Delivery Failure error message followed by delivery success

Question

Today, while using Outlook, I started receiving this error message when emailing a work colleague with the same domain name--"Delivery has failed to these recipients or groups"--but he reports that he received my email (and doesn't receive the same error message when emailing me). Note that I'm not receiving this error when emailing any other work colleagues, they all report receiving my email, and I've emailed my work colleague before without a problem.

My work colleague emailed me to report that he gets an error message if he includes his email address with our company domain name in the CC or BCC line -but then the email comes through to the recipient within a second after the error message.

How can we correct this?

Here's the full error message (with personal info removed):

Delivery has failed to these recipients or groups:

Colleague's Name (his email address with domain the same as mine)
Your message wasn't delivered because the recipient's email provider rejected it.

Diagnostic information for administrators:

Generating server: MN2PR17MB3741.namprd17.prod.outlook.com
colleague's email address with domain the same as mine
Remote Server returned '550 5.7.520 Access denied, Your organization does not allow external forwarding. Please contact your administrator for further assistance. AS(7555)'
Original message headers:

Received: from SA1PR17MB5384.namprd17.prod.outlook.com (2603:10b6:806:1db::17)
by MN2PR17MB3741.namprd17.prod.outlook.com (2603:10b6:208:20c::14) with
Microsoft SMTP Server (version=TLS1_2,
cipher=TLS_ECDHE_RSA_WITH_AES_256_GCM_SHA384) id 15.20.4930.21; Mon, 31 Jan
2022 18:24:16 +0000
Received: from SA1PR17MB5384.namprd17.prod.outlook.com
([fe80::3c8e:908a:80f0:446d]) by SA1PR17MB5384.namprd17.prod.outlook.com
([fe80::3c8e:908a:80f0:446d%5]) with mapi id 15.20.4930.021; Mon, 31 Jan 2022
18:24:16 +0000
From: My name <my email address>
To: Colleague's name <his email address>
Subject: Re: Testing Email Addresses
Thread-Topic: Testing Email Addresses
Thread-Index: AQHYFs8v1UTte7dfuk2icfq3hFy7H6x9cRzogAAAjek=
Date: Mon, 31 Jan 2022 18:24:15 +0000
Message-ID: <@SA1PR17MB5384.namprd17.prod.outlook.com>
References: <@SA1PR17MB5384.namprd17.prod.outlook.com>
<@DM5PR1701MB1897.namprd17.prod.outlook.com>
In-Reply-To: <@DM5PR1701MB1897.namprd17.prod.outlook.com>
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Answer 1

Hi @George Weinstein

Could you please tell what email server are you using? Are you using exchange online or on-prem or hybrid?

And I noticed the message header include this: X-MS-Exchange-ForwardingLoop: colleague's email address;2b46e520-5364-4100-a28c-8cd0627d5a65
We can learn from the official document here:

This header is added when forwarding happens due to ForwardingSmtpAddress or ForwardingAddress properties set on a mailbox. In the case where the mailbox also has DeliverToMailboxAndForward:$true, when recipient A forwards a message to recipient B, there will be two copies of the message. One to the original recipient A and the other to the forwarded recipient B. The value of the header in the message to the forwarded recipient B will contain <SmtpAddressOfOriginalRecipient>;<TenantGuidOfOriginalRecipient>. The header looks like this:

X-MS-Exchange-ForwardingLoop: JDoe@Company portal .com;53bb1ab7-edea-4e35-8c3f-e395807764bf

Please check if the user defined the rule for forwarding e-mails that he receives, this may be the cause for this issue.
Below is a similar thread discussed the similar issue for your reference: Remote Server returned '550 5.7.520 Access denied, Your organization does not allow external forwarding.

Issue: You tried to send one email to one user in your organization, when did it, you got this non-delivery report in your Inbox, in the meantime, this user got all messages (including your sent email as well as that same non-delivery report).

Cause: Based on my experience, one scenario is that, this user set a redirect rule, or met one org-wide redirect rule.
To further confirm this, I recommend you contact admin, let him run message trace in Security & Compliance center, find all related entries in this mail flow chain: https://learn.microsoft.com/en-us/microsoft-365/security/office-365-security/message-trace-scc?view=o365-worldwide

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