An Ohio-based manufacturer will pay $216,464 for apparent U.S. sanctions violations that occurred when its European trade partners re-exported its products to Iran.
UniControl, a manufacturer of process controls and instrumentation, agreed to pay the fine as part of a settlement announced Monday by the Office of Foreign Assets Control (OFAC). According to OFAC, UniControl sent 21 shipments of air pressure switches worth $687,189 to several European trade partners from 2013-17 but failed to prevent those partners from re-exporting the switches to Iran. Before sending two shipments in 2017, UniControl employees knew the end users were located in Iran, OFAC said.
While the fine in the case could have exceeded $5 million, OFAC said there were several mitigating circumstances. UniControl self-reported the violations, took quick and decisive actions to end the relationship with the trade partners involved in the violations, cooperated with the investigation, and had no history of previous violations.
OFAC called the violations “non-egregious.”
Compliance takeaways: According to the settlement, UniControl knew of Iranian interest in its air pressure switches as far back as 2010, when one of its European trade partners indicated it would like to re-export them to Iran. UniControl rebuffed the offer but “failed to take appropriate steps in response to multiple warning signs” the trading partner later did so anyway.
A 2014 contract between UniControl and one of its European trade partners explicitly included Iran as part of the authorized sales territory. UniControl never updated the contract or made it clear such sales were prohibited, OFAC said.
There were other red flags as well, including its trade partner rebuffing offers to ship UniControl products to end users to overcome delays; interest in UniControl products by Iranian buyers at several trade shows, including at least one meeting between company sales staff and Iranian representatives; and a 2017 request by a trade partner to remove the “Made in USA” labels from the switches the partner intended to sell to Iranian customers.
Remediation: UniControl severed its relationship with two European trade partners when it disclosed the violations to OFAC and attempted to claw back two shipments headed to Iran. One partner agreed to return the switches, and UniControl issued that partner a rebate; another partner refused to return the switches and re-exported them to Iran. UniControl forfeited approximately $66,900 in payment for those switches.
The company has hired outside counsel to strengthen its sanctions compliance program; rewritten contracts to explicitly state its products should not be sold to prohibited end users; required end user certificates from its buyers on all sales of re-exported products; and added a destination control statement on a number of trade documents.
Quote: “This enforcement action highlights the importance of identifying and assessing multiple warning signs that indicate a foreign trade partner may be re-exporting goods to a sanctioned jurisdiction,” OFAC wrote in the settlement. “In this case, the multiple indicia of sanctions risks should have prompted a commensurate compliance response. In particular, U.S. businesses should seek transparency when dealing with foreign trade partners and follow up on activities that raise concerns or suspicion.”