Contributing Lawyers


Cyndee Todgham Cherniak

United States

Susan Kohn Ross


Andrew Hudson

Customs Update: Big issues roil traders

Customs Update: Big issues roil traders


July 2, 2008




International traders have for the most part been insulated from a lot of the issues roiling "big business," but that is changing as criminal, anti-trust and other significant issues have come home to roost in international trade.


In a recent example, the Department of Justice in a case involving Chinese textile transshipments announced that defendants agreed to pay more than $2.7 million to settle civil charges against the companies and their principals. These parties are said to have undervalued and misdescribed goods and also claimed the imported textiles to be made in Russia or South Korea, thereby evading significant quota charges. According to Justice, these garments were destined for such well-known companies as Wal-Mart Stores, J.C. Penny, Family Dollar Stores, Kohl's and Marshalls. The matter came to light via a whistle blower.


Then there is the major anti-trust investigation Justice is leading. The case started out as an investigation of the energy industry in Africa but quickly spread to the airline industry. Fines to settle criminal charges include British Airways, $300 million; Korean Air, $300 million; Qantas, $61 million, and Japan Airlines, $110 million. Air France-KLM reportedly will pay $350 million, the second-highest fine ever levied in a criminal anti-trust prosecution. Fines of $60 million, $52 million and $42 million will be paid by Cathay Pacific, Martinair, and SAS. This last round of settlements is still subject to approval by the courts. Keep in mind that while the companies are settling, Justice is inflicting additional pain by granting immunity to the companies, but not necessarily all the individual players.


The airlines have all been accused of fixing prices through meetings, conversations and communications in the United States, Europe and elsewhere regarding setting and enforcing cargo rates.


This investigation is far from over. Information received from the airlines has led Justice to open a probe into the actions and roles of freight forwarders. It is understood there are three separate areas of services under investigation -- Europe-U.S., Asia-U.S. and Europe- Asia. It appears that Justice in the U.S. is closely cooperating with its foreign counterparts and seeks recovery from the forwarders based in the U.S., not as the result of their U.S.-based activities but rather simply because they carried out the directions of their foreign affiliates and, for example, collected freight charges on behalf of those foreign affiliates!


Lest anyone think the charges and fines impact companies only, keep in mind the recent plea of Bruce McCaffrey, formerly the highest-ranking U.S. executive of Qantas. McCaffrey's plea deal included a $20,000 fine and eight months in prison. What makes the situation particularly poignant is that the remaining Qantas executives, who are the supposed co-conspirators, are not likely to be subject to prosecution in the U.S. as price-fixing is not a crime in Australia! McCaffrey's misfortune was to be situated in California and so subject to U.S. jurisdiction and the Sherman Act.


Federal agencies long ago admitted they get lots of leads about possible violations, and some of them even turn into big cases, such as the anti-trust investigation discussed above which was also initiated by a whistle-blower. So, what is your company doing regarding disgruntled employees? Who will turn on you? Take a look at and the Government Accountability Project to get an idea of just what can happen to your company, if you are not careful. Keeping in mind the current salmonella outbreak and what it did to the tomato industry in particular and produce as a whole, it's not always the facts that get you in trouble, it's what people think is going on.  

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