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Commentary: Attempt to protect Chinese market share is basis of FedEx lawsuit against U.S. Department of Commerce

FreightWaves features commentary from Market Voices – contributors with unique knowledge of numerous transportation/logistics/supply chain sectors, as well as other critical expertise.

FedEx announced on June 24 that it is suing the U.S. Department of Commerce in the United States District Court for the District of Columbia. From its announcement: “FedEx believes that the Export Administration Regulations [EAR] violate common carriers’ rights to due process under the Fifth Amendment of the U.S. Constitution as they unreasonably hold common carriers strictly liable for shipments that may violate the EAR without requiring evidence that the carriers had knowledge of any violations.”

Huawei Technology Co. is a Chinese telecommunications company that has repeatedly been in the news as the subject of several federal investigations. In January of this year, a multi-count indictment against Huawei Telecommunications was unsealed in Bellevue, Washington, with Deutsche Telekom’s U.S. subsidiary T-Mobile at the center of an alleged theft of intellectual property dating back to 2012.

In December, 2018, the daughter of Huawei’s founder and the company’s CFO Wanzhou Meng was detained upon her arrival in Canada and has remained under house arrest as the U.S. government seeks her extradition. The U.S. Department of Justice’s 13-count indictment against Meng and three other defendants in late January alleges fraud and attempted evasion of U.S. sanctions against Iran. This week, Meng’s attorneys argued in Canadian court that the country has no jurisdiction in the case and cannot act as a police force for the United States. No decision has been reached. 

For FedEx, the trouble began in mid-May, when the Department of Commerce added Huawei to the Entity List, restricting U.S. businesses interaction with the company. A tech writer in the United Kingdom attempted to send a Huawei cellphone to someone in the United States, and FedEx returned it to him and cited an operational error. This was enough to anger China and state-run media issued a statement that it would be asking questions of FedEx and that the company could find itself on a list of “unreliable entities,” not unlike the U.S. list which would prohibit companies from doing business with FedEx.

FedEx does not want to jeopardize its investment in China and its market share there. It is attempting to distance itself from the government’s actions and protect its investment by citing its status as a common carrier. In its statement, the company said, “FedEx is a transportation company, not a law enforcement entity.” 
The Commerce Department has not yet commented on the suit, a copy of which can be found here.

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Scott Case

Scott Case grew up in and around the air cargo business – literally. His father opened a customs brokerage and freight forwarding firm in 1977 and as a boy Scott would accompany him to Chicago’s O’Hare International Airport late on Saturday nights to clear automobiles arriving from Japan on Flying Tigers’ Flight 0078. He would drink hot chocolate, watch weights and balances calculated on desk calendar-sized tablets and stand inside empty 747s that seemed as big as Soldier Field. Fast forward to today. Case has been a practicing customs broker and freight forwarder for more than 20 years, while concurrently spending seven years on the national and global stage as the National Customs Brokers & Forwarders Association of America, Inc.’s air freight committee chair. He founded Position: Global, a marketing and branding company focused on the unique needs, vocabulary and issues facing logistics companies. Case remains a licensed customs broker and serves as the elected President of the International Air Cargo Association of Chicago.

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