BIS recently issued a TDO (temporary denial order) which contained some interesting allegations about “virtual offices” against a company charged with illegal exports to Iran. The order places Anvik Technologies and its owner, Babak Jafarpour, on the Denied Persons List.
According to the investigation, Anvik/Jafarpour rented a variety of “virtual office spaces” in places like Chicago and Kuala Lumpur. BIS describes this “global network of leased virtual offices” as places where the company “does not occupy any physical space or otherwise have operations that would enable them to use items there.” The purpose of these virtual offices was to provide Anvik with business addresses, which they could use to disguise the end-users and end use of certain items to a variety of U.S. and foreign manufacturers.
On several occasions during 2009 and 2010, Anvik completed end-use certificates and made other statements certifying that a variety of items subject to the EAR were being purchased for end-use in the United States. In fact, Anvik attempted to route these items from one virtual office to the next, with the ultimate goal of shipping the items to destinations in Iran. Some of the items the company tried to obtain included microwave mixers, bias tees, GPS timing boards, digital phase shifters and millidioptometers. The items range from EAR99 classifications to other ECCNs with more stringent controls. However, all the items are prohibited from export to Iran under the Iranian Transactions Regulations administered by OFAC.
As U.S. and foreign manufacturers or distributors, what can you do to ensure your customers are not using “virtual front offices” to violate the law? Here are a few ideas:
- Obtain End-Use/End-User Certifications: In many of the situations described in the TDO, the manufacturer had obtained an end-use certificate from Anvik certifying the items were being purchased for use in the United States. (The fact that Anvik falsely made these statements is beside the point. It’s important for manufacturers to perform their due diligence for the items being shipped.)
- Use Destination Control Statements and/or Certificates of Origin: This places your customer on notice about your item’s origin, and explains that the items may not be diverted or re-exported/re-transferred without prior authorization from the U.S. government. In one case, the manufacturer included these documents in its shipment to Anvik. This makes it more difficult for your customer to “claim ignorance” when they decide to send your products overseas.
- Check End Users: This includes searching your customers against the denied parties lists. But it can also mean doing some fact-finding on your own. For example, how difficult would it be to determine that your customers “office” is really just a leased address and not really the place where they work? A simple phone call to the leased office’s answering service might be all you need.
- Look for Red Flags. Stop. Investigate: Is your customer providing more than one address for the shipping label, purchase order or invoice? Is your customer listing a freight forwarder as the final destination? Or a PO box? Above all – do not proceed with a transaction if you know or suspect an export violation will occur. Stop, investigate and report suspected violations immediately.
Although this process isn’t foolproof, there are a variety of ways manufacturers can help limit their liability and show due diligence under the law. At least in the case of Anvik, it appears that companies were doing what they could to ensure the proper end user and end use for the items being sold.
FYI. Babak Jafarpour’s alias is “Bob Jefferson.” So, I suspect there will be an even greater number of false positives the next time companies search their employees and customers against the denied party lists.
Bob Jeffersons of the world … beware!
Tom Reynolds is the Vice President of Operations for Export Solutions, a consultancy firm which specializes in ITAR and EAR compliance.