The United States Department of Justice (DOJ) announced yesterday that it had indicted three individuals for violating U.S. sanctions laws against Iran. These individuals are accused of purchasing computers in the United States and exporting them to Dubai for ultimate reshipment to Iran. Further, it is alleged that these persons knew the computers were destined for Iran.
According to the press release, one of the three individuals was indicted on 27 counts, and if charged on all accounts, could face up to 20 years in prison and $1 million in fines for each of the 13 IEEPA counts, and five years imprisonment for each of the false statement counts.
This case helps debunk the common misconception that the shipment of goods to Iran through third countries is acceptable. The U.S. sanctions regimes targets the underlying transactions and effective intention. Additionally, activities like structuring transactions with an eye to circumvent regulations, or effectively shifting opportunities to non-U.S. persons all constitute violations of U.S. laws.
It should be noted that even merchants in third country jurisdictions (such as Dubai) that reexport “dual use” (i.e., goods having civilian and military use) goods that are export-controlled under U.S. laws can also be penalized for reshipping such goods to destinations like Iran. In addition to various civil and criminal penalties, they can also be designated on various Department of Commerce lists, which can in effect make doing business very difficult for them, even beyond the United States (e.g., merchants in third countries may not be willing to work with them, even on matters that have no connection to Iran, simply because the company is on a U.S. list).
Although this is a case of conspiracy, it brings to attention the general complexity of international business. This case aside, very small businesses (including sole proprietorships) in the United States often enter into international commercial transactions not realizing the depth of their legal obligations. Persons seeking to engage in international business should always ensure first and foremost that what they intend to do is legal under all applicable laws and regulations, and if so, if any licenses or permits are required, that their business structure receives optimal tax treatment in a legally compliant manner, and importantly, that they are contractually protected (from everything such as U.S. laws with extra-territorial protection all the way down to clauses describing how they will be compensated).