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Recognizing Contraband Contents

What claims professionals need to know about illegal goods.

November 25, 2015 Photo

Contraband is big business. On any given day, the U.S. Customs and Border Protection says it confiscates over five tons of illicit drugs, about $650,000 of undeclared or illicit currency, and $3.4 million worth of counterfeit products, such as DVDs and Gucci handbags, that have intellectual property rights violations. Few realize the international trade in wildlife and animal parts amounts to a multibillion-dollar business. Depending on the state, you can be penalized simply for picking up a certain bird feather.

Black’s Law defines “contraband” as anything that is against the law or treaty—basically, goods that are banned from being imported into a particular country. When most people hear the word “contraband,” it conjures up things like guns and drugs, but there are many other items that may surprise you. What is considered contraband can vary from state to state and from country to country.

To illustrate, consider that sneakers and cellphones—both of which are perfectly legal everywhere—are considered contraband in prison. Fireworks and marijuana are worth noting, too. Colorado has legalized marijuana for recreational and medical use, and fireworks also are legally available in the state. In Ohio, however, most fireworks are considered contraband, with only sparklers and novelties being legal. At press time, marijuana also is illegal to use and possess recreationally in the state.

Kinds of Contraband

There are a few types of contraband. One is called prima facie, or “at face value.” An example of this might include finding cocaine at a claims site. You know it’s illegal when you see it. There also is “derivative” contraband, however. If a claims professional finds cocaine on top of a digital scale, the scale itself would be considered derivative contraband and be confiscated by law enforcement. However, if the policyholder can prove that the scale was used for legal acts, such as to weigh food, then the claimant would be entitled for loss reimbursement.

Commercial and homeowners’ policy language typically cover most every class of contents with the exception of illegal or illicit property and contraband. Most written policies do not include a full list of contraband items. Take, for example, decorative contact lenses. Most claims professionals would not think twice about covering these, reasoning that they could be part of a Halloween costume. However, contact lens of any type are considered illicit if they are sold without a doctor’s prescription. (The FDA provides information that explains why decorative lenses are contraband and illegal.) Claims professionals will have to make their own best judgment on whether or not to cover for costume contacts, but the law is on their side if they choose not to.

Embargoes and Sanctions

Sanctions differ from trade embargoes. Sanctions apply to individuals, companies, products, or industries whereas embargoes apply to all trade with a foreign country. Today, the U.S. has full or partial trade embargoes against Iran, North Korea, Sudan, and Syria, with a lessoning degree on Cuba due to minor sanctions being lifted this year. That is good news for cigar aficionados, who are now allowed to bring up to $100 worth of Cuban tobacco into the country and $400 in trade. Laws can change suddenly depending on the geopolitical climate, however. For instance, in 2014 President Obama sanctioned the manufacturer of the Russian-made MK47 assault rifle. Now, MK47s coming in from Russia are considered illegal.

Iran’s embargo was enacted in 1979 as a result of the hostage crisis. Common items from Iran include Persian rugs and pistachios. The embargo against North Korea was enacted in 1950 in response to the Korean War. Korea infamously has been known for printing fake currency and pushing counterfeit prescription pills. When claims involve a large stash of Marlboro or Newport cigarette cartons, it’s a best practice to inspect the logos for shoddy artwork and also to check for a tax stamp. No tax stamp means there is a good chance that the items are contraband. Pfizer Viagra pills purchased legally in the States cost $15 on average whereas a knockoff from North Korea sells for about $1.

The Wildlife Trade

One of the most controversial items is the buying and selling of illicit wildlife animal parts, a trade estimated to be worth between $8 billion and $10 billion. Animal parts include elephant ivory, rhinoceros horns, turtle shells, hides, and skins.

Rhino horns are extremely lucrative, selling for over $25,000 a pound. They have been used in Chinese medicine for over 2,000 years. If it’s possible to discern “rhino horn” on a list of ingredients for something like an herbal supplement, it is illegal to own.

Polar bears are probably one of the most common hides confiscated despite having been banned in the U.S. since 1972 and protected under the Marine Mammal Protection Act and other U.S. fish and wildlife laws. Claims professionals who encounter polar bear rugs on a list of contents claims will want to document when and where it was purchased after first establishing its authenticity since in places like Canada, polar bear rugs are perfectly legal.

Another area involving hides and skins are dog and cat furs. China utilizes dog and cat fur in their apparel fabrication. Fur coats, the fluff around the hood, and the like may very well contain dog or cat fur. Claims professionals should examine the tag of questionable apparel. If the material is fur, laws state that tags must list what type of material was used and if any animal was used in making the product.

Elephant ivory is another profoundly sad case in point. Once again, laws vary from state to state. Last year, New York Governor Andrew Cuomo banned the sale of all ivory, antiquities being the exception. On claims involving pianos, ivory keys can be difficult to ascertain without proper training. Guitars also may carry inlaid frets crafted with ivory, and some cosmetic boxes and hair combs on the market are made from the material. It’s important to determine when the products were purchased and if indeed the items are genuine ivory or a bone facsimile. (See sidebar, “Telling the Difference.”)

It’s important to note that laws governing wildlife are complex and can vary from state to state depending from what country the particular item is derived. Laws also vary on the year in which the item was brought into the U.S. When claims professionals encounter animal parts such as feathers and exotic taxidermy, it’s smart to document as much information as possible.

Blood Diamonds

Also known as “conflict diamonds,” so-called blood diamonds are those that are sold to fund drug or human trafficking, arms sales, or terrorism. Blood diamonds commonly arrive from Angola, the Congo, Liberia, and the Ivory Coast. In 2000, the Kimberly Process came into effect to lobby for banning blood diamonds. Seeking an appraisal by a gemologist may be warranted in cases where the diamond may be suspect.

Well-trained claims professionals should know that certain types of contents are controversial. Legal status can vary depending on the state in which the item is located. A legal bearskin rug in Connecticut is illegal to own in Massachusetts. Fireworks, marijuana, or firearms may be contraband depending on the state. Items that look perfectly legal and uncontroversial, such as a pair of sneakers, can be illicit property if they came from Iran.   


Telling the Difference

There are three methods claims professionals can employ when discerning between objects made of bone or ivory. One way is to use a jeweler’s loupe to inspect the particular piece in detail. If the object betrays pores or streaks, there is a high likelihood that the piece is made of bone. Another way is to softly strike the object against a hard surface—after receiving the claimant’s permission, of course. If the object is made of plastic, it will make a distinct hollow sound, whereas ivory will provide a denser sound. The third way is to perform a burn test, a method that calls for supreme caution. In a burn test, a lighter is used to heat the tip of a needle, making it red hot. It is then used to prick an indistinct spot on the particular item. If it leaves a mark, there is a good chance it’s not ivory. Bone and plastic will show a burn mark, whereas ivory will tolerate it.


About The Authors
Scott Lacourse

Scott Lacourse is a director for Enservio, which offers software and services across the entire value chain of contents claim processing. He has been a CLM Fellow since 2012 and can be reached at  slacourse@enservio.com

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