It has been a real pleasure to speak at this prestigious event, last week, particularly for uniquely combining international trade compliance (including customs compliance) with anticorruption compliance!
It was the launching of our recently founded NGO: the Transborder Integrity Initiative™, which inaugural meeting took place in an International Conference – Board Meeting, in Sao Paulo – Brazil.
Such international conference gathered our founding members, responsible for our activities in Brazil, Chile, United States and Mexico, as well as other compliance leaders in global companies.
The Transborder Integrity Initiative™ is a network of entities engaged in international commerce seeking to promote, by collective action, transparency and integrity in the importation and exportation of merchandise worldwide, with a focus on emerging countries.
Two pillars support our objectives:
Customs Compliance – Increasing the quality of companies’ customs compliance programs, including their internal controls and procedures; and
Anti-corruption Compliance – Identifying corruption risks involved in cross-border trade in high risk countries and implementing appropriate internal controls and compliance measures to address such risks.
The complexities of customs regulations, which vary by individual country, and the discretionary power of customs officials over the flow of goods, make international trade especially prone to corruption and companies vulnerable to enforcement actions under anti-corruption laws such as the U.S. Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act, as well as many other countries’ anti-corruption laws.
This exposure is amplified by the complexities of global trade, which routinely involves the use of third party intermediaries acting on the company’s behalf, such as customs brokers, freight forwarders, carriers, warehouse operators, distributors and so on. Companies engaged in international trade often export to many countries greatly increasing their utilization of third party intermediaries.
Failure to abide with the strict letter of import laws and regulations can be used to extort bribes, exposing companies to investigation and prosecution under anti-corruption laws and giving rise to associated reputational damage. A typical example would be as follows:
1. An incorrect customs legal requirement – such as tariff classification, customs valuation, application of a rule of origin, claim for preferential duty treatment or simply paperwork incorrectly completed – is noticed by a customs official, who may solicit a bribe;
2. The third party acting on the company’s behalf in the distant, culturally unfamiliar country, may try to resolve the situation by the old-school method of bribing or attempting to bribe the customs official on his own, without direction from the exporter or importer;
3. Under the FCPA, for example, the company is held responsible for the misconduct of its agent in bribing the customs official, thereby making the company vulnerable to enforcement actions, which can include large civil and criminal fines and penalties, including possible incarceration. Such actions can also jeopardize the company’s reputation and affect shareholder value of the company.
Transborder Integrity Initiative™ creates an effort and means by collective action to address the challenge of corruption at the border.