FedEx Sues Commerce, BIS Over Export Controls 'Burdens,' Calls EAR 'Unlawful'

FedEx filed a lawsuit against the Commerce Department and the Bureau of Industry and Security for imposing export controls it says are “unconstitutional” and “impossible” to comply with, according to court records. The company also said BIS’s Entity List “imposes an overbroad, disproportionate burden on FedEx,” records show. The suit asks the court to stop Commerce from enforcing certain sections of the Export Administration Regulations on FedEx, to declare the EAR “unlawful” and to award FedEx any additional appropriate relief, including “costs and expenses.”

The suit, which was filed June 24 and which also names Commerce Secretary Wilbur Ross and Assistant Secretary for Industry and Analysis at BIS Nazak Nikakhtar as defendants, comes less than a month after China targeted FedEx for failing to deliver a package to Huawei Technologies. China said it was opening an investigation into the shipping company after suspecting it of “undermining” the rights of Chinese clients, including Huawei (see 1906030036). BIS added Huawei to its Entity List on May 16, restricting exports to the company for items subject to the EAR (see 1905160072).

In the lawsuit, FedEx said it is “virtually impossible” to determine which packages contain items subject to the EAR, forcing the company to ban all shipments to parties on the Entity List, even if the shipments are allowed. “Without a safe harbor, the EAR give FedEx two options: continue to operate under threat of imminent enforcement actions, or cease operations that may conceivably lead to enforcement and face possible legal consequences from customers and foreign governments,” the company said.

Even if it could inspect every shipment to ensure compliance with the EAR, FedEx said, that would likely violate customer privacy laws. And even if FedEx disregarded privacy concerns, it said it would not have enough information to be able to make the “highly technical determinations” necessary to declare any items outside the U.S. as subject to the EAR. “The EAR effectively force FedEx to police the content of its packages in a manner it is not able to do,” FedEx said.

FedEx said strictly complying with the EAR would force it to stop shipments of everyday items, such as a computer shipment from Germany to Indonesia. FedEx said the computer might contain “greater than a de minimis level of U.S. controlled content by value,” but the company would have no way of knowing. The company said it was charged with 53 export control violations by BIS in 2017, and said it is concerned about more violations and fines.

“The credible threat of civil and criminal liability places FedEx between a rock and a hard place,” the company said in the suit. “FedEx must either forgo lawful activity because of its well-founded fear of prosecution, or willfully violate the Export Controls, thereby subjecting itself to criminal prosecution and punishment.”

In a statement, FedEx said it “strongly supports” the objectives of U.S. export control laws but said they place an “unreasonable burden” on the company. “FedEx will continue to defend our rights as a U.S. based global company,” it said. A Commerce Department spokesperson said the agency has not yet reviewed the lawsuit but looks “forward to defending Commerce’s role in protecting U.S. national security.”