Via EDGAR and FedEx Express
March 14, 2017
Cecilia D. Blye
Chief, Office of Global Security Risk
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E., Mail Stop 4628
Washington, D.C. 20549-5546
Re: FedEx Corporation
Form 10-K for the Fiscal Year Ended May 31, 2016
Filed July 18, 2016
File No. 1-15829
General
1. In your letter to us dated March 11, 2014, you described contacts with Syria and Sudan. We note that your FedEx Small Business Center website provides a list of Syria import and export restrictions. As you are aware, Syria and Sudan are designated by the State Department as state sponsors of terrorism and are subject to U.S. economic sanctions and export controls. Please describe to us the nature and extent of past, current, and anticipated contacts with Syria and Sudan since your prior letter, whether through subsidiaries, affiliates, distributors, resellers or other direct or indirect arrangements. We note that Syria YP’s website provides an address in Damascus, Syria for FedEx, and it provides a link to FedEx’s website; and USGoBuy and My Germany’s websites provide information for shipping to Syria and Sudan via FedEx. You should describe any products, services, technology or components you have provided to Syria and Sudan, directly or indirectly, and any agreements, commercial arrangements, or other contacts with the governments of those countries or entities they control.
Response:
[...]
Contacts with Syria
There has been no change with respect to our contacts with Syria since our March 11, 2014 letter to the Commission. We do not provide, directly or indirectly, any transportation services to or from Syria. FedEx has never had any assets or employees in Syria, any flights to, from or within Syria or any direct operations in Syria. TNT Express, our subsidiary that we acquired on May 25, 2016 (the “Acquisition Date”), has had no assets or employees in Syria, and has not provided, directly or indirectly, any transportation services to or from Syria, since the Acquisition Date. Until such time that we may legally resume transportation services to and from Syria, we will not provide such services.
Due to U.S. government restrictions, our aircraft currently do not fly through airspace controlled by Syria. Prior to these restrictions becoming effective, our aircraft occasionally flew through Syrian airspace (in accordance with relevant U.S. sanction laws and regulations and U.S. Federal Aviation Administration directives), as a result of which we made immaterial payments – called overflight fees – to the Syrian government. Such payments were not prohibited by U.S. law or sanctions policy. We made the payments to Hadid International Services, based in Dubai, which in turn paid the Syrian government. We paid overflight fees in fiscal 2014 relating to two flights in fiscal 2013. We also paid one overflight fee in fiscal 2015 relating to a single flight in May 2014 that was required to divert into Syrian airspace due to safety and weather concerns, in compliance with applicable U.S. restrictions and regulations. If U.S. government restrictions pertaining to Syrian airspace are lifted, our aircraft may resume occasionally flying through airspace controlled by Syria.
To the best of our knowledge, we do not have any other contacts with the Syrian government or entities affiliated with the Syrian government.
Our wholly owned subsidiary FedEx Trade Networks, Inc., through its wholly owned subsidiary FedEx Trade Networks Transport & Brokerage, Inc. (collectively, “FTN”), continues to offer customs brokerage services for certain goods of Syrian origin being imported into the United States and Canada, as permitted by U.S. law and sanctions policy. FTN provided customs brokerage services in April 2015 for one shipment from Dubai, United Arab Emirates to New York that was said to contain one item of Syrian origin (a wooden sculpture). This shipment qualified as an exempt transaction under the Syrian Sanctions Regulations (31 C.F.R. §§ 542.211(b) and 542.307(a)) and was allowed to proceed. To the best of our knowledge, since our March 11, 2014 letter to the Commission, FTN has not provided customs brokerage services for any other shipments containing items of Syrian origin.
Contacts with Sudan
There has been no change with respect to our contacts with Sudan since our March 11, 2014 letter to the Commission. We do not provide, directly or indirectly, any transportation services to or from Sudan, and we do not plan to provide any such services in the future. FedEx has never had any assets or employees in Sudan, any flights to, from or within Sudan or any direct operations in Sudan. Our subsidiary TNT Express has had no assets or employees in Sudan, and has not provided, directly or indirectly, any transportation services to or from Sudan, since the Acquisition Date.
Our aircraft may occasionally fly through airspace controlled by Sudan, as a result of which we may pay immaterial overflight fees to the Sudanese government. Such payments are not prohibited by U.S. law or sanctions policy. As with Syria, we make any such payments through Hadid International Services. As we previously disclosed, our aircraft flew through Sudanese airspace four times between January 2011 and March 2014 for charter flights. Hadid International Services sent us invoices for those four charter flights in June 2016 (for fiscal 2012 overflights) and September 2016 (for fiscal 2014 overflights). Upon receipt of these invoices, we became obligated to pay the applicable overflight fees, and we made such payments in fiscal 2017. Since our March 11, 2014 letter to the Commission, our aircraft have not flown through Sudanese airspace.
To the best of our knowledge, we do not have any other contacts with the Sudanese government or entities affiliated with the Sudanese government.
We have comprehensive export controls and economic sanctions programs designed to ensure compliance with U.S. and other applicable export laws, rules and regulations. As part of our ongoing efforts to monitor the effectiveness of our international trade compliance programs, in January 2017 FTN identified one August 2013 shipment from the United States to Canada for which FTN provided customs brokerage services and which contained items of Sudanese origin. The items – one piece of jewelry valued at $3 and four containers of dry spices valued at $20 – were identified as gifts, and qualified as an authorized transaction under the Sudanese Sanctions Regulations (31 C.F.R. § 538.510).
FTN continues to offer customs brokerage services for certain goods of Sudanese origin being imported into the United States and Canada, as permitted by U.S. law and sanctions policy. To the best of our knowledge, since our March 11, 2014 letter to the Commission, FTN has not provided customs brokerage services for any shipments containing items of Sudanese origin.
https://www.sec.gov/Archives/edgar/data/1048911/000119312517081896/filename1.htm
1) FedEx appears to have interpreted 538.405 (Transactions incidental to a licensed transaction authorized) as permitting the provision of customs brokerage services in connection with a shipment from the U.S. to Canada of an item of Sudanese origin that was covered by 538.510, which generally licensed "[t]he importation into the United States of [certain] Sudanese-origin goods." While this is not exactly counterintuitive, it should be noted that to the extent that the provision of "brokering services" does not inherently constitute a transaction ordinarily incident to the underlying transaction being brokered, "customs brokering," while called "brokering," is apparently not the sort of "brokering service" for which a license would be required even in connection with otherwise generally licensed transactions. See General Comment on the Relationship Between "Brokering Services" and Authorities Permitting or Exempting Transactions "Ordinarily Incident" to Other Transactions (System Ed. Note). In contrast to other types of brokering, customs brokers do not take commissions from buyers and sellers, and their services only come into play once an agreement between buyer and seller has been made.
2) FedEx suggests that it provides customs brokerage/clearance services in connection with shipments of goods into Canada, whether or not the shipment involves the U.S. For exempt transactions, there is no reason to believe that this activity would not likewise be considered exempt.
3) See General Note on Correspondence of Publicly traded Companies with the SEC Concerning Sanctions (System Ed. Note)