Statement of
Mark Foulon
Acting Under Secretary of Commerce for Industry and Security
before the
Committee on Banking, Housing, and Urban Affairs
United States Senate
March 21,
2007
Mr. Chairman, Senator Shelby,
Members of the Committee:
Thank you for the opportunity to
appear before the Committee today to discuss U.S.
export control and sanctions policies towards Iran. I am pleased to be here today with my
colleagues from the Departments of State and Treasury, with whom we work
closely to implement the President’s policies with regard to trade with Iran.
The United
States has maintained sanctions against Iran since 1979, with a reinforcing
trade embargo starting in May 1995. Iran has been designated as a state sponsor of
terrorism since 1984, and because of Iran’s
continued active support for terrorism and concerns that it is pursuing weapons
of mass destruction, U.S.
sanctions were gradually increased until a comprehensive embargo was put in
place. Consistent with these
authorities, the Departments of Commerce and Treasury prohibit virtually all
exports of U.S.-origin goods to Iran.
The Department of Commerce does not
have primary jurisdiction for export licensing to Iran. Because of the comprehensive nature of the U.S. embargo on Iran, the Treasury Department has
been designated as the lead agency in this area. Within Treasury, this function is performed
by the Office of Foreign Assets Control.
This approach has been used when the broad nature of a U.S. embargo
requires not only a prohibition on exports and re-exports of items under
the Commerce Department’s jurisdiction,
but also comprehensive restrictions on financial transactions and investments
under the jurisdiction of the Treasury Department.
Virtually any export of U.S.-origin
goods to Iran
must therefore be authorized by the Treasury Department. The Commerce Department’s primary role in the
licensing process, as part of the Administration’s overall sanctions program,
is to provide technical assistance to Treasury on the proper classification of
goods proposed for export or re-export to Iran under a Treasury license.
The Commerce Department also plays
an important role in the enforcement of the Iran sanctions regime by
investigating for possible prosecution and penalties violations of the Export
Administration Regulations. These
investigations are conducted by the Commerce Department’s Bureau of Industry
and Security’s Office of Export Enforcement (OEE), which has approximately 100
federal agents in ten locations throughout the United States. These locations include field offices in Boston, New York, Washington, Miami, Chicago, Dallas, Los Angeles, and San Jose;
one resident office in Houston; and the Washington, DC,
headquarters. More than 20 percent of OEE’s
current open investigations – over 150 – involve Iran.
Since October, 2004, investigations
by OEE, at times working with U.S. Immigration and Customs Enforcement (ICE) or
other law enforcement agencies, have resulted in 13 criminal convictions
related to illegal exports of dual-use items to Iran, with five more cases pending
sentencing. A sample of these successful
prosecutions includes the following:
· On November 30, 2006, Juan Sevilla,
sales director of United Calibration Corporation, was sentenced to five years
probation, six months home confinement, 100 hours of community service, and a
fine of $10,000 for attempting to export machinery and calibration software to
measure the tensile strength of steels; one use of such items would have been
to test the chemical properties of metals that could be utilized for
manufacturing nuclear materials.
· On December 7, 2004, Ebara
International, Inc., was sentenced to a $6.3 million criminal fine, and one
corporate officer was sentenced to three years probation and a $10,000 criminal
fine, for exporting industrial natural gas pipeline equipment to the National
Iranian Gas Company; and industrial pumps and valves to the South Pars Gas
Field Project.
· On December 13, 2006, Ernest Koh was sentenced to 52
months in prison for exporting parts for C-130 military transport planes and
P-3 naval aircraft. The parts were
diverted to Malaysia and
then illegally transshipped to Iran. The investigation also found that the guilty
party had laundered millions of dollars from bank accounts in Singapore through accounts in the United States
to promote the illegal scheme;
· In September, 2005, Mohammed
Farajbakhsh was sentenced to seven months in prison and two years probation for
his role in a conspiracy to export computer goods and satellite equipment via
the United Arab Emirates to
an entity affiliated with Iran’s
ballistic missile program.
Violators of the Iran sanctions regulations can also
face Administrative penalties. Last
year, OEE investigations led to such penalties in 16 cases, totaling $1.6
million in fines.
I would like to make one additional
point with regard to the prosecutions.
While the Export Administration Act is in lapse, as it has been since
2001, the U.S.
dual-use export control system has been maintained under the authority of the
International Emergency Economic Powers Act (IEEPA). IEEPA penalties are substantially less than
the penalties under the EAA.
I would also like to emphasize the
value we place on cooperation with our sister law enforcement agencies. Indeed, many of our enforcement
investigations are conducted jointly with the Federal Bureau of Investigation,
U.S. Immigration and Customs Enforcement, or other agencies. In addition, Commerce actively participates
in FBI-led Joint Terrorism Task Forces which focus on export control
violations, including those involving Iran’s
support of international terrorism and violations of the Iran sanctions.
As the examples I cited illustrate,
enforcement of our comprehensive embargo against Iran
involves more than just stopping direct shipments from the United States. The Administration is also focused on
interdicting and disrupting the illegal transshipment of U.S. goods through third countries to Iran
and other embargoed destinations. This
takes two major forms.
First, in coordination with the
Department of State, Commerce work s with other countries to identify foreign
entities that seek to evade U.S.
export control laws to divert U.S.-origin goods to Iran. We encourage these countries to prevent
companies located within their borders from undertaking such illegal activities,
focusing first on government-to-government cooperation as well as cooperation
and information-sharing with the private sector.
Second, to strengthen
government-to-government cooperation, the Administration works to develop or
strengthen foreign government export control regimes; to promote information
and data exchanges with foreign export control and customs authorities; and to
cooperate on enforcement. Specific
initiatives to develop export control capabilities have included technical
assistance in drafting export control laws and licensing procedures,
enforcement training, and industry outreach.
Through programs like the Export Control and Related Border Security
Assistance (EXBS) Program, the Departments of Commerce and State have been able
to work with countries, including those of transshipment concern, to help them
develop and implement effective export and border controls.
To strengthen cooperation and
facilitate enforcement, the Commerce Department also has posted export control
officers to five foreign locations – Abu Dhabi, Beijing, Hong Kong, New Delhi
and Moscow. These export control officers are OEE agents
temporarily assigned to the U.S. & Foreign Commercial Service. While they do not have overseas investigative
authority, they do support the effort to prevent illicit transshipments. Pursuant to an existing Memorandum of
Understanding between OEE and ICE, ICE’s 56 Attaché offices are responsible for
conducting ICE and OEE investigative activities overseas.
Commerce’s export control officers
conduct post-shipment verification visits to verify that items are being
properly used – and have not been diverted to illicit users or uses within the
country or illegally transshipped to another country such as Iran. The export control officer in Hong Kong has
broader regional responsibilities, reaching to other transshipment countries
such as Malaysia, Singapore, and Indonesia.
As part of our efforts in this
regard, the Commerce Department has worked to educate the private sector,
especially key companies such as freight forwarders, integrators, air cargo
carriers, and shipping lines. With
regard to Iran, we have
targeted our education and outreach on major hubs that might be used to
illegally transship U.S.-origin goods to Iran,
not only in the Persian Gulf region but also in Southeast
Asia.
One recent successful example of
Commerce’s efforts to stop dangerous transshipments involves Mayrow General
Trading, a company located in the United Arab Emirates. In June 2006, the Commerce Department imposed
strict sanctions on transactions with this firm and its related corporate
entities, because Mayrow is believed to have acquired U.S.-origin components
capable of being used to construct Improvised Explosive Devices or other
devices that have been, and may continue to be, used against coalition forces
in Iraq and Afghanistan. In addition, as a result of information
provided by the United States
government, the United Arab
Emirates initiated an investigation of
Mayrow that led to it being shut down.
In an effort to increase the
options at our disposal for combating illicit transshipment to Iran
and elsewhere, Commerce published last month an advance notice of proposed
rulemaking that would amend the Export Administration Regulations by adding a
new group – Country Group C. This group
would be reserved for countries that pose a diversion concern based on criteria
such as transit and transshipment volume and the adequacy of export controls. At this time, this is an idea in the
preliminary stages of consideration, and therefore it is premature to discuss
to which countries these requirements might apply. However, Commerce believes that this approach
could be an effective tool to increase our ability to prevent illicit
diversions of U.S. goods to
countries like Iran.
As our presence here today
demonstrates, Mr. Chairman, the Iran
sanctions program encompasses many agencies of the U.S. Government that work
together to ensure that the sanctions are being implemented and enforced to the
fullest extent possible under existing laws and regulations. We at the Commerce Department are pleased to
be a part of the Administration’s Iran sanctions team. At this time I would be happy to answer any
questions you may have.