Tag Archive for import violations

Gibson Guitar Hits Sour Note, Settles Import Violations Case

August 31, 2012 Caroline Import Compliance, Trade Compliance No comments

Earlier this month, the US Justice Department announced that Gibson Guitar has agreed to pay a penalty of $300,000 for illegally importing exotic wood from Madagascar. Gibson has also agreed to donate $50,000 to the National Fish and Wildlife Foundation and was forced to sacrifice their inventory of the illegal wood, which was valued at $261,844.

In 2009, Gibson came under suspicion for importing the ebony wood, a direct violation of the Lacey Act, which requires US companies to follow domestic laws while importing wood. Madagascar has historically had a problem with illegal logging, especially with this type of ebony. Gibson has since ceased imports of the wood, which the company uses to manufacture its fretboards.

Gibson’s CEO, Henry Juszkiewicz made the following statement following the announcement:

We felt compelled to settle as the costs of proving our case at trial would have cost millions of dollars and taken a very long time to resolve. This allows us to get back to the business of making guitars.

As part of the said agreement, Gibson Guitar acknowledged its purchase of several shipments of ebony which violated a Madagascar law designed to protect endangered forests. The company has also pledged to strengthen its environmental compliance policy.

Click here to read the full article.

 

Importers on the lookout for ‘Food Fraud’

March 30, 2010 Caroline Customs Compliance, Import Compliance, Trade Compliance No comments

Remember the case of the Red Bicyclette? E & J Gallo thought they were purchasing fine pinot noir from France, all the while the producers were actually giving them a wine produced from an inferior grape.

According to a new article from the Washington Post (posted on MSNBC,) these cases of ‘food fraud’ are on the rise.

It is not clear how many food manufacturers, importers and retailers are testing products, but large companies with valuable brands to protect have been increasingly using the new technology, said Vincent Paez, director of food safety business development at Thermo Fisher Scientific, which sells some of the equipment and performs laboratory analysis, including DNA testing.Still, of the hundreds of customers who bought 10 million pounds of mislabeled Vietnamese catfish — including national chains and top rated restaurants — only one or two caught the deception, said Assistant U.S. Attorney Joseph Johns, who prosecuted the Fairfax fish importer. “It was the rare exception, not the norm,” he said.

What can importers of legitimate products do when faced with a fraudulent competitor? Some importers are turning to the FDA to enhance regulations or investigate the safety of the fakes- to limited success:

At the FDA’s first public meeting on food fraud last year, groups across the industry complained that it is not doing enough.”If it’s not going to hurt or kill someone, FDA’s resources are limited enough that they can’t take time to address it,” said Bob Bauer, a spokesman for the National Honey Packers & Dealers Association and the North American Olive Oil Association.

“If it’s not going to hurt or kill someone, FDA’s resources are limited enough that they can’t take time to address it,” said Bob Bauer, a spokesman for the National Honey Packers & Dealers Association and the North American Olive Oil Association.Both groups have petitioned the FDA to set standards for honey and olive oil, which would make it possible for companies to sue competitors that sell an adulterated product. The olive oil industry has been waiting for FDA to act on its request since 1991; major honey and beekeeping groups have been waiting since 2006. An agency spokesman said those requests are pending.

Importers are looking to scientific verification to combat the fakes instead of waiting for the FDA to make a move. By creating a surveillance arm of the FDA, companies will be better protected from the imposters. And, with the help of high tech tools, escalating surveillance is not impossible:

The recent development of high-tech tools — including DNA testing — hasmade it easier to detect fraud that might have gone unnoticed a decade ago. DNA can be extracted from cells of fish and meat and from other foods, such as rice and even coffee. Technicians then identify the species by comparing the DNA to a database of samples.Another tool, isotope ratio analysis, can determine subtle differences between food — whether a fish was farmed or wild, for example, or whether caviar came from Finland or a U.S. stream.

Fake caviar? Importers see rise in 'Food Fraud'

Photo courtesy Geishaboy-

The techniques have become so accessible that two New York City high school students, working with scientists at the Rockefeller University and the American Museum of Natural History last year, discovered after analyzing DNA in 11 of 66 foods — including the sheep’s milk cheese and caviar — bought randomly at markets in Manhattan were mislabeled.

Read the complete article at: “Fake caviar? Fight against ‘food fraud’ grows.“

Import Violations: Good Grapes Gone Bad

February 24, 2010 Caroline Customs Compliance, Import Compliance, Trade Compliance, Wacky Wednesday No comments

U.S. Wine company E. & J. Gallo has triumphed over local French wine producers after discovering that these exporters were intentionally mislabeling their wine in order to command a higher price when selling to Gallo.

In 2008, French customs found that during three years some 13.5 million liters, or about 3.6 million gallons, of mislabeled wine had been sold to Gallo.

The producers and traders were accused of deliberately mislabeling the wine with a more expensive variety of grape.

The producers and traders in France were claiming their “ordinary” wines were in fact

Trade Compliance - Pinot Noir Import Violation

Photo Courtesy Robert S. Donovan

PinotNoir – giving them an extra profit of around 43 euro per liter.

According to SmartMoney’s article on the case, French customs officials figured outthe scam once they realized that the amount of Pinot Noir being sold to Gallo exceeded the amount produced in the entire region.

The author, Ryan Sager, goes on to ask, “But would anyone have figured it out otherwise?  The scheme ran for years. But, as one French winemaker’s lawyer sniffed to the BBC: “Not a single American consumer complained.” Sager continues to analyze recent studies comparing enjoyment of wine to price – very interesting article, especially for wine lovers.

So, what is the penalty for this misrepresentation? The court in Ducasse, France, which decided the case, gave the following punishments:

  • Claude Courset of the Ducasse wine traders was given a six-month suspended prison sentence and has to pay a fine of 45,000 euros. The prosecutor had asked for a tough prison sentence.
  • Five other people were sentenced to fines of between 3,000 and 6,000 euros and the remaining six for less than that.
  • The Sieur d’Arques trading firm of Limoux was ordered to pay 180,000 euros in penalties.

A spokesperson for E. & J. Gallo stated, “We are deeply disappointed to learn today that our supplier Sieru d’Arques has been found guilty of selling falsely labeled French Pinot Noir as recently as March of 2008.”

Pop quiz: Do different varietals of wine carry different HS (Harmonized System) or ECN (Export Control) Numbers?

View Results

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Customs Brokers Gone Bad

February 19, 2010 Caroline Customs Compliance, Import Compliance, Trade Compliance No comments

The Boston Business Journal reports on the case of a customs broker intentionally misleading a Danish company into paying customs duties on duty-free items.

Gregory Manuelian, the customs broker, was sentenced today to 24 months in prison, followed by 3 years of supervised release. The company, B-K Medical systems, is a Danish subsidiary of Analogic Corporation. They discovered the scheme in 2006 – after Manuelian had defrauded the company over time out of $1.2 million.

How did he do it? Lying about Trade Compliance! (The horror!)

The Boston Business Journal gives a good overview in layman’s terms:

During the course of Manuelian’s fraud, the U.S. Attorney’s Office said, B-K reimbursed him for invoices he faxed to the Massachusetts company, which showed money owed on duties and brokerage fees. However, in 2006 the U.S. Department of Commerce had begun to eliminate the duties on the very type of medical equipment that B-K imports and, by 2009, those goods were completely duty free.

To legitimize his customs forms, Manuelian mailed fake customs forms to B-K that showed customs fees of 5.3 percent of the medical equipment’s value. The amounts of Manuelian’s invoices ranged from $1,000 to $9,000, according to the U.S. Attorney’s Office.

But, I know all you trade compliance pros want to know the real details, so here is some elaboration from the Department of Justice (Massachusetts) release announcing Manuelian’s charges in 2005- before today’s announcement of his conviction.

After 1999, the U.S. Government phased out duties on the medical equipment that B-K imported, but MANUELIAN continued to represent to B-K that he was paying duties on B-K’s behalf. In fact, he paid no such duties. MANUELIAN provided B-K with bogus forms showing that a duty was owed on the medical equipment, usually equal to 5.3% of their import value.

The bogus Customs Forms 7501 that MANUELIAN prepared often described the medical equipment as “electric cables,” which were components of the equipment. According to the Indictment, MANUELIAN further concealed his fraud by falsely reporting to B-K personnel that, by characterizing the goods in such fashion, B-K would qualify for a duty lower than that which applied to medical equipment.

It is alleged that, through these misrepresentations, MANUELIAN repeatedly induced B-K to reimburse Marquis Clearance for duties that Marquis Clearance never actually paid, in amounts ranging from $1000 to $9000. It is also alleged that over the course of his scheme, MANUELIAN submitted over three hundred fraudulent invoices to B-K, which induced B-K to pay a total of over $1.1 million to Marquis Clearance.

If convicted on these charges, MANUELIAN

Manuelian faced up to 20 years imprisonment, to be followed by three years of supervised release and a $250,000 fine on each of the wire fraud counts, and 5 years imprisonment, 3 years supervised release and a $250,000 fine on each of the forged customs document counts. He ended up receiving 2 years imprisonment and 3 years supervised release.

Hmm, I get the feeling there’s a lesson here. He intentionally classified the items correctly when submitting to CBP but then gave the company falsified documents listing the incorrect classifications, so that the duty charges would appear to be 5.3% of the items’ value. If the company had a way to electronically submit these records, receiving an actual copy of what the broker submitted, this would have been discovered immediately. Or, at the very least, they should have an expert double-check their broker’s work (which may be how the fraud was discovered.)

White Paper: Automating Import Complianceimport compliance white paper

Best-in-Class companies are implementing import compliance software into their enterprise procurement software in order to capture and review a complete audit trail of all import transaction activities from pre-entry to Customs to post-entry. The Web-based system also provides trading partners with pre-validated entry data and automatic shipping documentation for their network of global suppliers and carriers to ensure compliance.

Download our white paper, Automating the Import Supply Chain, to learn more.

10 General Prohibitions for Trade Compliance

October 21, 2009 Caroline Customs Compliance, Trade Compliance No comments

Found a succinct list of rules of thumb to ensure Trade Compliance at MondialTradeCompliance.com

10 General Prohibitions

  1. Export and re-export of controlled items to listed countries.(Get your export licenses!)
  2. Re-export and export from abroad of foreign-made items incorporating more than a de minimis amount of controlled U.S. content.
  3. Re-export and export from abroad of the foreign-produced direct product of U.S. technology and software
  4. Engaging in actions prohibited by a denial order.
  5. Export or re-export to prohibited end-users or end-uses (aka Denied Parties)
  6. Export or re-export to embargoed destinations.
  7. Support of proliferation activities.
  8. In transit shipments and items to be unladen from vessels or aircraft.
  9. Violation of any order, terms and conditions.
  10. Proceeding with a transaction with knowledge that a violation has occurred or is about to occur.

What do you think of the list? Any additions to these 10 or further explanation?

Import Violations: CBP Seizes Rhinoceros Beetles

July 1, 2009 Caroline Customs Compliance, Import Compliance, Trade Compliance, Wacky Wednesday No comments

Over a dozen rare rhinoceros beetles, seized by CBP last year from a post office, have found a new home at the Smithsonian in Washington DC.

When the insects were discovered in May 2008 at the Mohnton post office, an investigation by Immigration and Customs Enforcement and other agencies led to the arrest of Marc T. Dilullo, 36, of Exeter Township. He pleaded guilty in April to importing the bugs illegally from Taiwan and received three months probation and a $5,000 fine.

How much does it cost just to purchase the bugs and ship them to the US, anyway?rhinoceros beetle

I’m sure Mr. Dilullo had carefully laid plans, researching just the right kind of enormous insects to make his pets/minions. All were unraveled by one curious postal worker:

Two dozen exotic beetles discovered last year by a Berks County postal worker who heard scratching inside a box marked ”toys, gifts and jellies” …

Put that on your toast!

Although they are technically illegal immigrants, the insects have received gainful employment and will be working at the Smithsonian to demonstrate  animal diversity and threats to the natural balance.

(Glad they found a good home that is not underneath someone’s shoe.)

Import Compliance: Hey Man, Looking to Buy Some Sensitive Military Tech?

June 24, 2009 Caroline Import Compliance, Trade Compliance, Wacky Wednesday No comments

A recent article at Nextgov reported that actually, it’s quite easy to purchase sensitive military technology and send it military technologyabroad.

Auditors from the Government Accountability Office (GOA), who posed as representatives from a fictitious company, were able to purchase sensitive technology equipment such as night-vision scopes that U.S. soldiers use in Iraq and Afghanistan, hardware to detonate nuclear weapons, sensors used in improvised explosive devices, and gyro chips for guided missiles and military aircraft.

During its investigation from May 2008 to June 2009, GAO also was able to purchase an F-16 engine-monitoring system computer, which the Air Force uses in single-engine aircraft to monitor engine performance, said Gregory Kutz, managing director of forensic audits and special investigations at GAO, in his testimony before the House Subcommittee on Oversight and Investigations on Thursday.

Due to the fact that there are few restrictions on domestic sales of dual-use technology, which serve both commercial and military purposes, obtaining these items is fairly easy. The manufacturers only asked that the undercover agents sign forms verifying the products would not be used illegally or for terrorist plots.

The undercover agents were then able to send nonfunctional look-alike items via FedEx to a country in southeast Asia with known terrorist ties. Current laws such as the Arms Export Control Act and the Export Administration Act focus on preventing foreign nationals from purchasing and receiving sensitive military technology.

The GOA also performed a similar drill in April, and were able to purchase technology online on eBay, Craigslist, etc. According to the GOA:

Preventing the illegal export of sensitive items used in nuclear weapons, IEDs, and other military applications requires stopping the purchase of the items at the source “because once sensitive items make it into the hands of terrorists or foreign government agents, the shipment and transport out of the United States is unlikely to be detected,” the report noted.

The lessons:

  • Know your customers!
  • Know your suppliers!
  • Importers must be careful too – even when selling domestically.
  • Audit trails are always helpful.
  • New legislation could be coming soon.

Read the complete article at Nextgov.

Import Compliance: How To Win A Free Place to Stay

June 24, 2009 Caroline Import Compliance, Trade Compliance No comments

Boskage Trade News has a clever posting on their blog today on Import Compliance:Ankle Monitoring Bracelet

How to Win a Free Place to Stay with Three Meals a Day

1. Send emails to your foreign suppliers requesting two invoices – one with a lower cost for CBP and one with the actual cost submitted directly to you.
2. Submit fraudulent invoices to CBP.
3. Instruct your foreign supplier declare only 50% of the value on items with higher duty rates.
4. Intentionally misclassify goods to receive lower duty rates.
5. Keep records of all of these communications.

If you participate in the activities above, you might be the winner of an all expense paid trip to PRISON.

With all the recent coverage of exporters receiving fines and prison time, don’t forget that importers can be held responsible too! And new regulations like 10+2 make compliance even more complex.

Importer Security Filing (10+2) Compliance

CBP hasnt started enforcing 10+2 yet, but they are keeping an eye on who making an effort now, and who is delaying the inevitable. By January 2010, all importers must be ready for the ISF – leaving little more than 6 months to prepare. An automated solution can help ease the pain!