C.H. Robinson OFAC Settlement: $257.7K (2024)

Following a series of overseas acquisitions by CHR of freight and logistics firms, between November 2018 and February 2022 five of CHR's foreign subsidiaries provided freight brokerage or transportation services for 82 shipments, resulting in 76 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. § 560.215(a), and six apparent violations of the Cuban Assets Control Regulations (CACR), § 515.204(a)(1). The vast majority of the apparent violations appear to have occurred because the subsidiaries' brokerage management systems had not yet been incorporated into CHR's system or otherwise updated to include the latest sanctions compliance controls and did not screen for potentially violative transactions.

CHR-Guangzhou, a China-based subsidiary, provided transportation services on September 16, 2021 for a shipment from China to Turkey. The air waybill identified "W5" — the International Air Transport Association code for Mahan Airlines, an Iranian airline — as the first carrier, and IKA (Tehran Imam Khomeini International Airport) as the first destination. CHR-Guangzhou staff reviewed the air waybill before the shipment was sent but failed to recognize either the fact or sanctions implications of Mahan Airlines' involvement, or the fact that the first destination was Iran, in apparent violation of § 560.215 of the ITSR.

Space Cargo Group – Spain (SCG-Spain), acquired in February 2019, sent spare parts for textile machinery from Spain to Iran on March 12, 2019, using its own export system that had not yet been integrated into CHR's systems, in apparent violation of § 560.215 of the ITSR (§ 560.206(a)(2)).

CHR-Canada, established following an August 2017 acquisition, provided freight brokerage services from November 14, 2018 to February 17, 2022 for 71 shipments of Iranian- or Cuban-origin goods valued at $448,731 destined for Canada. Six of these transactions were apparent violations of the CACR, § 515.204(a)(1), involving merchandise of Cuban origin; the remaining 65 were apparent violations of the ITSR, § 560.215 (§ 560.206(a)(1)), involving Iranian-origin goods.

CHR-Australia, established following a September 2016 acquisition, acted as a customs broker in eight instances from April 26, 2019 to June 21, 2021 for the importation into Australia of Iranian-origin goods from Germany, Spain, Singapore, and Iran valued at $148,196, in apparent violation of the ITSR, § 560.215.

On December 21, 2019, a CHR-Peru employee circumvented internal processes to facilitate an export valued at $74,919 from Peru to Iran; that employee is no longer with CHR-Peru. This conduct appears to have violated the ITSR, § 560.215.

CHR's export compliance team discovered the conduct in 2022 during regular sample audits. These subsidiaries, acquired between 2016 and 2019, continued to use their own operating systems until at least 2022, with the integration lag being the primary cause of the apparent violations.

The statutory maximum civil monetary penalty applicable in this matter is $28,629,270. OFAC determined that CHR voluntarily self-disclosed the Apparent Violations and that the Apparent Violations constitute a non-egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. Part 501, app. A, the base civil monetary penalty applicable in this matter equals the sum of one-half of the transaction value for each apparent violation, which is $322,112. The settlement amount of $257,690 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This case highlights the importance for U.S. companies acquiring non-U.S. firms of establishing appropriate compliance controls and training as soon as possible after acquisition. The need to institute worldwide compliance functions, including sanctions-related technology and systems, is especially important to avoid potential violations. While integrating such systems, which can be time-consuming, companies should consider interim measures to minimize risk.

Companies that may become acquired by U.S. persons may wish to consider taking steps to limit the exposure potential buyers may face, including through compliance with U.S. sanctions, as potential acquirers may be liable for any subsequent violations set in motion prior to closing, and may factor such considerations into their decision-making.

This matter also emphasizes the benefits of foreign subsidiaries of U.S. companies having a compliance program that takes into account OFAC sanctions. Because the CACR and ITSR extend to foreign subsidiaries, imports and exports not involving the United States may nonetheless be subject to U.S. jurisdiction.

Finally, implementing systems and escalation protocols to ensure the careful review of all shipping documents such as air waybills, bills of lading, and certificates of origin can help prevent violations. Such documents may contain important information relevant to sanctions, such as port locations, product origin, and names and addresses of buyers, sellers, shippers and intermediaries.

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