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Jan.12, 2015

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20 THE JOURNAL OF COMMERCE JANUARY 12.2015 2015 ANNUAL REVIEW & OUTLOOK GOVERNMENT IN PERSPECTIVE Avoiding the Cops and Robbers A s we start 2015, the question for international traders is how much more can change? Put another way, what will happen next? As we look back over the past year, we see a variety of challenges: unilateral regulatory action by one agency or another; the attempted criminalization of vehi- cle exports; an unclear decision about when officers may be liable for the gross negligence of their corporations; questions of unfair competition; continuing significant anti-bribery and anti-corruption fines; large fines for export violations; prosecution over trade secrets; hurdles to implementation of the Food Safety Mod- ernization Act; ongoing challenges to the conflict minerals rules implemented by the Securities and Exchange Commission; and a plethora of anti-dumping and coun- tervailing duty findings. No one is foolish enough to think the points summarized won't continue into the near future, but there seems to be a notable set of trends worth highlight - ing, including the ever-increasing cost of regulatory compliance. Whether your company is large or small, regulators and prosecutors will measure the conse- quence of a misstep in large part by the scope and implementation of your com- pliance plan. For companies of any size, the question long ago stopped being whether you need a compliance program, and became what it must cover, who will oversee it and how to manage the cost. By way of example, a recent case raised the conflict between California state and U.S. federal law regarding when a product qualifies as Made in USA. The case, while not leading to fundamental changes in product labeling, served as a reminder that laws and regulations at many levels need to be integrated into that compliance program. Similar conf licts are common between state and federal laws or for regulations around many types of products, especially food and medical devices, where local officials tout their protection of public health. This theme is especially emphasized when a local prosecutor seeks to charge a felony in liability cases where federal law provides only for misdemeanor. Examples of other issues with potentially great impact are the continuing First Amendment challenge to the con- flict minerals rules enacted by the SEC, and the Food and Drug Administration's herculean efforts to implement all the provisions mandated by the Food Safety Moderniza- tion Act. Add to this the quicksand of social accountability, and you have a wealth of challenges for any company, no matter its size or financial wherewithal. And this is just the tip of the iceberg. Another theme to watch is enforcement — the increased efforts of agencies at all levels to seek more serious consequences when mis- steps occur. This is a largely quiet phenomenon, because so many of those efforts never see the public light. They are conducted within the confidentiality of the regulatory process, so little is known about them unless the company under review is publicly traded and, therefore, must state in its annual financial report the reserve it has set aside to address a particular investigation. Admittedly, the Commerce, State and Justice depart- ments, as well as the SEC are permitted to publicize their civil and criminal cases, but the same is not true with Cus- toms and Border Protection. CBP and Homeland Security Investigations have lost their most experienced profes- sionals to retirement, and a lot of institutional knowledge went with them. As a result, they're still struggling to put together any significant trade fraud cases. Those two agencies, in particular, have enhanced their efforts at trade enforcement with varying levels of success. Now that former Acting Customs Commissioner Tom Winkowski has moved to Immigration and Customs Enforcement, HSI's parent, it's reasonable to expect those efforts to expand, and their success levels to rise accordingly. The one new issue is cybersecurity, which has gotten plenty of publicity in the last year because of high-pro- file cases of hacking and intrusions at Target and Home Depot, among others. The threat, however, extends far into the commercial supply chain, and has nothing to do with counterfeit chips. B Y S U S A N KO H N RO S S

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