Iran

Who would have ever thought: export controls in Mother Jones? Here is a summary of what Mother Jones had to say:

The latest statistics on US arms sales to Iran is beginning to raise a lot of eyebrows and questions. Investigators at the US bureau of Immigration and Customs Enforcement (ICE) have some answers to the numerous questions but even the answers seem to raise even more questions.

We are told by the Department of Homeland Security that dealers around the world are recruiting US military and intelligence officials to assist them in exporting restricted military commodities to neutral third countries-when they know the final destination will be a sanctioned country, such as Iran.

Last year The Justice Department appointed Steven W. Pelak to serve as the first-ever National Export Control Coordinator. The position was created as a stepping stone for getting a hold of the export problem at hand. In essence, Pelak will be a US attorney that will only try US export cases. Read More

The Associated Press recently outlined seven years of US government trade data and announced that the value of US exports to Iran has rose from close to $8 million in 2001 to nearly $150 million last year. Despite the only exceptions for exports being agricultural, medical and humanitarian it seems that cigarettes, bull semen, bras, golf carts, fur clothing, sculptures, perfume and musical instruments all fall under “humanitarian” exceptions.

What’s worse is that the sanctions we put on Iran are suppose to irritate their military efforts, but somehow they have received at least $13,000 in “aircraft launching gear and/or deck arrestors”. Although this seems like a small amount, it actually is far from it. Older military items are often sold for near pennies. Before Bush signed legislation prohibiting the Pentagon from selling leftover F-14 parts, they would sell the parts that once costs the US roughly $38 million, and would now sell them for around $2,000 to $4,000 to domestic buyers. Read More

In 2003 Omega Engineering Incorporated of Connecticut was charged with 18 violations by BIS. In April 1997 the company attempted to get a license to export laboratory equipment including load cells, load bolts, strain gauges and related parts to Pakistan. The export license was denied; Omega appealed the denial, which was eventually rejected. Then Omega exported the items anyway, and got caught.

Beginning in June 2007 the company sent the laboratory equipment to Newport, Germany where it was then shipped to Pakistan with Omega’s full knowledge. Charges 1-17 are all violations of false statements on Shipper’s Export Declarations, Omega filed SED’s filing that Germany was the ultimate destination when it knew that Pakistan was the actual ultimate destination. The final charge was a violation of 764.2(e), the company acted with knowledge that they were committing a violation when they continued to export the goods after their export license was denied. Read More

Hassan Saied Keshari, owner of Kesh Air International and Traian Bujduveanu, owner of Orion Aviation Corp, both face up to 20 years in prison and fines up to $1 million. The two men, Keshari from California and Florida resident Bujduveanu were indicted for their purchasing and selling US aircraft parts to Iran on numerous occasions.

Records indicate that Keshari would receive email orders from buyers in Iran, he would then request quotes from Bujduveanu and the two worked together to send the shipment to a company in Dubai who would then forward the parts to Iran. Overtime the pair shipped US parts for the CH-53 military helicopter, the F-14 Tomcat fighter jet, and the AH-1 attack helicopter, all notoriously used by the Iran military.

Because all parts were manufactured in the US they are designated as “defense articles” on the US munitions list requiring any exports to be licensed, especially to Iran. Keshari and Bujduveanu have been indicted on 11 counts of violating the International Emergency Economic Powers Act (IEEPA), the United States Iran Embargo, and the Arms Export Control Act. The charges are as follows:

• Charge 1: Conspiracy to export goods to Iran
• Charges 2 through 7: Exporting military aircraft parts from the US to Iran
• Charges 8 through 9: Exporting defense articles from the US to Iran by way of Dubai, United Arab Emirates
• Charge 10: Making false statements by misrepresenting the contents of a package containing military aircraft parts being exported from the US

More information:

• DOJ News Release: Two Munitions Dealers Indicted on Charges of Exporting Military Aircraft Parts to Iran

The Department of State has issued to Congress that Cuba, Eritrea, Iran, North Korea, Syria, and Venezuela are not fully cooperating with the United States antiterrorism efforts. John D. Negroponte, Deputy Secretary of State has issued the decision to retain the certification of North Korea pursuant to Section 40A of the Arms Export Control Act.

There will be an ongoing review of the designation of North Korea and the outcome of the review may warrant a new assessment and possible change in certification.

More information:

• Federal Register Notice

Engineering Dynamics of Kenner LA has been fined $132,791.39 for export violations. (Editor’s note: I would love somebody to tell me how they came up with the 39 cents. — John Black) The company has been exporting an engineering software program from the US to Iran via Brazil without authorization from the Office of Foreign Assets Control (OFAC) from March 1995 into February 2007 to export the software until the US Department of Treasury discovered the illegal exports.

Over the years the company and its co-conspirators would market, sell, and service the engineering software program to their Iranian clients through another conspirator in Brazil. Engineering Dynamics will not be suspended from export transactions as long as their entire penalty is paid as agreed upon.

More information available at:
BIS - e2044.pdf (PDF)

French corporation, Cryostar France pleads guilty to conspiracy, illegal export, and attempted illegal export of Cryogenic Submersible Pumps to Iran. Cryostar has several businesses worldwide where they specialize in the design and manufacturing of cryogenic equipment. They were sentenced in the US to a criminal fine of $500,000 and corporate probation of two years.

Cyrostar was a middleman between Ebara International Corp., Inc. and “TN” a French company with a US subsidiary. Cryostar was to purchase the pumps from Ebara and then resell them to “TN” who would then forward the pumps to Iran. Cryostar falsely indicated that the final purchaser was the French company “TN” who would install the pumps in France, when all parties were in agreement that the pumps would go to Iran. The three companies created false purchase orders, and purchased as many component parts from non-US suppliers as possible to avoid any and all questions from US suppliers and to conceal their conduct. No export licenses were ever obtained for any of the items.

In 2004 penalties were imposed on Ebara and its former CEO Everett Hylton. At that time Ebara pled guilty to criminal violations and agreed to an administrative settlement, with combined fines of over $6.4 million dollars while Hylton agreed to personally pay $109,000. Ebara and Hylton’s schemed together to violate the embargo on Iran after some people in Ebara initially stopped an Ebara sale to Iran. Ebara falsified some documents and removed “made by Ebara” markings from certain items to evade US restrictions on Iran.

More information:

• DOJ Announces $500,000 Fine for Illegal Exports to Iran (WorldTrade Interactive)
• For the 2004 penalties: BIS News Release

The Bureau of Industry and Security has issued an order suspending all export privileges for 180 days for several businesses associated with Balli Holdings of the UK. The companies commencing in the UK, Armenia and Iran all knowingly violated the Export Administration Regulations.

The companies are charged with:

• re-exporting three US origin aircraft to Iran and had prepared to send an additional three before being caught;
• making false statements to the BIS in an attempt to conceal the end-user of the aircrafts;
• failing to comply with a BIS order to return the three additional aircraft

More information:

• US Sanctions British, Armenian firms for Iran exports (Iran Focus News)

Laura Wang-Woodford, director of Monarch Aviation Pte, Ltd. (“Monarch”) of Singapore was arrested and has been arraigned on a 20-count federal indictment. Wang-Woodford is accused of exporting components for Chinook military helicopters from the US to Singapore and then to Iran in violation of the International Emergency Powers Act, after identifying them as commercial components.

Ms Wang-Woodford and her husband ran Monarch, which has been importing and exporting military and commercial aircraft components for more than 16 years. Brian Woodford remains fugitive since his wife was arrested on December 23, 2007 at San Francisco International Airport.

The indictment charges consist of charges of:

1. Conspiring to export aircraft parts to Iran
2. Several counts of exporting aircraft parts to Iran against the IEEPA
3. Conspiring to export defense articles without a license
4. Exporting and attempting to export defense articles without a license in violation of the AECA and ITAR
5. Conspiring to launder the proceeds of the unlawful export of defense articles
6. Illegal export of US military aircraft components
7. Falsely identifying components in export documents filed to the US government
8. Conspiring to transmit funds from Singapore to Cincinnati, Ohio with the intent to promote the illegal export scheme in violation of the federal money laundering statutes

Read More

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.

More information:

Export Control Blog

In 2006, the U.S. National Security Strategy stated that the United States was facing challenges from Iran and its efforts and involvement in international terrorism. The GAO has since reviewed U.S. sanctions against Iran and the impact it has had and reviewed numerous data relating to Iran’s economy and energy sector.

After conducting research, the GAO concluded that Congress should consider requiring the National Security Council and key agencies to:

1. Assess data on Iran sanctions and complete an overall baseline assessment of sanctions
2. Develop a framework for ongoing assessments
3. Periodically report the results to Congress

Officials did report that U.S. sanctions involving Iran has slowed foreign investment in the country’s petroleum sector, however other evidence indicates that the extent of the reported impact. Read More

Well, maybe the US Iran embargo will be successful in cleaning up trash on America’s highways.

Juan Sevilla has been found guilty of knowingly and willfully selling a United Computer Inclusive Hydraulic Floor Model Testing Machine to Iran. The machine tests the hardness of plastics, polymers and many metals and composites. Beginning January 16, 2008 Sevilla is suspended from any exporting transactions until December 5, 2011. He has been sentenced to home confinement for six months and probation for five years. Sevilla was also ordered to serve 100 hours community service and ordered to pay a $10,000 fine.

More information:

Federal Register Notice

On December 19, 2007, the Department of State issued an amendment to the International Traffic in Arms Regulations concerning exports and sales which were prohibited by United Nations Security Council embargoes. The amended list will add countries subject to such embargos. The current list includes: Cote d’Ivoire, Democratic Republic of Congo, Iraq, Iran, Lebanon, Liberia, North Korea, Rwanda, Sierra Leone, Somalia, and Sudan.

More information:

Federal Register 72FR71575.pdf (PDF)

Mine Safety Appliances Company in Pittsburgh, PA has been charged with violating the Export Administration Regulations and forced to pay a fine of $470,000. The company is charged with committing 107 violations beginning as early as May of 2001.

During 71 separate occasions Mine Safety Appliance Company reexported various safety equipment items that were subject to the Regulations, from the United Arab Emirates to Iran without the required U.S. government authorizations. Then on 31 other occasions the company reexported controlled items to the same location without the required licenses from the BIS.

Mine Safety Appliance Company also reexported safety equipment items subject to the regulations from the United Arab Emirates to Syria without the required Department of Commerce licenses on 5 separate instances.

The Pittsburgh Company will not be debarred as long as their fine is paid as agreed.

More information:

BIS Order (e2025.pdf) (PDF)

Proclad International Pipelines, Ltd. has been fined $100,000 for export violations. The Scotland-based company manufactures pipes used in the oil and gas, power generation, energy, aerospace, petro-chemical and marine engineering industries world wide.

In 2004 the company attempted to export nickel alloy pipes, which are subject to both the Regulations and the Iranian Transactions Regulations. The pipes must have required authorization to be exported from the United States to Iran through the United Arab Emirates. The pipes were declined by a freight forwarder because there was no evidence that the goods were authorized by the U.S. Government to be shipped to Iran. This act alone caused Proclad to be charged with four violations including conspiracy to violate the regulations.

During March and April of 2004 Proclad was in the course of an investigation subject to the Regulations, they were found to be making false statements and/or representations to the BIS’s Office of Export Enforcement concerning the nickel alloy pipes causing two more charges.

Over the course of the entire investigation Proclad was charged with 10 violations:

• Causing, Aiding or Abetting a Violation of the Regulations
• Conspiracy to Violate the Regulations
• Ordering Nickel Alloy Pipes with knowledge that a violation of the Regulations is Intended to Occur
• Taking Actions with the Intent of Evading the Regulations
• Misrepresentation and Concealment of Facts

The company was not only fined the civil penalty of $100,000 but has also been debarred for seven years from any transactions involving any commodity, software or technology exported or to be exported from the United States that is subject to the Regulations. Proclad, its officers, representatives, agents, and employees will be considered “Denied Persons.”

More information:

BIS Order (e2021.pdf) (PDF)

Proclad Website