For the remainder of the week, we return to Sherlock Holmes-themed blog posts. We have finished our review of The Adventures of Sherlock Holmes and now move on to The Memoirs of Sherlock Holmes. We begin this week’s adventure by considering one of the darkest of tales in the Holmes canon, The Adventure of the Cardboard Box. It has two grisly murders, Iago level manipulation, dismembered body parts and, at the end of the day, some brilliant deduction by Holmes. Indeed, Leslie Klinger, in “The New Annotated Sherlock Holmes Volume 1”, said of story, “It is one of Watson’s stories, combing brilliant detection and a powerful human drama.”

The tale itself begins on a macabre note, with a pair of severed ears being delivered to Miss Susan Cushing of Croydon from Belfast. Inspector Lestrade believes it to be a prank of medical students whom Miss Cushing was forced to evict because of their unruly behavior. Holmes, however, is convinced that it is evidence of a serious crime. He reasons that medical students would be able to make a more precise cut than the roughly hacked ears suggest. Further, the address was roughly written and poorly spelled, suggesting to Holmes that the sender lacks education. The knot tying the package suggests someone with sailing experience.

Holmes considers the solution so simple that he asks Lestrade not to mention his name in connection with it. A few questions to Susan, a few observations, a cable to Liverpool and a visit to Susan’s sister Sarah, convinces Holmes that the ears belong to the third sister, Mary and her lover, and that they have been murdered by Mary’s estranged husband, Jim Browner. Browner, who is blackout drunk, had meant to horrify Sarah rather than Susan because he ultimately blamed her for causing the trouble that culminated in his murder of his wife and her lover.

He is arrested when his ship reaches London, sailing from Belfast. He confesses but is presented with considerable sympathy, a simple man tormented by guilt. Holmes identifies the real villain of the story is Sarah Cushing. She fell in love with him, tried to seduce Browner; then, when he was loyal to his wife Mary, set out to wreck his marriage, by poisoning her mind to her own husband and by introducing and pushing her onto a new lover, given her husband’s alcoholism. Indeed, as Holmes unfolded the tale Klinger said, “Even Holmes, the hardened criminal investigator, is troubled by his discoveries: What is the meaning of it Watson? What object is served by the circle of misery and violence and fear.”

I thought this story made a good introduction into the world of freight forwarders and the Foreign Corrupt Practices Act (FCPA). The FCPA world is littered with cases involving freight forwarders, brokers and agents in the shipping and express delivery arena. This is particularly true where companies are required to deliver goods into a foreign country through the assistance of a freight forwarder or express delivery service. There are multiple risk factors to consider, including: Location; customs and other governmental agencies; aviation and postal regulators; business promotion expenditures for governmental officials; agents and sub-agents; and Foreign Government accounts. One factor not often discussed is the freight forwarder who always delivers the package on time, even to the most difficult locations; thereby implying that the freight forwarder will to anything to get the job done.

How can a company assess this risk? One approach was developed by James Min, former Vice President & Global Head of International Trade Law for Deutsche Post DHL, who established a risk matrix for the freight forwarders/express delivery industry. In this Min Model, Min analyzed risks by multiplying certain risk factors and scoring the overall risk. This model showed that location should not be the sole criteria for risk. The factors in the Min Model are the performance of your company’s customs clearance brokers and how far that performance varies from the norm your company normally receives. In the below chart, +1.00 equals average clearance time; >1.0 equals faster than average and <1 means slower than average.

The Min Model 

Country TI-CPI Customs Clearance Performance Variance from Average Performance Risk Score Risk Rank
A 55 0.93 1.21 61.9 1
B 20 0.76 0.89 13.5 3
C 54 0.29 1.00 15.6 2
D 88 0.12 0.7 7.39 4

The key in this approach is how often the service varies above the average for customs clearance times. If the percentage of customs clearance performance is so great that your vendors’ variance is above 100% most of the time, this could be a red flag that bribery or corruption is involved. This should lead to further investigation, due diligence, or asking of questions of your vendor.

Almost every business transaction engaged in by a freight forwarder, express delivery service or customs broker outside the US involves a foreign governmental official. Every time your company moves raw materials into or out of a country there is an interaction with a foreign governmental official in the form of a customs official. Every customs transaction involves a payment to a foreign government and every transaction involves some form of a foreign governmental regulatory process. While the individual payment per transaction can be small, the amount of total transactions can be quite high, if a large volume of goods is being imported into a foreign country.

Conversely, interacting with international tax authorities can present problems similar to those with customs officials, but the stakes can often be much higher since tax transactions may be less in frequency but higher in financial risk. These types of risks include the valuation of raw materials for value-added tax (VAT) purposes before such materials are incorporated into a final product, or the lack of segregation between goods to be sold on the foreign country’s domestic market as opposed to those which may be shipped through a free trade zone for sale outside that country’s domestic market.

If you utilize the services of a freight forwarder, you might want to consider their success factor. It may well go a long way in determining your company’s FCPA liability. Just as Holmes found Sarah Cushing to be morally responsible for causing the death of her sister Mary and her lover; you might find that a freight forwarder with a 100% success rate has something to hide.

I hope you will join me tomorrow where I consider The Adventure of the Yellow Face.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2020

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