FedEx loses appeal regarding shipments sensitive to national security

FedEx is liable for shipments sensitive to national security, even if it is unaware of what it is shipping.

In a recent ruling, a District of Columbia Circuit Court panel upheld a decision dismissing a lawsuit against the Department of Commerce filed by FedEx. The shipping company argued that it should not be liable for shipments sensitive to national security without knowing what is in the shipment. Both a federal district and appeals court disagreed.

In 2011, the Department of Commerce sent FedEx a “charging letter” alleging that FedEx had violated the 2018 Export Control Act six times. The Export Control Act regulates the export of materials sensitive to national security.

Specifically, the Export Control Act directs the Commerce Department to restrict the export of items that “would make a significant contribution to the military potential of any other country or combination of countries that would prove detrimental to the national security of the United States.”

The Export Control Act includes a list of entities to whom certain exports are prohibited. If certain materials are shipped to those entities, the shipper can be found liable for civil aiding and abetting violations.

In the case of FedEx, the company had sent items to Syria, the United Arab Emirates and China without the required licenses. FedEx and the Commerce Department reached a settlement of nearly $400,000.

In 2017, FedEx was found to violate the Export Control Act 53 times.

The company was accused of aiding or abetting when it shipped civil aircraft parts and equipment to France or Pakistan without the proper license. Both destinations are on the “Entity List” related to the Export Control Act.

The federal government claimed FedEx knew or should have known that “its screening software did not flag a transaction unless the name of the recipient/consignee exactly matched the full name of the entity as found on the Entity List, even where the address information was identical or nearly identical.” The violations cost FedEx half a million dollars.

FedEx filed a lawsuit against the government arguing it is not liable for the shipments. However, both a district and appeals court disagreed, finding that the government did not overstep its authority when levying the penalties. LL