Freight forwarder learns the hard way not to ignore red flags.
It can be awfully tempting for a busy freight forwarder to say “forget about it” to U.S. export control regulatory compliance when there’s an urgent and profitable shipment to get out the door. Besides, who’s going to notice in a sea of exports?
More and more in this time during which U.S. shipment data is available to regulatory agencies such as the Commerce Department’s Bureau of Industry and Security through the Automated Export System, this type of negligence is much more easily exposed.
Mohawk Customs and Shipping Corp., based in Syracuse, N.Y., recently learned this the hard way when BIS’ Office of Export Enforcement investigated AES data to discover that in 2012 the forwarder allowed an export to go to a Russian research institute that was on the Entity List with a license requirement.
According to the charging document filed Friday, upon further investigation, BIS learned that “a Mohawk export supervisor erroneously overrode or ignored this red flag and Mohawk proceeded without further inquiry or due diligence to forward the items for export,” including filing electronic export information indicating “no license required” for the shipment. To make matters worse with BIS enforcement agents, Mohawk screened the Russian research institute against the Entity List prior to export, showing knowledge of the wrongdoing.
It was further discovered by BIS that Mohawk committed similar violations in 2014 and 2015 with two exports involving a Chinese university that was similarly known to the company through the Entity List screening software and required a Commerce license.
For these violations, BIS assessed a civil penalty in the amount of $155,000 against Mohawk. (According to the BIS charging documents, $20,000 will be suspended if the company doesn’t commit future violations.)
No doubt Mohawk has learned from these violations and responded by tightening its in-house export compliance policies and procedures.
The big lesson here is that just because the forwarder is the middleman of the export transaction for the U.S. exporter doesn’t make it any less culpable in violations of the Export Administration Regulations. Similarly, violations of this nature don’t let the exporter, who hired the forwarder, off the hook for BIS investigators and the possibility of penalties. Both forwarder and exporter have an obligation to never take their export compliance obligations for granted and invest in the necessary training and tools to steer clear of violations.
Commentary: Export compliance matters
