Company Fined by BIS After Hiding Exports to Iran, Giving Sanctions ‘Discount’

The company, Luminultra, which used its Maryland production facility to export the items to Iran, agreed to complete three export compliance audits during a three-year probationary period. Luminultra must submit the results of those audits to BIS each March for three years, and they must be in “substantial compliance” with published BIS compliance audit guidelines.

If the company identifies any potential violations of the Export Administration Regulations from those audits, it must “promptly provide copies of the pertinent air waybills and other export control documents and supporting documentation” to the BIS Office of Export Enforcement. All Luminultra employees must also complete export compliance training within one year.

If Luminultra doesn’t pay the fine or violates any part of the settlement, BIS may suspend its export privileges for the three-year probationary period.

BIS said Luminultra exported a total of $33,681 worth of water testing equipment to Iran, including three “PhotonMaster luminometers” and 25 “aqueous test kits.” Both the luminometers, which measure microbial activity in drinking and wastewater, and the test kits, which are used to test any kind of water system, were classified as EAR99. But BIS said they still required a license for Iran and were also prohibited by the Iranian Transactions and Sanctions Regulations administered by the Office of Foreign Assets Control.

Although OFAC has a general license that allows certain exports of medicine and medical devices to Iran, BIS said the agency in January 2023 determined that the luminometers and the aqueous test kits weren’t considered medical devices and weren’t eligible for the license. BIS also said Luminultra should have known it wasn’t eligible for the license because the company included “special instructions” for the sale to Iran that states that the products are “NOT for human diagnostic or medical use.”

BIS said “no OFAC license was sought or obtained.”

BIS also said the company had “knowledge” that the exports violated the EAR, adding that Luminultra “knew or should have known that its exports were ultimately destined for distribution within Iran and acted intentionally to conceal such a fact.”

Luminultra, in purchase emails, acknowledged that the products were being sent to Iran and that they violated export controls, and the company “acted intentionally to conceal such a fact,” BIS said. Luminultra even “provided a discount on the sale price” to the Iranian customer to account for the sanctions risk the customer was “undertaking,” BIS said.

The violations began after Luminultra negotiated the sale of the luminometers and testing kits between July 2021 and October 2022 to Fanavari Pishrafteh Jahan (FPJ), a Tehran-based distributor of laboratory equipment and analytical instruments. In a July 2022 email, an FPJ employee asked Luminultra for a discount on the sale price because of “sanctions and critical economic conditions.” BIS said an FPJ employee “justified the request" by saying: “You know because we can’t work directly at the moment we must bear several extra charges.”

Those extra charges included “exchange broker fees in absence of a direct bank or bank transfer,” extra shipping and handling costs because the products couldn’t be sent directly to Iran, and a 5% UAE customs duty, the FPJ employee said, according to BIS. The FPJ employee also asked Luminultra to take several steps to hide the actual end user and destination of the products, including by omitting references to the Iranian company and address in all documents and instead listing only the UAE freight forwarder, ShipIt Freight Solutions. FPJ also asked Luminultra to undervalue the shipment to try to avoid the UAE customs duty, and BIS said they wrote: “please make sure no real invoice will be sent along with the shipment.”

Luminultra and FJP “took these additional actions to obscure the shipment to Iran by sending it through the UAE and to complete payment to the United States,” BIS said, including “when the FJP bank was unable, due to OFAC sanctions, to send funds directly to the United States.”

FPJ’s request not to include its actual identity in the shipping documents and to list the UAE freight forwarder as the ultimate consignee were “red flags” that Luminultra not only should’ve caught, BIS said, they also imposed “a duty upon Luminultra to verify the validity of the transaction.”

But BIS also said the company did more than just disregard red flags, saying Luminultra’s “managerial and supervisory level staff” were “aware the shipment was destined for Iran.” The agency said the company’s internal communications showed that a Luminultra employee “reiterated” to Luminultra’s vice president of sales that the items were destined for Iran. The employee wrote in an email: “this is the FPJ order for Iran and we are very nearly at the finish line but they’re making some strange requests around the commercial invoice that sound slightly shady.”

“Luminultra’s employees knew that falsifying the invoice for FJP’s purchase would be illegal and as a result, Luminultra ultimately declined to do so,” but despite the “significant concerns raised by FPJ’s unusual requests,” BIS said, Luminultra shipped the luminometers and test kits in October 2022.

BIS also said Luminultra committed an EAR violation when it falsely listed ShipIt Freight Solutions as the ultimate consignee in the Electronic Export Information filings within the Automated Export System. The company “knew that the ultimate consignee and end user of the items was FPJ in Iran,” BIS said.

Luminultra didn’t immediately respond to a request for comment.