Aug
27
BIS Whacks Small Freight Forwarder With Huge Penalty
Posted by Clif Burns at 7:39 pm on August 27, 2009
Category: General
The Bureau of Industry and Security (“BIS”) posted yesterday the details of its settlement with Eastways Shipping, a small New-York based freight forwarder. Under the settlement agreement Eastways agreed to pay $70,000 to settle charges that it handled three export shipment of EAR99 scrap metal to Allied Trading Company, a company on BIS’s Entity List. The settlement suspends $10,000 of the penalty provided that the other $60,000 is paid when due and that Eastways commits no further export violations for a one-year period. The value of the shipments was $95,335.
Eastways appears to be a very small company with estimated annual revenues of $930,000 and five employees. It’s quite possible that a company of that size was unaware of the need to check the Entity List or even knew how to do so. That doesn’t excuse the violation, particularly where checking the Entity List and other lists isn’t terribly burdensome, but it does suggest that a fine equal to more than seven percent of the company’s annual revenues and more than 70 percent of the value of the shipment is perhaps overly punitive in this situation.
As I’ve said before, BIS would do more to promote small business compliance by specific outreach efforts targeted at small businesses rather than periodic, and severe, spankings of small businesses that commit minor export violations such as this one. Under the listing for Allied Trading Company there is a presumption of license approval for exports of EAR99 items, so Eastway’s sin was not really exporting the scrap metal, but was for handling an export where the shipper failed to seek a required license that would have been routinely granted.
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4 Comments:
Leaving aside that pesky question of whether the expiration of the EAA according to its clear terms constitutes a emergency occurring outside the United States that justifies invoking emergency powers un IEEPA, 50 USC 1701, for year after year, an issue that really hasn’t been clearly settled yet for reasons I’m always delighted to discuss, the charges in this case simply aren’t warranted. Aiding and abetting is not a statutory offense even under 50 USC 1705(a) as rewritten by IEEPA Enhancement Act, and certainly wasn’t in 2006 when acts involved were alleged to have occurred, nor were they part of the EAA of 1969 as it existed in 1977, if you want to apply the opinion in Quinn. The Administrative Procedures Act, 5 USC 558(b) provides that “A sanction may not be imposed or a substantive rule or order issued except within jurisdiction delegated to the agency and as authorized by law.” This enforcement action was ultra vires. BIS has jumped the reservation, again, and they’re gambling that no one will have the courage or the money to stop them.
Why would the forwarder be responsible for screening the end user? I thought that was the responsibility of the Exporter/USPPI? I’s assume forwarders would possibly screen vessel carriers, but are thy supposed to screen end users too?
Hillybilly raises a good point (as he often does). I’ve often felt that many companies pay the fine rather than fight the charges. It takes too long and is too expensive to fight the government. Not to mention the other consequences to be considered. I’m referring to the damage to reputation, stockholders perception and vendor reactions and the myriad other ways even being charged can damage an individual or company. There have been a couple of cases mentioned here where individuals have put up a defense and I am eager to see if their stories have a happy ending.
Cajun,
I’m a forwarder, and wary of General Prohibition 10 (15 CFR 736.2(b)(10)):
“You may not sell, transfer, export, reexport, finance, order, buy, remove, conceal, store, use, loan, dispose of, transport, forward, or otherwise service, in whole or in part, any item subject to the EAR and exported or to be exported with knowledge that a violation of the Export Administration Regulations, the Export Administration Act or any order, license, License Exception, or other authorization issued thereunder has occurred, is about to occur, or is intended to occur in connection with the item.”
Since a great many exporters don’t know their ECCN from a hole in the ground, forwarders (well, the good forwarders) have to pick up the slack.
Now what I continue to wonder in this is whether the forwarder had a Power of Attorney to cover his, uh, hole in the ground; if he had showed himself as the USPPI; or if these were routed export transactions and the forwarder was therefore the U.S. agent for the FPPI (read 15 CFR 758.3(b)).
