01 March 2012

Freight Forwarders Banned, Imprisoned and Fined for Illegal Logistics Operations  

Agents Warned Be Careful About the Cargo You Carry and the Rates You Charge

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US – WORLDWIDE – Regular readers will know we try to keep them informed of all the cases involving shipping agencies and freight forwarding groups which have been charged or convicted of offences which bring the name of the logistics industry into disrepute. Many however still fail to realise the implications of operating or conspiring to operate a cartel or, worse still, the penalties which can be incurred for smuggling or the illegal transport of sensitive items.

The recent news that five well known freight forwarding operators have now been effectively banned from any association with potentially lucrative US Government contracts may serve as a wake up call to any who have become complacent about how they do business. At a time when every agent is trying to optimise profits the temptation to collude on rates or to turn a blind eye to cargo with possible criminal consequences for the carriers is much greater.

The five banned freight forwarders have all previously undertaken significant amounts of work directly or indirectly for the US Government and their debarment means they will be excluded from any contracts, particularly defence contracts and are ineligible to participate in works concerning U.S. Department of State’s Directorate of Defense Trade Controls (DDTC), which is the agency that administers the International Traffic in Arms Regulations (ITAR) unless matters of foreign policy or US national security interests make it imperative, a highly unlikely scenario.

The five named freight operators actually now only represent three Swiss and German based forwarding giants and are named as: BAX Global Inc. California (now a part of Schenker AG); Schenker AG, Germany; Kühne + Nagel International AG, Switzerland; Panalpina Inc. New Jersey, and Panalpina Welttransport (Holding) AG, Switzerland. This penalty follows the guilty pleas made to the US Courts over anti trust activities including price fixing which resulted in over $50 million in fines being levied covered in our story of 1st October 2010.

This is a slow burning penalty for the logistics groups involved, any contracts negotiated before 16th February 2012 can continue however anyone wishing to employ the banned companies on Government works with contracts negotiated after that date will have to present evidence that they are the only possible choice as freight forwarders for the works on offer – not an ideal situation for a contractor who wishes to outsource with the threat of penalties for anyone who tries to avoid the legislation.

As regards the handling and forwarding of forbidden substances headlines recently have concerned the fate of Christopher Tappin who has been extradited to the US to stand trial in connection with an alleged scheme to illegally export to Iran specialised zinc/silver oxide reserve batteries used in the Hawk Air Defence Missile. Two conspirators charged along with Tappin for their roles in the scheme have already been convicted and sentenced. On the 24th August 2007 Robert Gibson was sentenced to a two-year prison term and on the 9th November that year Robert Caldwell received a 20 month prison sentence plus two years supervised release for their respective roles in the plot.

For anyone who thinks these are isolated cases it might be useful to list some of the offences and resultant sentences handed down by the US Courts in the recent past.

On the 17th February Jeng “Jay” Shih, was sentenced in the District of Columbia to 18 months in prison, while his Queens, N.Y., company, Sunrise Technologies and Trading Corporation, was sentenced to 24 months corporate probation for conspiracy to illegally export U.S.-origin computers from the United States to Iran through the United Arab Emirates (UAE). Accompanying financial penalties of over $3.5 million were also levied on them and their co-conspirators.

On the 16th February an Iranian citizen Behrouz Dolatzadeh was arrested by authorities in the Czech Republic on illegal export charges in the Czech Republic after he allegedly tried to arrange the purchase and shipment of some 3,500 M-4 fully automatic assault rifles. Four individuals are under arrest in Singapore awaiting extradition to the US after they apparently tried to ship components known to have been used in the manufacture of Improvised Explosive Devices (IEDs) used in Iraq apparently smuggled in from Iran.

On the 1st February Igor Bobel, of Brooklyn, N.Y., pleaded guilty in the Eastern District of Pennsylvania to one count of smuggling and one count of attempting to illegally export Military-Grade Thermal Weapon Sight and Rifle Scopes to Eastern Europe. On the 10th January, Steven Neal Greenoe was sentenced in the Eastern District of North Carolina to serve 10 years in prison in connection with the illegal export or firearms from the United States to the United Kingdom, after pleading guilty in March. Also in January Bulgarian authorities in Sofia arrested Bin Yang, aka “Raymond Yang,” a citizen and resident of China after he allegedly bought military accelerometers, which are used for “smart” munitions and bunker-busting bombs online from the US intending to ship them to China.

Last December two men, Amparo Echeverri and Carlos Alfredo Pantoja-Coral received prison terms for attempting to smuggle fighter plane jet engines to Iran and so the list goes on and on. The US Department of Justice has now released a 64 page .pdf detailing the dozens of offences they have uncovered with only the most serious noted together with the sentences handed out. These cases are mostly only for sensitive material with military applications and don’t address the thousands of shipments of other illicit materials such as drugs which are seen daily by Customs officers in the US and worldwide.

The punishment for Schenkers, Panalpina and Kühne + Nagel plus the case of Mr Tappin, whether proven guilty or not, plus the huge wealth of other fines, imprisonments and pending accusations should ensure that everyone associated with the transfer of cargo across international borders is especially careful to conduct themselves properly and ensure their security arrangements are watertight as currently the view of the US Courts is to impose swingeing sentences for any whom they believe have transgressed against any laws whether anti trust or illegal shipment related.

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