Freight Forwarder Enforcement Penalties Not Limited to Civil Fines
As we discussed in an earlier article, the Department of Commerce’s Bureau of Industry and Security (BIS) enforcement actions often include the assessment of civil penalties. But enforcement proceedings can also include other additional measures.
For example, in March of 2013, Aeroships International, Inc., a freight forwarder located in Illinois, had its export privileges suspended for a period of four years for arranging the export of a generator to a party in Pakistan listed on the BIS Entity List, which identifies entities that are subject to license requirements for certain items that appear on the Export Administration Regulations’s (EAR) Commerce Control List. In that proceeding BIS also ordered one of Aeroships’ owners to attend an export compliance training course within six months from the date of issuance of the order.
The denial of export privileges resulting from violations of export controls would significantly impact a freight forwarder’s ability to provide logistics services to its clients, and would lead to significant financial consequences for the freight forwarder. In issuing its determination, BIS ordered that Aeroships would not be allowed to “directly or indirectly, participate in any way in any transaction involving any commodity, software or technology…exported or to be exported from the United States that is subject to the [EAR], or in any other activity subject to the [EAR].”
As part of the four year denial period instituted by BIS, Aeroships was prohibited from applying for, obtaining, or using any export license, export license exception, or export control document. In March 2010, G&W International Forwarders, a freight forwarder located in New York, was assessed a civil penalty of $20,000 for services it provided while arranging for the export of a stack sizer screening machine to an entity located in India which was on the BIS Entity List. In addition to receiving a monetary penalty, G&W International was also ordered by BIS to complete an audit of its internal compliance program.
In another enforcement proceeding dating to 2011, a New York freight forwarder was assessed a civil penalty of $200,000 for arranging the export of certain controlled items subject to the EAR to an entity located in India which was listed on the BIS Entity List. In that proceeding, Toll Global Forwarding (USA) Inc. was also ordered to complete an external audit of its export compliance program.
These export enforcement cases highlight the need for freight forwarders to establish robust export compliance programs. Those internal programs should not only take into account restricted party screening and an awareness of requirements for exports to embargoed destinations, but should also factor into account the need to obtain accurate information from clients regarding the export control status of commodities being shipped overseas. These compliance programs must also contain operating procedures which enable freight forwarders to verify the accuracy and completeness of information provided by a client, and the ability to routinely monitor all applicable U.S. export regulations in order to stay abreast of changing regulatory requirements.
Julio Fernandez is a trade compliance professional in Washington, DC. His expertise includes developing export compliance programs for projects funded by the U.S. Agency for International Development.