On December 11, 2023, the U.S. Departments of Commerce, State, Justice, Treasury and Homeland Security published a joint Quint-Seal Compliance Note, “Know Your Cargo: Reinforcing Best Practices to Ensure the Safe and Compliant Transport of Goods in Maritime and Other Forms of Transportation.”
The agencies highlight the increasingly complex nature of global supply chains and opportunities for nefarious actors to evade export control laws and U.S. sanctions. The note also highlights the responsibility of individuals and entities participating in the global transport of goods to assess their risk profile and implement compliance programs.
Potential Indicators of Efforts to Evade Sanctions and Export Controls
The note directs companies involved in funding and facilitating the transport of cargo to be aware of these practices that may suggest export control or sanctions evasion:
- Manipulating location or identification data
- Falsifying cargo and vessel documents
- Ship-to-ship transfers
- Voyage irregularities and use of abnormal shipping routes
- Frequent registration changes” that evade national provisions; and
- Complex ownership or management
Recommended Compliance Practices
The note recommends that individuals and entities who participate in maritime and other transportation industries should implement and strengthen compliance controls as necessary, especially when operating in high-risk areas or when dealing with entities who demonstrate suspicious behavior. A non-exhaustive list of compliance practices includes:
- Institutionalizing sanctions and export control programs
- Establish location monitoring best practices and contractual requirements
- Know your customer
- Exercise supply chain due diligence
- Industry information sharing
The note also encourages individuals and companies to report suspicious behavior to the relevant U.S. authorities.
Recent Activity to Combat the Illicit Shipment of Cargo
The note highlights increased U.S. criminal and regulatory enforcement activity and the partnership between the agencies to enforce U.S. laws and regulations. Examples of recent enforcement actions include:
- On September 8, 2023, the DOJ announced the first-ever criminal resolution against a bareboat charterer of a crude oil tanker carrying contraband Iranian oil for the benefit of the IRGC.
Civil Forfeiture Action
- In July 2020, DOJ filed a civil forfeiture complaint and warrant alleging that the oil aboard four vessels was the object of a scheme to deliver the oil to Venezuela.
Civil Enforcement Actions
- In 2018, BIS imposed a $155,000 penalty on a logistics company that exported items to entities in China and Russia on the Entity List.
- In 2019, OFAC imposed monetary penalties of over $800,000 on a U.S.-based company who executed agreements with third parties who had nominated blocked Iranian vessels for their shipments.
- In 2022, OFAC imposed a penalty of $6.1 million against a freight forwarding company who instructed its United Arab Emirates and South Korea affiliates to avoid including the names of sanctioned jurisdictions on invoices to avoid scrutiny.
The note concludes by urging companies operating in the maritime and other transportation industries to be vigilant in their compliance efforts and be on the lookout for efforts to disguise the nature, origin, or destination of cargo being transported.
Bottom Line: Know Your Business Partners
This compliance note demonstrates that the U.S. government has prioritized enforcement activity and expects parties involved in international trade to play their part in detecting and avoiding evasion.
Diaz Trade Law has significant experience in a broad range of compliance matters and can help you implement a robust export compliance program. Contact us at email@example.com or call us at 305-456-3830.
Want more information on Export Compliance Training? Check out our blog posts and on-demand webinars:
- The Importance of Regular Export Compliance Training for your Business
- Building a Strong Export Compliance Plan
- Building & Maintaining an Effective Export Compliance Plan
- Introduction to Export Controls