Forwarder Penalty for Export Violations Eased for Informing on Another Company

The Bureau of Industry and Security has issued an order penalizing a freight forwarder for two violations of the Export Administration Regulations, but that penalty appears to have been eased under a BIS policy aimed at incentivizing companies to disclose violations by others.

According to the order, the forwarder facilitated the export of enterprise servers and switches (items controlled for anti-terrorism reasons) from the U.S. to Iran on behalf of an Iran-based exporter without the required U.S. government authorization.

BIS is therefore denying the forwarder’s export privileges for two years, although that denial is being suspended and will be waived after the two-year period provided the forwarder commits no further export violations. BIS is also requiring the forwarder to complete export compliance training within 12 months to ensure that its employees responsible for export compliance recognize and familiarize themselves with BIS “Know Your Customer” guidance as well as guidance on export red flags. BIS states that the timely completion of this training is a condition for the granting, restoration, or continuing validity of any export license, license exception, permission, or privilege granted or to be granted to the forwarder.

BIS indicates that this penalty has been mitigated (e.g., no monetary fine was imposed) because the forwarder cooperated and assisted BIS with its investigation, resulting in two seizures of goods, and later assisted in a separate investigation of another potential export violation by a third party. BIS announced in April 2023 that disclosures of potential export violations by others would be considered a mitigating factor in any future enforcement action against the disclosing party, which appears to have been the case here.