The transshipment case that went to court, which makes it unusually valuable: the standard was litigated rather than negotiated.
OFAC’s 2014 penalty notice alleged that between August 2008 and May 2012 Epsilon issued 39 invoices for sales to Asra International LLC, also known as Asra Electronic Trading Co., a company that Epsilon knew or had reason to know distributed most, if not all, of its products to Iran. Epsilon challenged the notice in the US District Court for the District of Columbia, which granted summary judgment for OFAC. The matter subsequently settled at $1,500,000.
What it establishes
The operative phrase is “knew or had reason to know”. Epsilon’s direct customer was in the United Arab Emirates, which is not a restricted destination, and the sales to that customer were, on their face, sales to the UAE.
The case confirms that an exporter’s obligation does not stop at the identity of its immediate counterparty where the surrounding facts indicate where the goods are actually going. That is the doctrinal basis for treating third-country transshipment as the exporter’s problem rather than the intermediary’s alone, and it is why the behavioural red flags published by export control authorities carry the weight they do.
Why the litigation matters
Most sanctions cases settle, so the standards are rarely tested. This one produced a judicial examination of what an exporter is required to conclude from the pattern of its own sales, and it is cited for that reason well beyond the facts of car audio equipment.