High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
If it looks like a deal that’s too good to be true, it likely is, especially if it involves reflagging unregistered ships. The following is a report by maritime law firm Blank Rome:
On July 19, 2012, the Office of Foreign Assets Control (“OFAC”) issued an advisory stating that Iran Islamic Republic of Iran Shipping Lines (“IRISL”) is currently operating unregistered vessels. OFAC advises all persons in the maritime industry that any assistance provided to IRISL in connection with the re-flagging of its vessels may constitute a provision of services in violation of U.S. sanctions. Such a violation may result in the assisting person being added to OFAC’s Specially Designated Nationals (“SDN”) list for having assisted another designated person or entity.
On June 9, 2010, enhanced U.N. sanctions were adopted by the U.N. Security Council, which froze the assets of various designated persons, including certain entities deemed to be owned, controlled by, or acting on behalf of IRISL. Due to these international sanctions, many of IRISL’s vessels have either had their flags revoked or registration rejected by vessel registries. OFAC noted that it is likely that persons will encounter such unregistered or improperly flagged vessels more frequently as jurisdictions continue to refuse to flag IRISL’s vessels.
As expected, the sanctions are taking its toll both on Iran (the intended target) and the international shipping community. Blocked funds, rejected U.S. dollar transactions, contractual conundrums, and uncertainty have made navigating an already complex regulatory environment even more difficult. It goes without saying that those who wish to continue pursuing lawful business opportunities with Iran or Iranian entities must establish comprehensive compliance programs that ensure an up-to-the minute understanding of the various applicable regimes. However, even the best compliance program provides little comfort to those caught mid-transaction by new SDN and other blocked party designations with immediate effect. In today’s environment, a workable compliance program must focus not only on the current state of applicable laws and regulations, but equally on the risk of regulatory changes. As a practical matter, this means that parties to shipping transactions in particular must conduct thorough due diligence to determine whether they are dealing with persons who are at risk of being designated as off-limits during the pendency of the transaction.
Conclusion and Advice
It is well-known that IRISL continues to try to shift the official registered owners, flags and names of its vessels in an attempt to conceal IRISL’s connection to the vessels. All maritime industry personnel should be aware of the fact that IRISL vessels are on OFAC’s SDN list, which is regularly updated as OFAC learns of additional IRISL vessels or those having a connection to IRISL.
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