THE BAD NEWS (IN A
It’s a scary new world out there. Under the recently amended Lacey Act, it is possible for innocent buyers to be subject to imprisonment, civil and criminal fines up to $200,000, and forfeiture of goods. Even a simple typo on an import declaration could cost you two hundred and fifty dollars.
If you want the bad news in detail, skip down to here.
Otherwise, let's go straight to the Good News:
THE GOOD NEWS
Complying with the Lacey Act: A Real-World Guide
(revised in the spring of 2010) will help you handle both
Far most cost effective than third party consultants and certainly more
efficient and practical than paying lawyer's fees in the future, the Guide provides
practical instructions to help you to organize and manage your
documentation and coordinate your internal and external
communications. A bit of due diligence on your part can reduce or mitigate potential penalties as well as significantly diminish your overall risk of being the target of an investigation.
The newly revised Guide—complete with sample databases and documentation—will assist you in preparing for the necessary import declarations; in learning how to document the legality of your product; and in educating yourself, your staff, suppliers and customers regarding the potential impact of the Lacey Act.
"Understanding the information taught in the Guide and applying the
advice given to the way your company does business should significantly
reduce the likelihood of an expensive and time-consuming investigation
Heide Domenick, Esq.
Also included with the printed guide is a CD ROM containing assorted templates and documentation with recommendations for your use with domestic customers and international partners, and a reference file linking you directly to online resources.
Sample Purchase Order text has also been provided in multiple languages common to many
key supplying regions. The Guide even includes tips to help reduce the risk of that pesky typo costing you again and again.
For more information on the contents, see the Table
of Contents. Click here to order your
Lacey’s goal is to protect the world’s forests by encouraging a more detailed questioning of supply chains and to provide a means of enforcement against egregious offenders. So whether you choose to take action because it’s the right thing to do, or because you are afraid of potential prosecution, you will be following the spirit of the Law, perhaps even more so than the letter.
THE BAD NEWS (IN DETAIL)
In simple English, the Lacey Act has three basic provisions:
1) It is a United States federal offense to trade in illegal or “tainted” plants and plant-based products, and the action that made the product illegal (”tainted” the product) does not have to have occurred within the United States. Included in the long list of ways to “taint” a product are actions such as harvesting it illegally, trading it without proper duties or other fees being paid, or smuggling/stealing it;
2) Importers need to declare both what species they are bringing in and where it came from; and
3) Don’t lie to the government! (While this seems like common sense, the government has to specifically state that it’s wrong so they can prosecute you if you do it).
The initial focus by most companies is on the documentary burden. Every importer must file a detailed declaration for incoming agricultural products specifying species and country of origin no matter where the final product is produced. So an engineered floor might be made in China but contain a Meranti plywood core made in Malaysia and a top veneer of Red Oak originally from the United States. The declaration requires that the importer know the source countries and exact scientific species for each component, including material originating from the United States.
U.S. Customs has developed a rolling implementation schedule, requiring declarations for different HS Codes to start on different dates. These dates are subject to change as Customs’ information collection system continues to be developed.
The potential for legal liability falls on everyone in the chain. On an absolute level, Lacey allows for the confiscation of goods from anyone-even to the point of allowing the government to enter a home to pull up a living room floor, rip out the kitchen cabinets or seize Johnny’s new bunk bed. Now, in the real world, that’s just not going to happen, but that’s the potential extent of liability. Anyone in the chain, from the importer to the retailer to the homeowner, and even the trucking companies technically share the risk for the legality of their wood in the product.
Most people define Lacey’s start date as when their specific import declarations are required. This focus can be dangerous since the legality requirement already in effect: as of May 22, 2008, it is against U.S. law to trade in any illegally harvested agricultural product. Every one of us is currently Lacey liable.
While the greatest burdens and risks will be on the actual importers, distributors and retailers should also be asking some questions of their suppliers, if only to be able to respond to their customers’ questions. In some markets, domestic producers are using Lacey as a scare tactic in their marketing to try to pull customers away from imported products.
It is important to note that the Lacey Act does not specifically require importers to document the legality of their material at time of entry, and there is no specific burden of documentation for anyone further down the chain of custody. So technically there is no immediate legal obligation to compel a company to ensure the legality of their supply chain. However, forcing companies to trace a product’s chain of legality is most definitely the intent and the expectation of the government and the government can prosecute based on a failure to do so if they determine that you’ve traded in “tainted” material.
Furthermore, in a Lacey violation case, ignorance will not be considered a sufficient defense. Even if a company or an individual had no idea that a product was “tainted,” they can still face fines or confiscation if the government believes that they should have reasonably known.
The good news is that the U.S. government bears the burden of proof. For criminal charges, they must demonstrate beyond a reasonable doubt that you knowingly committed the crime or knowingly traded in “tainted” material. To assess civil penalties, they must show, again beyond a reasonable doubt, that you failed in your professional due diligence and truly should have known that a product was “tainted.”
The challenge is that under Lacey, material can become “tainted” even if the law being broken is not an American one. The illegal action can occur at any point in the chain. From that point further, the wood is considered “tainted,” and thus it would be considered a violation of the Lacey Act to import it or sell it within the United States. This means that importers must ensure not only that their immediate purchase is legal but also attempt to trace the origin of the material back to its original point of harvest, confirming that each step along the way was made in full accordance with local and international laws.
It should also be noted that while being certified (FSC, SFI, PEFC, MTCC or by any other internationally recognized program) does not specifically protect companies from prosecution under
Lacey. It helps show that a company is doing its due diligence. Although it will certainly be considered a sign of good faith, the U.S. government does not accept any third-party verification regarding the legality (or illegality) of material.
Foreign companies and individuals can also be prosecuted under Lacey and in some previous Lacey cases (for fish and wildlife, not wood), foreign nationals have been arrested during a visit to the United States and subsequently tried and jailed.
Finally, the international demand for legality documentation is here to stay, and it’s not just for the USA. Japan began requiring some forms of legality statements over five years ago, the United Kingdom is debating the issue, and even the state of Illinois recently considered passing a law against the trade of illegal timber within the state. Furthermore, the European Union is currently developing legislation similar to the Lacey Act which will cover international trade with all of the countries in the Euro-zone. (There is rumor that this legislation may potentially require the submission of legality documentation at the point of entry, which Lacey currently does not require).
So the work you do today, if you trade in other countries, may help you far beyond just complying with the Lacey Act. The documentary conditions created by Lacey Act may well become the default condition for the international trade of wood products.