The Legal Corner, August 2013 Issue:
In my years of practice before Government Agencies (CBP, FDA, TSA and sister Agencies), questions regularly arise from clients who interact with these same agencies: What do I do if a “Special Agent” arrives at my place of business and wants to ask questions about prior transactions?
The answer often depends not only on the legal requirements of a particular Agency, but also on whether the information requested relates to you and your company or to a third party with whom you are working.
As an example, Customs and Border Protection (CBP) has rules which authorize it to demand production of documents or testimony from importers or anyone involved in the import process including carriers, forwarders, brokers, importers and anyone else who has information. Usually, there is an adequate lead time for you to educate yourself as to the legal obligations, but most people don’t know that if you are a “third-party record keeper” (maintaining records for another party), CBP is required to give notice to the importer, advising that an administrative summons was served on the broker, forwarder or accountant that is maintaining or has copies of your records.
If you voluntarily give records of someone else to the enforcement officer, you may also be breaching your duty of confidentiality to your client/customer. The CBP regulation makes it clear as to what a broker can or cannot properly disclose to a third party and under what circumstances.
TSA, on the other hand, has an absolute right – 24/7 – to immediately demand access to a carrier or IAC’s records with no notice requirements. Big or small, a licensed entity must respond, so your designated TSA contact person should be an arm’s length away (at least by phone) at all times. TSA is improving, but is still assessing substantial penalties for perceived minor infractions.
The Food and Drug Administration has been severely criticized for its lack of enforcement personnel and activity, but it too has almost unlimited authority to inspect facilities which manufacture, store or transport “food.”
Its seizure authority has expanded and there is considerable pressure on the FDA to clamp down on our foreign trading partners. Safety and health concerns have drastically slowed the import process and the new rules, yet to be enforced, threaten to increase both seizure activity and imposition of fines as well as mandatory recalls.
On the tail end of this process is Fish and Wildlife, always a tough-minded, and, some would say, unfairly aggressive regulatory agency. Most violators are penalized regardless of where the fault lies. Thus, if an illegal import activity is found to have emanated from a foreign supplier, the importer, even if innocent, is subject to having its import seized and forfeited. Mitigation Guidelines have yet to be established in an attempt to lessen penalties assessed against an “innocent party.”
Conclusion
What to do? It is axiomatic that when the IRS asks a question, the majority of businessmen will immediately call their tax accountant or tax lawyer. There is significant recognition that IRS violations can be quite costly. Conversely, I have found that many companies in the international cargo supply chain will routinely answer probing questions from the same type of enforcement agents in other government sectors. A good general practice to adopt is that before you answer questions or supply information, you first consult with an attorney who is expert in the rules of the government agency calling at your door.
Carl R. Soller, Special Customs, International Cargo and Regulatory Compliance Counsel to McBreen & Kopko is counsel to the JFK Airport Customs Brokers and Freight Forwarders Association and a recognized expert in his practice areas. He and his firm concentrate their Air Cargo Practice in all business and regulatory matters on a nationwide basis. He offers advice on supply chain security and its related Government Regulations to the Air Cargo Community as well as advice and a vast range of assistance to importers and exporters of all kinds of consumer goods. He can be reached at (646) 502-5791 or csoller@mklawnyc.com