International Trade, Enforcement & Compliance Recent Developments Update (October 25, 2023)

A veritable grab bag of international trade developments to parse this week. Recent developments include increasing FCPA enforcement, a record OFAC economic sanctions penalty, and a large customs penalty for willful failure to correct known customs errors. Because nothing gets companies to pay more attention to compliance than the prospect of big fines and enforcement actions.

FCPA Penalty

FCPA enforcement is up strongly over the last two years, including recent examples of a Colombian financial services institution paying over $80 million to resolve parallel bribery investigations in the United States and Colombia. Total annual FCPA penalties have risen from $360 million to $1.5 billion. Does your organization have a robust anticorruption program in place, including effective controls for gifts, meals, entertainment, and travel and audit procedures designed to test the efficacy of its internal controls?

Economic Sanctions Compliance

OFAC announced a $508 million settlement — the largest-ever economic sanctions against a non-financial institution — based upon alleged sales of cigarettes to North Korea and to proliferators of weapons of mass destruction. The alleged violations include what OFAC described as a seven-year conspiracy to use U.S. financial institutions to transfer profits from a North Korean joint venture. Does your organization maintain comprehensive oversight of how its non-U.S. subsidiaries handle financial transactions to ensure that they are handling them in accordance with all OFAC and AML requirements?

Customs/Valuation

An importer who provided invoices that undervalued the entered value of merchandise by failing to include all costs for the merchandise received a penalty of $1 million for failing to pay all tariffs due as a result of the undervaluation of the merchandise. Does your organization regularly confirm that the invoices that it uses for entering goods meet the customs requirements and include all required elements, including such off-invoice items as royalties and assists?

Customs Misclassification/Failure to Implement Form 28s

The Department of Justice announced a $22.8 million penalty against a company for misclassifying its goods under a duty-free provision when in fact the goods were subject to duties. Notably, the company continued to do so after receiving notices of action (Form 28s and 29s) from the company, which it failed to broadly implement to cover other imports of the same or similar goods. Does your company have a mechanism in place to ensure any requests for information or notices of action from CBP are (1) promptly notices, (2) forwarded to the correct person, (3) handled in a timely fashion, and (4) promptly applied to the universe of relevant goods?

Section 301 Duties

The U.S. Trade Representative has extended more than 300 exclusions for Section 301 products, as well as exclusions for 77 medical products related to address the COVID pandemic. Does your organization have procedures in place to review the applicability of Section 301 exclusions and the general applicability of Section 301 duties, both to ensure the proper payment of any Section 301 duties due as well as to claim any tariff-saving opportunities available?

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