When the folks “in charge” either fail to educate their untrained employees (cheaper than professional export clerks) at least on the red-flags, or fail to educate themselves about export compliance – there is no one to blame but themselves.

The problem is two fold with 1) Startup mom-n-pop shops who are just looking for a quick buck and are too stupid to acquaint themselves with regulations. 2) mega forwarders who employ the plug-and-play model of staffing – fully automated with the workers untrained in anything but their specific narrow job function – and complete idiots in sales who know nothing about exporting at all.

I’ll tell you this, riot gear would never have gotten past my desk on the first rfq unless the shipper was fully cognizant, upon my questioning, of the ITAR and BIS regs. But I’ve been doing this for 15 years now and was taught in the old school – and have the full support of management to question any and all red-flags that I see.

Jurassic Forwarder

Businesses need to realize that they get what they pay for, but the marketers for forwarders and brokers need to be careful about encouraging false expectations.

I understand we don’t know the details of the indicment or the settlement. We can only guess of the circumstances. I agree with Vito: most clerks not only in exports but imports are not trained properly, are underpaid, overworked and therefore do not care about the profession, even less of the regulations.

Thank you Clif for your excellent blog.

I see this all the time. Most of the clerks doing the export entries at freight forwarding companies don’t fully understand the regulations or simply don’t have the knowledge – it is usually the few compliance people sitting somewhere at the corporate office that has that required knowledge but that position is missing at the local branch levels.

The EAR doesn’t have a direct requirement that a freight forwarder open and inspect the content of a package. What’s going on here is that many BIS regs don’t require knowledge of the violation as a prerequisite to liability. In this case, BIS charged the freight forwarder with violating 15 CFR 764.2(c), which doesn’t have a knowledge requirement. Section 764.2(e) has a knowledge requirement and is used by BIS to charge as a separate violation when knowledge is present, allowing in effect a double penalty, something I’ve argued against. A violation of 764.2 requires a violation of another part of the EAR and in general this means a violation of a relevant portion of section 736. In this case, it would be a violation of 736.2(b)(1) which makes it a violation to export an item that requires a license to a particular destination without such a license. Again, 736.2(b)(1) has no knowledge requirement.

Because BIS provides as little information as possible in publicly-released charging and settlement documents, it is hard to be certain what the agency is up to. It is possible that in the freight forwarder cases there are particular circumstances that led it to find liabiity on the part of the freight forwarder that aren’t mentioned. But without some explanation of these circumstances by BIS, one has to assume that BIS was imposing a strict liability theory under which the freight forwarder could be liable for an illegal export even if the freight forwarder didn’t have actual knowledge of the illegality of the export.

As a policy matter, I can understand imposing strict liability on exporters in order to encourage adequate compliance by exporters. I’m at a loss as to a policy that would impose strict liability on freight forwarders. BIS would do well to provide some explication of those circumstances in which the freight forwarder is liable for the sins of its customers.

Please help me on this one: Where does the 15CFR or 22CFR or 19CFR say the freight forwarder (FF) is liable for opening and inspecting the content of a shipment as you mentioned above?

This is a duty performed by the TSA, ICE, CBP or any other acronym paid with taxpayer’s money, not the FF’s. True: the FF needs to exercise due diligence, custody the cargo at all times, ask the right questions, know the customer, identify red flags, check the denied parties list, Ofac’s, SDN’s, etc, etc. All this done, specially when proceeding with a suicidal routed transaction.

As a freight forwarder, this case obviously caught my attention. The BIS never says whether this was a routed export transaction, but I have to suspect 15 CFR 758.4(b), which says, in part:

“The U.S. principal party in interest is the exporter and must determine licensing authority (License, License Exception, or NLR), and obtain the appropriate license or other authorization, unless the U.S. principal party in interest obtains from the foreign principal party in interest a writing wherein the foreign principal party in interest expressly assumes responsibility for determining licensing requirements and obtaining license authority, making the U.S. agent of the foreign principal party in interest the exporter for EAR purposes.”

If this were a routed export transaction, who else might that U.S. agent be but the freight forwarder? Yet I do not believe that most freight forwarders understand the risk they assume in routed exports, and the accountability they incur to make an appropriate license determination. And should an export license be required, the responsibility they undertake to apply for an export license, along with what all that entails. No, I suspect that they just get out the old “EAR99/NLR” rubber stamp.