Long-haul truck manufacturer PACCAR Inc. will pay more than $1.7 million to settle allegations the company may have evaded sanctions against Iran. PACCAR’s Netherlands-based subsidiary, DAF Trucks N.V., allegedly sold or supplied 63 trucks worth about $5.4 million to European customers that “it knew or had reason to know were ultimately intended for buyers in Iran,” according to OFAC. PACCAR is engaged primarily in the manufacture and sale of trucks and related goods and services, including under the DAF nameplate, among others. DAF sells its trucks through a network of more than 300 independent dealers that enter into dealer agreements that govern each dealer’s relationship with DAF. DAF dealers typically purchase trucks from DAF and then resell the trucks to end-customers. DAF builds most trucks pursuant to specific dealer orders for immediate resale to identified end-customers.
In June and October 2014, a DAF dealer based in Hamburg, Germany, placed two orders with DAF via its wholly owned subsidiary in Germany (“DAF Germany”) for 51 trucks. Even though the final paperwork associated with these transactions identified the ultimate end-customer as an unnamed party in Russia, the Hamburg-based dealer resold the trucks to a buyer in Iran. A former employee/manager of DAF Germany had, at a minimum, reason to know that the trucks were intended for Iran rather than for Russia. The Hamburg-based dealer initially requested a price quotation from, and then placed an order with, DAF Germany for trucks with particular specifications for an Iranian company located in Iran. The then-employee/manager of DAF Germany informed the Hamburg-based dealer that DAF Germany could not sell trucks destined for Iran. That same day, the Hamburg-based dealer submitted a pricing request for a new order of trucks purportedly destined for a customer or end-user in Russia with virtually identical specifications as the earlier order intended for Iran. Although the new pricing request was submitted on the same day on which DAF Germany refused the Iran-related purchase order and the proposed purchase involved the same types of trucks, with the same specifications, and the same delivery point as those included in the Iran-related purchase order, DAF Germany —including the former employee/manager — failed to conduct an adequate inquiry and processed the order. Additionally, in June 2014, DAF sold 10 trucks to an authorized DAF sales dealer located in Sofia, Bulgaria. The Bulgarian authorized dealer subsequently sold and delivered the 10 DAF trucks to an affiliated rental company, which in turn sold the 10 trucks to a buyer in Iran. The Bulgarian authorized dealer’s parent company disclosed that a used truck sales manager employed by DAF introduced that authorized dealer to the Iranian buyers of the 10 trucks and knew or should have known that the trucks were intended for Iran prior to introducing the parties. A DAF investigation found that the sales manager ignored warning signs indicating the trucks were destined for Iran and failed to take reasonable steps in response to the warnings. OFAC determined that PACCAR voluntarily disclosed the apparent violations, and that the apparent violations constitute a non-egregious case. The base penalty amount for the apparent violations is $2,713,214. The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. OFAC considered the following to be aggravating factors: (1) DAF personnel — specifically, employees in DAF Germany and DAF Trucks Frankfurt and a DAF used trucks sales manager — failed to exercise a minimal degree of caution or care when they ignored warning signs regarding potential sales involving OFAC-sanctioned countries and allowed goods to be sold to customers that they knew or had reason to know intended to re-sell the goods to buyers in Iran; (2) in each case, a DAF employee had knowledge or reason to know the goods were being re-sold to buyers in Iran; (3) DAF’s exportation of goods from Germany to Iran conferred millions of dollars in economic benefits on Iran; and (4) PACCAR, DAF’s parent company, is a large sophisticated entity that engages extensively in international business.