Correspondence
[FEDEX CORPORATION LETTERHEAD]
VIA EDGAR AND FEDEX EXPRESS
January 14, 2011
Cecilia D. Blye
Chief, Office of Global Security Risk
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549-5546
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Re: |
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FedEx Corporation
Form 10-K for the year ended May 31, 2010
File No. 1-15829 |
Dear Ms. Blye:
We are in receipt of the Commissions letter to Frederick W. Smith, Chairman, President and Chief
Executive Officer of FedEx Corporation, dated December 15, 2010, providing comments and requesting
information relating to our contacts with Syria, Iran and Sudan. Each of these countries has been
designated by the U.S. Secretary of State as a country whose government has repeatedly provided
support for acts of international terrorism (Syria on December 29, 1979; Iran on January 19, 1984;
and Sudan on August 12, 1993), and each country is subject to U.S. economic sanctions and export
controls. The following are FedExs responses to the Commissions comments:
General
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Please update us on your contacts with Syria since your letter to us as of July 14,
2006. |
Response: There have not been any substantive changes to the nature of our contacts with
Syria since our letter dated July 14, 2006. As described in that letter, we indirectly offer
certain limited transportation services to and from Syria, but we do not have, nor have we ever
had, any assets or employees in Syria, any flights to or from Syria, or any direct operations
within Syria.
Our wholly owned subsidiary Federal Express Corporation (FedEx Express) offers package delivery
services from Syria and to Syria from countries other than the U.S., subject to certain limitations
and in compliance with U.S. export restrictions. FedEx Express provides these services indirectly,
through third-party transportation companies. All packages to or from Syria are tendered to or
received from a third-party carrier, currently Emirates Airline, in Dubai, United Arab Emirates. An independent licensee, referred to by FedEx as a Global Service
Participant (GSP), is responsible for pick-up and delivery of the packages within Syria; our
current GSP for Syria is Falcon Express Inc., based in Dubai.
Cecilia D. Blye
January 14, 2011
Page 2
FedEx Express began indirect inbound service to Syria in 1989 and indirect outbound service from
Syria in 1993. In May 2004, when the U.S. government imposed economic sanctions on Syria,
including a ban on most exports from the U.S. to Syria, FedEx Express promptly terminated service
to Syria from all locations. As permitted by U.S. law and foreign policy, FedEx Express reinstated
indirect service to Syria from countries other than the U.S. on June 28, 2004, subject to certain
limitations and in compliance with the U.S. export restrictions. FedEx Express policy still
prohibits all shipments from the U.S. to Syria, even though the law permits such shipments in a
variety of instances.
In
addition, our wholly owned subsidiary FedEx Trade Networks, Inc.,
through its wholly owned subsidiary FedEx Trade Networks Transport & Brokerage, Inc.,
which we acquired in February 2000 (collectively FTN), offers limited freight-forwarding services to and from Syria
through third-party air and ocean cargo carriers where permitted by
law. FTN also offers customs brokerage services for
goods being imported to the United States and Canada from Syria. FTN provides freight-forwarding
services from the U.S. to Syria, but only if the shipment is permitted under the U.S. export
restrictions. Since July 14, 2006, however, FTN has not arranged transportation for any shipments
from the U.S. to Syria. During this period, however, FTN arranged ocean transportation for 13
shipments from the U.S. to Lebanon that were erroneously reported through the Automated Export
System (AES) as being destined for Syria. FTN intends to disclose these erroneous AES filings,
and its corrective actions, to the appropriate U.S. governmental agencies.
We do not anticipate any significant change in our service to and from Syria.
Our aircraft occasionally fly through airspace controlled by Syria, as a result of which we make
immaterial payments called overflight fees to the Syrian government. Such payments are not
prohibited by U.S. law or sanctions policy. We make the payments to Hadid International Services,
based in Dubai, which in turn pays the appropriate governmental officials. To the best of our
knowledge, we do not have any other contacts with the Syrian government or entities affiliated with
the Syrian government.
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We note October and May 2007 news articles discussing that Pentagon investigators
intercepted parts for F-14 Tomcat warplanes headed to Iran via FedEx through Germany and
the UAE from Southern California. We also note a March 2010 news article discussing an
evangelist who sent bullets in Bibles to Sudan through Kenya via FedEx. Finally, we note
that two Chinese freight forwarders (Forwarder Express and Guangzhou Gongcheng Import &
Export Service Co.) claim that they provide FedEx and other express courier services from
Shenzhen, China to Tehran and Abadan, Iran and that these companies websites include the
FedEx Express logo on the pages which list these services. Iran and Sudan are identified
by the U.S. State Department |
Cecilia D. Blye
January 14, 2011
Page 3
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 your past, current, and
anticipated contacts with Iran and Sudan whether through affiliates, distributors,
resellers, subsidiaries, or other direct or indirect arrangements. Your response should
describe any services or products you have provided to Iran or Sudan and any agreements,
commercial arrangements, or other contacts you have had with the governments of Iran or
Sudan or entities controlled by these governments. Please also provide this information for
Syria.
Response: Our contacts with Syria are described above in response to Comment No. 1.
Contrary to what is suggested by the news articles and Chinese freight forwarders referenced in
Comment No. 2, we do not provide any transportation services to or from either Iran or Sudan, we
have not provided any such service since June 1, 2007 (the beginning of the period to which we
agreed to limit our response), and we do not plan to provide any such service in the future.
As with Syria, our aircraft occasionally fly through airspace controlled by Iran, as a result of
which pay immaterial overflight fees to the Iranian government. Such payments are not prohibited
by U.S. law or sanctions policy. As with Syria, we make the payments to Hadid International
Services, based in Dubai, which in turn pays the appropriate Iranian governmental officials. Our
aircraft have not flown through airspace controlled by Sudan since June 1, 2007, but to the extent
we ever do so in the future, we would make similarly lawful overflight fee payments to the Sudanese
government through a third-party vendor. To the best of our knowledge, we do not have any other
contacts with the Iranian or Sudanese governments or entities affiliated with either such
government.
With respect to the October and May 2007 news articles reporting that Pentagon investigators
intercepted parts for F-14 Tomcat warplanes headed to Iran, we are aware of a U.S. government
investigation relating to aircraft parts that were shipped from the U.S. to the United Arab
Emirates via FedEx Express, apparently for onward transportation to Iran via a third-party carrier
without any prior knowledge or involvement by us. We fully cooperated with the U.S. Department of
Justice and the Federal Bureau of Investigation in this investigation, including by gathering
evidence that was instrumental in the conviction of the defendants in the case, and received a
letter of appreciation from the U.S. Department of Justice for such cooperation.
With respect to the March 2010 news article discussing an evangelist who sent bullets in Bibles to
Sudan, we are also aware of this incident. In February 2010, two shipments were tendered to FedEx
Express in San Francisco, California, for transportation to Nairobi, Kenya, apparently for onward
transportation to Sudan via a third-party carrier without any prior knowledge or involvement on our
part. We later learned that these two packages were subsequently seized by the Kenyan police while
someone was attempting to ship them from Kenya to Sudan through a different transportation
provider.
Cecilia D. Blye
January 14, 2011
Page 4
With respect to the website claims by the two purported Chinese freight forwarders, to our
knowledge, we do not have any business relationship with either company. Please be advised that we
are working with the U.S. and Chinese governments, including the U.S.-China Joint Commission on
Commerce and Trade, to investigate and shut down such unauthorized express delivery service agents
and websites established in China.
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Please discuss the materiality of your contacts with Iran, Syria and Sudan described in
response to the foregoing comments, and whether those contacts constitute a material
investment risk for your security holders. You should address materiality in quantitative
terms, including the approximate dollar amounts of any associated revenues, assets, and
liabilities for the last three fiscal years and subsequent interim period. Also, address
materiality in terms of qualitative factors that a reasonable investor would deem important
in making an investment decision, including the potential impact of corporate activities
upon a companys reputation and share value. As you know, various state and municipal
governments, universities, and other investors have proposed or adopted divestment or
similar initiatives regarding investment in companies that do business with U.S.-designated
state sponsors of terrorism. Your materiality analysis should address the potential impact
of the investor sentiment evidenced by such actions directed toward companies that have
operations associated with Iran, Syria and Sudan. |
Response: As discussed above in response to Comment No. 2, we have no contacts (other than
through the occasional, indirect and legal payment of overflight fees) with Iran or Sudan. With
respect to our limited contacts with Syria, in our fiscal year ended May 31, 2010, we generated
less than $1.6 million of revenue from shipments to Syria, and less than $500,000 of revenue from
shipments from Syria. This $2.1 million of revenue is inconsequential, representing approximately
0.006% of our $34.7 billion of total revenue for the year.
As discussed above in response to Comment No. 1, we serve Syria through third-party transportation
providers and do not have, nor have we ever had, any direct operations in that country. In
addition, we have put in place policies to ensure compliance with applicable laws relating to our
service to and from Syria, including the export controls administered by the Commerce Departments
Bureau of Industry and Security and the blocking requirements on designated persons administered by
the Department of the Treasury. Therefore, we do not believe this service creates any investment
risk for our stockholders.
Based upon these quantitative and qualitative factors and the fact that information regarding our
restricted service offerings to and from Syria has long been publicly available on our Web site and
we have received few investor inquiries in this area, we have seen no indication that such contacts
have had or will have any impact on investor sentiment or our reputation or share value. We are
certainly sensitive to the concerns of our investors, however, and we will continue to monitor
investor sentiment and activity in this area, as we routinely do in many other areas.
Cecilia D. Blye
January 14, 2011
Page 5
In sum, we do not believe that a reasonable investor would consider additional information about
our indirect services to and from Syria important or helpful in arriving at an investment decision.
Our contacts with Syria comply in all respects with U.S. law and foreign policy and are not
material to our financial condition or operating results. In sum, we continue to believe that they
do not constitute an investment risk for our stockholders, and therefore we continue to make no
reference to Syria in our filings with the Commission.
Please be advised that we understand our obligation to ensure the accuracy and adequacy of the
disclosure in our SEC filings, that our filings include all information required under the
Securities Exchange Act of 1934 and that we provide all information that investors require for an
informed investment decision.
Furthermore, FedEx acknowledges that:
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the company is responsible for the adequacy and accuracy of the disclosure in the
filings; |
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staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filings; and |
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the company may not assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of the United States. |
Please contact me if you have any additional questions.
Very truly yours,
FedEx Corporation
/s/ ROBERT T. MOLINET
Robert T. Molinet
Corporate Vice President
Securities & Corporate Law
RTM:mtf [853254]
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cc: |
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Frederick W. Smith
Christine P. Richards
Alan B. Graf, Jr. |