Another Indictment for Sale to Iran
January 2008
Two Louisiana men have been indicted after officials claimed that their company, Engineering Dynamics, Inc., sold CAD software to companies in Iran. They did not actually directly sell the software to Iran, but sold the software to a distributor in Brazil who then sold the software to companies in Iran.
The indictment is based on sales by the foreign distributor and most of the allegations relate to communications from the Brazilian distributor to Engineering Dynamics, Inc. relating to its Iranian sales. Most of the communication was only for the purpose of calculating and paying commissions that were due to EDI. There were merely a handful of communications from EDI to the Brazilian distributors and of those communications none ever indicated that EDI was directing the distributor to sell the goods to Iran.
The indictment does raise the question as to the reach of U.S. sanctions against Iran. If a U.S. company sells an item to a foreign distributor who later sells an item to a sanction country, the U.S. company is not liable for that sale unless there is evidence that the original US export was made for the purpose of reexporting the goods to the sanctioned country. This is a lesson to be learned for many companies, it is a good idea to obtain an undertaking from foreign distributors that the exporter’s products won’t be sold to a sanctioned country. This is especially important because it is very hard for a U.S. exporter to prove that the distributor was solely responsible for the sale and that it was made with no prior knowledge, participation or assistance of the U.S. exporter.
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