BIS fines German company & issues 3 years suspended export ban for Iran sanctions violations
The Bureau of Industry and Security (BIS) suspended export privileges for a German aircraft maintenance company MSI Aircraft Maintenance Services International GmbH & Co. (MSI) and fined it a civil penalty of $51,921 for procuring U.S. parts and components for sanctioned Iranian airline Mahan Airways.
From September 2011to July 2012, MSI conspired with an affiliated German Company (German Company No. 1) and Mahan Airways (Mahan), to procure, for or on Mahan’s behalf, items that were subject to the Export Administration Regulations (EAR) including U.S.-origin aircraft parts and components.
MSI, German Company No. 1 and Mahan sought to export or reexport, U.S.-origin reservoir and valve assemblies, items subject to the EAR and valued at approximately $51,921 to Iran via transshipment through Germany.
The items also were/are subject to the Iranian Transactions Regulations (ITR), which are administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC)
Interestingly, this is a case of an EAR99 item (lowest export classification risk) that could not be shipped to Iran.
The EAR requires that no person may export or reexport an EAR99 item that also is subject to the ITR without prior authorization from OFAC. No authorization was sought or obtained from OFAC for the export in this transaction.
When questioned by the seller about the end-user for the items, an MSI employee provided the names of a Thai and Afghan airlines. The reservoir and valve assemblies were subsequently exported from the United States to MSI in Germany in three shipments. Additionally, the Bills of Lading and other invoices further identified the items, which were listed by serial number, as U.S.-origin and/or having been shipped from the United States.
MSI’s managing director further addressed a correspondence to Mahan’s managing director, indicating that MSI and German Company No. 1 were both suppliers for Mahan. The letter, which was on joint MSI/German Company No. 1 letterhead, pointed out that both companies procured and/or repaired aircraft parts on Mahan’s behalf.
By engaging in this activity, MSI violated Section 764.2(d) of the EAR.
MSI was ordered to pay back the same amount it has earned from the sale $51,921 which wasn’t so damaging by itself. But MSI will also be subject to a suspended 3-year export ban, which may be more problematic. A denial of export privileges prohibits a company from participating in any way in any transaction subject to the EAR. Furthermore, it is unlawful for other businesses and individuals subject to the EAR to participate in any way in an export transaction subject to the EAR with a denied person.
The suspended ban will be waived after a 3 years probationary period provided that MSI: (i) complies with US export controls and sanctions laws; (ii) continues to cooperate with BIS and OFAC; (iii) adheres to reporting requirements to notify the agencies of any further violations; and (iv) makes full and timely payment of the penalty. (See order, settlement agreement and charging letter here.)
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