Two Packages to Sudan Net $5k Fine for KLM

Posted by at 7:59 pm on June 14, 2010
Category: OFACSudan

Khartoum AirportWhile I was traveling earlier this month, I missed the latest release of civil penalty information by the Treasury Department’s Office of Foreign Assets Control (“OFAC”). Both KLM and Geico were fined. We’ll look at the KLM case today and GEICO tomorrow because both penalty cases raise interesting issues.

KLM was fined $5,336.26 in connection with two cargo shipments it carried between KLM’s cargo facilities at O’Hare Airport in Chicago and the Khartoum International Airport. One shipment consisted of oil field equipment and the other contained hydraulic hoses. The offending shipments were not voluntarily disclosed to OFAC.M

OFAC’s initial nastygram to KLM (or “Prepenalty Notice” in OFAC-speak) proposed a $6,277.95 penalty. KLM’s reply admitted that its compliance program didn’t mention embargoed destinations but sought clemency from OFAC on the grounds that it had now circulated a notice to all U.S. operations reminding them about “bookings that cannot be accepted.” That delayed stab at compliance, however, did net KLM a savings of $941.69 or about 15% of the originally proposed penalty.

What is interesting here is that it now appears that KLM has circulated a bulletin to all of it’s cargo operations instructing them not to take any packages to Sudan or other embargoed destinations. That, of course, is an excessive, but understandable, response to the OFAC penalty proceeding. Yet, as we all know, not all cargo to Sudan is prohibited. A box of books would be fine under the information exemption. But KLM doesn’t want to have to inspect cargo and determine whether an export license is or isn’t required. And who can blame them?

Yes, yes, KLM broke the rules here, and it’s hard to muster up an abundance of sympathy for a carrier whose compliance program didn’t even mention that whole business of embargoed countries. Yet, yet, busting an airline for something like this (even if the fine is less than a first-class transatlantic ticket) will necessarily result in the airline doing exactly what it did here: overreact. This will make it difficult for shippers to send perfectly legal cargo to the country, violating the spirit, if not the letter, of the Berman Amendment, which established the exception for informational materials.

If OFAC needed a couple of whipping boys here, the shippers were better targets. They, of course, knew what they are shipping and should have known it wasn’t exempt.


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Copyright © 2010 Clif Burns. All Rights Reserved.
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Was the USPPI fined? And was there a freight forwarder involved?

It seems to me that, too often, forwarders and carriers answer to things like this is, “No, we don’t serve that point”. But it’s not always impossible to ship to embargoed destinations. There are some licenses and license exceptions available. One just has to know what “i”s to dot and what “t”s not to cross.

Comment by Jim Dickeson on June 14th, 2010 @ 8:47 pm


Sometimes I am overwhelmed by the attitude of different parts of USG. On the one hand OFAC are more than willing to penalise KLM for an infraction (justifiable or not)when all of their systems will almost certainly have had the data necessary to identify and stop the infraction if only ICE had set a simple set of declaration requirements.

Unless there is something amiss, KLM’s (electronic) manifest will have included the magical three letter code KRT to indicate the country of destination.

How difficult is it?



Comment by Hamish on June 15th, 2010 @ 12:41 am

In addition to Berman Amendment/Free Trade in Ideas Act exceptions, there are also TSRA exceptions for food. medicine, and medical devices classified as EAR99. Given that US foreign policy is somewhat more favorably disposed toward southern Sudan and Darfur, which have been the victims of repression by the Khartoum government, one would think that OFAC would attempt to facilitate supplies to those areas, including the semi-autonomous government in the South.

Comment by Hillbilly on June 16th, 2010 @ 10:28 am

KLM is a common carrier of cargo. Refusing to accept a lawful shipment from someone willing to pay the price in the published tariff and willing to comply with the terms thereof would be a violation of their obligations as a common carrier (and theoir licenses form the relvant governments to operate as such), yes?

What are the potential penalties for refusal of a common carrier to transport a lawful shipment? What is the mechanism for recourse? Is there a right of private action? Are there potential regulatory sanctions?

Comment by Edward Hasbrouck on June 16th, 2010 @ 2:22 pm

Perhaps KLM’s compliance with BIS/OFAC requirements would have been ‘easier’ if their Codeshare Partner Delta had advised them on how to construct an appropriately compliant programme; obviously U.S.A. Common Carriers have no such problem – oh, I forget there is no U.S.A. airline that goes to Sudan, except through a foreign codeshare partner.

Comment by Stan Kirby on June 21st, 2010 @ 8:03 am