Facilitation Payments in Customs & Ports – Part 1

Facilitation Payments in Customs & Ports – Part 1

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January 19, 2016

Last month, the TRACE Customs Working Group convened to discuss the most challenging compliance issues related to customs and borders. The group of senior-level compliance professionals from TRACE logistics and freight forwarding member companies almost unanimously identified unlawful demands for small bribes by customs officials as being one of the most persistent and difficult compliance issues to tackle, which is consistent with findings in the UK Chamber of Shipping’s The Bribery Act 2010 - Practical Guidance for the UK Shipping Industry, published this past September. In addition, offering a mechanism to resist unlawful demands for gifts in cash or kind, such as cigarettes and alcohol, has been a goal of a recently developed Baltic and International Maritime Council (BIMCO) anti-corruption clause (which we will discuss in more detail in Part II of this post).

The compliance challenge in customs lies in the fact that demanding and receiving payments or other things of value by customs officials has historically been a widely practiced and accepted routine in customs and ports worldwide. The perception that bribery is entrenched in customs in many parts of the world was also behind the U.S. Congress’ decision to amend the Foreign Corrupt Practices Act in 1988 to explicitly exclude “facilitating payments” in customs and ports from the definition of bribery. However, U.S. enforcement authorities have shifted toward a quite narrow interpretation of the facilitation payment exception in recent years (while most national anti-corruption laws, including the UK Bribery Act, prohibit facilitation payments outright). Small payments of a recurring nature, for example, will not be viewed as facilitation payments under the FCPA, as evidenced by the 2010 Panalpina case.

What can companies do? Companies seeking to eliminate small bribes from their operations (and operations of their third parties) should follow “the three R’s approach”:  Resist, Report, and Record. Some practical tips on resisting bribe demands mentioned during the TRACE Customs Working Group meeting included use of the following:  visible “no corruption” labels on trucks; business cards explicitly saying “we are not paying bribes”; and large posters with “Don’t ask / We don’t pay / We report” written in local languages and displayed prominently on vessels.

Part II of this blog post will focus on the recently released BIMCO anti-corruption clause and examples of collective action being successfully used to resist bribe demands in customs and ports.  

For more on this topic, please see the following resources:

Tipping Risks in Shipping
The High Cost of Small Bribes
Bribery’s Broken Windows
Tips and Bribes:  Not the Same Thing

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