Trends In International Litigation : International Business Lawyer & Attorney : Ed Joffe : Joffe & Joffe Law Firm : Miami, Florida Global Customs & Trade Issues

The Justice Department reported today that a Miami resident Guillermo Sanchez, 55, pleaded guilty today to charges that he conspired to defraud the Export-Import Bank of the United States (Ex-Im Bank) of approximately $854,000, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and Osvaldo L. Gratacos, Acting Inspector General of the Ex-Im Bank.
Sanchez pleaded guilty in U.S. District Court in Washington, D.C., to one count of conspiracy to defraud the Ex-Im Bank and one count of mail fraud in connection with 10 loans guaranteed by the Ex-Im Bank.
 

According to court documents and testimony at the plea hearing, from approximately May 2006 through August 2007, Sanchez acted as a purported exporter of construction equipment to South America in 10 different loan transactions. The loans were obtained from a Florida bank and insured by the Ex-Im Bank. Sanchez admitted that he and a co-conspirator prepared and submitted to the Florida bank and the Ex-Im Bank loan documents, including commercial invoices, packing lists and bills of lading falsely reflecting that Sanchez purchased and shipped approximately $854,000 worth of generators manufactured in the United States to South American customers.
According to court documents and testimony, Sanchez’s company, ACE Products, received approximately $853,642 in loan proceeds based on the false representations and Sanchez retained a portion of the money for his own personal benefit and use. In or about August 2007, defaults on the loan transactions caused the Ex-Im Bank to pay the Florida bank’s claim for outstanding principal and accrued interest of approximately $854,161.

The Ex-Im Bank, an independent agency of the United States, is the official export credit agency of the United States and issues loan insurance to U.S. banks on behalf of creditworthy foreign companies for the purpose of purchasing U.S. goods. The Ex-Im Bank issues a loan insurance policy, which provides that if the foreign borrower defaults on its loan repayments to the lending bank, the Ex-Im Bank will reimburse the amount of the outstanding loan principal and interest to the lending bank.

Sentencing for Sanchez is scheduled for Nov. 1, 2010. The conspiracy charge carries a maximum prison sentence of five years and the mail fraud charge carries a maximum prison sentence of 20 years. Each charge also carries a maximum fine of $250,000, or twice the gain or loss, whichever is greater. The defendant also faces a term of supervised release following any prison sentence.
The scheme was investigated by special agents of the Ex-Im Bank, Office of Inspector General, after bank staff referred information concerning the loan defaults. This case was prosecuted by Senior Litigation Counsel Patrick M. Donley of the Criminal Division’s Fraud Section.
 

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 In just four weeks, U.S. Customs and Border Protection officials at the Los Angeles/Long Beach seaport seized six shipments of counterfeit sunglasses arriving from China with a combined manufacturer’s suggested retail price of more than $18.6 million.

Louis Vuitton, Versace and Coach are among the Counterfeit Trademarks

“Stopping the importation of counterfeit and pirated merchandise continues to be a top priority for CBP,” said Christopher Perry, CBP acting director of Field Operations, Los Angeles. “These seizures are fine examples of the hard work the men and women of CBP perform to protect the American consumer and the economic vitality of our country.”

CBP officials seized a total 156,900 pairs of sunglasses in violation of Versace, Louis Vuitton, Dolce Gabbana, Lacoste, Coach, Emporio Armani and Bvlgary trademarks with a total domestic value of $151,564. The infringing merchandise was discovered on six different shipments during the period of March 13 to April 14.

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Erik Wesner, a nationally-recognized researcher and author of Success Made Simple: An Inside Look at Why Amish Businesses Thrive recently posted the following leadership lesson. 

I recently gave the teenage son of an Amish friend a lift. Amish don’t drive of course, but generally have no problem accepting rides.

We had a big day planned: first stop was a carriage shop in the heart of the Lancaster County settlement, where “Elam” as we’ll call him, would order a new buggy. A younger brother was turning 16, which meant he’d inherit Elam’s vehicle, clearing the way for Elam to get a new one (the tab for a new buggy, in case you were wondering? Around $7-8000 or more, depending on the features—and there are more than you might think).

Next, we stopped at a hardware store, where Elam had a $150 gift certificate to spend. The gift certificate was a present from his boss on the local carpentry crew where he’d worked a little under a year.Curious, I asked Elam some more about the gift. It was a year-end bonus he had received as a thank-you for work well done. As he spoke about his boss, Elam nearly bubbled over, going on and on in warm tones. Something about the man had obviously moved him.

As Elam continued, I learned that on another occasion he’d received a titanium hammer, tough and light, for a more efficient drive. Another nice plus, but I sensed the gifts weren’t the root of this young man’s affection. I tried to dig deeper. “What exactly is it about him that makes him a good boss?” I asked.After a few stops and starts, he explained as best he could that it was the fact that he didn’t “act” like a boss. He wasn’t afraid to get his hands dirty.

From time to time Elam’s boss would show up to work on jobs with his employees. While there, he’d follow his own foreman’s instructions—essentially subjugating himself to one of his own employees, who, he was able to recognize, knew more of what was going on and was in a better position to make decisions on that particular job.

The Amish man realized that he didn’t know everything. He let the people he put in charge do the work he’d entrusted them with. He was a boss without being bossy. He was a humble leader.

Even at his young age, Elam could sense that his leader was special. Having listened to his explanation, I was hardly surprised. Among Amish businesses, humble leadership is nothing unusual.

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 As reported by Jim Garamone of the American Forces Press Service, on April 20,2010, Defense Secretary Robert M. Gates told members of Business Executives for National Security that the United States must totally revamp the Cold War-era export control system, because it does not adequately protect crucial American capabilities and makes it nearly impossible to quickly share needed capabilities with allies and partners.

The current export-control system is a Cold War artifact, the secretary noted. “As a result,” he said, “its rules, organizations and processes are not set up to deal effectively with those situations that could do us the most harm in the 21st century – a terrorist group obtaining a critical component for a weapon of mass destruction, or a rogue state seeking advanced ballistic missile parts.“Most importantly,” he added, “the current arrangement fails at the critical task of preventing harmful exports while facilitating useful ones.”

Gates proposed a tiered approach to export control that he said would allow the United States to build higher walls around truly crucial technologies while lowering walls around others. One flaw of the current system, he said, is that it makes no differentiation among technologies, and the lists are endless.

Our plan relies on four key reforms: a single export-control list, a single licensing agency, a single enforcement/coordination agency and a single information technology system,” the secretary said.

The nation currently has two export-control lists: one maintained at the State Department and one by Commerce. “The single list, combined with a single licensing agency, would allow us to concentrate on controlling those critical technologies and items – the ‘crown jewels’ – that are the basis for maintaining our military technology advantage, especially technologies and items that no foreign government or company can duplicate,” Gates said.

It would be a tiered system, the secretary explained, with truly critical technologies at the top cascading down to lesser technologies. Items could move from one group to another as their sensitivity changes, he said.

A single licensing agency would have jurisdiction over both munitions and dual-use technologies. This, Gates said, would streamline the licensing process and reduce confusion. Obama will decide where this agency would be located later this spring, the secretary added.

Consolidating enforcement also will strengthen the system, Gates said. “Those who endanger our troops and compromise our national security will not be able to hide behind jurisdictional uncertainties or game the system,” the secretary said. “Violators will be subject to thorough investigation, prosecution and punishment severe enough to deter lawbreaking.”

We will turn these principles and proposals into action through a three-phased process that will unfold over the course of the next year,” he said. The first phase will see the transition to a single list and the single licensing agency. The second phase will transition to a single information technology system and implement the tiered control list.

“These changes, which can be made through executive action, represent substantial progress and momentum towards reform,” he said. “But they are by themselves insufficient to fully meet the challenge at hand. We need a final, third phase.”

That phase will require congressional action, Gates said, adding that he looks forward to working with senators and representatives to craft the right approach.

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The 8th round of negotiations on the proposed Anti-Counterfeiting Trade Agreement (ACTA) was held in Wellington, New Zealand from April 12-16,  2010, hosted by New Zealand.

Participants in the negotiations included Australia, Canada, the European Union, represented by the European Commission, the EU Presidency (Spain) and EU Member States, Japan, Korea, Mexico, Morocco, New Zealand, Singapore, Switzerland and the United States of America.

The Participants have reported that good progress was made toward narrowing existing differences, in the areas of Civil Enforcement, Border Measures, Criminal Enforcement and Special Measures for the Digital Environment. In addition the participants held constructive discussions regarding the scope of intellectual property rights covered in ACTA.

In agreeing to release publicly this draft text in the particular circumstances of this negotiation, participants reaffirmed the importance of maintaining the confidentiality of their respective positions in trade negotiations.

ACTA will not interfere with a signatory’s ability to respect its citizens’ fundamental rights and liberties, and will be consistent with the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement) and will respect the Declaration on TRIPS and Public Health.

There is no proposal to oblige ACTA participants to require border authorities to search travellers’ baggage or their personal electronic devices for infringing materials. In addition, ACTA will not address the cross-border transit of legitimate generic medicines.

While the participants recognise the importance of responding effectively to the challenge of Internet piracy, they confirmed that no participant is proposing to require governments to mandate a ‘graduated response’ or ‘three strikes’ approach to copyright infringement on the Internet.

The participants agreed that the next meeting would be hosted by Switzerland in June 2010. They also reaffirmed their commitment to continue their work with the aim of concluding ACTA as soon as possible in 2010.

The draft is available  on the trade.ec.europa.eu website.
 

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On Monday, April 19, Charles Paul Edward Jumet of Fluvanna County, Va., was sentenced  to 87 months in prison for paying bribes to former Panamanian government officials to secure maritime contracts, in violation of the Foreign Corrupt Practices Act (FCPA), and for making a false statement to federal agents. In addition to the prison term, U.S. District Court Judge Henry E. Hudson for the Eastern District of Virginia ordered Jumet to pay a $15,000 fine and to serve three years of supervised release following the prison term. The 87-month sentence is the longest prison term imposed against an individual for violating the FCPA.

Jumet, 53, pleaded guilty on Nov. 13, 2009, to conspiring to violate the FCPA and making a false statement to federal agents. The FCPA makes it a crime to pay or offer to pay anything of value to a foreign government official in order to obtain or retain business.

"Today’s sentence – the longest ever imposed for violating the FCPA – is an important milestone in our effort to deter foreign bribery," said Assistant Attorney General Breuer. "As this case confirms, foreign corruption carries with it very serious penalties, which can include substantial prison time for individuals who violate the law."

"Today’s sentencing is an example of how those who intentionally bribe and mislead the government for their personal gain will be prosecuted to the maximum extent," said Assistant Director Henry. "The FBI is committed to pursuing those who disrupt the level playing field to which companies in the U.S. and around the world are entitled."

"This sentence serves as a warning to those who engage in corrupt business dealings ," said ICE Special Agent in Charge Torres. "ICE will continue to work with our law enforcement partners both here and abroad to investigate and prosecute those involved in such illicit activities ."

According to court documents, from approximately 1997 through July 2003, Jumet and others conspired to pay money secretly to Panamanian government officials in exchange for awarding contracts to Ports Engineering Consultants Corporation (PECC) to maintain lighthouses and buoys along Panama’s waterway. In December 1997, the Panamanian government awarded PECC a no-bid 20-year concession. Upon receipt of the concession, Jumet admitted that he and others authorized corrupt payments to be made to the Panamanian government officials. In total, Jumet and others caused corrupt payments of more than $200,000 to be paid to the former administrator and the former deputy administrator of the Panama Maritime Authority and to a former high-ranking elected executive official of the Republic of Panama.

Jumet also made a false statement to federal agents about a "dividend" check payable to the bearer in the amount of $18,000 that was endorsed and deposited into an account belonging to the high-ranking elected Panamanian government official. Jumet falsely claimed that this "dividend" check was a donation for the high-ranking elected official’s re-election campaign, when, in fact, Jumet admitted it was given to the elected Panamanian government official as a corrupt payment for allowing PECC to receive the contract.

In a related case, John Warwick pleaded guilty on Feb. 13, 2010, for his role in the same conspiracy to violate the FCPA. He is scheduled to be sentenced by Judge Hudson on May 14, 2010.

The case was prosecuted by Trial Attorney Rina Tucker Harris of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Michael S. Dry of the U.S. Attorney’s Office for the Eastern District of Virginia. The case was investigated by the FBI’s Washington Field Office, the FBI’s Richmond Field Office and ICE’s Richmond Field Office.

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In two separate cases, Florida judges quashed foreign service which did not comply with the Hague Convention.

Mak Petroleum, Inc., which owned and operated a number of gas stations and convenience stores throughout Florida, signed an agreement to buy a parcel of real property in Ontario, Canada from the Light Korean Presbyterian Church (Islington). Mak deposited $100,000.00 with Re/Max West Realty, Inc., in Ontario towards the price. The sale did not close.

After Mak filed for bankruptcy, the Trustee brought suit for return of the deposit and sent the Complaint “by mail service via Federal Express international, receipt requested” to the Church at its address in Ontario, Canada. The Church subsequently filed a Motion to Quash Service of Process.

The Bankruptcy court noted that the United States and Canada are both signatories to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, generally known as the Hague Convention and that that Convention is mandatory n all cases to which it applies. Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 698, 108 S.Ct. 2104, 100 L.Ed.2d 722 (1988). Accordingly, the court quashed service.

Likewise, in a case brought in the U. S. District Court for the Southern District of Florida,
Plantation Gen. Hosp., L.P. v. Cayman Islands, the hospital merely mailed a copy of the complaint to the defendant. Since the Cayman Islands is also a signatory to the Hague Convention, the judge quashed service.

Lawyers serving overseas are cautioned to pay attention to the rules. Opposing a motion to quash is expensive and ultimately delays the client’s day in court. It is much smarter to handle it correctly from the beginning.
 

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Steve Stecklow of The Wall Street Journal reports that  Iran's state shipping company has changed the names and ownership of most of its vessels to evade U.S. sanctions.  The Treasury Department has yet to update the blacklist that U.S. companies use to verify they are in compliance, according to a new report.

As a result, some firms are at risk of doing business with the company, Islamic Republic of Iran Shipping Lines, despite a ban that has been in place since 2008, says the report by the Wisconsin Project on Nuclear Arms Control, a Washington-based nonprofit watchdog.
The findings raise questions about the effectiveness of some of Washington's sanctions, which are aimed at pressuring the regime in Tehran not to build nuclear weapons—something Iran denies it is doing.

OFAC Director Adam J. Szubin said his agency "deliberates carefully about the timing of its public designations," adding, "We may choose to delay a public identification to allow for additional surveillance or to secure cooperation with foreign allies."  Mr. Szubin also said the Iranian company's actions signaled the sanctions were having an effect. "Since its designation [by the Treasury], IRISL has taken a number of steps to mask its commercial activities and disguise the ownership of its ships. IRISL's attempts to deceive third parties are consistent with its past practices, and a measure of the impact that U.S. sanctions have had."

The Treasury Department added IRISL, its vessels and related entities, to a list of blacklisted Iranian companies in September 2008, accusing it of shipping military-related cargo, including a chemical used in missiles, to Iran's defense ministry, through deceptive techniques. IRISL's cargoes are subject to inspection under a U.N. Security Council resolution. Tehran also faces sanctions by the U.N. and the European Union.
 

The Wisconsin Project report says IRISL has since renamed at least 80 of the 123 vessels in its shipping fleet—often dropping the word "Iran"—but that Treasury's current published list used by U.S. companies continues to include the old names. IRISL's vessels still carry the same unique ship-identification numbers required of all ships, but these numbers don't always appear on cargo documents, the Wisconsin Project reported. The report also states that IRISL, in another apparent sanctions-avoiding technique, has been transferring ownership of its ships to shell companies that don't appear on OFAC's list.
 

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On April 6, 2010, United States Trade Representative Ron Kirk and Secretary of Agriculture Tom Vilsack announced that the United States and Brazil have agreed upon a path toward a negotiated settlement with Brazil over the Cotton dispute.

The Cotton dispute is a long-running dispute brought by Brazil against the United States. In 2005 and again in 2008, the World Trade Organization (WTO) found that certain U.S. agricultural subsidies are inconsistent with WTO commitments: (1) payments to cotton producers under the marketing loan and countercyclical programs; and (2) export credit guarantees under the GSM-102 Program, a USDA program used to provide guarantees for credit extended by private U.S. banks to approved foreign banks for purchases of U.S. agricultural products by foreign buyers.

On August 31, 2009, WTO arbitrators issued arbitration awards in this dispute. These awards provided the level of countermeasures that Brazil could impose against U.S. trade. The annual amount of countermeasures has two parts: 1) a fixed amount of $147.3 million for the cotton payments and 2) an amount for the GSM-102 program that varies based upon program usage. Using the data that we have given Brazil (in accordance with the arbitrators' award), the current total of authorized countermeasures is $820 million.

The arbitrators also provided that Brazil could impose cross-sectoral countermeasures (i.e. countermeasures in sectors outside of trade in goods, specifically intellectual property and services). It may impose cross-sectoral countermeasures to the extent that it applies total countermeasures in excess of a threshold. The threshold varies annually, but is currently approximately $560 million. Therefore, of the approximately $820 million in countermeasures Brazil could impose now, about $260 million of that could be cross-sectoral.

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Today the FBI returned to the government of Peru two Colonial paintings that were recovered by the FBI Art Crime Team. FBI Assistant Director Kevin Perkins, Criminal Investigative Division, presented the artifacts to Ambassador Luis Miguel Valdivieso at a ceremony at the Embassy of Peru in Washington, D.C.

“We are pleased to be able to return these paintings to the government of Peru,” said Assistant Director Perkins. “Unfortunately, Peru suffers from depredations caused by thieves and looters and these stolen and looted objects regularly are brought into the U.S. for sale or display. This deprives the Peruvian people of their religious and cultural heritage and corrupts the legitimate market for works of art.”

In 2005, Exipion Ernesto Ortiz-Espinosa brought two paintings into the United States from Bolivia. One of the paintings, the 18th century oil on canvas known as "Doble Trinidad” or “Sagrada Familia,” depicts the Holy Family with Trinity in a style characteristic of the Cusco School of painting. It has been appraised at $26,000. The other painting, “Saint Dominic,” an 18th century oil on canvas, depicts Saint Dominic offering a wedding veil to Santa Rosa of Lima and has been valued at $38,000. The works are of the Cusco and Lima style of religious painting created to inspire devotion and hung in churches, monasteries, and convents throughout Peru during the Colonial period.

Ortiz consigned the two paintings to a gallery for sale. Suspecting the paintings were stolen when he observed they had been cut from their frames and that the appropriate legal documentation could not be produced, the dealer called the FBI. The paintings were seized in 2007 and forfeited in 2009 pursuant to the Convention on Cultural Property Implementation Act (CCPIA). Under the CCPIA, the 1997 bilateral agreement between the U.S. and Peru, it is illegal to import Colonial-era religious paintings into the United States from Peru without documentation certifying that the export did not violate Peruvian law.

Left to right: With the returned paintings as a backdrop, FBI Assistant Director Kevin Perkins, Criminal Investigative Division, speaks as (from left to right) Juan Jose Sanchez, general of the National Police of Peru and security advisor to the embassy; Ambassador Luis Miguel Valdivieso; and Deputy Asistant Drector Gina Holland, Office of International Affairs, U.S. Immigration and Customs Enforcement, Department of Homeland Security, listen at ceremony at the Peruvian Embassy.

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On March 26, 2010 the ICC Banking Commission Task Force on Anti-Money Laundering released guidelines on sanction clauses in trade related products, including letters of credit, documentary collections and guarantees.

The use of clauses related to sanctions in trade transactions has become a problematic issue for banks involved in international trade, and particularly in letters of credit. The ICC Commission on Banking Technique and Practice therefore has decided to draw the attention of the trade finance community to the use and impact of sanction clauses.

With these guidelines, ICC’s primary intention is to make practitioners aware of the need to be careful in their choice of counterparties or service suppliers and to emphasize that it is their responsibility to ensure that they do nothing that brings into question the irrevocable nature of the credit or guarantee, the certainty of payment, or the intent to honor obligations.

Banks have increasingly begun including sanction clauses in transactions because they are concerned about the implications of sanctions for their own obligations and trade related transactions. In letter of credit transactions, where sanction clauses give the issuer discretion whether or not to honor, they put in question the independent nature of the letter of credit and its irrevocability.
 

A copy of the guidelines is attached.

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 Vuitton, the proprietor of the Community trade mark ‘Vuitton’ and of a number of French national trade marks became aware that the entry, by internet users, of terms constituting its trade marks into Google’s search engine triggered the display, under the heading ‘sponsored links’, of links to sites offering imitation versions of Vuitton’s products and to sites of its competitors. Google offers a paid referencing service called ‘AdWords’. That service enables any business, by reserving one or more keywords, to obtain the placing of an advertising link to its site, accompanied by a commercial message. That advertising link appears under the heading ‘sponsored links’, which is displayed either on the right-hand side of the screen, to the right of the natural results, or on the upper part of the screen, above those results.
Vuitton brought an action against Google before a French court asking whether it is lawful to use, as keywords in the context of an internet referencing service, signs which correspond to trade marks, where consent has not been given by the proprietors of those trademarks.
The Cour de cassation (French Court of Cassation),referred these questions to the European Court of Justice, which ruled on March 23, 2010 that Google had not infringed. The decision is available at the European Court of Justice website.  

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A Florida federal court has upheld the right of the US coast guard to arrest drug runner in international waters.  On or about August 18, 2009, the US Coast Guard boarded a go-fast vessel in international waters, approximately 240 miles north of Columbia. The US law enforcement team conducted a right-of-visit boarding of the vessel to determine its nationality There were three crew members: Antonio Munoz Brant-Epigmelio and two individuals of Venezuelan nationality. The alleged master of the vessel claimed Venezuelan nationality for the vessel. Following inquiry by the United States Coast Guard, the Government of Venezuela confirmed Venezuelan registry of the vessel and granted the Government of the United States authorization to board and search the vessel. United States law enforcement discovered forty-five (45) bales of cocaine on the vessel. Antonio Munoz Brant-Epigmelio, a Colombian national, was arrested.

Brant-Epigmelio was charged in a two-count indictment with possession, and conspiracy to possess, with intent to distribute five kilograms or more of a mixture or substance containing a detectable amount of cocaine, in violation of the Maritime Drug Law Enforcement Act (“MDLEA”), 46 U.S.C. 70501, et seq. The other crew members and the vessel were returned to Venezuela.

Brant-Epigmelio moved to dismiss the indictment for lack of subject matter jurisdiction, arguing that he was not on a “vessel subject to the jurisdiction of the United States” because “[a]s a matter of law, a country of registry cannot take possession of its vessel but can consent to the exercise of jurisdiction by the United States over a single individual on board; and, further, that the United States cannot subject a vessel to its jurisdiction but can relinquish actual custody and control over the vessel to another country” The Court noted that the Maritime Drug Law Enforcement Act ("MDLEA") provides that a vessel is under the jurisdiction of the United States when the country of registry "has consented or waived objection to the enforcement of the United States law by the United States." Because the Venezuelan government had waived objection to the enforcement of United States law, the vessel was subject to the jurisdiction of the United States. Therefore, the court denied Defendant's motion to dismiss for lack of subject matter jurisdiction.

[U.S. v. Antonio Munoz Brant-Epigmelio US District Court, M.D.Fla., 2010]
 

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