Untangling American ties
Demand for logistics services is certainly high, but the complexity of the “U.S. problem,” has kept many forwarders away. Although CEVA Logistics is technically a Netherlands-based forwarder, it’s long history with American logistics has forced it to remain uninvolved with Iranian freight. “CEVA in all locations, including its non US entities, are treated as U.S. persons because of CEVA’s ownership structure,” read a company statement. ”As a result, there is no change in CEVA’s policy concerning Iran. Our policy remains that there is no company activity concerning Iran.”
The key to many of these trade restrictions is “dual-use commodities” – the trade goods that could conceivably be used for both civil and military purposes, which are determined by the U.S. Office of Foreign Asset Control (OFAC). “For instance, anything that uses a laser – that would fall under a potential dual use,” said Schenker’s Dietmar. “People assume it’s harmless, but there is a potential for using it for other purposes.”
Violations for trading dual-use products under OFAC are no trivial matter, either, with many stiff penalties levied against banks that fund the transactions. Deutsche Bank was hit for a $2.35 billion violation – a record penalty, Dietmar said. “This activity has intimidated banks and made it harder to fund some of this trade,” he said. “You have to find small, local banks, like a savings and loan, that will not be as exposed to the high penalties, but the smaller banks that are willing to fund these transactions have almost vanished from the planet.”
The question is, how far back in the design phase is OFAC willing to go to determine U.S. involvement? Opel is a German auto manufacturer, but it is a subsidiary of GM. Also, there is hardly a web-related business that is not related, in some way, to Sysco Systems, from the U.S. If a forwarder wants to ship cell phones, tablets or laptops to Iran, it has to find those that only use technology developed outside the U.S., an increasingly difficult standard to meet.
“You might have a case of flower pots from Germany that have been made by a German company for 200 years. But the moment you have an American person on your board, or use any kind of technology based on ideas developed in the U.S., the trade will fall under those trade restrictions,” Dietmar said. “There are no easy answers.”
Other ripples from the remaining Iran sanctions are more subtly felt, especially for companies undergoing mergers and acquisitions activity. In a recent statement from Danish forwarder DSV’s legal and security department, the company was “all systems go” for establishing trade with Iran now that sanctions have been lifted, but the purchase of U.S.-based UTi Worldwide has thrown a wrench in those plans.
“We had a green light to go ahead with transports to, from and via Iran – except for the U.S.,” said CEO Jens Bjørn Andersen. “A number of restrictions remain in place for transports of weapons, aerospace products, dual-use products and the entire nuclear industry. We will have high focus on complying with these restrictions when we now are reestablishing contacts to partners and agents in the Iran.” However, he added that any plans of establishing an office inside Iran have been put on hold as DSV concentrates its resources on integration with UTi – a company that will only make it more difficult to work within Iran.
European express delivery firm TNT has said that, once the deal with U.S.-based FedEx is finalized, it would have to pull out of the Iran market, as a result of the ownership change. According to a TNT spokesman, the divestiture from Iran would not involve road or air assets within the country, as it currently works through an Iran-based agent. “We have analyzed the compliance requirements that would apply to TNT after completion of the FedEx offer, including the restrictions arising from U.S. economic and trade sanctions,” TNT said. “This means that we will no longer be able to offer a delivery service to/from Iran after completion.”
Even the blockbuster aircraft deal with Airbus may be in jeopardy. Because about 10 percent of the parts used in Airbus planes are made in the U.S., the order from Iran may need to secure a special export licence to comply with U.S. sanctions. U.S.-based Boeing has been prevented from doing business with Iran since 1979, but in February this year, the aircraft manufacturer received a license from the U.S. government to meet with Iranian carriers “to determine their actual fleet requirements.” This license will enable Boeing to analyze market needs in Iran, but it falls short of allowing Iran to place jet orders.