Customs and International Trade Law Blog : International Trade Lawyer & Attorney : Becker & Poliakoff Law Firm : Customs Law, Border Protection

Every year, the numerous agencies of the United States Government send out letters to companies putting them on notice that the company is suspected of committing some serious violation.  Usually, the letter or notice demands a written response within 30 days or the company will be subject to a penalty or fine.  Knowing how to handle such letters, notices, or subpoenas is critical in terminating the investigation successfully, not paying a huge penalty, and even avoiding criminal prosecution.

The Executive Branch departments, bureaus, and agencies of the Federal Government  all have the legal authority to investigate and assess penalties against companies that violate that particular Government agency's regulations. This is especially true of companies which are importers, exporters, or otherwise involved in international trade such as customs brokers, international freight forwarders, airlines, and indirect air carriers.  The U.S. Food and Drug Administration (FDA) would issue an "Administrative Subpoena" or a"Notice of FDA Action", the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) would issue an "Administrative Subpoena" while the U.S. Department of Transportation's Federal Aviation Administration (FAA) would call it a "Notice of Proposed Civil Penalty", the U.S. Department of Homeland Security's Customs and Border Protection (CBP) describes it as a "Notice of Action" and "Pre-Penalty Notice", the Environmental Protection Agency (EPA) calls it a "Request for Information", the U.S. Commerce Department's Bureau of Industry and Security (BIS) calls it a "Proposed Charging Letter", and the Transportation Security Administration (TSA) would call it a "Letter of investigation". 

Whatever pseudonym or term is used, the Government documents are all similar in that they:

(1) are a legal demand from the Government,

(2) require a written response by the addressee,

(3) describe briefly the factual basis for the demand,

(4) threaten action against the company for not providing a timely response, and

(5) threaten action against an individual if false information is provided to the Government.

The first response by the President of the company (or its General Counsel) who receives the letter is - you guessed it - identify and call a lawyer very knowledgeable and experienced in handling these investigations.  All communications between the company and its outside lawyer are considered to be under the attorney-client privilege. That means that anything the President or other employees of the company say to the attorney are entirely confidential.  The inquiry by the outside legal expert is also confidential, so anything the attorney discovers or discusses with the company's employees do not have to be subsequently disclosed to the Government.

In my over 20 years of practice as a customs and international trade lawyer routinely involved in defending companies under investigation by the U.S. Government, the biggest error by company officers is that they respond directly to the U.S. Government without seeking proper legal advice.  Only after the company receives a large penalty do I finally get the call to straighten it all out. Fortunately, whether the letter of investigation is from Washington, D.C. to a company located in California, Florida, New York, or elsewhere in the United States, the administrative procedures are identical.

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The U.S. Department of Homeland Security's Immigration and Customs Enforcement (ICE) is seizing a record number of bank accounts for money laundering.  In summary, here is how it works.  A Special Agent from ICE submits an Affidavit to a Federal Judge, the Judge signs a Seizure Warrant authoring the Special Agent to serve that document upon the bank to seize whatever money is in that account.  Although the seizure of such accounts may accomplish a legitimate law enforcement purpose in attempting to stop the illicit sale of narcotics by taking the money generated from those sales, the process is too easily abused by the U.S. Government.

The Affidavit filed by the Special Agent is usually "sealed" which means it will not be available to the public or even the person or company for which the bank account monies were seized. Due process should allow a claimant prompt access to that information so the account holder may meaningfully challenge the seizure in Federal Court.  At a minimum, the Seizure Warrant should specify what the facts were that supported an allegation of money laundering. Right now, the standard language in the Seizure Warrant only states:

The bank account is subject to seizure and grounds exist for the issuance of this seizure warrant pursuant to 18 U.S.C. 981(a)(1(A) and 21 U.S.C. 881. 

That's it; that's all you get from the U.S. Government as the reasons that your entire bank account has now been cleaned out, potentially leaving a company unable to pay its bills, including to its employees, or leaving  a person desperate to pay his or her daily living expenses.

Bank account seizures now commonly allege trade based money laundering.  According to the U.S. Department of Homeland Security, global trade is frequently used by criminal organizations to move money around the world such as by Colombian drug cartels to repatriate drug proceeds, a process commonly referred to as the Black Market Peso Exchange.

Fortunately, the law demands that the U.S. Attorney's Office file a Complaint of Forfeiture against the bank account in Federal Court within a few months of the seizure of the bank account.  The Complaint will finally state the general factual basis for the seizure, and you finally get your 'day in court'.  Typically, the assigned Assistant U.S. Attorney will share information with the attorney representing the owner of the seized account in an attempt to avoid a litigation battle.  It is often to the advantage of both the Government and the account holder to attempt to work something out, otherwise, a lot of time and money will be spent in Federal Court litigation fighting over whether the money really is the proceeds of some 'specified unlawful activity' and whether or not the account owner is an 'innocent owner' to whom the money should be returned.

The Federal laws and procedures are the same throughout the United States for bank accounts seized pursuant to a Seizure Warrant for alleged trade-based money laundering.  Such seizures are most likely to occur in Miami, the State of Texas, and the metro area of New York City.

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I am still troubled by the Wall Street Journal lead article on October 4, 2010 with the headline "Recession-Weary Americans Sour on Free Trade."  I asked myself why would Americans who live in an economy built successfully on the principles of capitalism and free enterprise be against international trade?  The WSJ article stated that a poll concluded that 53% of Americans said free trade hurt, rather than helped, the U.S. economy, a statistic that increased from 46% in 2007 and 32% in 1999.  My bold prediction is that 2011 will be the year that the Obama Administration successfully finalizes free trade agreements with South Korea, Panama, and Colombia, and then Congress passes laws approving them.

Americans sometimes want their cake and eat it too. They want American companies to make and export more airplanes, more tractors, and more wheat and corn, all the while shopping at their local department stores and buying merchandise made in, and exported from, China, Indonesia, and Mexico.   As stated in the WSJ by my law school friend Myron Brilliant, Senior Vice President at the U.S. Chamber of Commerce:

When we knock down [trade] barriers in those [foreign] markets, we create jobs here [in the United States]. We've got to trade to create jobs in our country.

Boeing employs tens of thousands of employees in the United States to produce airplanes to sell overseas.  American farmers grow wheat and corn in amounts far beyond what could be consumed in the United States.  Caterpillar sells more tractor equipment overseas than it does in the United States. According to CNN.com, the U.S. International Trade Commission has estimated that reducing customs duties in the U.S.-Korea trade agreement will increase exports of American goods to South Korean by at least $10 billion per year.

With the Republicans now in control of the U.S. House of Representatives, and the Democrats maintaining control of the U.S. Senate, it is my hope that both my Republican and Democratic friends who understand and appreciate the benefits of international trade will embrace free trade agreements. That sure would help achieve President Obama's ambitions of doubling U.S. exports within 5 years.  Customs duties imposed by the United States on foreign made, imported products, and customs duties imposed by Panama, South Korea, and Colombia on U.S. made products is really just another form of taxation. Since we all detest taxes, let's join together and pass these free trade agreements in 2011.

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