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Ethics, Regulation & Global Realities

February 27, 2008

An IACCM member asked recently whether anyone had suggestions about successful ways to handle corrupt customs officials. “What do you do,” they asked” when you have expensive capital equipment and the only way to get it released is to pay a bribe?”

I contacted one of the world’s top experts, Alexandra Wrage, the Executive Director of TRACE International. Alexandra leads a fascinating life as she travels the globe, working with governments, overseas companies and the major international corporates. When I first made contact, she was fleeing rebel forces in Chad – I guess they were not a good audience for anti-bribery compliance at just that moment!

When we finally caught up, Alexandra was certainly sympathetic to the problem, but could not offer any silver bullet. She did observe, however, that companies that simply say ‘no’ are meeting with increased success. She explained that smart business people are citing the major fines, penalties and even jail terms now being imposed on those found guilty of corruption – and that, while foreign officials may not like this removal of their source of funds, they do understand that there really is no choice.

So the stock answer seems to be, make sure that you and your staff have the facts in front of you and treat this like any other negotiation – explain why you will not and cannot accede to their demands. And if you want to find evidence to support this, the TRACE website is a great place to start.

Our conversation moved on to cover some of the contractual methods open to companies with regard to anti-bribery measures. This is where things remain tricky. Many companies are today focusing on contract terms that require their suppliers to adhere to regulatory and other ethical standards – bribery, environmental, child labor all being examples. Increasingly, they insist that such provisions are passed through to sub-contractors and service providers. The problem is, how is this validated?

Self-certification is one choice; but some companies go further and insist on a right of audit (which is what the US Department of Justice recommends).  This is potentially a double-edged sword, because if you have the right of audit and an exposure then arises, you may be judged negligent if you were not active in pursuing your audit rights.

Realistically, most companies simply cannot afford the overhead of conducting regular audits of their global supply base. So perhaps self-certification, with extensive consequnces for any non-compliance, may be the best answer right now. And maybe it also means that companies need to consider avoiding smaller, local suppliers who may find it harder to push back against corruption. By working with larger multi-nationals, the transaction price may be higher, but the business cost will be lower. And perhaps the loss of trade will be an added incentive to foreign governments to act against corrupt practices.

One Comment
  1. Lynda Wallace permalink

    Attaching a completed Shipper’s Export Declaration (SES) on EVERY box or carton shipped reduces or eliminates issues at import customs.

    Failing to attach an SED ensures that someone will have to visit import customs to get the shippment released … and bribery happens in person, despite laws against it and participating in it.

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