Animal nutrition company BIOMIN America was fined by more than $250’000 for coordinating sales of agricultural commodities to a company in Cuba without authorization from OFAC (US Office of Foreign Assets Controls).
Instead of applying for the necessary OFAC authorizations for exports to Cuba, BIOMIN America developed a transaction structure involving their owned or controlled foreign entities. BIOMIN identified this structure as being consistent with the US sanctions regulations.
Most probably they did not realize that the Cuban Assets Control Regulations (CACR) applies to US subsidiaries abroad the same way it does to US entities.
Aggravating factors considered by OFAC were:
– Failing to seek appropriate advice;
– No existing compliance program;
– “Reckless in actions” to sell to Cuba;
– Management knowledge about the transactions; and
– Subsidiary of ERBER Group, a “commercially sophisticated” company.
Mitigation factors have been:
– The fact that the sales may have been eligible for a general license under the CACR or a specific OFAC license;
– Start to engage with external export control consultants to conduct comprehensive trainings on, compliance, export license requirements, denied persons screening and country specific embargoes
– Development of “formal written policies and procedures” to prevent future violations,
This case underscores the importance of global companies maintaining a compliance program. Seeking appropriate advice and guidance before doing business that may involve US sanctions requirements instead of developing creative alternative processes via non US companies will keep you away from export controls as well as direct and indirect tax implications and consequences.
Are you interested in a deep dive into the topic? Happy to have a chat with you and exchange via a virtual meeting.
Kind regards and stay healthy
Sandra / Christine
Dr. Sandra Ragaz, Partner, Leader Pharma & Life Science VAT Switzerland
Tel +41 58 792 44 69
Mobile +41 79 792 72 98
Christine Frankenberger, Manager, Export Controls, Customs & International Trade
Tel +41 58 792 4690
Mobile +41 79 359 0638