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The Indian government is okay with the exports, but the US government is not?

It's complicated (of course it's complicated; but of course it is; among other things it determines whether you place a tariff on items). The World Customs Organization set up a Harmonized System, which is multipurpose international product nomenclature for exporting and importing items.

The Indian government's HS is online. It allows the export of finished wooden parts for musical instruments. These have a code of 9902 (and subcodes for type of part). It allows the export of veneer under 6mm in thickness (HS 4008) (the veneer is used for, among other things, the back and sides of acoustic guitars). It expressly prohibits the export of "wood sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded, or end jointed, of a thickness exceeding 6mm" (HS 4407).

Because HS 9902 parts are finished parts, there's usually a tariff that has to be paid on them. At least as far back as 1993, U.S. guitar manufacturers received a customs ruling that fretboard blanks (specifically, those from India) were to be considered HS 4407 items. That way, the manufacturers didn't have to pay a 5.7% tariff on the fretboard blanks.

From August 2010 to August 2011, Gibson imported fretboard blanks directly at least eleven times (according to the government's search warrant, which identifies them by date), and Gibson used HS 4407 to identify the blanks for import each time.

In this case, a company called Atheena Exports of India sold fretboard blanks to Luthier Mercantile International of California. Atheena Exports has a website where it says it sells parts for musical instruments. Atheena Exports' website catalogue has ebony fretboards, but they are all finished to size and have slits cut for frets. They're clearly a finished product - a HS 9902 product - legal to export from India. That's what Atheena Exports listed on its export paperwork, a 'finished product for musical instruments." I have no idea whether the Indian government inspected the crate or container; only a small percentage of shipments leaving the U.S. are inspected and customs relies on the paperwork for the rest.

However, Atheena didn't ship finished fretboards to Luthier Mercantile. It shipped blanks that were rough cut, oversized pieces of raw wood with no fret slots. All of the wood was roughly 10mm thick, cut lengthwise into rough shape. In other words, instead of a finished products, it certainly sounds like "wood sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded, or end jointed, of a thickness exceeding 6mm." That would be a HS 4407 product. That's how US import law identifies it. That product would be illegal to export from India.

Luthier Mercantile either doesn't want to pay the tariff, or LM knows the product isn't finished. Luthier Mercantile changed the import/export paperwork. It replaced the HS 9902/"Finished part" with HS 4408/"Veneer under 6mm thick" on the customs import form.

There, things get complicated, so let's go back to the export.

On June 10, 2011, Atheena Exports of India, documents the export of “finished parts of musical instruments”/HS 9209. The U.S importer of record is Luthier Mercantile of California, a company which specializes in providing wood to luthiers. The U.S. customs port is Dallas.

Luthier Mercantile fills out the import paperwork, changing the description of the goods and the HS code to reflect that the goods in the container are unfinished veneer.

On June 27, 2011, a shipment of Indian ebony is stopped by Customs and Border Patrol (CBP) agents at the Dallas, Texas Port of Entry (the DFW airport). There’s no Lacey Act declaration. The shipment is marked as 4408 ("WOOD VENEER <6MM THICKNESS"). It’s not marked 9209, which would have required payment of a tariff. The paperwork says to notify Luthiers Mercantile International of California upon arrival and to ship interstate to the address of a Red Arrow Delivery Service Warehouse in Nashville. The customs paperwork says the final consignee is Theodor Nagel GmbH, a Germany company. (Well, form 7501 says Nagel, form 3461 lists LMI) Nagel is owned by the same people who own LMI. Plus, Nagel is the company that sold the Madagascar ebony to Gibson in 2009. Based on the 68 different pleadings filed in the Madagascar ebony confiscation case, it's pretty clear that Theodor Nagel is a target (probably the primary target) of a criminal investigation being handled by the Environmental Crimes Division of the Justice Department. In fact, the Madagascar ebony shipment to Gibson was discovered in 2009 because a contact in Madagascar had notified U.S. Fish and Wildlife that convicted wood trafficker Roger Thunam had illegally sold ebony to Nagel, and customs was looking for shipments to the U.S. from Nagel. Gibson just happened to be the purchaser.

Gibson's name doesn't appear anywhere on the Dallas shipment, but Nagel's does, and the Red Arrow Delivery Service Warehouse does - which is where Nagel sent the illegal Madagascar ebony in 2009.

Customs agents inspect the container. It doesn’t contain veneer. It contains rough pieces of cut wood about 10mm thick – they’re fretboard blanks. Since 1993, customs rules have said that guitar fretboard blanks are a 4407 item (cut, split, or chipped wood over 6mm thick). Indian law prohibits the export of 4407 items (India’s HS is online).

Fish and Wildlife is notified and a Wildlife Inspector notifies Luthier Mercantile. Natalie Swango, the General Manager for LMI shows up and produces a Lacey Act declaration that was signed back on June 17, before the shipment arrived. It was never filed. The Lacey Act declaration doesn't list Nagel as the final consignee. It shows Gibson Guitars as the final consignee with a note, “Attention: Herb Jenkins.” Herb Jenkins orders wood for Gibson. (LMI has since stated that it was the final consignee, having changed from Nagel to Gibson and then to LMI).

According to the Wildlife Inspector (Swango has confirmed that she told the WI that the final consignee was Gibson, but says she was mistaken), she says that Gibson is the final consignee and the import paperwork is wrong.

The feds don't stop the shipment. They want to see where it goes. They track the shipment to the Red Arrow Delivery Service Warehouse. There, they find another shipment of fretboard blanks from India. This shipment came in through Canada on paperwork listing LMI as the final consignee. WI Kim Theurer speaks with a manager at the warehouse, Nancy Alvarez, who says that the wood belongs to Gibson and is delivered to Gibson as Gibson asks for it. The manager also gives WI Theurer an email from LMI stating that Gibson Guitars is the actual final consignee, not LMI, which is listed as the final consignee on the customs forms.

At this point, the feds get a warrant and raid Gibson's two factories (and offices) and the Red Arrow warehouse, where they seize wood, computers, and a thumb drive.

Now, try fitting in the changing of HS codes and descriptions, and final consignees, and shipments from Canada, and the fact that the importer is owned by the same people who own the German company that's almost certainly a target in an ongoing criminal investigation - and try and fit that into a thirty-second television report. Or a blog.

I think this situation - the import from India - was a clusterdance and Gibson was invited to the party. I don't think Gibson asked LMI/Nagel to use false HS codes and false consignees. Gibson had been importing fingerboard blanks directly with appropriate codes, and with its own name on the import forms, and without government raids or seizures.

I think the government's position may be technically correct, but isn't reasonable in the long run. You have to be able to import blanks from India (although it appears the feds had no problem with it until LMI tried it without a Lacey Act declaration, with a false description, with a changed and false HS code, and with a false consignee).

And this was rinky-dink stuff. The 2009 raid and confiscation is where Gibson really fouled up.

Gibson needs to stop doing business with Theodor Nagel GmbH and any other company owned by Nagel's principals.