US appeals court overturns OFAC penalty on Epsilon Electronics

The US Court of Appeals for the DC Circuit has overturned a $4million OFAC penalty on US audio product supplier Epsilon Electronics, and remanded the case back to the lower court with instructions for OFAC to reconsider the penalty (see previous blog). OFAC said that Epsilon knew or had reason to know that it shipped around $3.4m of car audio and video equipment to a company that re-exports most of its products to Iran, although it did not find any direct evidence that the shipments made their way there.

The DC District Court had granted OFAC’s motion for summary judgment. The Court of Appeals found that while 34 of the 39 shipments concerned violated US sanctions on Iran, 5 of the shipments did not and therefore OFAC should reconsider the monetary penalty it imposed. In addition, it found that while OFAC did not need to show that the goods ended up in Iran, only that they left the US, OFAC had not adequately explained its determination that Epsilon had reason to know that the goods would end up in Iran and so its final decision on liability was capricious and arbitrary.