Doing business with these forwarders could result in ITAR violations

Sanctions Imposed On ITAR Freight Forwarders

Earlier this month, the Department of the Air Force imposed a sanction against six freight forwarding companies who allegedly engaged in anti-trust price-fixing. (UPDATE: That list has now been reduced to five.) As a result, these forwarders are debarred from engaging in government contracts. (And as a result of that, these same forwarders are also generally ineligible to engage in ITAR-related work per ITAR 120.1.)

Does this mean the forwarders in question committed ITAR violations?

No, not necessarily.

Instead, because of other allegations, these forwarders have been added to the government’s excluded parties list system (EPLS). As a result of being added to this list, the forwarders are also ineligible to participate in ITAR transactions, unless DDTC has provided written authorization to the contrary.

That written authorization must come in the form of a “transaction exception request,” which should be made on a case-by-case basis by those seeking to use one of the named forwarders as part of any ITAR-related transaction.

How Does ITAR Relate To Freight Forwarders?

DDTC has provided guidance on its website for existing, pending, and future authorizations related to these freight forwarders. To summarize that guidance:

1. All existing licenses/approvals are unaffected.
2. Any pending license received by DDTC prior to 02/18/2012 will be reviewed without any further action or requirements from the applicant.
3. All new and pending licenses received after 02/18/2012 will be Returned Without Action (RWA’d) unless the applicant submits a transaction exception request.

The five freight forwarders in question are:

1. BAX Global
2. Kuhne and Nagel
3. Panalpina Welttransport
4. Panalpina Inc.
5. Schenker AG

As an exporter, your company could find itself committing ITAR violations if it uses these forwarders without first obtaining a transaction exception request from DDTC. See ITAR 127.1(c). This is one more reason why careful screening of all parties involved in your transaction is a must for companies seeking to be ITAR compliant.

In order to obtain the necessary exception request, you should explain to DDTC, in writing, why the forwarder in question should be part of the transaction, and how the inclusion of said forwarder is in the best interests of U.S. foreign policy / national security.

Until then, I imagine these five forwarders will be doing everything they can to be removed from the EPLS … ASAP!