The Oil Hits the Fan
If only they made GPS units for legal compliance.
So you’re driving your family from Texas to visit the new Harry Potter theme park in Orlando. You’re under the gun. You must complete the long drive before tomorrow afternoon because you made special reservations and plans for your daughter to spend her birthday at the park. You can’t be late. But you've never been to Florida. “How hard can it be to find this park?” you think to yourself, confident that your advanced, albeit largely untested, driving and navigation skills will get you there in time and without a hitch. But your spouse keeps bugging you to buy a map “just in case” (you draw the line at GPS because you view the technology as undignified and wimpy). You give in to her demand (you hate it when she’s completely correct) and, while gassing up the car, you rifle through the collection of maps at the local convenience store. This is Texas, so the store does not have an Orlando map, but it does have a map to Plano, Texas, a city of comparable population and geographic configuration. You plop down $10.27 (includes tax) and stick the map in the glove compartment. The drive proves more challenging than you anticipated, and you need to make up several hours that you lost somewhere along the Gulf Coast. You finally reach the Florida border, but there are no road signs to the Harry Potter theme park or Orlando. You are fast approaching a fork in the road. You’re probably doomed anyway, but take the wrong road and your fate is sealed. Everyone in the car starts to panic, so your wife pulls out the new map from the glove compartment, opens it and asks “Honey, where’s the map to Orlando?” [Disclaimer: the story you just read is completely fictional, excepting the part about the new Harry Potter park, which rocks from all accounts].
I know what you are thinking. There isn’t an idiot on earth that would buy a map to a city he/she is not visiting. I respectfully disagree. Lawyers see this kind of thing happen every day, not with cartography, but with compliance manuals and procedures. Manuals and procedures are maps of sorts that lead companies to legal compliance. You would think that their importance would be more widely recognized. Companies regularly buy off-the-shelf compliance templates, “borrow” some other company’s manual, or fail to update a good compliance manual that may have been correct and helpful in the distant past.
While we are on the subject of the Gulf Coast, let’s talk about BP’s oil spill and the importance of good compliance policies.
BP’s emergency cleanup plan instructs its employees to look out for walruses, sea otters, sea lions and seals during oil spills in the Gulf of Mexico. The problem is that none of these mammals live in the Gulf (I guess we should all be thankful that BP did not also list orcas, penguins, and flying reindeer). BP’s emergency plan also lists the contact information for an ocean biologist who has been dead for five years, and unless BP or Kevin Costner know a reputable medium, that information is likely to be of little value in cleaning up the spill or mitigating BP’s legal exposure. It is not that BP is exceptionally bad when it comes to its emergency procedures, just equally bad. The news services are reporting that BP copied verbatim its emergency cleanup plan from other major companies.
I cannot predict whether BP will be indicted for its misdeeds and mistakes in the Gulf. However, I can predict with some confidence that if BP is indicted and convicted, the Government will trot out BP’s shoddy emergency cleanup plan to convince the judge to inflict the most severe punishment possible.
BP’s oil spill is a nightmare that keeps on giving, but it may be possible to find an untainted, healthy anemone in all the oily muck. Maybe companies will more often evaluate their compliance procedures before emergencies pop up. Maybe it will finally sink in that due diligence requires that they DO diligence.
If your compliance procedures are not customized to fit your company’s unique needs and culture, and if they are not updated regularly to accommodate rapidly evolving laws, technology, and changes within a company, then they are as helpful as a Texas map in Florida.
In A Few Good Men, Demi Moore played an attorney defending two Marines against criminal charges. When testimony was not going her way, she objected, and the judge overruled her objection. She then “strenuously” objected, was overruled, and then asked that the judge to reconsider his ruling, which he, of course, did not do. She was Sisyphus in fast motion, futilely pushing up the same hill and before the same arbiter, and her co-counsel castigated her for her persistence.
It is hard to convince anyone they are wrong, especially judges. We lawyers (judges are lawyers) are a haughty bunch by training and disposition. Surrendering a centimeter to the other side diminishes us and our clients. For a court, the loss of face can be devastating. Revising a previous ruling suggests the possibility of inattention to detail or flouting of the law. Rather than self-flagellate, judges and parties tend to rely on the speculative system of appeals to make the necessary adjustments and balance the scales of justice.
Today the Court of International Trade (CIT) rejected the US Government’s request for the court to reconsider its judgment in favor of UPS, the defendant. The Government has long tried to collect a $75,000 penalty against UPS for misclassifying imported items and for not exercising “reasonable supervision and control” over its customs business as required by 19 USC 1641(b)(4) and 19 CFR 111.1. Previously, the Court of International Trade and, upon the appeal, the Court of Appeals for the Federal Circuit both agreed that UPS failed to properly classify the items. UPS still won (as it now stands) because the Government (specifically the CBP FP&F officer) failed to testify in the original trial that he considered all ten factors under the definition of “reasonable supervision and control.” See 19 CFR 111.1. In today’s ruling, the CIT rejected the Government’s request to reopen the trial to introduce the “ten factors” testimony and to reconsider the judgment it previously entered in UPS’s favor. The CIT refused to concede that it had committed “multiple and manifest errors” as alleged by the Government.
Although UPS won this latest skirmish, one of the most important issues to customs brokers remains unsettled in this prolonged litigation, namely whether CBP can penalize brokers beyond $30,000 for multiple violations under 19 CFR 111.91.
One certainty is that from now, CBP will regurgitate the ten factors each time it penalizes a customs broker. FP&F officers now have a lot more hoops to jump through.
For the curious, here are the ten factors under 19 CFR 111.1:
the training required of employees of the broker;
the issuance of written instructions and guidelines to employees of the broker;
the volume and type of business of the broker
the reject rate for the various customs transactions;
the maintenance of current editions of CBP Regulations, the Harmonized Tariff Schedule of the United States, and CBP issuances;
the availability of an individually licensed broker for necessary consultation with employees of the broker;
the frequency of supervisory visits of an individually licensed broker to another office of the broker that does not have a resident individually licensed broker;
the frequency of audits and reviews by an individually licensed broker of the customs transactions handled by employees of the broker;
the extent to which the individually licensed broker who qualifies the district permit is involved in the operation of the brokerage;
any circumstance which indicates that an individually licensed broker has a real interest in the operations of a broker.
In honor of James Joyce’s Ulysses, Ireland celebrates Bloom’s Day every June 16. The novel, regarded as one of modern literature’s masterpieces, has been controversial and the target of censors since it was written almost a hundred years ago. It has vexed readers and the courts as they try to wrestle with its complexities. Apple Computer apparently does not share this sense of constraint. Apple recently excised from its popular apps store what it considers offending images that are part of a graphic version of the novel. Whether the company should be allowed to do this will undoubtedly be litigated in the coming years. Those opposing Apple’s censorship will analogize to and distinguish the powers granted US Customs and Border Protection in that agency’s previous efforts to keep out Ulysses from entering through our nation’s borders.
19 USC 1305
Our nation employs a formidable array of laws and enforcement personnel to keep out offending items, like unlicensed weapons, illegal drugs, ancient cultural relics, stolen masterpieces, counterfeit goods, faulty toys/consumer products, forced labor products, infected produce, and endangered species. US Customs and Border Protection (CBP) is also our nation’s censor of first resort. This power is universally endorsed in light of pornography, especially child pornography. But what about censoring ideas? Does the agency have a role in keeping out material based solely on its content?
You would think not. After all, we have the First Amendment to protect crazy, outlandish, and unpopular ideas. We also have a US Supreme Court that even as it turns every rightward, still maintains a strong libertarian bent when it comes it protecting public expression. But strange things happen to our constitutional protections at our nation’s border. They dissipate to almost nothing. For example, the courts have carved out a border search exception to the Fourth Amendment’s protections against unreasonable searches and seizures. CBP officials can search you and your possessions at the border without a warrant and without probable cause. Almost any hunch will do and almost any intrusion is allowed. CBP is granted license to aggressively and unapologetically probe our laptops, cell phones, and any electronic device we possess for most any old reason. I have never read a satisfactory explanation why our courts seem to go flabby at the border, but the Bill of Rights starts to hobble noticeable as it approaches the border, like Superman with kryptonite. It is almost as if our federal judges have no faith that the values embodied in our supreme charter, which they are pledged to protect, can survive the rough and tumble of border life.
CBP is given vast and surprising powers under 19 USC § 1305 to act as censor. Part of the Tariff Act of 1930, this provision prohibits the importation of a motley list of items, including the content of writing in apparent contravention of the First Amendment:
All persons are prohibited from importing into the United States from any foreign country any book, pamphlet, paper, writing, advertisement, circular, print, picture, or drawing containing any matter advocating or urging treason or insurrection against the United States, or forcible resistance to any law of the United States, or containing any threat to take the life of or inflict bodily harm upon any person in the United States, or any obscene book, pamphlet, paper, writing, advertisement, circular, print, picture, drawing, or other representation, figure, or image on or of paper or other material, or any cast, instrument, or other article which is obscene or immoral, or any drug or medicine or any article whatever for causing unlawful abortion, or any lottery ticket, or any printed paper that may be used as a lottery ticket, or any advertisement of any lottery.
Section 1305 survived a constitutional challenge before the US Supreme Court. US v 12 200-Foot Reels of Super 8mm Film, 413 US 123 (US 1973). Justice William O. Douglas complained futilely in dissent, “I know of no constitutional way by which a book, tract, paper, postcard, or film may be made contraband because of its contents.” Justice Burger writing the majority opinion clearly disagreed.
Not all judges have been as Victorian in their outlook. In of the most famous and fascinating opinions ever issued by a US district court, and one composed with as much dramatic flair as any novel, the Honorable John Woolsey decided that Ulysses was not obscene and could not be confiscated by the Customs Service. US v One Book Called "Ulysses,'' 5 F Supp 182 (DC NY 1933). Judge Woolsey concluded:
The book as a whole is not pornographic, and, while in not a few spots it is coarse, blasphemous, and obscene, it does not, our opinion, tend to promote lust. The erotic passages are submerged in the book as a whole and have little resultant effect. If these are to make the book subject to confiscation, by the same test Venus and Adonis, Hamlet, Romeo and Juliet, and the story told in the Eight Book of the Odyssey by the bard Demodocus of how Ares and Aphrodite were entrapped in a net spread by the outraged Hephaestus amid the laughter of the immortal gods, as well as many other classics, would have to be suppressed. Indeed, it may be questioned whether the obscene passages in Romeo and Juliet were as necessary to the development of the play as those in the monologue of Mrs. Bloom are to the depiction of the latter's tortured soul.
There are other cases where the federal courts decided whether US Customs properly flexed its censoring powers under Section 1305.
A district court reversed the forfeiture of “Contraception” a book written by Marie Scopes, a British doctor. True to its title, this was an instructional manual written for physicians. The judge concluded that the book was not obscene “for the reading of it would not stir the sex impulses of any person with a normal mind.” US v One Book Entitled "Contraception,'' 51 F2d 525 (DC NY 1931). Section 1305 has even reached the importation of contraceptive devices. In a case that foreshadowed Roe v Wade, the Ninth Circuit sided with a New York gynecologist, and against the US Government, when the doctor imported a package of 120 vaginal pessaries (medical devices sometimes uses for contraception) “where it would not be desirable for a patient to undertake a pregnancy.” US v One Package, 86 F2d 737 (2nd Cir 1936).
Lottery tickets too?
The following discussion is not about censoring content, but it says a great deal about the federal government’s extensive and strange power to seize offending material at the board. Section 1305 does not allow you import lottery tickets. You cannot even mail them, although you can, of course, carry them over state lines. See also 18 USC 1301. The reason for this restriction is unclear, but I suspect there are concerns with gambling and crime syndicates. Perhaps the justification is that each state does not want gambling competition from other states or countries. Or maybe the law is intended to prevent people with winning tickets, who cannot make the trip, from selling their tickets to agents who will redeem the tickets in person, as is normally required. This seems to be the court’s motivation in Courtertier v Gil Bonair, 173 F3d 450 (1st Cir 1999). Mr. Courtertier was “a licensed Puerto Rico lottery agent which is in the business of transporting drawn prized Puerto Rican lottery tickets from Saint Thomas to Puerto Rico to redeem said tickets.” US Customs agents in Puerto Rico confiscated his stash of lottery tickets on his way back from the US Virgin Islands. He had around 22,000 lottery tickets worth about $46,000 dollars. The lottery tickets were all issued by the Commonwealth of Puerto Rico, so CBP could not have confiscated them if he had bought them in Puerto Rico. He gave CBP an opening when he carried the lottery tickets on his flight back from the Virgin Islands, a foreign country. The court allowed CBP to keep the confiscated tickets.
Suppressing political activists
Our government has also used Section 1305 to intimidate citizens who oppose its policies, as seen in several court challenges by Edward Haase against the Government. US Customs and FBI officials seized and photocopied Mr. Haase’s books and notes as he returned from Nicaragua, where he had been writing articles that were critical of the Reagan Administration’s policies in that country. Eventually the courts ordered the government to return his papers, awarded him attorneys fees, and issued a permanent injunction. See the Center for Constitutional Rights summary of the Haase and related litigation. The Customs Service issued a directive reversing its policy, a policy that apparently is still in effect.
Section 1305 today
Most of the litigation and court challenges under Section 1305 happened many decades ago. The federal government may have been reluctant to use the provision in light of society’s changing mores and the Supreme Court’s evolving First Amendment jurisprudence. We can also blame the Internet as most content is now sent via the ether in digital form rather than over nation’s borders in paper form. However, Congress has not repealed 19 USC 1305. It is almost as if it is being kept in reserve “just in case.” Like it any other law at their disposal, enforcement authorities can invoke 19 USC 1305 whenever they see a need and opportunity.
You Be The Judge
Be your own judge and bypass both Apple and CBP by reading Ulysses yourself. Click here.
Often the most direct and quickest way to have the Bureau of Industry and Security (BIS) respond to your export questions is through the telephone. Indeed, the BIS likes to tout the service as a wonderful benefit to the world.
There are drawbacks, however. If you are calling to the BIS's general counselor desk (agency does not list the contact information of all the various counselors and officials, so the general help desk is sometimes all you have) it can be a complete crap shoot. Some counselor will talk to you only if you identify both yourself and your company completely. The counselor may have only superficial or incorrect knowledge about your issue. Indeed, the information and advice given might be contradicted by the information and advice that another BIS officer may have offered. Worse still, unless you have taped the conversation (which may be illegal), you have no proof of what was said to you. If the export goes wrong or you are accused of violating the law, again, you will have no proof about what was to told to you.
Exporters should use the BIS's help desk, but should not rely on it unconditionally. You must make your own independent confirmation of the state of the law.
By the way, is emailing the BIS or filling out its online contact form any better? Sure. A written response is much better. There is a downside, however. You still need to identify yourself and your company, a condition that can compromise your ability to be frank. Ideally, you should hire a third party, preferably a lawyer, when you need to contact government officials.
Principal and a founding member of GRVR Attorneys.