FedEx's lawsuit against the Trump administration stems from its inability to police hundreds of thousands of shipments for regulatory violations, according to its CEO.
"We contacted the Department of Commerce today and told them that the increasing use of restrictions on exports and imports by the Commerce Department in various geopolitical and trade disputes creates just an impossible burden on FedEx and common carriers," he said.
"Because, under the Department of Commerce's regulations, we are expected to be the policeman for these export and import controls - and there are about 1,100 entities now on this list and five were just added last Friday.
"We're required under the regulations of the department to certify that the shipper - who may or may not be telling the truth - is in compliance with those export regulations. Despite the fact that we handle 15 million shipments a day, if we make an error on any one of them... we can be fined $250,000 per piece."
In a statement released earlier Monday, the company further explained its decision to sue.
"As a company that is committed to complying with all laws and regulations in the countries we serve, FedEx strongly supports the objectives of U.S. export control laws," the statement read.
"FedEx is a transportation company, not a law enforcement agency."
Shortly after Smith's interview, Commerce Secretary Wilbur Ross told Fox News: "The regulation states that common carriers cannot knowingly ship items in contravention of the entity list or other export control authorities. It does not require a common carrier to be a policeman or to know what’s in every package."
China’s foreign ministry spokesman Geng Shuang said the shipping company should offer an explanation after FedEx released a statement saying an “operational error” was to blame for the package not being shipped to the U.S., Reuters reported.
On Friday, PCMag said FedEx refused to ship a package that reportedly contained a Huawei phone. The parcel, which was shipped from Great Britain and bound for the U.S., was ultimately returned after spending about five hours in Indianapolis, Indiana.
Smith reacted to the situation in his interview with Baier.
"Huawei is just emblematic of this problem," Smith claimed.
"The Huawei incident concern two packages - two out of 15 million - where a 30-year employee - a great FedEx team member - made an error and diverted two packages for a compliance audit. We found out about it. We returned them to the customer. We apologized.
"There was third one in the U.K., where a relatively new teammate - because the box said Huawei on it - misinterpreted the regulations and didn't accept the package."
Smith said the issue was emblematic of the "confusing situations" that can arise from the rare shipment that, "becomes an international cause celebre."
"It's impossible," he said.
Fox Business' Katherine Lam contributed to this report.