The 360-degree approach to compliance works with all the stakeholders in a compliance program, even the Document Document Document stakeholders; IE., the regulators. By using innovative techniques, one law firm came up with mechanism to present verifiable evidence to regulators, using the basic techniques of social media in operationalizing compliance as a solution to a difficult compliance issue around, of all things, honey. This example shows how creative thinking by a lawyer, in the field of import compliance, led to the development of a software application, using some of the concepts of social media. Once again demonstrating the maxim that compliance practitioners (and lawyers) are only limited by their imagination, the use of this software tool demonstrates the power of what a 360-degree view can bring to your compliance program.
Gar Hurst, partner at the law firm of Givens and Johnston PLLC in Houston, faced an issue around US anti-dumping laws for honey that originated in China. The US Government applies anti-dumping trade sanctions to goods from a specific list of countries. They do this when a domestic interest group alleges and proves, at least theoretically, that the producers in certain foreign countries are selling their goods into the US market at below fair-market value. By doing this, they are harming the US domestic industry. The dumping duties, which can result from this, can easily be 100, 200, even up to 500% of import duties. To get around the anti-dumping laws, importers would ship Chinese originated honey to Indonesia, Vietnam or some other country and pass it off as originating from one of those locations.
The problem that faced was how to prove the honey did not originate from China. Hurst said, “We were working with a Southeast Asian honey producer. They were in this situation where Customs was essentially treating them as though they were a Chinese producer. We’ve provided them documents. We’ve provided them invoices. We’ve provided them production documents but there was nothing that we could give them documentary that they didn’t believed could be faked. That was the problem, documents on their face are just a form of testimonial evidence. Meaning, somebody somewhere said, this honey is from the Philippines. It’s only as good as the word of the person who wrote it on. We needed something that would get beyond that problem.”
Using awareness around communications through a smart phone, Hurst and his team came up with an idea “that with the explosion of smartphone technology which is in the hands of basically everybody in the United States and soon to be everyone in the world, these devices basically allow a person to take a picture that is geo-tagged and time and date stamped and then upload that picture to a database in the cloud. Effectively, that’s what we did.” As Hurst explained the process which they came up it was amazingly simply, “We basically created an app that resided on Android phone that they could then go around and document the collection of all these various barrels of honey and its processing. Every time they take a picture, it would be time and date stamped with geo-tagging as well. You know when and where a picture of a particular barrel of honey which we would label with some special labels so you could identify it when and where that was taken.” The product they came up with is called CoVouch.
From there the information is uploaded into a secure database that Hurst and his team created in the cloud. His firm then took all the evidence they had documented that the honey originated in Indonesia, not China, and presented it to the US Customs service to show his client had not sourced its honey in China. In version 2.0 Hurst and his development team are creating a searchable database which US Customs can use to make spot checks and other determinations.
Recognizing the level of technical sophistication of honey farmers in Asia, CoVouch is amazingly simply to use. It takes pictures, puts time stamps on them and puts geo-tags that show the location where the picture was taken and with glued or pasted on bar codes, you can trace the shipment of honey throughout its journey. But it does so in a way that tells a story. Hurst said, “you’re telling the story but the provenance, of one imported barrel of honey and how did it get to where it’s at. It’s different. That’s exactly what we’re trying to do and trying to do it in a way that is easy enough so that, as you put it, a fairly, uneducated farmer in Indonesia can do it and a busy Customs agent in the United States can review it.”
Such a software system uses the concepts around social media to make a honey farmer a provider of documents evidence, through photographs, to meet US anti-dumping laws. But I see the application as a much broader tool that could be used by anyone who needs to verify information on delivery, delivery amounts, delivery times and delivery locations. This could be a field hand who is delivering chemicals even West Africa and does not know how to speak English. Hurst pointed to uses around whether something might be eligible for special import or export regulations due to NAFTA, whether restricted trade goods, such as those used in the oilfield industry, worked their way into Iran and even applicability under the Buy American Act around the US content in goods.
For the compliance practitioner, you could use such a tool to not only receive information, and more importantly photographic evidence, but you could also deliver information. But the key is that you are only limited by your imagination. CoVouch could be a tool that you use internally for delivery of information and receipt of information inside your company.
Three Key Takeaways
This month’s podcast series is sponsored by Dun & Bradstreet. Dun & Bradstreet’s compliance solutions provide comprehensive due diligence reporting and analysis to reduce your risk of working with fraudulent companies by accessing a company’s beneficial ownership, reputation risk and more. For more information, go to dnb.com/compliance.