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Thursday, October 6, 2011

Looking At the Gibson Guitar Raid and the Lacey Act

In August, Federal agents carried out armed raids on Gibson Guitar factories in Tennessee. The affidavit filed by the Fish and Wildlife Service in conjunction with the raids asserted that Gibson had fraudulently filled out paperwork to cover the fact that it was knowingly importing illegally harvested Indian rosewood.

The Tea Party and some Republicans are all atwitter (literally) about Department of Justice and FWS overreach and the Obama Administration's anti-business heavy-handedness.

The Left in general, and the Greens in particular, are standing by the raids in the name of corporate responsibility and forest sustainability.

Quite literally, politics has intersected commerce, so this is a great place to take a neutral look at the issue. To minimize editorializing, I'll list the major facets of the story before I offer my own conclusion.
  • The Lacey Act was originally signed into law in 1900. It's purpose at the time was to make it illegal to poach game in one state and sell it in another. It has been amended several times over the years and is used most commonly now to prevent the introduction and spread of non-native species.
  • In 2008 the Lacey Act was expanded once again, this time to include restriction of plants and plant products that may have been harvested illegally in their country of origin. The Lacey Act mandates that a complete chain of ownership of all products imported under the control of the Lacey Act be strictly documented and recorded. 
  • The stated reason for the 2008 amendment was concisely explained by Glen Hurowitz of the Environmental Investigation Agency thusly: "American forest products growers, companies, and workers were being asked to compete with foreign operators who employ slave and child labor, and log in national parks and other areas without permission and without paying taxes -- even companies that funded Taliban attacks on American soldiers. Competition from illegal imports costs the American forest products industry around $1 billion per year, representing thousands of lost jobs, according to a study by the American Forest & Paper Association." LINK
  • "We need the protection of the Lacey Act. We need a fair playing field. Our small, little companies cannot compete with artificially low prices from wood that comes in illegally ... This is our Jobs Act," said Mark Barford, executive director of the Memphis-based National Hardwood Lumber Association. LINK
  • The wood in question - ebony - does not grow in North America and there is no suitable North American substitute for this wood. Quality guitar fingerboards are not usually manufactured with species native to North America.
  • It should also be noted that the Environmental Investigation Agency is funded by George Soros. Bio on Wikipedia. Ed. note: I generally avoid using Wikipedia for any sourcing information, but Soros is such a controversial figure that finding unbiased biographies is difficult.
  • The Lacey Act, as with any other government regulation, has caused some unintended consequences. In this case, the Act requires US citizens and corporations to obey local laws, including a US interpretation of those laws [the exporting] country might not use. [Ten] years ago, four Americans were charged with importing lobster tails in plastic bags rather than cardboard boxes, a violation of a Honduran regulation that Honduras no longer enforced. Yet the law is the law and so they were sentenced to 8 years of imprisonment each. The Lacey Act, in that case designed to keep Americans from breaking foreign rules when hunting or fishing (like poaching elephants in Kenya) clearly was wrong in principle regarding a lobster in a bag instead of a box. Italics quote Hank Campbell at Science 2.0
  • In 2009, Gibson was raided by DOJ in search of wood imported from Madagascar. No outcome has been finalized in that case, and it is currently on hold due to the raids in August. The Federal government is still in possession of the wood it seized in that raid. At the time, a coup had just overthrown Madagascar's government and the international legality of the current government was in question.
  • The DOJ traced all the wood seized in all raids on Gibson back to Luthiers Mercantile, which is owned by German company Theodor Nagel GmbH.
  • The DOJ claims Luthiers Mercantile used false customs codes during shipment. It also claims Gibson was complicit in the false filings.
  • The Lacey Act does not penalize the unknowing owner of an item imported illegally under its auspices. So in the example above, the buyer of a lobster imported in a plastic bag, not a cardboard box, is held harmless.
  • "According to an affidavit sworn by FWS Special Agent Kevin Seiler, the wood — upon export from India — was classified as 'finished parts of musical instruments,' which is permitted under Indian law. However, the exported wood was, in fact, a batch of 1,250 sawn logs, unfinished. This is a violation of Indian law and, therefore, a violation of the Lacey Act, according to the complaint." - Nashville Post.
  • "The dispute is over Indian Ebony, all completely documented and legal except for this interpretation business. The Indian government 'prohibits the export of sawn wood' but does not prohibit the export of veneers, sheets of woods that have already been worked on. The Feds say the wood was falsely declared as veneers because some assembly is still done in the U.S rather than India." - Hank Campbell.
  • The assembly that is done in the US is the final cutting and shaping and the addition of frets and fret markings.
  • According to Gibson CEO Henry Juszkiewicz, a Fish and Wildlife Service representative told him that his problems with the Federal government would simply go away if he "had all of the work outsourced to India."
  • According to Indian law the export of the wood Gibson purchased is legal. According to Department of Justice interpretation of Indian law, the same transaction is illegal under Indian law and is therefore illegal here.
  • Bob Taylor, CEO of Taylor Guitars, described his company's relationship to the Lacey Act in a blog post for the Forest Legality Alliance: "It's very simple. We now investigate the sources of our wood, and we ensure to the best of our ability that the wood was taken legally. We fill out the paperwork required and we present our business as an open book. The cost isn't so much for us. It's not an unbearable added burden, and we're happy to do the extra administrative work. If I could take any user of wood, whether it be a guitar player or a purchaser of a dining room table, with me on a trip to the forest of 2011 in many, many parts of the world, and let them see with their own eyes the state of the forests and the people living in them, I'd stake my last dollar on the fact that they'd come home and preach with a loud voice how deforestation has got to be stopped. You have to see it to believe it, and if you haven't seen it with your own eyes, you can't argue against it. Period. I'm sorry, but that's the truth."
  • Gibson has been importing this wood since the 2008 amendment to the Lacey Act and for years prior, but it was not until 2009 under the Obama Administration that the raids occurred.
  • "For years, Gibson has been a part of Greenpeace's "Music Wood" coalition, their CEO was on the Board of the Rainforest Alliance and Gibson was an early adopter of the certification created by the Forest Stewardship Council."  - Hank Campbell
  • Gibson and CEO Juszkiewicz donated $10,000 in 2010 to the Consumer Electronics Association PAC. Juszkiewicz also donated $2,000 to Jim Cooper and his run for the 5th District Congressional Seat in Tennessee. Cooper is a Democrat.
With as little political bias as possible, those are the basic facts that both sides of the case.

This case is not going to go away and I'm sensing that we are watching the evolution of a major political issue in the coming year.

There are a couple of facts that bother me because they don't necessarily pass the smell test.
  1. The Environmental Investigation Agency is a privately funded organization with a stated agenda and they seem to be the largest voice against Gibson in this case. Funding sources for EIA should make what they do suspect.
  2. Bob Taylor from Taylor Guitars was quick to come out against his main competitor Gibson, while other, smaller guitar manufacturers and luthiers are stating they are chilled by what is happening to Gibson.
  3. The Tea Party and Juszkiewicz seem to have a close relationship, but he did in fact donate to a Democrat congressional candidate, so it is difficult to tell if Juszkiewicz is joining Tea Party efforts because of, or in spite of, the current Federal action against his company.
  4. An armed raid of an American factory by a Federal agency seems a little opporesive if in fact the only illegal activity is the "fraudulent" filing of paperwork by an importer owned by a German company.
Democrats and the Left are using the Gibson case as an example of Tea Party malfeasance, while the Tea Party is using the Gibson case as another example of a Federal government run rampant.

At this time this just seems to be another example of an overly oppressive government trying to enforce the good intentions of lawmakers with the heavy boot of regulation. However, I can't help but think that there is more to this story lying under the published facts.

Sources: Environmental Investigation Agency, Science 2.0, Nashville Post, and others.

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