August 06, 2019

PACCAR Settles Iran Sanctions Case Involving Dutch Subsidiary

By Samuel Rubenfeld

This article was updated with additional information from the enforcement notice.

Commercial vehicle maker PACCAR Inc agreed to pay $1.7 million to settle a case of alleged Iran sanctions violations relating to its Dutch subsidiary, the U.S. Treasury Department said.

The violations occurred on three occasions between October 2013 and February 2015, when DAF Trucks N.V., an Eindhoven-based subsidiary of PACCAR, sold or supplied 63 trucks to customers in Europe that it knew, or had reason to know, were intended for buyers in Iran, the Treasury said. The 63 trucks had a value of about $5.4 million, according to the Treasury.

PACCAR, which last month reported record quarterly revenues, didn’t respond to a request for comment. The Bellevue, Wash.-based Fortune 500 company manufactures and sells trucks, and related goods, under several brand names, including DAF and Peterbilt. 

PACCAR voluntarily disclosed the violations, which the Treasury deemed non-egregious. The company and its DAF subsidiary confirmed to the Treasury that they stopped the conduct and took a series of steps to minimize the risk of its recurrence. The steps taken by DAF, according to the Treasury, included hiring a full-time compliance director and updating its European Union trade restrictions compliance manual, as well as changing the way it handles direct sales agreements and making trade sanctions compliance training an annual requirement.

“This enforcement [action] highlights the benefits U.S. companies can realize in conducting sanctions-related training and in taking appropriate steps to audit and monitor foreign subsidiaries for [sanctions] compliance,” the Treasury said in the notice.

DAF sells trucks through a network of more than 300 independent dealers that enter agreements with the company, according to the Treasury: The dealers typically buy trucks from DAF and then re-sell them to end-customers. DAF dealers in Germany and Bulgaria resold trucks to Iranian buyers, the Treasury notice said.

A dealer in Hamburg, Germany, placed orders in June and October 2014 with DAF through the company’s German subsidiary for 51 trucks that wound up in Iran, due to a lack of due diligence by the company, the Treasury notice said. 

The dealer had initially requested a price quote and placed an order with DAF Germany with specifications for an Iranian company, but was then told by an employee that DAF Germany couldn’t sell trucks destined for Iran, the notice said. That same day, the Hamburg-based dealer submitted new paperwork purportedly destined for an end-user in Russia “with virtually identical specifications” as those in the earlier order bound for Iran, but DAF Germany processed it anyway without inquiry, the Treasury said in the notice.

In another, separate case in Germany, a dealer in Frankfurt directly owned by DAF sold two trucks to a trader based in the Netherlands after the original buyer in Germany canceled its order; the Dutch trader then resold the trucks to buyers in Iran, having submitted drafts of its involces, which referenced the buyers in Iran, to an employee of the dealer.  

In Bulgaria, DAF sold 10 trucks to an authorized dealer located in Sofia; the dealer subsequently sold them to an affiliated rental company which, in turn, sold them to a buyer in Iran.