Foreign Customs Clearance: Avoiding Corruption and Ensuring Compliance

Source: Consilium Global Business Advisors,“Export Logistics - FCPA Enforcement and Compliance”, April 20, 2012

Author: Ed Marsh

Given that clearance is one of the riskiest and most vulnerable links in the customs process, a large percentage of FCPA violations have focused on illegal payments made to secure customs clearance. Foreign customs officials know the critical nature of the clearance process and the value of timely clearance. Thus, officials have leverage to extract illegal payments at this critical step.

Because of the volatility and exposure associated with customs clearance, shipper usually relies on BDP to assist them in this process. In order to safeguard our clients and ourselves, the billing and documentation must be detailed and specific to each transaction. Regardless of the number of deliveries, there must be a detailed accounting of each payment made for the customs clearance. It is this detailed billing information that allows us to monitor the customs clearance process and ensure that no illegal payments are made.

Complications continue to arise with regard to application of the FCPA’s “facilitation payment” exception. This exception authorizes a payment to foreign government officials for non-discretionary (“routine”) decisions in the customs clearance process. However, there are many scenarios where a shipment can be delayed at a border for minor paperwork issues. Is an expediting fee paid to a customs official despite an error in paperwork a proper fee or is it a discretionary action that does not fall within the facilitation payment exception?

Furthermore, such payments are now prohibited by the laws of many foreign countries as well as BDP policy. The global trend is to prohibit such payments because of the grave risk for misconduct that they foster.

Therefore, it is our duty to provide our clients with a secure and low-risk customs clearance process. Certain steps must be taken to ensure we are mitigating these risks:

1. Paperwork: The risk of bribes increases when a company’s shipment is delayed or seized at the foreign country’s border. If the paperwork is correct in every detail and in conformance with local law and regulations for the destination, the risk of such a delay or seizure is reduced.

2. Procedure: Review and understand our anti-corruption compliance procedures. Clients are looking to us to ensure their compliance within the customs clearance process. Therefore, use vendors who have good compliance programs and operate in a number of countries or regions in the world.

3. Communicate: It is necessary to inform our clients about BDP’s compliance expectations.

4. Review: Examine in detail all customs clearance invoices and provide details in each payment. Avoid ambiguous terms for payments which may cloak the appearance of illegal bribes. If a red flag is identified, the BDP employee must respond and elevate the issue for resolution.