Ohio firm failed to catch its European partners- Iran trade despite warning signs

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MSI Aircraft Maintenance Services

MSI Aircraft Maintenance Services

Bank Mellat

Bank Mellat

A Cleveland, Ohio-based manufacturer failed to take steps in response to “multiple apparent warning signs” about its European trade partners, which exported the company’s goods to Iran, according to a settlement announced Monday by the U.S. Treasury Department.

UniControl Inc., which produces controls, airflow pressure switches, boiler controls and other instruments, made 21 shipments to two European companies between July 2013 and March 2017 that were subsequently re-exported to Iran, according to an enforcement notice posted by the Treasury’s Office of Foreign Assets Control (OFAC).

“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 said in the notice. “In this case, the multiple indicia of sanctions risks should have prompted a commensurate compliance response.”

UniControl, which operates through its divisions, Hays Cleveland and Cleveland Controls, agreed to pay USD 216,424 to resolve the case, and as of this writing did not have a public response posted on its website. The company voluntarily self-disclosed the violations, and OFAC deemed the matter non-egregious.

The company ended shipments to its European partners at the time of its self-disclosure, a mitigating factor in the settlement, OFAC said. For the final two shipments, which UniControl had actual knowledge were bound for Iran, one of the European partners returned the goods and was reimbursed, but the other disregarded the company’s request and sent the items to Iran.

UniControl has invested in and strengthened its compliance programs, the OFAC notice said. The company has hired outside counsel; required customers to sign end-user and end-use certificates, including from secondary and tertiary buyers of its products; and added a destination control statement to the footer of certain trade documents, according to OFAC.

The company had made a litany of failures over the course of several years, which led to the exports, according to the enforcement notice.

One of UniControl’s European partners said in 2010, early in the relationship, that it had a significant market in Iran for the company’s goods, asking whether it could serve as a supplier. UniControl rebuffed the opportunity but never took steps in subsequent years to ensure its goods weren’t sent to Iran, the notice said. A 2014 sales agreement between UniControl and a European trade partner explicitly listed Iran as a country to sell the goods, but UniControl never sought to update or amend the agreement to stop shipments from going there, OFAC said.

In May 2016, UniControl offered to ship directly to an end-user when its European trade partner cited internal issues and company holidays for delays. But when the partner rebuffed that offer, UniControl did not raise concerns or try to reach the ostensible end-user of its goods, OFAC said.

Some of UniControl’s actions were more direct, according to OFAC. Corporate management and employees attended several European trade conferences, and met with Iranian nationals at a trade partner’s booth without questioning the partner about the Iranian interest in its products. At a 2017 conference, UniControl met one-on-one with an Iranian end-user and a partner.

And in a Feb. 23, 2017, email, a European partner requested UniControl remove a “Made in USA” label from switches slated for export to the European partner, who explained that an Iranian end-user “may have problems with the stated origin of the products.” The request raised questions within UniControl, prompting the company to seek guidance from outside counsel, but it nonetheless sent two subsequent shipments for re-export to Iran, OFAC said.

The OFAC settlement with UniControl comes days after a German aircraft maintenance services firm settled with an export controls office of the U.S. Commerce Department for transshipping U.S.-origin parts nearly a decade ago to blacklisted Iranian airline Mahan Air.

MSI Aircraft Maintenance Services International GmbH & Co., based in Ruesselsheim, Germany, ordered the aircraft parts in September 2011, telling the seller that they were bound for Thai and Afghan airlines, according to an order issued by the Commerce Department’s Bureau of Industry and Security (BIS). After receiving the parts across three shipments between October 2011 and April 2012, MSI Aircraft transferred them in July 2012 to Mahan Air in Tehran, BIS said in the order. MSI Aircraft was hit with a USD 51,921 civil penalty and a suspended three year denial order, during which time it is required to comply with U.S. investigations.

Mahan Air has been under a U.S. export denial order from BIS since 2008, and under sanctions since 2011 over its support of Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF).

The U.S. has sanctioned multiple companies over the years for providing services to the airline. Prosecutors have filed charges in various schemes to export parts to Mahan Air, and the Treasury in 2019 warned of risks emanating from Iran’s civil aviation sector, including from Mahan Air. In recent weeks, the airline has carried to Iran hundreds of thousands doses of coronavirus vaccines from Russia and China, according to media reports.

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