Hypothetical:
A shipping company regularly imports fresh fruit into the country of Freedonia. The fruit is subject to tariffs according to a schedule duly issued by Freedonia’s Ministry of Finance. By law, the tariffs are to be collected by a customs official upon the ship’s arrival in Freedonia. The shipping company’s senior management recently learned that in addition to collecting the tariffs, customs officials have also been requiring that the shipping company pay a tariff “processing fee,” which shipping company employees have paid. The shipping company consulted with local counsel and understands that the processing fee is not a legal or regulatory requirement. The shipping company inquired of its employees and learned that the “processing fees” have ranged from about $100 to $250, and that the customs officials have told the shipping company employees that if the processing fees are not paid, the fruit cannot be imported for two to three days, leading to significant spoilage of the fruit. The shipping employees want to continue making the payments, as they worry failure to do so will lead to significant delays in importing the fruit. The shipping company is listed on a US national stock exchange.
Key Considerations:
- The FCPA excepts from the anti-bribery provisions facilitating payments, small payments to foreign officials made to facilitate or expedite routine governmental action. These are also sometimes referred to as “grease payments.”
- Routine governmental action is defined as a function or service that a foreign official is ordinarily obligated to perform; a discretionary decision does not qualify.
- Even though the payments described above likely fall into the definition of a facilitating payment, and thus likely do not violate the FCPA anti-bribery provisions, the payments are likely illegal under Freedonia law.
- In addition, other international anti-corruption laws, such as the UK Bribery Act 2010, do not contain an exception for facilitating payments.
- Finally, issuers must fairly and accurately record any facilitating payments. Failure to do so would violate the accounting provisions of the FCPA. It would not be accurate to categorize these payments as legitimate processing fees; rather, the payments should be booked as facilitating payments or some similar description.