All too often, a client tries to counter unwanted export advice with statements like: “Nonsense – George told me we don’t need a license!” If “George” were a competing export control consultant, he might actually have been right – we can all learn things from the competition. But George almost always turns out to be “some guy I met at a trade show” or a salesman intent on closing a deal.
Unfortunately, the price of relying on George can be steep. Delacor.com, Inc., an internet-based Argentine travel agency recently agreed to pay $2,809,800 – negotiated down from a potential $4.6 million fine – to settle Treasury Department allegations that its foreign subsidiaries assisted 17,836 persons with flight/hotel reservations for travel between Cuba and countries other than the US without OFAC authorization.
As a Latin American company, Delacor could perhaps be forgiven for not anticipating that it needed to be listed by a US agency as an Authorized Travel-Service Provider before it could facilitate visits to Cuba by residents, for example, of Portugal or Hong Kong. (A Chinese client was similarly surprised to learn that it needed a US license to export Microsoft products it purchased in Shenzhen to a customer in Iran.) But Delacor executives got little sympathy from regulators when they claimed to have relied on a “third party’s oral assurances” that no license was required.
Foresight Point 1: Where embargoed the countries – Cuba, Sudan, Iran, North Korea – are concerned, assume that you can’t do it. If you need a license, you probably won’t get it. And even if a license exception applies, you need to know what you must do to qualify for the exception before you do it.
Foresight Point 2: Fines at now being levied in amounts that can no longer be viewed as “costs of doing business.” At $157 per penalized transaction, it’s safe to say that Delacor’s profit per transaction was more than erased. But the real cost was even steeper if you factor in the legal fees Delacor must have incurred in settling 17,836 infractions. Even when you voluntarily disclose, as Delacor did, the regulators always ask: “Is this all?” Convincing them that you’ve disclosed all identifiable infractions – which Delacor apparently did “in a clear and organized fashion” – can cost hundreds of thousands of dollars.