Saturday, December 31, 2011

Bank Account Seizures by ICE and DEA for Money Laundering

Peter Quinter, Esq.
This past year has seen an explosion of seizures of bank accounts by the Drug Enforcement Administration (DEA) and the U.S. Immigration and Customs Enforcement (ICE) or Homeland Security Investigations (HSI) for alleged trade-based money laundering or "structuring". In 2011, I have handled these cases in Miami, New York, San Diego, Boston, Phoenix, San Juan, and Norfolk.  The funds in the bank accounts are taken when the bank is served with a Seizure Warrant signed by a United States Magistrate Judge, based upon an affidavit prepared by the DEA or ICE Agent.

Typically, the bank (and its customer) do not get to see the Affidavit because the criminal proceeding is ongoing, and the Affidavit is sealed.  The Seizure Warrant itself typically alleges that the money is subject to seizure because it is the proceeds of drug activity in violation of 21 U.S.C. 881 and 18 U.S.C. 1956.

A related legal basis for the seizure of bank accounts is 'structuring' - the deposit of $10,000 or less in cash repeatedly in a bank account to avoid the filing by the bank of a Currency Transaction Report (CTR) with the Financial Crimes Enforcement Network (FinCen), U.S. Department of the Treasury .  See 31 CFR 1010.314.  A CTR is FinCen Form 104.  A CTR is required to be filed by all banks whenever a deposit of cash over $10,000 is made in a single day into a single account or by a customer into different accounts.  Be aware that deposits of cash into multiple branches of a bank or in multiple transactions is still structuring.  See 31 CFR 1010.313.  Whenever a bank suspects that its depositor or customer is depositing $10,000 or less to avoid the bank filing the CTR, the bank often instead files a Suspicious Activity Report (SAR).  The SAR reports are analyzed by FinCen, and often referred to the DEA or ICE for investigation.  Some of the investigations results in seizures of bank accounts as mentioned above.

Bank account holders absolutely have the right to challenge the taking of their money by the DEA or ICE.  If your money has been seized, you have a right to know the legal basis for the seizure, and should, through your attorney, contact the DEA or ICE Agent, or the Assistant U.S. Attorney.  In civil forfeiture cases, there is an administrative process to follow once a Notice of Seizure is issued to the bank account holder by the Fines, Penalties, and Forfeitures Office of U.S. Customs and Border Protection (CBP) or a Notice of Seizure by the DEA.  If the Notice of Seizure is from CBP, file a Petition, and if the Notice of Seizure is issued by the DEA, file a Sworn Claim with the Asset Forfeiture Section located in Quantico, Virginia.  The procedures of both agencies are very specific, and must be followed carefully, otherwise, your right to challenge the seizure will be lost forever.
------------------------------
Comments or questions, click below, or contact me directly.
Peter Quinter, Partner in Charge, Customs and International Trade Law Department
(954) 270-1864 or peter.quinter@gray-robinson.com.

Tuesday, December 13, 2011

NAFTA and Mexican Government Questionnaires to U.S. Exporters

In the past year, the Mexican Government (SAT) has issued questionnaires to exporters from the United States which provided a NAFTA Certificate of Origin to the Mexican importer. The North American Free Trade Agreement (NAFTA) Certificate of Origin is always created and signed by the U.S. exporter or producer, and always provided to the Mexican importer at the time of importation so that the Mexican importer may importer the merchandise into Mexico without paying any customs duties.    Years later, the Mexican Government may send a questionnaire to first the U.S. exporter, and then the Mexican importer, demanding proof that the merchandise really "originated" in the United States and properly entered Mexico without any payment of customs duties.

 The problems are (1) the U.S. exporter falsely completed the NAFTA Certificate of origin either intentionally or by ignorance, (2) the U.S. exporter relied on the U.S. producer who provided misleading information to the U.S. exporter, or (3) the records establishing that the merchandise originated in the United States are not available.

I usually recommend the U.S. exporter who received a letter from the SAT of the Mexican Government to respond. Moreover, it is best to seek the assistance of the supplier of the merchandise to the U.S. exporter and the Mexican importer. If the questionnaire is not answered properly and timely, the SAT will deny the NAFTA preferential treatment, and demand payment of customs duties, late fees, interest, and penalties from the Mexican importer, plus perhaps antidumping duties.  The Mexican importer may end up paying those charges to the Mexican Government agency and then seek full reimbursement, plus legal fees, from the U.S. exporter. 

 ----------------------------

For any questions or comments, please contact Peter Quinter at peter.quinter@gray-robinson.com
or by phone at 305-416-6960.

Wednesday, October 19, 2011

How to Comply with International Inconsistencies in FDA Cosmetic Labeling Requirements


The U.S. Food and Drug Administration ("FDA") has strict labeling requirements for cosmetic products.  One area that consistently causes confusion among companies that distribute cosmetic products to countries on different continents is the area of labeling. Different products have different labeling requirements depending on the application of the product, the type of ingredient being labeled, the size of the product, and the country to which the product will be shipped. For example, the rules regarding how to describe color additives for products entering the U.S. are different than those for Canada and Europe.
Fortunately, it is possible to comply with the labeling requirements for the U.S. as well as Canada and Europe using only one label. In fact, it can even be accomplished with a product bearing a label as small as that of mascara. Accomplishing this is greatly beneficial to these companies because they can take advantage of economies of scale and taper production costs by merely having one label printed to be distributed to several countries.  However, this is a delicate maneuver that, if not done properly, will likely result in seizure and detention by the FDA or a foreign country's equivalent agency. This will cause delays in the shipments, and may cause civil penalties and forfeiture of the products.
To avoid this common mistake and take advantage of the fact that one label may be used throughout the U.S., Canada, and Europe, you should contact an attorney well versed in the FDA regulations. Taking this precautionary measure is an investment in greater profits and peace of mind.

Sunday, August 14, 2011

TSA and Pepper Spray - A Story of What NOT to Do

Peter Quinter, Esq.
Our beloved Transportation Security Administration (TSA) has the responsibility of screening passengers to "ensure that certain items and persons prohibited from flying don’t board commercial airliners."  This is accomplished through 43,000 Transportation Security Officers (TSOs) located at 450 airports around the United States.  While I am waiting in line to be screened, there seems always to be one energetic TSO screaming at my fellow passengers to take our shoes off, remove most liquids, take our belts off, take out our laptops, etc.. it is hard to remember that the official Mission of the TSA is to "protect the Nation’s transportation systems to ensure freedom of movement for people and commerce."  I do have one funny story to tell you about the TSA and a certain passenger.

While the TSA regulations specifically prohibit the carrying on board an aircraft, or even into the airport, any weapon or explosive device, a particular passenger had a pepper spray pen with him. The pepper spray pen was not detected by the TSO when the passenger's body and luggage went through those radiation-emitting devices.

That is bad enough, but what the passenger did next was a mistake. After passing through TSA, he then approached the crew of the aircraft at his gate of departure, and handed over the pepper spray pen to the gate agents with some sort of statement that the TSOs did not detect the pen during the screening process.  Predictably, the passenger was then approached by law enforcement, interrogated, and not allowed to fly on that aircraft. The passenger subsequently received a Letter of Investigation from the TSA with the threat of a $11,000 penalty for attempting to compromise a security system utilized by TSA.

Seems to me that the gate agents and TSA should simply have said "thank you" to the passenger for turning over the pepper spray pen, rather than going on a witch hunt.  Perhaps the lesson the TSA wants to get across to people is not to tell the truth. If the passenger had kept his mouth shut, he would have kept his pepper spray pen, not missed his flight, and not have to pay a potential penalty of $11,000.  Plus, I guess now the TSOs will start yelling at passengers that the list of prohibited items includes pepper spray pens.

One more thing.  While it is prohibited to carry on board an aircraft any pepper spray, you may still transport it in your checked luggage, according to the TSA website.  Go figure!

---------------------------------------------------

For questions or comments, please contact:

Peter Quinter, Partner, Customs and International Trade Department
peter.quinter@gray-robinson.com or (954) 270-1864

Saturday, August 13, 2011

Homeland Security Says U.S. Customs Bonds are Insufficient

The Office of Inspector General (OIG) of the U.S. Department of Homeland Security (DHS) issued a report criticizing U.S. Customs and Border Protection (CBP).  In a June 2011 report entitled "Efficacy of Customs and Border Protection's Bonding Process," DHS concluded that up to $12 billion in single transaction bonds for importers may fail to be collected.   Considering that approximately $2 trillion of goods are imported into the United States each year, and that CBP collects about $32 billion in duties, taxes, and fees, $12 billion is a heck of a lot of money to lose.

Let's discuss some fundamental customs laws and policies first.  A bond is a contract between a principal (i.e. importer) and a surety (i.e. insurance company), with CBP serving as the beneficiary when an importer fails to pay any duties, taxes, and fees assessed by CBP on the imported merchandise.  The single transaction bond amount for the importer established by CBP is typically 1 to 3 times the total value of the imported merchandise for that particular shipment, plus duties, taxes, and fees.  If the importer does not pay the assessed amounts promptly, a liquidated damages claim is issued by the Fines, Penalties, and Forfeitures (FP&F) Office of CBP against the importer and the surety company. 

Although in theory, this type of insurance policy should pay CBP in full every time, it does not really work that way.  Blame it, in part, on anti-dumping and countervailing duty cases.  The U.S. Government Accountability Office (GAO) estimates that it takes over 3 years in anti-dumping or countervailing duty cases between the initial entry of merchandise subject to an anti-dumping or countervailing duty order, and when the final duty bill is issued to the importer.   Importers that are unwilling or unable to pay, or have already gone out of business, result in a loss of revenue to CBP.

According to the OIG Report, CBP has written off tens of millions of dollars "because of inaccurate, incomplete, or missing bonds" such as a lack of signatures or inaccurate transaction numbers.   Moreover, it turns out that CBP is not doing a good job of keeping copies of the bonds, but often relies upon the customs brokers to do so.  The OIG Report concluded that "there is a potential for collusion between the broker and the importer."  Well, at least, for once, DHS and CBP don't blame this problem on those pesky customs lawyers.

So, you ask, what will happen now.  No surprise this time - CBP will certainly re-evaluate its current monetary guidelines, last significantly updated in November 2010, to establishing higher bond limits, especially for food and drug products regulated by the FDA which pose a potential threat to the public health and safety.  Importers should expect to see such letters from CBP's Revenue Division at the National Finance Center located in Indianapolis, Indiana, and more liquidated damages claims from the FP&F offices around the country.
----------------------------------------------------
For questions or comments, please contact:
Peter Quinter, Partner, Customs and International Trade Department
peter.quinter@gray-robinson.com or (954) 270-1864

Friday, April 29, 2011

The Journal for Export Control Professionals

Peter Quinter, Esq.
I am pleased to introduce to you a new periodical, "World Export Controls Review - the journal of export controls and compliance," published by Brightlaw Media Ltd., London, England.  The first issue published in March 2011 is free.  The April 2011 publication contains my article entitled "Good Practice: Responding to an OFAC Administrative Subpoena" (available only upon request).
The publication reports on sanctions programs such as the United States has with Burma, Iran, and Libya, as well as general international trade topics such as "U.S. Tightens Controls on Foreign Workers" or "Evolving Intent Standards in U.S. Prosecutions". The publication is truly for the legal experts in international trade and export controls.

world ecr helps its readers stay on top of:

  • Developments in export control regulation and policy around the world,
     
  • Changing enforcement policies and practice governing export and re-export,
     
  • Legal implications of changing distribution technologies,
     
  • Best practice in trade regulation compliance, and
  •  
  • Encryption, technology transfer and end-use and end-user controls.
I hope you enjoy reading the article, and will subscribe to the publication. 
Peter Quinter, Partner
Customs and International Trade Department