Real threat to U.S. national security may be along northern border

Whistleblower lawsuit raises troubling questions about cross-border commerce

 

As the Obama administration prepares to send some 1,200 National Guard troops to the Southwest to secure the border, it may well be the nation’s northern border with Canada that has already been breached.

A document detailing that potential threat to U.S. national security surfaced in a lawsuit in the Ontario Superior Court of Justice in Canada. That document, an internal Federal Express Canada Ltd. report dubbed the “GTS Update,” reveals that a significant percentage of shipments involving high-value merchandise and/or controlled goods exported using FedEx Canada as the carrier appear to be leaving Canada without the proper Customs paperwork.

Under Canadian Customs law, goods exported to foreign countries, other than those destined for the U.S., that are valued at [Canadian] $2,000 or more, or that are deemed "controlled goods," must be reported to the Canadian Border Service Agency via an “export declaration,” otherwise known as a B13A form. Proof that the declaration has been filed also must be presented to CBSA at the time the goods are shipped.

Consequently, this class of shipments would likely include a high percentage of controlled goods (defined as strategic, dangerous or regulated, such as nuclear dual-use technology, dangerous chemicals or U.S. goods being shipped from Canada). According to Canadian Customs regulations, these controlled goods are monitored closely, in part, to assure that they don’t pose a security threat to other nations, such as the United States.

The still-pending lawsuit, filed by a former Federal Express Canada Ltd. customs department employee named Nazir Ghany, alleges that FedEx Canada has engaged in “unlawful activities” that violate the Canadian Customs Act. As a consequence of reporting these alleged violations, Ghany contends he was demoted and subjected to retaliation by FedEx Canada management — to the point where he claims he had no choice but to resign from his job.

FedEx Canada has not yet filed a statement of defense with the court in the case. However, a letter penned by one of the company’s legal representatives and directed to Dharamjit Singh, Ghany’s solicitor, or lawyer, argues that Ghany’s pleadings lack “material facts,” are “time barred” and are otherwise not supported by Canadian law.

Singh counters in his pleadings that Ghany will be able to produce evidence at the proper point in the proceedings. He also points to the GTS Update as proof of FedEx Canada’s lack of vigor in following Canadian Customs laws. That GTS Update includes an analysis of the total number of shipments FedEx Canada “exported with out proof of report” — proof that an export declaration, or B13A, had been filed with the Canadian Border Service Agency, or CBSA.

Susan Foster, manager of Customs Regulatory Trade and Compliance for FedEx Canada, in an affidavit filed in the Gh any lawsuit, states the following concerning the shipments involving missing B13A forms:

The GTS Update “shows that there were approximately 19,549 shipments exported without proof of report” and as a result of the foregoing, the potential … penalties to FedEx customers just for the period of May 2005 to April 2006 would have been approximately [Canadian] $19 million.

Singh, however, contends the potential damage to the “national security of the USA and Canada” is much greater. He stresses that, according to the GTS Update, the nearly 20,000 “illegal shipments in just one year” represented 21 percent of total B13A-eligible shipments for that period. That means, he alleges, nearly one-fifth of those shipments were exported in violation of Canadian Customs law.

"It would be inconceivable that nuclear and other technology was not involved [in some of those shipments],” Singh contends. “In any event, there is no excuse for these shipments to have been shipped.”

FedEx Canada’s Foster stresses in her affidavit that “exporters of shipments, not carriers such as FedEx Canada, are ultimately accountable for meeting the export reporting requirements [such as filing required B13A documents]. …”

Big Stakes

FedEx Canada, which employs some 5,000 people, is based in Mississauga, Ontario, and is a subsidiary of USA-based FedEx Corp. — which ships some 6 million packages daily to nearly 230 countries. So, in the scheme of things, a total of 20,000 shipments lacking the proper paperwork doesn’t seem like a big deal.

“Unless there’s a pattern to it,” says U.S. attorney Mark Conrad, a former supervisory special agent with the U.S. Customs Service — since integrated into the U.S. Department of Homeland Security.

And that pattern, Singh argues, is the fact that the shipments would have involved a high percentage of “controlled” goods destined for foreign nations, including to countries that might serve as transshipment points for materials destined for Iran.

President Barack Obama, Singh stresses, has been very clear about his concern over Iran’s nuclear intentions, expressed most recently in a letter Obama sent to Luiz Inácio Lula da Silva, president of Brazil, and last year during a presentation he made at the G20 Conference in Pittsburgh [video below].

Singh also points to an article that appeared in the Vancouver Sun last year that quoted the head of CBSA’s Counter Proliferation Section, George Webb: “We have anything [and everything] to do with a nuclear program going to Iran.”

The story claims Canadian authorities “have seized everything from centrifuge parts to programmable logic controllers that were being illegally shipped to Iran through third countries.”

In fact, Singh adds, a trial is now underway in Toronto involving a Canadian man accused of attempting to ship to Iran, via Dubai, nuclear dual-use goods (10 specialized gas-pressure gauges, which would have required a B13A filing for export from Canada). The gauges, which are commercial products that could have been used to help centrifuges produce the highly enriched uranium needed for a nuclear weapon, were purchased from a U.S. company and shipped from Boston to Toronto “and undervalued when declared,” according to a story in the Canadian Globe and Mail. The alleged plot was uncovered in this case because the U.S. company reported the suspicious shipment to law enforcement authorities.

There is no information available publicly on how the accused planned to ship the gauges to Dubai, according to Singh. Still, he says the case is an example of how violations of Canada’s export laws can involve real threats to global security.

One U.S. Customs official who spoke with Narco News explains that even if all the proper paperwork is filed with an export shipment, that still does not guarantee an illegal shipment will be caught by Customs officials, in either the U.S. or Canada, since criminals lie on forms and the government “bureaucracy takes time to have the AM coffee, get up, and get going.”

The Customs official adds that in cases where required export documents are not filled out, it’s usually because the shipper wants to avoid the extra paperwork and duties involved — with the rare exception being a situation where a shipper is part of a criminal conspiracy.

However, if shipments are known to lack the proper customs declarations, as is allegedly the case with the shipments outlined in the GTS Update, then that should raise some red flags, even if it is likely that only a small fraction of those shipments might involve controlled or dangerous goods, the U.S. Customs official points out.

Singh adds that in the case of FedEx Canada, most of the exports destined for foreign nations other than the U.S. are routed first through FedEx terminals in the U.S. Foster, in a separate deposition she underwent as part of Ghany’s litigation, confirms that the B13A-eligible shipments outlined in the GTS Update “go to the U.S.” prior to being transported to their final destinations.

That fact, the Customs official says, creates a whole other set of potential problems on the U.S. Side of the border, where self-regulation is the guiding hand.

The U.S. Customs officials explains:

You are looking into a truly bottomless pit. First, the shipper has to be honest. Then, the common carrier, say FedEx, has to be honest. All of the employees at both companies have to be honest; no one can be bribed, because generally, all it takes is one person taking a bribe to fiddle with the paperwork. Self-regulation does not work for precisely this reason. You only need one weak link, and that criminal doesn't have to be a boss, or a senior manager; it can be a clerk in the shipping office.

“Gaping Hole”

In the case of controlled goods exported from Canada and destined for the U.S., there is no requirement for a B13A filing under Canadian law. That’s because Canada and the U.S. have in place a memorandum of understanding that calls for each nation to exchange import data.

However, major criticisms have been raised about U.S. Customs and Border Protection’s reliance on self-regulation under programs such as “C-TPAT,” which allows qualifying private-sector companies to oversee their own shipment security. In exchange, these C-TPAT-approved companies are granted a reduction in cargo examinations as well as expedited processing when their shipments are selected for examination.

The rational for such programs is that it allows U.S. border enforcers to better allocate scarce resources toward monitoring the immense volume of goods moved by shippers who have not been prescreened through C-TPAT and similar self-regulation programs.

Over the first six months of fiscal 2009, according to U.S. Customs and Border Protection, goods shipped via C-TPAT and a sister program called Importer Self Assessment (ISA), accounted for about half of all U.S. import value for the period — some $454 billion worth of goods.

The Washington, D.C.-based Project on Government Oversight (POGO), in a letter sent to members of Congress late last year, pointed out some serious flaws in this self-regulation model.

From the POGO letter:

In our efforts to further this mission, we want to bring to your attention two troubling self-policing programs—the Customs-Trade Partnership Against Terrorism (C-TPAT) and Importer Self-Assessment (ISA) programs—administered by U.S. Customs and Border Protection (CBP) within the Department of Homeland Security (DHS). Inherent in this sort of self-regulation is a reduction of federal oversight of imported goods coming into the country. POGO believes that self-regulation programs, by their very nature, are unsound because they are not objective or reliable, and that they are ripe for abuse, placing U.S. citizens in jeopardy.

… Specifically, POGO has received insider information that importers non-compliant with trade laws and regulations have been approved and are applying for the C-TPAT and ISA programs.

It must also be noted that a number of the known C-TPAT companies have committed serious trade violations in the past, yet have been granted membership into C-TPAT and ISA, without testing to verify their problems have been corrected.

…. It is easy to conclude that all of these programs are, in part, the result of limited resources to monitor the hundreds of billions of dollars of goods that enter the U.S. each year. However, the risk inherent with that strategy becomes a financial, security, and safety issue.

Although CBP does not make public the list of companies participating in C-TPAT or ISA, POGO was able to identify a number of those firms via government and company Web sites. Among the companies in the program, according to POGO, are BP America, Tektronix, Target Corp. and FedEx.

Singh concedes he does not yet know how FedEx Canada knew about the 20,000 or so shipments lacking the proper B13A filings, or when they discovered the problem. However, he contends that the confidential FedEx Canada GTS Update report now entered into evidence in Ghany’s lawsuit -- even though it is some four years old -- is not an isolated document and that FedEx has been tracking this data across multiple years.

“We haven't gone for discoveries as yet,” Singh says. “But my client did tell me that there were status reports every year and FedEx obviously knew of these shortcomings.”

For its part, FedEx Canada is not conceding the GTS Update is or is not part of a regular reporting regime, nor that the report included in the lawsuit was even seen by the company’s top management.

Whether the nearly 20,000 exports that left Canada absent the proper export declaration, per the GTS Update, are part of a continuing pattern or not, or whether some of those shipments might have contained materials destined for a foreign arms program, is simply not known at this point.

However, according to former U.S. Customs supervisory special agent Conrad, the questions raised by the Ghany case are not new.

“All of us in law enforcement that dealt with technology theft from the U.S. by the old USSR were aware that high-speed, efficient organizations such as FedEx ... were problems because of their need to move things through the system faster than the government could [track it],” Conrad says. “That is still the case today.

“It is it a huge gaping hole. ... The bad guys are always thinking of ways and means to beat us.”

Stay tuned.....

Nazir Ghany vs. FedEx Canada case documents

Susan Foster Affidavit, including GTS Update exhibit

Susan Foster deposition

Ghany Amended Statement of Claim

Letter from FedEx Canada legal representatives

Canadian B13A form

 

 

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