ENFORCEMENT INFORMATION FOR JUNE 19, 2015
John Bean Technologies Corporation ("JBT") Settles Potential Civil Liability for Alleged Violations of Executive Order 13382 and/or the Weapons of Mass Destruction Proliferators Sanctions Regulations. JBT, of Chicago, Illinois, has agreed to pay $391,950 to settle potential civil liability for alleged violations of Executive Order 13382 of June 28, 2005, "Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters" (E.O. 13382) and the Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 C.F.R. part 544 (the "Regulations").
Specifically, 1) from on or about April 8 to April 17, 2009, JBT appears to have violated E.O. 13382 and § 544.201(a) of the Regulations when goods that JBT sold to a Chinese company were shipped by Islamic Republic of Iran Shipping Lines (IRISL) aboard a blocked vessel from Spain to China, and trade documents related to the shipment were presented to a U.S. bank for payment pursuant to a letter of credit ("L/C") in the amount of $2,897,936; 2) from on or about May 8 to May 19, 2009, JBT appears to have violated E.O. 13382 and § 544.201(a) of the Regulations when it presented trade documents related to the IRISL shipment to Banco Santander, a Spanish bank, in the amount of $2,897,936, in order to receive payment for the goods sold to CSA, after the U.S. bank declined to advise the L/C and the trade documents had been returned to JBT pursuant to an OFAC license; and 3) from on or about May 21 to July 9, 2009, JBT appears to have violated E.O. 13382 and § 544.201(a) of the Regulations when JBT reimbursed JBT AeroTech Spain for charges paid to its freight forwarder for the shipping services rendered by IRISL, and to Banco Santander for fees associated with negotiating the L/C in the amount of $164,470.24 for those payments via inter-company transfer (collectively, the "Apparent Violations").
OFAC determined that JBT did not voluntarily self-disclose the Apparent Violations, and that the Apparent Violations constitute a non-egregious case. The base penalty amount for the Apparent Violations was $670,000.
The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. OFAC considered the following to be aggravating factors: (1) With respect to counts 2 and 3, JBT management knew of the conduct resulting in the Apparent Violations; (2) economic benefit was conferred to a blocked entity, resulting in harm to the sanctions program objectives of the Regulations; and (3) JBT is a sophisticated entity that conducts business throughout the world. OFAC considered the following to be mitigating factors: (1) JBT has not been the subject of a Penalty Notice or a Finding of Violation from OFAC in the five years preceding the transactions constituting the Apparent Violations; (2) JBT implemented some remedial measures to prevent a recurrence of the Apparent Violations, including employee training, enhancements to its compliance program, and enhanced party screening; and (3) JBT cooperated with OFAC’s investigation, including, among other cooperation, by agreeing to toll the statute of limitations for 514 days.
1) Uncharacteristic double counting/breaking down a single transaction into its smaller transactions in order to charge multiple violations. Presumably the reason for this was that the company acted with actual knowledge of its violations after a U.S. bank declined to advise the blocked LOC.
2) Bases for liability are consistent with past cases involving Iranian vessels and the presentation of L/Cs in which blocked persons have an interest (see Tofasco of America, Inc., 2014).
3) The WMDPSR do not apply directly to subsidiaries and affiliates of U.S. companies, so unless JBT AeroTech Spain is a branch of the U.S. entity, the reimbursement to the Spanish affiliate for charges paid to the freight forwarder would have been a case of some combination of "indirect dealing" in the SDN's property interest and/or "facilitation" of the underlying transaction involving the IRISL. Recall that indirect dealings and facilitation are not explicitly mentioned in the WMDPSR or the blocking provision, but OFAC has interpreted all ordinary blocking regulations to cover indirect dealings (see Bupa Florida, (2015); Civil Enforcement Information - Zoltek Companies, Inc. (2018)).
4) For more factual information, see "OFAC Sets Mousetrap; Company Takes Cheese," June 30, 2015 at exportlawblog.com, in which it suggested that OFAC released the initially-blocked letter of credit specifically so that the JBT would try to use it again and in the second instance have no claim that it acted without actual knowledge of a violation. https://www.exportlawblog.com/archives/7047.
5) For classification purposes, we have categorized this item as one that impliedly deals with the concept of an “extinction” of an interest. A blocked persons’ “interest” in an obligation does not extinguish simply because the underlying transaction has been completed. Compare KeyCorp, Correspondence with SEC Office of Global Security Risk (2009, 2012), where IRISL was determined to have an “interest” in a bankers acceptance related to a shipment of goods aboard an IRISL vessel, even after the goods were shipped. But note the standard "Termination and acquisition of an interest in blocked property" provision (e.g. 544.403 of the WMDPSR).
"Whenever a transaction licensed or authorized by or pursuant to this part results in the transfer of property (including any property interest) away from a person, such property shall no longer be deemed to be property blocked pursuant to §544.201(a), unless there exists in the property another interest that is blocked pursuant to §544.201(a) or any other part of this chapter, the transfer of which has not been effected pursuant to license or other authorization."
In this case, the L/C in which IRISL maintained its "interest" was initially blocked, and then unblocked pursuant to a specific license prior to being dealt in again in a way that OFAC determined constituted a violation of the WMSPSR. The role of 544.403 in the fact pattern, as presented by OFAC, is not clear. It is possible that the initial specific license unblocking the L/C said that the authorization for the return of the trade documents (including, we assume, the L/C itself) did not serve to extinguish the IRISL interest. There is very little on record that speaks to the operation of the "transfer of property...away from a person" language found in the standard "Termination and acquisition of an interest in blocked property" provision.