Feb
13
iPods to Iran: A How-To Guide
Posted by Clif Burns at 11:19 pm on February 13, 2008
Category: Iran Sanctions
A fascinating article in today’s Wall Street Journal details how Iran eludes U.S. sanctions on exports to that country. An interview with an Iranian merchant supplies an instructive example of how the merchant obtains iPod accessories from Tennessee-based Griffin Technology:
The owner of an electronics-goods store in affluent North Tehran, who asked to be identified only by his first name, Borhan, recently stopped using bank-to-bank wire transfers to pay for goods because of the restrictions. U.S. companies can’t ship most products into Iran. Borhan says he orders iPod accessories online from Griffin Technology in Nashville, Tenn., and has them shipped to a middleman — a UAE-registered company in Dubai that operates out of a post-office box.
A typical $10,000 order, packed in 10 boxes, costs as much as $800 to ship to Dubai, he says. He pays another $500 to the middleman to unpack the goods in Dubai and reship them to Tehran. To pay for the shipment, he says, he gives cash to an acquaintance in Tehran who sends the money to his brother in Dubai through an informal money-transfer service, or “hawala.” The brother then pays the middleman.
Commissions for the middlemen and for the hawala transfer come out to about $1,000. The payment system takes three days, instead of the 12 hours a bank-to-bank transfer would take. (A spokeswoman for Griffin says it is “unable to control where products end up in the marketplace.”)
The pat response from Griffin — “we can’t control where products end up” — just doesn’t cut it here. If the story of how the merchant ordered the product is true, this transaction doesn’t have red flags; it has red banners the size of a football field draped all over it. A transaction worth $10,000 shipped to a P.O. Box in Dubai is bad enough, but if Griffin checked the IP Address associated with the order it would almost certainly show that the order came from Iran. Game over.
Exporters can’t simply bury their heads, ostrich-like, in the sand and say they just have no idea where their products wind up and that they are “shocked, shocked to find that” their products were ultimately shipped to Iran or another sanctioned country.
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Copyright © 2008 Clif Burns. All Rights Reserved.
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9 Comments:
Clif: With respect, that’s a very within-the-beltway point of view. Griffin very likely hasn’t even heard of the EAR, let alone OEE’s “red flags”. The ICE RAIC in Nashville has barely heard of it, and doesn’t much care: Even the legacy Customs agents there are far more concerned with drugs and kiddie porn and avoiding being roped into immigration enforcement than with export controls. OEE’s WAFO, which has Tennessee in its territory, hasn’t held an outreach meeting or forum, in Nashville since 2003 and BIS cancelled its last scheduled seminar there. Although the local US FCS/ITA office offers its assistance to anyone who asks, few know to ask.
Mike, I agree that my viewpoint is one of an inside-the-beltway lawyer who counsels clients on compliance. And part of the purpose of this blog is to identify compliance issues to exporters who might not be aware of them.
That being said, I don’t think one could make a case that Griffin consciously flaunted the law based on what we know from the anecdote in the WSJ and that they may well be unaware of the EAR and red flags. That just means that, if true, Griffin shouldn’t be subject to a significant fine, although in theory they could be on the hook here for a $250,000 fine.
The comment of we don’t know where are products are going to end up really strikes a cord. It is clearlu stated in the EAR and ITAR that it is the duty of the exporter to know and inquire about who is receiving their products. They even give red flags to look for. ICE needs to step up and make an examples of exporters like these before one of these products comes back to bite us.
Article appeared in the Journal today? Bet the next knock on Griffin’s door will not be yet another Valentines flower delivery !!
We, the people who play in the compliance arena, expect everyone to at least know that the EAR and ITAR exist. You wouldn’t believe how many Griffin Techs there are in the land….
Ladyx – think of your comment as job security for all of the people who play in the compliance arena!
I just have to say oh my goodness.
Red flags all over that and then some.
annmarie you state “It is clearly stated in the EAR and ITAR that it is the duty of the exporter to know and inquire about who is receiving their products”. However, smugglers obviously lie and so, despite the law or any precautions a company might take, they still can not control where their products will ultimately end up. The point of the WSJ article is that everyone’s products are in Iran.
That somebody can still think that the UAE is not known for that sort of operation is rather “interesting”. Besides “ignorance of the law is no excuse” as we would say back home
