How to respond when the feds come knocking

Braden K Core

Attorney Braden K. Core

NEW ORLEANS – Most forwarders hope to never have to deal with a government enforcement action, but the smart ones know that it’s best to be prepared just in case the TSA or the FAA come knocking when you least expect it.

Speaking at yesterday’s Air Cargo 2015 session, attorney Braden K. Core, with Scopelitis, Garvin, Light, Hanson & Feary, specializing in transportation law, and Paulette Kolba, an export compliance expert, provided some advice for forwarders on ways to keep in compliance with the federal government.

Braden told the forwarders in attendance that if they receive a letter of investigation (LOI), they should make sure their ground people cooperate fully with the investigating agency. The things not to do include failing to report the violation up the chain of command. “Take the LOI very seriously to minimize the impact of a potential investigation,” he said.

Prompt compliance is critical, Braden said. If a violation is discovered, he suggested moving swiftly to resolve the issue and to keep a running list of what is requested by the investigators and what is provided. Consider whether you need an attorney and get one involved early if need be, he added. In responding to the LOI, have someone other than the employee, who may have committed the violation, write the response.

“A letter of investigation is like a pre-lawsuit,” Braden said. “Don’t wait if you can avoid legal enforcement action.” In fact, voluntary self-disclosure is often a good idea – to own the violation before the agency comes after you. It won’t necessarily get you off the hook, but it helps, he added.

How can a forwarder get in trouble in the first place? An on-site inspection usually reveals a violation. It can be a simple licensing error, or perhaps some cargo is discovered to be prohibited merchandise, such as drug paraphernalia or intellectual property, or it could be goods intended for an embargoed destination.

Paulette Kolba

Paulette Kolba

Kolba recommended always having a documented compliance program. She said agencies such as Customs, the Office of Export Enforcement and Homeland Security, among many others, are watching what’s being shipped. “Government agencies talk to each other about who is in trouble,” she said. Customs doesn’t have to share why they are detaining your cargo, either, so it could sit at a border for as long as they see fit.

Enforcement actions, such as charging letters, subpoenas and warrants, should be taken very seriously, both speakers said.

“If you’re served a warrant, it’s time to hire an attorney,” Braden said. Once a warrant is approved, an agency can request all documents, all communications, a specific timeline or specific transactions, and even conduct an email search.

If a subpoena is delivered, Kolba said to ask if you are the target and seek internal legal advice first. “Keep communication in a limited circle of people, limit the scope of the request if possible, ask for more time and gather documentation,” she added.

And since violations and corresponding records can remain public record for several years, the negative publicity can hurt your forwarding business.

The bottom line – have a policy for handling government investigations. The exporter should be giving all their information to forwarders, so it’s important that, as a forwarder, you know who your customer is.

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