Federal Court Dismisses FedEx Lawsuit Against BIS

The U.S. District Court for the District of Columbia on Sept. 10 dismissed FedEx’s lawsuit against the Bureau of Industry and Security (see 1906250030), saying the shipping company failed to show that BIS was acting outside the authority of the Export Administration Regulations. The court also disagreed with FedEx’s claims that the agency was using the EAR to apply overly burdensome liability standards on carriers and impose penalties even when carriers do not have knowledge of violations.

FedEx, which filed the suit June 24, 2019, argued that BIS export controls are “impossible” for some carriers and forwarders to comply with because companies are sometimes unable to determine whether packages they are handling contain items subject to the EAR.

But the court dismissed FedEx’s arguments, saying it disagreed with the company’s claim that the EAR is excessively burdensome because it holds FedEx “strictly liable for … violations committed by others.” The court said it is “not irrational” for BIS to create a “liability regime” to prevent companies “from aiding or abetting export violations that would jeopardize” U.S. national security interests. It added that carriers such as FedEx, unlike “one-off customers,” are “repeat players with the institutional knowledge and scale to navigate the EAR.”

“Thus it is reasonable that common carriers might be held to a higher standard … and it is not unreasonable for [BIS] to hold common carriers strictly liable for violations but to penalize customers only for knowing violations,” the court said, calling FedEx’s arguments “unpersuasive.”

The court also said FedEx was incorrect in asserting that BIS may penalize carriers “only for transferring [controlled goods], and not for aiding and abetting.” While the court said parts of the EAR are “not entirely elegant and may lead to some confusion,” that claim has “no clear basis in the statutory language” of the EAR. “As a textual matter,” the court said, “this argument is straightforwardly wrong.” FedEx did not immediately comment.