China and India are selling more and more (in addition to Middle Eastern countries) to Iran. On February 17, there was another guilty verdict for transshipping to Iran. This time it was a New York man who exported computer equipment to Iran through the UAE and was sentenced to 18 months in federal prison, along with a $1.25 million forfeiture of profits and loss of exporting privileges for ten years. Although these cases are arguably not the same as a U.S. company whose products inadvertently end up in Iran, U.S. government regulators a concerned that U.S. products are getting into Iran in increasing numbers via China and India. Thus, the U.S. government enforcement divisions are focusing on these issues and are expecting U.S. entities to ramp up their due diligence. I suggest the following due diligence proactive efforts:
- Screen parties to see if they have Iranian subsidiaries. You can’t just stop with the SDN list.
- Ask whether the goods will be exported and if so to where. Document this correspondence or have a checklist.
- Obtain certifications from your buyers.
- Add re-export prohibitions in your contracts.
- Make sure you have such language on your invoices, etc. even if not required by Commerce or State because you are sending EAR99 items.
- Run reports (like Dun & Bradstreet or a Commerce Department company profile) on your buyers and file the results.
- Update your compliance manual regularly and supplement your training with these new concerns.
Regulators expect you to investigate your customers. I know this seems like a burden for smaller companies but you can get your compliance program going without spending lots of money and such prevention will save you money in the long run…and you will sleep better at night with one less thing to worry about.