue today is the AMPS penalty related to lack of verification (post audit) if a driver at the border has presented paperwork on your behalf but failed to get confirmation from CBSA. Especially an issue when you use LTL (less than truckload) freight where there are multiple shipments to a truck. According to Mr Dewar:

LTL (less than truckload) carriers particularly are embracing the benefits of eMfst.  Previously document files would need to be scanned and logged individually by CBSA at time of border crossing.  We’ve seen situations where a truck driver would fully present to CBSA but ‘documents would be stuck together or a scan would fail’.  Administrative Penalties if undetected include a first infraction of $2,000, second infraction $4,000 and escalating from there.  Imagine fully declaring to Customs at border crossing with 10 shipments where ’2 documents stuck together or failed at scan’ and incurring a fine of $6,000 ($2,000 + $4,000)?  With eMfst any single shipment will automatically present the entire load to Customs for import release processing decisions.  All supply chain partners are excited about the accountability and risk management benefits of eMfst.

In an ACI e-manifest world with the right provider you can have a definitive audit trail with each e-manifest that is filed. No replying on stamping and no concerns for files getting stuck together. There are some assumptions here such as the carrier must participate in the RNS (Release Notification System) to have visibility if the broker partner has filed the entry on behalf of the importer, while the carrier doesn’t have to wait for that filing in today’s world there is still ongoing discussion if the importer would be subject to a penalty on their shipment if both sides of the equation haven’t been filed in advance in order to allow CBSA proper review and targeting. We are keeping an eye on this issue and it’s compliance obligations to importers and exporters.

This again reinforces another reason why the Integrated Trade Compliance Strategy makes sense as the lines of communication and visibility as defined by the strategy would ensure that partners know who owns what and stay in communication and sync with regards to tactical issues like customs clearance and now ACI e-manifest.