Trends In International Litigation : International Business Lawyer & Attorney : Ed Joffe : Joffe & Joffe Law Firm : Miami, Florida Global Customs & Trade Issues

Balli Aviation Ltd., a subsidiary of the United Kingdom-based Balli Group PLC, was sentenced today in the U.S. District Court for the District of Columbia to pay a $2 million fine and to serve a five-year corporate period of probation after pleading guilty on Feb. 5, 2010, to a two-count criminal information in connection with its illegal export of commercial Boeing 747 aircraft from the United States to Iran.

Consistent with the plea agreement, U.S. District Judge Ellen Segal Huvelle sentenced Balli Aviation Ltd. to a maximum fine of $2 million and corporate probation for five years. The $2 million fine, combined with a related $15 million civil settlement among Balli Group PLC, Balli Aviation Ltd., the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), is one of the largest fines for an export violation in BIS history.

Under the terms of the related civil settlement, Balli Group PLC and Balli Aviation Ltd. have agreed to pay a civil penalty of $15 million, of which $2 million will be suspended if there are no further export control violations. In addition, Balli Aviation Ltd. and Balli Group PLC are denied export privileges for five years, although this penalty will be suspended provided that neither Balli Aviation, Ltd. nor Balli Group PLC commits any export violations and pays the civil penalty. Under the terms of the settlement, Balli Group PLC and Balli Aviation, Ltd. will also have to submit the results of an independent audit of its export compliance program to BIS and OFAC for each of the next five years.
According to count one of the criminal information filed with the court, beginning in at least October 2007, through July 2008, Balli Aviation Ltd. conspired to export three Boeing 747 aircraft from the United States to Iran without first having obtained the required export license from BIS or authorization from OFAC, in violation of the Export Administration Regulations (EAR) and the Iranian Transactions Regulations. Specifically, the information states that Balli Aviation Ltd., through its subsidiaries, the Blue Sky Companies, purchased U.S.-origin aircraft with financing obtained from an Iranian airline and caused these aircraft to be exported to Iran without obtaining the required U.S. government licenses. Further, Balli Aviation Ltd. entered into lease arrangements that permitted the Iranian airline to use the U.S.-origin aircraft for flights in and out of Iran.

Count two of the criminal information states that Balli Aviation Ltd. violated a Temporary Denial Order (TDO) issued by BIS on March 17, 2008, that prohibited the company from conducting any transaction involving any item subject to the EAR. Starting in or about March 2008 and continuing through about August 2008, Balli Aviation Ltd. willfully violated the TDO by carrying on negotiations with others concerning buying, receiving, using, selling and delivering U.S.-origin aircraft which went to the Export Administration Regulations.

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Steve Stecklow of The Wall Street Journal reports that  Iran's state shipping company has changed the names and ownership of most of its vessels to evade U.S. sanctions.  The Treasury Department has yet to update the blacklist that U.S. companies use to verify they are in compliance, according to a new report.

As a result, some firms are at risk of doing business with the company, Islamic Republic of Iran Shipping Lines, despite a ban that has been in place since 2008, says the report by the Wisconsin Project on Nuclear Arms Control, a Washington-based nonprofit watchdog.
The findings raise questions about the effectiveness of some of Washington's sanctions, which are aimed at pressuring the regime in Tehran not to build nuclear weapons—something Iran denies it is doing.

OFAC Director Adam J. Szubin said his agency "deliberates carefully about the timing of its public designations," adding, "We may choose to delay a public identification to allow for additional surveillance or to secure cooperation with foreign allies."  Mr. Szubin also said the Iranian company's actions signaled the sanctions were having an effect. "Since its designation [by the Treasury], IRISL has taken a number of steps to mask its commercial activities and disguise the ownership of its ships. IRISL's attempts to deceive third parties are consistent with its past practices, and a measure of the impact that U.S. sanctions have had."

The Treasury Department added IRISL, its vessels and related entities, to a list of blacklisted Iranian companies in September 2008, accusing it of shipping military-related cargo, including a chemical used in missiles, to Iran's defense ministry, through deceptive techniques. IRISL's cargoes are subject to inspection under a U.N. Security Council resolution. Tehran also faces sanctions by the U.N. and the European Union.
 

The Wisconsin Project report says IRISL has since renamed at least 80 of the 123 vessels in its shipping fleet—often dropping the word "Iran"—but that Treasury's current published list used by U.S. companies continues to include the old names. IRISL's vessels still carry the same unique ship-identification numbers required of all ships, but these numbers don't always appear on cargo documents, the Wisconsin Project reported. The report also states that IRISL, in another apparent sanctions-avoiding technique, has been transferring ownership of its ships to shell companies that don't appear on OFAC's list.
 

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The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) have amended the Iranian Transactions Regulations, Sudanese Sanctions Regulations, and Cuban Assets Control Regulations to ensure that individuals in these countries can exercise their universal right to free speech and information to the greatest extent possible. The amendments add general licenses authorizing the exportation of certain personal Internet-based communications services – such as instant messaging, chat and email, and social networking – to Iran, Sudan and Cuba. The amendments also permit the exportation of related software to Iran and Sudan.

The new general licenses authorize exports from the United States or by U.S. persons to persons in Iran and Sudan of services and software related to the exchange of personal communications over the Internet, including web browsing, blogging, email, instant messaging, and chat; social networking; and photo and movie sharing. Today's amendments also provide that specific licenses may be issued on a case-by-case basis for the exportation of services and software used to share information over the Internet that not covered by the general licenses.

The sanctions regulations on Cuba also have been amended to include a similar authorization and statement of licensing policy for the exportation of such services to Cuba. Unlike Iran and Sudan, the exportation of goods and technology, including software, to Cuba is separately licensed or otherwise authorized by the Commerce Department.

"Consistent with the Administration's deep commitment to the universal rights of all the world's citizens, the issuance of these general licenses will make it easier for individuals in Iran, Sudan and Cuba to use the Internet to communicate with each other and with the outside world. Today's actions will enable Iranian, Sudanese and Cuban citizens to exercise their most basic rights," said Deputy Treasury Secretary Neal Wolin.
 

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