Eagle Shipping Settles Sanctions Violations Case
- Business & Finance
Eagle Shipping, a Marshall Islands ship management company owned by Eagle Bulk Shipping, has agreed to pay USD 1.1 million to settle its potential civil liability for violations of the Burmese Sanctions Regulations.
The U.S. passed the regulations in 1997, having determined that the Government of Burma, then ruled by a military junta, had committed large-scale repression of the democratic opposition in Burma, and thus banned all investments to U.S. companies and persons in the country.
The 36 violations cited by the U.S. Treasury Department involve Eagle Shipping’s dealings in the property interests of Myawaddy Trading Limited, which was designated by OFAC, and the provision of transportation services from Burma to Singapore for a land reclamation project for the benefit of Myawaddy.
The total transaction value of the 36 Apparent Violations was USD 1,796,400.
Eagle Bulk Shipping voluntarily disclosed the violations that occurred in 2011 and 2014 to OFAC after new management took over the company in 2014, following the company’s emergence from bankruptcy proceedings.
The questionable shipping deal
According to OFAC’s disclosure, in June 2011, Eagle Shipping’s affiliate in Singapore, Eagle Bulk Pte Ltd, entered into a chartering agreement with a sand buyer in Singapore to carry sea sand from Kawthaung, Burma to Singapore onboard an Eagle vessel.
After loading the sand cargo onto the vessel, on June 28, 2011, the Singaporean Company sent Eagle Pte a set of sample shipping documents, including a bill of lading and export cargo manifest, as an example for Eagle Pte’s documentation of the sand cargo.
However, the sample documents raised concerns for the former management of Eagle because the documents listed Myawaddy, an entity on the SDN List at that time, as the shipper. On June 29, 2011, in response to Eagle Pte’s demand for clarification, the Singaporean Company sent Eagle another sample bill of lading that listed an alternate shipper of the sand.
A former manager of Eagle instructed the captain of the Eagle vessel that he may sign the departure documentation.
The captain, however, refused to sign the departure documentation because he learned that some of the additional shipping documents (such as mate’s receipt and export declaration) presented by the shipping agents explicitly listed Myawaddy as the shipper of the cargo.
On June 30, 2011, the Singaporean Company’s local agent sent the captain a set of revised shipping documents after changing the shipper’s name from Myawaddy to the alternate shipper. The captain forwarded a copy of the revised documents to a former manager and other staff of Eagle for a review and approval, and in an email exchange, warned that according to the information from a port officer, the alternative shipper did not sell sea sand in this region, and the Burmese government had a contract only with Myawaddy and only Myawaddy was the shipper.
On the same day, Eagle received a message from the Singaporean Company that continued delays would result in negative repercussions with the Burmese government.
Additionally, the captain reported to Eagle that Burmese local officials had taken the crew’s passports and refused to clear the vessel for departure.
Eagle applied for an OFAC license authorizing the Eagle vessel to carry the sand cargo to Singapore due to the evidence suggesting an SDN’s involvement in the shipping transaction.
However, before OFAC responded to the license request, on or about July 2, 2011, Eagle, citing crew safety concerns, signed the revised shipping documents and obtained the return of the crew’s passports. The Eagle Vessel then left Burma and subsequently discharged the cargo in Singapore.
After this first sand voyage, on May 18, 2012, Eagle filed a new application with OFAC requesting a license that would authorize Eagle vessels to carry more sand cargoes procured, partially or wholly, directly or indirectly, from Myawaddy. On October 11, 2012, OFAC denied the application.
“While the application was pending with OFAC, and despite the absence of OFAC’s authorization, Eagle resumed shipping sand procured from Myawaddy. The former President of Eagle Shipping later received OFAC’s denial letter, but allegedly failed to forward it to others within Eagle. Eagle thereafter continued carrying sand cargoes supplied by Myawaddy from Burma to Singapore,” OFAC said.
As informed, Eagle Bulk has since terminated the conduct and introduced remedial measures as part of its compliance commitments to minimize the risk of recurrence of similar cases in the future.
These measures include the appointment of a dedicated Compliance Officer, development and implementation of a formal sanctions compliance program, sanctions training to employees and preparation of contingency plans in the event that Eagle identifies the interest of an OFAC-blocked or -prohibited party after cargo is loaded on an Eagle vessel.
“This case demonstrates the importance for companies operating in high-risk industries (e.g., international shipping and trading) to implement risk-based compliance measures, especially when engaging in transactions involving exposure to jurisdictions or persons implicated by U.S. sanctions. It is essential that companies engaging in international transactions consider and respond to sanctions-related warning signs, such as information that goods originated from or were supplied by a person or entity subject to U.S. economic and trade sanctions. The failure to adhere to formal responses from OFAC, such as the adjudication of license applications or requests for guidance, can represent serious sanctions infractions,” OFAC concluded.