The cleanest published illustration of re-export diversion, because the exporter asked the right question at the right time and was given a false answer.
OFAC’s enforcement release records that in May 2010 Nordgas sought to buy air pressure switches from a US company intending to re-export them to customers in Iran. The US company told Nordgas it could not export the switches if the end users were Iranian entities. Nordgas acknowledged the restriction and represented that it would comply.
Over approximately four years it then re-exported 27 shipments of those switches to as many as ten customers in Iran, and, in OFAC’s words, obfuscated the re-exportation and the Iranian customers from the US company.
Why this is the model case for the technique
Every element of dual-use re-export diversion is present in a form that can be read off the document. The item is an ordinary industrial component with an entirely legitimate market. The purchaser is a real manufacturer in an unrestricted country. The sale by the US company was lawful. The violation happens entirely in the second leg, which the US exporter could not see and which Nordgas actively concealed.
It also demonstrates the limit of the end-user representation. The US company did what the guidance asks — it identified the risk, it raised it, and it obtained an assurance. The assurance was false, and there was no step available to the exporter at the point of sale that would have revealed that.
The outcome
OFAC found the apparent violations egregious and not voluntarily self-disclosed, but suspended $650,000 of the $950,000 pending satisfactory completion of enhanced compliance commitments, taking account of Nordgas’s financial circumstances and cooperation.