Aug
6
DHL Agrees to 9.44 Million Dollar Fine
Posted by Clif Burns at 12:31 pm on August 6, 2009
Category: General
If sometime mid-morning you heard a loud cheer followed by exclamations of “It’s about time!”, what you heard was small to middle-market exporters cheering the announcement of a settlement agreement between DHL and two federal export agencies, the Bureau of Industry and Security (“BIS”) and the Office of Foreign Assets Control (“OFAC’). Under the Settlement Agreement, DHL agreed to pay to the two agencies $9.44 million in penalties for allegations that DHL unlawfully aided and abetted the illegal exportation of goods to Syria, Iran and Sudan and failed to comply with record keeping requirements of the Export Administration Regulations and OFAC regulations. OFAC specifically alleged “thousands” of shipments by DHL to Iran and Sudan.
The reason for this sudden eruption of schadenfreude among some sectors of the export community is that many exporters have relied on companies like DHL to assist them through the regulatory thickets of exporting from the U.S only to find that these companies failed to comply with all the requirements. The results of this non-compliance are voluntary disclosures made, and fines paid, by the exporters while the freight forwarders like DHL get off scot free. Too many exporters, particularly those without a large number of export transactions, are forced to rely on DHL and others to lodge licenses, make AES entries, handle endorsements of the license to decrement the value of the license, and so forth. And when that isn’t properly done, it’s often the exporters that pay the price.
Another interesting part of the DHL settlement is that, according to the OFAC press release,
Many of the shipments were intercepted and reported to OFAC by the U.S. Department of Homeland Security’s Customs and Border Protection (CBP)
Say what? This means that DHL was sending packages out of the country where the destination on the air waybill was Iran or Sudan or another sanctioned country. How on earth could that have happened? I think the only reasonable conclusion is that DHL’s employees only used the company’s compliance program when they tore out pages to make paper airplanes to throw down the hall. I’m kidding, of course, but you do have to wonder how DHL could show up at the border with packages headed to Iran, Syria and Sudan.
In better news for DHL, the Jamaica Exporter’s Association today awarded DHL its annual prize as the “best-in-class transportation company that enables and supports the growth of Jamaica’s export industry.” Have a Red Stripe, fellows. You not only deserve it, you probably need it too!
UPDATE: Here is the link to settlement documents.
[NOTE: the photograph illustrating this post is not an actual photo taken in Tehran but a humorous illustration created through the magic of image-editing software.]
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Copyright © 2009 Clif Burns. All Rights Reserved.
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9 Comments:
Cliff:
It is not that one feels happy for the misfortunes of others, a very repulsive emotion very common these days, but this is happening too often not only with DHL but Fedex. They get away very easily submitting SED’s by the thousands. For the record I have experienced cases when the big guys did not use the license, used a license wihout lodging or failed to use the license altogether.
Sorry for them but I am going to frame this report for sales and marketing tooling. Is in the public domain and there is no need for a license from OFAC, DDTC nor BIS.
I wonder how the parties came to settle on the extremely not-round figure of $9,444,744. Were BIS and OFAC concerned that a mere $9,000,000 would have been a slap on the wrist? Was DHL worried that $9,500,000 would topple it into bankruptcy?
Pat B.: Having spent a good bit of my misspent youth at Commerce, I can only tell you that they are very formulaic there. Good sorts really, but very much attached to formulae and procedures. OFAC would be the one for round numbers, lest they worry their pretty little heads trying to count on their fingers and toes.
The not-round figure was a result of mitigation. The nitty gritty can be found at http://efoia.bis.doc.gov/exportcontrolviolations/e2119.pdf, with the Prepenalty Notice on pages 16 to 21. Don’t miss page 17 where it begins “The prior enforcement guidelines…”.
And it’s not just exports. They never inquire to the importer when filing customs entries. Years ago, an express courier company (who will remain unnamed) cleared a shipment of foreign-made computer monitors under 9801 just because it was being “returned for repair/replacement”. Then they came to me when Customs asked them for a Manufacturer’s Affidavit. I told them that I wouldn’t provide it because they weren’t made in the U.S. I further asked them why they filed 9801 when the Taiwan origin was clearly printed on the commercial invoice, and they said, “Oh, we never look at the invoice, we just use what was keyed in at origin.” Oh. Really. Does Customs know that their foreign offices are conducting Customs business without a license?
Lesson: The DHLs, FedExes, and UPSs are inexpensive because they make their money processing tremendous volumes all the same way. But if you need something “special”, like a customs clearance or license exception, you’re taking your chances. Let them handle the documents (unless they contain controlled technical data) because they do that very well. But if you have real freight, better use a real freight forwarder or customs broker.
I’m interested in the role of the Berman Amendment in these investigations, because I assume that a large volume of what couriers carry is documents — most of which are exempt from OFAC or BIS regulation under IEEPA. Clearly, the failure to identify the contents of shipments on air waybills or to keep records as required would have killed any defense DHL might have had under Berman. I can’t tell whether this is a result of cynical intention or just sloppy operations.
Cheering? I just saw a group of defense industry executives go by doing the macarena.
The good ole “blame the forwarder” days are back! And the blame is for not keeping records! What could be better?
As an ex-DHL employee, I can assure you their motto is customer based and certainly not “by the books”..Do whatever it takes to make the customer happy, even if it means moving freight that has not cleared customs…You only pay the fines if you get caught, then you mitigate it down, but in the meantime keep moving more…..
An interesting comment from Mike Liberto refering to “blame the forwarder”. The forwarder has to understand what the law does and does not allow you to do, that way you they both their company and client on the right side of the law. Most western countries correctly follow an ethical export control policy, if a forwarder transgresses that policy they have no room for complaint. Forwarders need to understand export control as much and companies in the defence industry, if they do not they should stay away from defence industry work as they are not fit for purpose.
For the record I am a forwarder.
I currently work at DHL Global Forwarding in the Special Projects Division, and the gap between the divisions are huge. I read a story like this and wonder ,”how did this happened?!”, then I read further and saw it was actually DHL Express.
In my division, compliance is definitely top priority. We will not move freight until we receive all the information we need (licensing requirements by any agency, EAR99 or ECCN, etc). I remember a few months ago I was involved in a new project going to a place that can definitely throw red flags. The customer was starting to get angry with me when I started demanding licensing requirements, ECCN numbers, and everything else. He didn’t realize it until one of his products had an ECCN and surprise, a license requirement. He now fully understands just how much trouble we saved him.
A good freight forwarders explains to their customer that yes, we’re throwing the rule book at you, but we’re doing it for you and your company’s well being. Bad ones just move freight and not ask questions, like the case here. Heck, they even lost airwaybills?! That’s crazy.
