Two years ago, armed agents of the U.S. Fish and Wildlife Service raided Gibson Guitars, for a second time, over its sourcing of wood that allegedly violated the byzantine requirements of the Lacey Act regulating the import of wood. Now, as noted at Reason 24/7, Lumber Liquidators is on the receiving end of an unwelcome intrusion by agents of the Department of Homeland Security, the U.S. Fish and Wildlife Service, and the Department of Justice—once again over the importation of wood. With the feds kicking in doors and brandishing guns in an effort to protect the American public from the fearsome menace of poorly documented or illegally sourced planks, boards and timber, can it be long before we see the rise of the next great black market figure: the lumberlegger?
After the 2011 raid, Gibson Guitars waged a public relations campaign against the federal government, even accusing government officials of overtly lying about the company's actions. Ultimately, though, as the costs of legal combat and confiscated materials accumulated, Gibson settled with the government—though not without striking a defiant tone.
After many weeks of negotiation, Gibson has settled all issues with the U.S. Government and the Department of Justice. CEO Henry Juszkiewicz commented, "We felt compelled to settle as the costs of proving our case at trial would have cost millions of dollars and taken a very long time to resolve. This allows us to get back to the business of making guitars. An important part of the settlement is that we are getting back the materials seized in a second armed raid on our factories and we have formal acknowledgement that we can continue to source rosewood and ebony fingerboards from India, as we have done for many decades."
Despite the fact that, "…the government acknowledges that Gibson has cooperated with the Government and the investigation conducted by the Fish and Wildlife Service", Gibson was subject to two hostile raids on its factories by agents carrying weapons and attired in SWAT gear where employees were forced out of the premises, the production was shut down, goods were seized as contraband, and threats were made that would have forced the business to close.
In the settlement, the Department of Justice extorted $300,000 from the guitar maker for itself, $50,000 for the National Fish and Wildlife Foundation, and an end to litigation in return for agreement not to prosecute as well as the return of wood imported from India and needed for the company to produce its products. The terms of the setllement also "acknowledge and agree that certain questions and inconsistencies now exist regarding the tariff classification of ebony and rosewood fingerboard blanks pursuant to the Indian government's Foreign Trade Policy." In plain English, the settlement conceded that the law and its application in the case were too confusing to make heads or tails of.
In contrast to Gibson Guitars, Lumber Liquidators is taking a grayer and less combative tone, saying:
Lumber Liquidators (NYSE: LL), the largest specialty retailer of hardwood flooring in North America, today commented on actions taken by Federal authorities, which relate to the importation of certain of the Company's wood flooring products. Yesterday, sealed search warrants were executed at the Company's corporate offices in Toano and Richmond, Virginia by the Department of Homeland Security's Immigration and Customs Enforcement and the U.S. Fish and Wildlife Service. The Company takes its sourcing and compliance very seriously, and is cooperating with authorities to provide them with requested information.
Lumber Liquidators sources its products directly from approximately 110 domestic and international mills around the world. As a result of the normal course of business, the Company is subject to a range of international and domestic regulations. Due to the scale of its international and domestic operations, Lumber Liquidators has policies and procedures in place for the sourcing, harvesting and manufacturing of its products designed to comply with federal and other regulations related to the importation of wood flooring products. The Company has more than 60 professionals around the world who perform and monitor those processes. Quality is a key component of Lumber Liquidators' value proposition, and through its commitment to continuous improvement, the Company invests significant resources for quality control and assurance.
That moderate tone may be a mistake, given the support that Gibson won when it revealed that much of the government's case in the second raid rested on technical and arbitrary classifications of Indian wood at different stages of the finishing process. The first raid had to do with the reliability of provenance declarations about the sourcing of wood from Madagascar.
Federal warrants are sealed and the feds are being tight-lipped about the Lumber Liquidators raid, so there's no knowing yet about the specifics of the case. What is obvious however, is that the legal path for importing wood into the United States from other countries is subject to interpretation by officials, rife with penalties enforced on a whim and fraught with peril.
That's the legal path.
If it's so hard and expensive to do things by the book, why bother trying? There seems to be a wide opening here for smugglers who bypass official barriers and deliver good to willing buyers—especially those who are damned if they do and damned if they don't. For you budding underground entrepreneurs out there, consider lumberlegging.