ENFORCEMENT INFORMATION FOR March 6, 2014
Ubiquiti Networks, Inc. Settles Potential Civil Liability for Apparent Violations of the Iranian Transactions and Sanctions Regulations: Ubiquiti Networks, Inc. ("Ubiquiti"), San Jose, CA, has agreed to pay $504,225 to settle potential civil liability for apparent violations of the Iranian Transactions and Sanctions Regulations (the "ITSR"). From on or about March 24, 2008, to in or around February 2010, Ubiquiti appears to have violated §§ 560.206 and 560.208 of the ITSR by engaging in transactions related to the exportation, reexportation, sale or supply, directly or indirectly, of goods for broadband wireless connectivity [1] to Iran, and facilitating the reexportation, sale or supply of such goods to Iran, when it entered into an agreement granting a distributor in the United Arab Emirates ("U.A.E.") exclusive rights to distribute Ubiquiti’s goods in Iran, then subsequently sold to the U.A.E. distributor and exported or shipped...
1) With respect to the distribution agreement with the UAE distributor and subsequent sales to that distributor, OFAC does not make clear whether that distributor dealt predominantly with Iran. This is a crucial question as it relates to the scope of the so-called "general inventory rule" as an interpretation of the "reason to know" knowledge qualifier pf 560.204 of the ITSR. 560.204(b) addresses the question of goods for incorporation in other goods, but it is evident that OFAC considers exports to third countries to be prohibited when the third country recipient deals predominantly with Iran or the government of Iran. If this was the case here, then the sales to the UAE distributor to be violations of the ITSR represents no break with OFAC's usual practice.
If, however, OFAC's position is that the deal...