BIS Focuses On Freight Forwarders and Trade Intermediaries Regarding Illegal Exports To Iran
In an October 2, 2009 statement to the Senate Banking, Housing and Urban Affairs Committee, the acting Under Secretary of the Department of Commerce Bureau of Industry and Security (BIS), Daniel O. Hill, elaborated upon his agency’s role in enforcing the U.S. embargo on Iran and his agency’s enforcement efforts. As some of you already know, BIS works with the Department of State and the Department of Treasury, Office of Foreign Assets Control (OFAC), to implement the embargo on Iran that dates from 1995. All exports to Iran are subject to the Export Administration Regulations enforced by BIS, as well as the OFAC Iranian Transactions Regulations. OFAC is the lead agency in administering the embargo, which includes broad restrictions on financial transactions with Iran. Both agencies have jurisdiction over the granting of export licenses.
All of this leads one to a logical question: What, if anything, can be exported to Iran? Why does licensing matter if there is a general policy that exports of U.S. goods are prohibited? The answer is that, for the most part, medicines, medical devices and agricultural products may be exported to Iran under a license. This is an exception to the embargo. BIS publishes a representative listing of medical devices eligible for export to Iran at the link below. The items listed by BIS on its site are examples, and the medical device exception can cover a broad array of goods. It should come as no surprise that there is a strong demand in Iran for U.S. medical goods, as U.S. companies are typically at the forefront of research, development and production in the field. Iran is a market that may be untapped and unexplored by companies with products eligible to receive Iran export licenses.
In the end, however, the vast majority of U.S. goods are prohibited for export to Iran. It is a violation of the export control laws to export goods from the U.S. with knowledge that they will go to Iran. U.S. exporters cannot avoid the Iran embargo by shipping through a middleman. It may also be illegal to export if a transaction raises “red flags” due to its inherently suspicious nature, such as when it appears that there is a significant risk of diversion from an authorized end user or location, such as a company in Dubai, to a prohibited end user in Iran. Notably, of BIS’s export control investigations, 29% involve Iran.
Lastly, Under Secretary Hill stated that BIS “focus[es] on key companies such as freight forwarders, integrators, air cargo carriers, and shipping lines with regard to the embargo on Iran.” OFAC, too, is ramping up enforcement against trade intermediaries. Both agencies are, in the end, attempting to create a culture of compliance within intermediary companies. Knowledge of the trade laws is key in this regard. Unfortunately, as we are taught when we are young, “ignorance of the law is no excuse,” and the same view is held by BIS and OFAC, so when a low-level employee without export compliance training approves a prohibited shipment or one that is inherently suspicious, the resulting violation can lead to penalties for the company as a whole.
