The agricultural trade press reports [1] that Brazilian ports have a 60-day backlog of soybean shipments – about twice the usual delay – due to a record soybean crop. In Argentina, labor unrest has created shipping delays for agricultural commodities. Delays like these increase corruption risks – they create conditions for customs agents to pressure companies for illicit payments, and they heighten the temptation for companies to look for creative ways around bottlenecks.
Indeed, bribing customs officials is a common FCPA enforcement scenario in Latin America. Cases like Ball Corporation [2] in Argentina, Helmerich & Payne [3] in Argentina and Venezuela, and American Rice [4] in Haiti highlight the potential problems associate with moving goods in and out of countries. In the 2012 Latin America Corruption Survey [5], customs was found to present the second highest level of “significant corruption” region-wide, second only to the police (FCPAméricas discussed these results here [6]).
How do companies manage these risks in an FCPA-compliant way? Here are some suggestions:
Verify Your Documentation. Companies should implement a system to verify their import or export documentation before it is presented to customs officials. The better this is completed up front, the less likely officials will find a reason to slow down the process.
Use Local Suppliers. By using local suppliers as much as possible – and shipping across international borders as little as possible – companies minimize the need to interact with customs officials in the first place.
Research Entry Points. Local inquiries can help identify the greatest risks for bribe requests. Companies can often learn which entry points are more prone to corruption than others. They can even determine which customs lanes have officials that are known for requesting payments. Armed with this kind of information, companies can try to route their shipments away from FCPA risks.
Plan ahead. By factoring delays into business plans and maintaining reserves, companies can relieve some of the pressure for employees on the ground to make improper payments. Depriving customs agents of timing “leverage” can reduce the temptation to pay bribes and the likelihood of receiving requests.
Take the Loss. It is a hard fact of business, particularly agribusiness, that sometimes you have to take a loss. One upside of refusing to pay bribes is that the losses you take can reduce future bribery risks. Oftentimes, once a company displays that it will not give in to pressure to bribe, the next customs entry will go much smoother.
Internalize Customs Agent Work. The activities of third party agents present some of the highest risks when it comes to customs dealings. It is essential that companies thoroughly vet their agents before using them, and monitor their work in an ongoing way. To mitigate this risk, many companies are now internalizing these processes, bringing in-house the work that despachantes and other agents would otherwise do.
Avoid Facilitation Payments. A classic example of an allowable facilitation payment is a small bribe to a customs official. But such payments are likely illegal under local law, and are always high-risk. If such payments are made, they should be vetted and approved by the compliance officer, and should be properly and openly recorded in the company’s books. A simpler way to avoid the risk is simply not to approve facilitation payments.
Communicate. Given that corruption risks can increase at certain times, companies may want to reinforce their anti-corruption training and communications with teams working in the high-risk markets. Companies might also consider implementing monitoring mechanisms for customs transactions in those markets.
In general, compliance officers should be alert to circumstances – like a surge in shipping delays – that may cause a temporary spike in FCPA risks. Proactive steps taken at the right time remind everyone in the company that compliance matters even when the chips are down.
The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com [7].
The author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author.
@2013 Matteson Ellis Law, PLLC