WASHINGTON — A fight between the Obama administration and iconic guitar manufacturer Gibson has reignited debate about just how much a U.S. company must know about its foreign trade partners and how much control it must exert over those from whom it buys.

The fight involves enforcement of recently amended U.S. environmental laws, and it’s taken on greater dimensions as tea party activists and GOP presidential candidates have made it a rally cry. They cite the case as an example of excessive regulation by the Obama administration.

At issue is whether Gibson — whose name is to guitars what Cadillac is to cars — should have known about potential wrongdoing by its suppliers and whether U.S. companies must enforce the environmental laws of other countries.

Flooring manufacturers and their distributors, such as Home Depot, have been the focus of attention about the sourcing of their tropical hardwood products. But the music manufacturing industry hasn’t received as much attention.

It’s smaller but still a big business, with the National Association of Music Merchants reporting that U.S. sales of fretted products — primarily guitars but also other stringed instruments — exceeded $1 billion in 2010.

Gibson has not been indicted or charged. But an affidavit filed in support of raids on Gibson operations in Tennessee — which resulted in the seizure of computers and more than $500,000 worth of Indian rosewood fret boards for guitars — suggested that the company failed to exercise sufficient control over the middlemen who supply the guitar maker, and the suppliers of those middlemen.

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The middleman in this case was the Theodor Nagel GmbH, a German company in Hamburg. In late September, about a month after the Gibson raid, Theodor Nagel filed for bankruptcy protection from creditors. That company is tied to Luthiers Mercantile, the U.S. company that imported the wood from Germany on behalf of Gibson.

The Aug. 24 raid was only possible because of amendments in 2008 to the Lacey Act, which was first enacted in 1900 by President McKinley. Back then the law was designed to limit commercial hunting that threatened wild game species.

The amendments require that American companies or individual importers of forest products ensure that the wood was obtained legally in the country of origin. In other words, U.S. companies are now responsible for compliance with laws in exporting countries, and they are liable for wrongdoing by their suppliers or middlemen. This is to end the practice of companies blaming intermediaries for bad practices, arguing they have no control over the behavior of their suppliers.

“It is one of the laws … that can make you guilty without intent. I don’t have to know that there is anything wrong, nor do I have to do anything wrong to be guilty,” said Henry Juszkiewicz, Gibson’s CEO.

Juszkiewicz feels singled out. “Everybody basically buys through intermediaries in the wood market,” he said.

Soon after the August raid by the U.S. Fish and Wildlife Service, Juszkiewicz went on the offensive, appearing on Fox News and becoming an instant celebrity in conservative circles.

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Environmental groups are watching the case closely, in part because Gibson has been supportive of efforts to promote sustainable logging.

“What’s hard for people to understand, is that the wood in question wasn’t necessarily illegally harvested. It was exported in (alleged) violation of an export ban,” said Anne Middleton, a forest campaign researcher for the Environmental Investigation Agency, a conservation group known for its use of investigation to combat illicit trade.

Gibson argues that it has since certified with the Indian government that it hasn’t violated Indian laws, and it has said the wood in question was a controlled wood that had the stamp of approval from the Forest Stewardship Council, which certifies wood products as having been sustainably harvested.

“I’m with the law. I like the Lacey Act,” said Juszkiewicz. “I would like not only to fix the problem we’re having with the uncertainty it creates for other businesses but also the conservation end.”

One Gibson competitor isn’t sympathetic. Bob Taylor, founder and CEO of Taylor Guitars, maker of popular high-end acoustic guitars, came out strongly in favor of Lacey Act enforcement after the raids.

“We saw Brazilian rosewood disappear from our grasp. Then Malagasy species like ebony and rosewood. Mahogany has been saved just in the nick of time. It seems our last large spruce trees can be counted on one hand,” Taylor wrote in a letter published by the Forest Legality Alliance. “Why would any of us think that without a change of action our African ebony, Indian rosewood and the like would last indefinitely? The time for action is now, whether we like it or not.”

 


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