FAC No.: IA-432831

OCT 2, 2008

DHL Holdings (USA), Inc.
Attn: Jon E. Olin, EVP, Secretary & General Counsel
1200 South Pine Island Road
Plantation, FL 33324

Dear Mr. Olin:

OCT 2, 2008

The Office of Foreign Assets Control ("OFAC") has reason to believe that DHL Holdings (USA), Inc. ("OHL") has engaged in certain prohibited transactions, detailed below, relating to Iran and Sudan and in violation of the Iranian Transactions Regulations, 31 C.F.R. Part 560 (the "ITR"), the Sudanese Sanctions Regulations, 31 C.F.R. Part 538 (the "SSR"), and the Reporting, Procedures and Penalties Regulations, 31 C.F.R. Part 501 (the "RPPR"), all of which were promulgated under the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq. ("IEEPA"). See 31 C.F.R. §§ 560.201, 560.204, 538.206, and 501.601.

Apparent Violations

The apparent violations for which this Prepenalty Notice ("Notice") is being issued involve DHL's transactions related to the importation and/or exportation of goods and/or services to or from Iran and Sudan. Specifically, the apparent violations are as follow:

1. From on or about December 17, 2002, to on or about March 30, 2007, DHL appears to have exported or attempted to export four unlicensed shipments of merchandise from the United States to Sudan in violation of §§ 538.205, 538.206, and/or 538.211 of the SSR, and 63 unlicensed shipments of merchandise from the United States to Iran in violation of §§ 560.203, 560.204, and/or 560.206 of the ITR, and imported one unlicensed shipment of merchandise from Iran to the United States in violation of §§ 560.201 and 560.206 of the ITR. These transactions are further detailed on Exhibit A.

2. For 32,228 exports to Iran between August 15, 2002, and April 17, 2006, DHL did not maintain records describing what it shipped to Iran, in violation of § 560.601 of the ITR and§ 501.601 of the RPPR.

OFAC has considered all of the information in its possession related to the alleged violations, as discussed further below, and determined that a civil monetary penalty is the appropriate enforcement response.

Proposed Penalty

On October 16, 2007, the President signed into law the International Emergency Economic Powers Enhancement Act ("Enhancement Act"), Pub L. NO. 110-96, which, inter alia, increased the maximum civil penalty applicable to violations of orders or regulations issued under IEEPA to the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed. The increased penalty amounts apply to violations with respect to which enforcement action 'was pending or commenced on or after October 16, 2007. Notwithstanding this availability of higher maximum penalties, and as stated in OFAC’S Civil Penalties - Interim Policy (November 27, 2007) (available at www.treas.gov/ofac), in those cases in which a party has agreed to a statute of limitations waiver where the statute of limitations would have otherwise expired prior to October 16, 2007 (the effective date of the Enhancement Act), OFAC will calculate the penalty amount in accordance with the maximum penalty amount applicable at the time the waiver was signed. As noted in the preamble to OFAC's recently published Economic Sanctions Enforcement Guidelines (73 Fed. Reg. 51933, 51934 (Sept. 8, 2008), OFAC's prior Enforcement Guidelines (68 Fed. Reg. 4422 (Jan. 29, 2003) (the "prior Enforcement Guidelines") will continue to apply to such cases. DHL entered into a Tolling Agreement for the alleged violations at issue in this Notice on August 15, 2007. Because at least one of DHL's alleged violations would have expired prior to October 16, 2007, OFAC has decided to treat all of the alleged violations under the lower pre-October 16, 2007, maximum penalties and the prior Enforcement Guidelines.

The prior Enforcement Guidelines provide that the proposed penalty for the sixty-eight alleged export and import-related transactions covered by Count l generally would be the transaction values of the exports and imports. OFAC notes, however, that DHL failed to keep adequate records for most of these shipments as well as for the vast majority of its other shipments, thereby precluding OFAC from determining the transaction values for those shipments. OFAC therefore has decided that the proposed penalty for each of these alleged violations should be at the then-applicable maximum statutory civil penalty amount. Sixty-six of the alleged violations covered by Count 1 occurred prior to March 9, 2006, when the maximum civil penalty was $11,000; two of the alleged violations occurred after March 9, 2006, when the maximum civil penalty was $50,000. Accordingly, OFAC's preliminary proposed penalty for the alleged violations covered by Count 1 is $826,000.

The prior Enforcement Guidelines provide that the proposed penalty for the 32,228 alleged recordkeeping violations covered by Count 2 would be $2,000 for the first alleged violation and $10,000 for each additional alleged violation. The preliminary proposed penalty for the violations contained in Count 2, therefore, is $322,272,000.

Analysis of Aggravating and Mitigation Factors:

Although the prior Enforcement Guidelines do not require consideration of aggravating and mitigating factors at this point in the civil penalty process, OFAC has decided to consider the aggravating and mitigating factors of which it is aware based on communications with DHL. OFAC is engaging in this analysis in this Notice due to the amount of information already before OFAC and the imminent expiration of the statute of limitations for some of the transactions at issue. The aggravating and mitigating factors considered by OFAC are:

Aggravating Factors:

• DHL had reason to know that the conduct giving rise to the violations took place because it actually entered information concerning shipments to Iran and Sudan into its database;
• DHL may have conferred a significant economic benefit to sanctioned countries that potentially created extraordinarily adverse harm to sanctions program objectives;
• DHL did not have an effective OFAC compliance program in place at the time of the alleged violations; and
• DHL's alleged violations comprise a large pattern of misconduct over an extended period of time.

Mitigating Factors:

• DHL has cooperated with OFAC by providing relevant information regarding the apparent violations to the extent that such information existed;
• DHL has improved its OFAC compliance program since receiving OFAC's Cease and Desist Order dated April 17, 2006; and
• DHL agreed to a statute of limitations waiver.

After weighing these aggravating and mitigating factors, OFAC has determined that the mitigating and aggravating factors for Count 1 balance out. Therefore, the proposed penalty for Count 1 is $826,000.

An additional and unique mitigating factor is present for the alleged violations covered by Count 2. Although DHL failed to keep adequate records in 32,228 instances, OFAC is aware that many of the underlying shipments for which adequate records were not kept may have been exports of informational materials, which were not prohibited by the ITR. OFAC has reason to believe that such shipments of informational materials may have made up as much as 90 percent or more of the shipments for which DHL failed to keep adequate records. In consideration of this unique mitigating factor along with the balancing of the aggravating and mitigating factors listed above, OFAC has determined that the preliminary proposed penalty for the alleged violations covered by Count 2 should be mitigated by 97 percent. The proposed penalty for count 2 therefore is $9,668,160. The total proposed aggregated penalty for Counts 1 and 2 is $10,494,160.

OFAC may further adjust the final proposed penalty amount set forth above based on new evidence presented in any response by DHL to this Notice and/or any modification resulting from further review and reconsideration by OF AC.

Election of Proceedings

1. DHL has the right to provide a written response to OFAC within thirty days of the mailing of this Notice. Such written response to this Notice need not be in any particular form, but it should contain a response to the allegations herein, and set forth the reasons why the penalty should not be issued, or if issued, why the amount should be less than that proposed in this Notice, as well as provide any other information or evidence that DHL deems relevant to OFAC's consideration of this matter. DHL's response should be addressed to the Office of Foreign Assets Control (Attention: Elton Ellison, Civil Penalties), U.S. Department of the Treasury, 1500 Pennsylvania Avenue, N.W., Washington, D.C. 20220. A copy may also be faxed to fax number (202) 622-5445. You should retain a receipt or other evidence which shows the date you sent DHL's response to OFAC.

2. In the event that DHL elects not to respond within thirty days, OFAC will conclude that DHL has decided not to submit any new facts or explanations for our consideration. In such instance, OFAC generally will issue a Penalty Notice in accordance with§ 560.705(b) of the ITR, § 538.704(b) of the SSR, and § 501.709(a) of the RPPR, finding a violation and assessing a monetary penalty.

3. Should DHL elect to resolve this matter absent any final agency finding of violation, DHL may initiate settlement negotiations by telephoning the OFAC staff member named below under "Contact Person" at any time before DHL is issued a Penalty Notice. If the negotiations result in settlement within the time period set forth in this Notice, DHL will not be required to make a written response to this Notice, which will be withdrawn without a formal determination of violation. In the event no settlement is reached, the period specified for written response to this Notice remains in effect unless additional time is granted by OFAC.

Collection

Section 560.706 of the ITR, § 538.705 of the SSR and§ 501.746 of the RPPR provide that this matter may be referred for administrative collective measures by the Department of the Treasury or to the United States Department of Justice for collection if any penalty assessed is not paid within thirty days of the mailing of a Penalty Notice, should one be issued pursuant to § 560.705 of the ITR, § 538.704 of the SSR, and/or § 501.709 of the RPPR.

Please note that 31 U.S.C. § 7701 requires that a person assessed a penalty by a Federal agency furnish a taxpayer identification number/Social Security Number. OFAC hereby discloses OFAC's intent to use such number for the purposes of collection and reporting on any delinquent penalty amount in the event of a failure to pay the penalty imposed.

Contact Person

If DHL has any questions concerning this matter, please feel free to contact me at telephone number (202) 622-1628.

Sincerely,

Elton A. Ellison
Assistant Director, Civil Penalties
Office of Foreign Assets Control