ENFORCEMENT INFORMATION FOR July 28, 2010
Maersk Line, Limited Settles Sudanese Sanctions Regulations and Iranian Transactions Regulations Allegations: Maersk Line, Limited, a Delaware corporation, and its wholly owned U.S. subsidiaries, Farrell Lines Incorporated, and E-Ships, Inc. (collectively, "MLL"), have remitted $3,088,400 to settle allegations of violations of the Sudanese Sanctions Regulations, 31 C.F.R. part 538 (the "SSR"), and of the Iranian Transactions Regulations, 31 C.F.R. part 560 (the "ITR"), occurring between January 2003 and October 2007.
The Office of Foreign Assets Control ("OFAC") alleged that MLL violated the SSR and the ITR by providing unlicensed shipping services for 4,714 shipments of cargo originating in or bound for Sudan and Iran. These alleged services involved the transportation of such cargo on vessels owned, operated and/or chartered by MLL, but time-chartered or sub-time-chartered by MLL's parent, A.P. Moller-Maersk A/S, on at least one leg of the cargo's journey to or from Sudan and Iran.
OFAC determined that MLL did not voluntarily self-disclose the matter to OFAC and that the alleged violations constituted a non-egregious case. The base penalty amount for the apparent violations - which was calculated based on gross freight charges from origination to destination - is $61,768,000. See OFAC's Economic Sanctions Enforcement Guidelines, 74 Fed. Reg. 57,593 (November 9, 2009) (also available at www.treas.gov/ofac). The settlement amount reflects OFAC's consideration of the following General Factors: MLL is part of a commercially sophisticated world-wide shipping conglomerate with significant experience operating under licenses issued by OFAC and other U.S. Government agencies; the activities conducted by MLL resulted in actual harm to sanctions program objectives by conferring an economic benefit on Sudan and Iran; MLL has not been found to have violated OFAC sanctions in the past five years; MLL substantially and fully cooperated with OFAC's investigation of the alleged violations, as described further below; MLL and its parent have undertaken substantial remediation to ensure that such alleged violations do not recur, as described further below; and mitigation is necessary to ensure that OFAC's enforcement response is proportionate, particularly in light of the fact that the base penalty amount is based on gross freight charges for shipping the cargo from origination to destination and the apparent violations involved only a portion of those voyages.
Although OFAC determined that MLL did not voluntarily self-disclose this matter, MLL received substantial mitigation credit for providing OFAC with a voluminous amount of well-organized data regarding its involvement in shipments to or from Sudan and Iran over a five-year period. This included requested information regarding port calls in Sudan as well as additional detailed information not specifically requested by OFAC regarding the use of U.S. flag MLL vessels for intermediate relay legs of shipments to or from sanctioned countries. MLL also promptly responded to all requests for additional information and agreed to two statute of limitations tolling agreements when requested by OFAC.
Substantial and effective remediation measures were undertaken by MLL, including global remedial measures undertaken throughout MLL's corporate family in order to ensure that commercial actions taken by MLL affiliates would not cause MLL to violate U.S. economic sanctions. In this regard, the global booking system in which MLL participates has been updated to ensure MLL's compliance with U.S. economic sanctions programs.
1) In Maersk Line, Limited, vessels were involved in the shipment of goods to countries subject to full export embargoes (Iran and Sudan). The vessels at issue where were "vessels owned, operated and/or chartered" by a U.S. person, and "time-chartered or sub-time-chartered by" the U.S. person’s non-U.S. parent, who was not directly subject to sanctions prohibitions. Without any further information, the fact that the vessels were "owned, operated and/or chartered" by the U.S. person was deemed sufficient to find a violation of broad embargo programs where the person chartering (hiring) the vessel engages in prohibited activities. At a minimum, the “owne[r], operat[or] and/or chartere[r]” could be found to have “facilitated” the prohibited activities in which the vessels engaged through the agreement charter agreement. OFAC is not clear about how the U.S. person's involvement with the vessels actually constituted a violation of the SSR and ITR, but note that the mere fact that at U.S. person's vessel ends up in a sanctioned destination is not necessarily a violation of an IEEPA-based embargo that does not apply extraterritorially. Refer to Overseas Shipholding Group, Inc., Various Correspondence with the SEC (2006-2015), and comments thereto.