No.: 06-01
Date: October 16, 2006
Foreign Corrupt Practices Act Review
Opinion Procedure Release
The Department has reviewed the FCPA Opinion
Procedure request of a Delaware corporation with headquarters in Switzerland
(hereinafter the “Requestor”). The Requestor seeks to contribute $25,000
to a regional Customs department or the Ministry of Finance (collectively, the
“Counterparty”) in an African country as part of a pilot project to improve
local enforcement of anti-counterfeiting laws. The Requestor seeks to make
the monetary contribution to the Counterparty in order for the agency to fund
incentive awards to local customs officials to improve local enforcement
relating to seizures of counterfeit products bearing the trademarks of the
Requestor and its competitors.
The letter of request states that
counterfeiting has become “a serious issue” for manufacturers such as the
Requestor and the issue “is often not a major priority for Customs authorities
(particularly in developing countries)[.]” According to the Requestor, the
African country selected for this “anti-counterfeiting coalition” serves as a
major transit point for illicit trade in counterfeit products, including the
products of the Requestor and its competitors. The Requestor states that
currently a transit tax is collected on all goods transiting the country, even
those that are contraband or counterfeit. The Requestor notes that the
salaries of local customs officials include a small percentage of any transit
tax they collect - again, whether on authentic or counterfeit products.
Thus, there is a financial disincentive for thorough inspection by local customs
officials of goods for counterfeit products. The Requestor asks for a
determination of the Department’s present enforcement intention under the FCPA
with respect to the proposed $25,000 contribution.
The Requestor represents, among other things, that in connection with its
proposed $25,000 contribution, it would execute a formal memorandum of
understanding (hereinafter “MOU”) with the Counterparty in the African country
to:
- encourage the mutual exchange of information related to the trade of
counterfeit products bearing the trademarks of the Requestor and its
competitors;
- establish procedures for an incentive compensation fund for the payment of
awards to local Customs officials who detain, seize and destroy counterfeit
products (“Award Candidates”);
- establish eligibility criteria for the calculation of awards and the
methods and frequency of distribution; and
- provide that the awards be given to Award Candidates directly by the
Counterparty or given to local customs offices to distribute to their
qualified Award Candidates.
The Requestor further represents that it would establish “a number of
procedural safeguards designed to assure that the funds made available by the
[Requestor’s] contribution were, in fact, going to provide incentives to local
customs officials for the purposes intended.” The Requestor will ensure
that the Ministry of Justice in the African country is aware of the pilot
program and that all aspects of the program are consistent with local laws,
including but not limited to the following procedural safeguards:
- First, the Requestor will make its contribution to the incentive
compensation fund by electronic transfer to an official government bank
account in the African country controlled by and in the name of the
Counterparty, and will require written confirmation that the account is a
valid government account, subject to periodic internal audit by the relevant
government authorities.
- Second, the Requestor will be notified, upon a seizure of suspected
counterfeit items by local customs officials, and will examine the suspect
goods to confirm they are in fact counterfeit. The Requestor further
represents that payments to Award Candidates will not be distributed unless
and until destruction of the counterfeit goods is confirmed by delivery of a
destruction certificate to the Counterparty (a copy of which would be sent to
the Requestor).
- Third, the Requestor will have no part in choosing the Award Candidates,
and the Counterparty will have sole control over, and full responsibility for,
the appropriate distribution of funds. The Requestor, however, will
require written evidence that its entire contribution was used only to pay
identified Award Candidates and that the awards were based upon a
predetermined award eligibility criteria and calculation method.
- Fourth, the Requestor will monitor the efficacy of the incentive program
and discuss with the Counterparty during periodic reviews whether changes or
refinements are necessary. As part of its monitoring effort, the
Requestor will monitor the number of notices received from local Customs
officials relating to relevant seizures during each six-month period and
follow the progression of such seizures.
- Fifth, the Requestor will require as part of its MOU with the Counterparty
that the Counterparty will retain for five years the records of the
distribution and receipt of funds, and shall permit inspection of such records
by the Requestor upon request during the life of the pilot project and for
three years thereafter.
The Requestor states in its letter of request that its pending business
activities in the African country are relatively small and “entirely unrelated
to the current request for an advisory opinion.” The Requestor further
states that its future business in the African country is not dependent upon the
existence of the proposed incentive program, and that the program is not
intended to influence any foreign official to obtain or retain business.
Finally, the Requestor states that if the program were successful, the Requestor
would continue to fund the central account on an as-needed basis to ensure that
there would be no interruption in merited awards to local customs officials, and
that the Requestor would seek, both initially and over time, to encourage its
competitors to contribute funds to the effort as well.
Based upon all of the
facts and circumstances, as represented by the Requestor, the Department does
not presently intend to take any enforcement action with respect to the proposed
$25,000 payment described in this request.
This Opinion, however, is subject
to the following important caveats:
- The Department’s Opinion should not be deemed to endorse the proposed
language of the MOU or the methodology for selection of the proposed Award
Candidates and distribution of funds, as neither the language of the MOU nor
any proposed methodology were submitted to the Department. This Opinion
likewise should not be deemed to address any possible expansion of the program
within or outside the African country. Rather, this Opinion is limited
to consideration of the $25,000 contribution to the particular African country
set forth in the letter of request.
- This Opinion does not apply to any monetary payments made by the Requestor
for purposes other than those expressed in the letter of request; nor does it
apply to any individuals involved in authorizing or distributing the monetary
awards to the Award Candidates.
The FCPA Opinion Letter and this release have no binding application to any
party which did not join in the request, and can be relied upon by the Requestor
only to the extent that the disclosure of facts and circumstances in its request
is accurate and complete and remains accurate and complete. |
