Rulings, remedies and court proceedings for customs and trade professionals

FedEx Loses Appeal in Lawsuit Against BIS

A U.S. appeals court on July 8 affirmed a 2020 District of Columbia court ruling dismissing FedEx’s lawsuit against the Bureau of Industry and Security, saying the shipping company failed to show BIS acted outside its authority. The court also rejected FedEx’s claims that the agency was using the Export Administration Regulations to apply overly burdensome liability standards on carriers and penalize them even when carriers do not have knowledge of violations.

The ruling by the U.S. Court of Appeals for the District of Columbia Circuit came more than a year after FedEx filed an appeal (see 2011090026) relating to its 2019 lawsuit against BIS. In that suit, FedEx argued that BIS’s export controls are “impossible” for carriers and forwarders to comply with because companies are sometimes unable to determine whether packages they are handling contain items subject to the EAR. The U.S. District Court for the District of Columbia dismissed the case in 2020, saying FedEx failed to prove the allegations (see 2009110038).

The appellate court this month issued a similar ruling, saying the “statutory text, circuit precedent, and deference to the Executive Branch in matters of national security and foreign affairs” all support the Commerce Department’s interpretation of its export control rules and penalties. Because the issues “lie at the heart of the United States’ national security and foreign policy interests,” the court said, it must “afford substantial deference” to Commerce’s judgment and how it implements its export control regulations.

“Given that deference,” the court said, “we would be hard-pressed to hold that the law plainly forecloses Commerce from interpreting its regulation to strike the mens rea balance in favor of protecting the Nation’s security.”

The court also struck down FedEx’s claim that BIS’s export control regulations violate “fair notice and vagueness concerns.” It pointed to the fact that FedEx had already twice been charged with violating U.S. export restrictions -- once in 2011 for allegedly violating controls against Syria, the United Arab Emirates and China, and another instance in 2017 when it illegally “facilitated the export” of civil aircraft equipment to France or Pakistan.

“Both times it settled the claims,” the court said. “So FedEx has long had actual notice of Commerce’s strict-liability interpretation and application of the regulation.”

FedEx is "disappointed" by the court's decision and is "evaluating our legal options," a spokesperson said July 11. "FedEx will continue to defend its rights as a U.S.-based global company," the person said.