Another day, another foreign subsidiary of a U.S. company caught shipping stuff to Iran. This time it’s the Luxembourg-based subsidiary of Viking, a leading manufacturer of fire protection systems. The fire extinguishing systems were shipped by the sub through the UAE (natch!) to Melli Etfae Iran Co. (National Iranian Safety & Fire Fighting Company).

An interesting twist here is that the subsidiary made the shipment notwithstanding direct orders from the COO of the U.S. parent company that shipments to Iran required a license. Indeed, this order was given the subsidiary less than a week before the first illegal shipment. Even so, under settlement agreements with both companies, the Bureau of Industry and Security (“BIS”) fined the parent $22,000 and the subsidiary $44,000. The exports came to light when a freight forwarder figured out what was going on and blew the whistle.

Several observations seem in order. First, fining the parent company after it had properly instructed the subsidiary that the shipments required a license seems harsh. After all, what more was the parent to do? Fly to Luxembourg and lock the staff in the basement?

Second, both the parent and the subsidiary were required by BIS to conduct an internal compliance audit substantial similar to BIS’s Export Management System Review Module. I don’t recall having seen this requirement imposed since it was imposed in the settlement agreement with Norman, Fox & Co. back in November 2005. It’s too early to judge, but I wouldn’t be surprised, based on the two Viking settlements, if we see this requirement cropping up more frequently.

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Copyright © 2007 Clif Burns. All Rights Reserved.
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