Foster Swift Business & Corporate Law Report
Companies should exercise considerable care before making sales to purchasers based in certain foreign countries. The U.S. Office of Foreign Assets Control (OFAC) and federal regulations impose restrictions on trade with certain foreign countries (for instance, Iran). A developing case that involves a Michigan manufacturer of super-alloys illustrates the serious consequences of violating those foreign trade regulations.
The Michigan manufacturer sold and scheduled shipment of a super-alloy to a Dubai-based trading company. Although the super-alloy is principally used to manufacture jet turbines, it can also be used to produce nuclear weapons. The Department of Homeland Security seized a shipment of the super-alloy based upon probable cause that the trading company intended to resell the super-alloy to Iran. Resultantly, in addition to losing a sale and forfeiting the seized material, the trading company faces an array of criminal charges in federal District Court.
As this recent case shows, due to potentially severe liability, including criminal charges, an exporter must ensure that its sales to foreign purchasers comply with foreign trade regulations. This includes checking all potential purchasers against U.S. government black lists and knowing how each purchaser intends to use your product. Indeed, as evidenced by this most recent case, otherwise benign exports of products or technology may run a foul of export license requirements because of unexpected defense and military applications.