The Lacey Act in the 21st Century: An Old Law’s Renewed Clout Imposes Serious Impacts on Importers and Processors of Foreign Wood
Recently, federal authorities searched the premises of Global Plywood & Lumber Inc., a California-based company, under the terms of a search warrant based on the United States Department of Homeland Security’s belief that Global Plywood, in conjunction with its Peruvian supplier, had violated U.S. and Peruvian laws by importing “significant quantities” of illegally harvested Amazonian timber. In February of this year, a federal court sentenced Lumber Liquidators Inc. for illegal importation of hardwood from Chinese suppliers. That sentence included a criminal penalty of more than $13 million and forfeited assets. The Global Plywood and Lumber Liquidators cases are two of a number of enforcement actions brought under the Lacey Act in recent years. Another high-profile investigation from 2011 involved allegations that Gibson Guitar Corporation illegally sourced hardwood from Madagascar and India. The company paid a $300,000 penalty following multiple raids on Gibson’s facilities.
Enacted in 1900, the Lacey Act banned trafficking in illegal wildlife for more than 100 years. In 2008, Congress expanded the Lacey Act to penalize importing or possessing plants and their products—including timber and wood products—taken in violation of the laws or regulations of the country from which they are sourced. It is illegal to “import, export, transport, sell, receive, acquire, or purchase” such materials. The scope of the statutory regime is broad enough to include, for example, logs harvested in violation of a harvest permit or indigenous peoples’ rights to the forestland. The Lacey Act imposes strict liability on offenders, meaning that U.S. importers are exposed to liability for any illegal conduct occurring before taking title to imported wood. In other words, the Lacey Act casts a wide net with respect to the acts it covers and the businesses that can be held liable under its terms.
Criminal and civil penalties under the Lacey Act vary depending on the offender’s level of culpability and exercise of “due care.” For knowing violations, the Lacey Act imposes criminal penalties of up to five years’ imprisonment and a maximum fine of $250,000 for individuals and $500,000 for organization for each offense. For unknowing violations, the penalties are less but still vary depending on whether the offender exercised due care and therefore should have known that it was violating the Lacey Act. For example, an offender who, in the exercise of due care, should have known that it was violating the Lacey Act is subject to one year’s imprisonment and a maximum fine of $100,000 per individual or $200,000 per organization for each offense.
A lesser penalty is imposed on an offender who is exercising due care but still unknowingly violates the Lacey Act. In that case, the offender is subject to a maximum fine of $10,000, though even this smaller fine is applied to each violation. Offenders may be required to forfeit the illegal wood, together with the vessels, vehicles, aircraft, and other equipment used to aid the illegal trading in addition to the fines and prison time.
The Lacey Act does not define “due care,” but courts have interpreted the term to mean the care that a “reasonably prudent person would exercise under the same or similar circumstances.” Accordingly, for forest products companies sourcing timber domestically and abroad, an analysis of internal sourcing policies and procedures in the context of industry standards is critical to determine whether it would meet the “due care” standard.
Unfortunately, forest products companies face a difficult task in establishing due care programs under the Lacey Act because the definition of “due care” is based on a flexible and amorphous test. Industry and consensus standards, which undoubtedly impact the “due care” bar, are becoming more complex. Therefore, forest products companies that source wood from foreign countries should be engaging experts well-versed in the Lacey Act, consensus standards, and the various third-party certification and verification schemes to help them craft due care programs that are tailored to each company’s unique profile. These programs should consist of policies and procedures that capture the heightened diligence required under the Lacey Act, yet remain simple and fit seamlessly within the company’s existing business structures.
- Jamee AsherAssociate
- Carson BowlerShareholder