Scopelitis International Newsletter - March 2019
March 20, 2019
Scopelitis International News – March 2019
Freight Forwarder Agent Risk
This month we move our focus from stoppage-in-transit issues to the risks arising from the use of third party intermediary “agents” by U.S. forwarders. It’s a very common industry practice for a U.S. forwarder who doesn’t have a foreign presence to obtain destination customs, handling, and delivery services from a foreign-based agent. The financial risk of such relationships is frequently mitigated by using agents that belong to an international network of independent freight forwarders. Those networks often provide a measure of financial protection against the default of its members. However, the legal relationship between the U.S. forwarder “principal” and the agent is also a serious risk. Agency law generally dictates that a principal is liable for the actions of its agents. Foreign agents used by U.S. forwarders often engage with foreign government officials, whether to facilitate customs clearance or obtain other permits or authorizations in connection with the entry of goods into the destination market. U.S. forwarders can face liability for acts of their agents which violate anti-corruption/anti-bribery laws like the U.S. Foreign Corrupt Practices Act or other similar laws in the destination country. Similarly, an agent’s actions on behalf of a forwarder could expose the forwarder to liability for violation of sanctions laws, anti-boycott laws and other trade-related laws. Every forwarder should memorialize its agent relationships in writing, with appropriate legal protections. However, it equally important to know as much as possible about the agent - including on-site visits, substantive audits, and a solid risk analysis - in order to avoid unforeseen liability.
“F.O.B.” is one of the most commonly used terms in sales and shipping documents. It may also be one of the most misunderstood delivery terms. The problem is that the term means different things to different people, can be used to describe various responsibility scenarios and can have a meaning that is dependent on whether a reference to standard shipping terms is included in the document. U.S. shippers are generally most familiar with the F.O.B. alternatives provided in Article 2 of the Uniform Commercial Code. There, the delivery (and transfer of title and risk of loss) may be at the shipment origin point or the shipment destination point and can be used in connection with transport by land, air or water. In addition, the parties can assign responsibility for freight charges. Difficulties arise if the parties do not name a point of origin or a point of destination in conjunction with the F.O.B. term, if they fail to appreciate where title and risk of loss with respect to the transferred goods will pass to the buyer as a result of the F.O.B. term used or, in the case of international shipments, they cite Incoterms 2010, the standard reference for international shipping terms. In that situation, F.O.B. means only delivery at the origin point and technically only applies to vessel transport. Accordingly, confusion abounds when the parties cite Incoterms, name an F.O.B. destination point and/or seek to apply the term to a multi modal or ground transport delivery situation. Clear alternatives are available. Ask your Scopelitis contact for further information if you’re not certain which F.O.B. term to use or whether to use F.O.B. at all.
Executive Enforcement Targets
A number of FCPA compliance commentators have speculated recently that 2019 may be an especially tough year for compliance officers, including general counsels and financial executives. The SEC and the Department of Justice have made it clear for some time that their enforcement efforts will include a specific focus on culpable individuals. Corporate gatekeepers such as Chief Legal Officers and Chief Financial Officers are especially attractive targets because they are almost always involved in the evaluation and approval of transactional details, including those associated with acquisitions and important operational moves. As part of their efforts to show a strong renewal of enforcement activity after the recent government shutdown, FCPA enforcement teams are likely to make an effort to accelerate the closure of pending investigations and, in conjunction with that effort, to identify senior gatekeepers who failed to uncover or report FCPA violations. Those individuals who have ultimate responsibility for identifying potential corruption risks and implementing effective training and audit programs to counter such risks would be well advised to stay on high alert during the coming year.
Global Network Resources
From May 8 to 11, John Hove and Jacob Fisher will be meeting in London with many of the Firm’s resources from all over the world. These meetings provide clients an unusual opportunity to meet, in person or via video or telephone conference, with local experts from any of more than 50 countries and to pose basic questions about issues they may be confronting in those jurisdictions. If you are considering expansion of your operations into a new country or have questions about an issue in a country where you already work, please contact John or Jake to see if a meeting with the Scopelitis resource for the relevant country or countries can be arranged.
For more information on the latest in international transportation law, contact a member of Scopelitis’ International Transportation & Logistics Law team - Nathaniel Saylor, Braden Core, John Hove, or Jake Fisher, or your Scopelitis contact. For any additional information on our Firm, please follow Scopelitis on social media.
Scopelitis practice area newsletters are intended as reports to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.
© Scopelitis, Garvin, Light, Hanson & Feary, P.C. 2019. All rights reserved.