Maersk Line, Ltd. paid the U.S. Office of Foreign Assets Control (OFAC) $3 million to settle allegations of violations of the U.S. trade embargo with Sudan and Iran that Maersk committed between 2003 and 2007.   How the world’s largest ocean transportation company committed such violations is a good story. How Maersk’s lawyer was able to limit the payment to $3 million is also important to understand.

According to the OFAC Enforcement Information for July 28, 2010,

OFAC’s investigation alleged that Maersk provided unlicensed shipping services for 4,714 shipments of cargo originating in or bound for Sudan and Iran. These services involved the transportation of such cargo on vessels owned, operated, and/or chartered by Maersk’s parent, A.P. Moller-Maersk A/S on at least one leg of the cargo’s journey to or from Sudan and Iran.

This is very interestingly worded by OFAC.  As A.P. Moller-Maersk A/S, a Danish conglomerate, is not bound by the U.S. laws regarding trade sanctions with Sudan and Iran, it could provide unrestricted vessels services in those countries.  If, however, any part of the cargo to or from those countries were transported on a U.S.-flagged vessel, then a violation of the U.S. laws would occur.  Cargo is often shifted from ship to ship between the port of departure and the port of delivery, and A.P. Moller -Maersk did not carefully trace the cargo from Sudan and Iran as well as it should have to prevent the cargo from touching a U.S.-flagged vessel.

Using OFAC’s Economic Sanction Enforcement Guidelines effective November 9, 2009, the penalty against Maersk could have been $61 million.  Even though Maersk did not voluntarily self-disclosure the violations to OFAC, the Settlement and payment of only $3 million reflects the mitigating factors of:

  • the non-egregious nature of the violation;
  • no violations by Maersk in the prior 5 years;
  • substantial and effective remediation measures were implemented by Maersk; and
  • substantial and full cooperation with OFAC officials during the investigation.

For non-U.S. based multinationals, compliance with U.S. trade laws and regulations enforced by OFAC and the export controls enforced by the Bureau of Industry and Security of the U.S. Department of Commerce is often confusing.   Moreover, if the world’s largest, most sophisticated shipping company, and one with an excellent reputation for service and integrity, is doing business with Iran and Sudan, what does that say about the effectiveness of the U.S. sanctions and trade embargo programs?