D.C. CIRCUIT COURT REJECTS FEDEX’S EXPORT REGULATION APPEAL
August 26, 2022
On July 8, 2022, the D.C. Circuit Court of Appeals issued a ruling affirming a District Court decision from 2020 that dismissed Federal Express Corporation’s (“FedEx”) claims against the U.S. Department of Commerce, arguing that the Department’s Export Administration Regulations (“EARs”) overstepped the agency’s authority and violated FedEx’s right to due process. In its Complaint, FedEx asserted that the Department’s EARs offer no “safe harbor provision” to except common carriers from liability for the contents of packages and communications they transmit on behalf of others, and that the EARs in fact hold common carriers liable as “aiders and abettors” of any EAR violations committed by customers, which can result in high monetary penalties. FedEx also contended that it is impossible for common carriers to inspect every shipment they handle. Therefore, FedEx made a due process claim as it asserted that without a safe harbor, the EARs only gave it two options; to continue to operate under the threat of enforcement action resulting from violations committed by its customers or cease operations to avoid the risk of U.S. enforcement action even though this course of action could result in legal consequences from customers and foreign governments. FedEx also requested declaratory and injunctive relief and asked the Court to review the Department’s EARs, declare them unlawful, and enjoin the Department’s actions (i.e., implementation of the EAR’s).
The D.C. Circuit Court of Appeals found that “the statutory text, circuit precedent, and deference to the executive branch in matters of national security and foreign affairs” all supported the Department’s actions. Further, the Court also noted that the EARs’ strict liability standard was consistent with the statute it implemented, and that FedEx had previously received ample notice of the Department’s strict interpretation of the law when the Department previously brought charges against FedEx for unlicensed shipments in both 2011 and 2017. The Court also reasoned that the Department’s efforts to protect national security interests and prevent bad actors from acquiring restricted items outweighed the burden of strict liability, meaning that “substantial deference” must be given to the judgment of the Department, which was tasked with enforcing the statute’s export control program.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com 202-659-6622) or Drew Derco (dderco@eckertseamans.com 202-659-6665).
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