- International Enforcement Actions
The CEO of a New York-based metallurgical company has been arrested on charges of illegally exporting a specialized metallic powder from the United States to Iran, the U.S. Justice Department announced on March 1. According to the criminal complaint, Erdal Kuyumcu, a naturalized U.S. citizen of Turkish descent, allegedly exported over a thousand pounds of a thermal spray powder to Iran, via transshipment through Turkey, in two shipments in 2013. The metallic powder is composed primarily of cobalt and nickel and can be used to coat gas turbine components, which have aerospace, missile production, and nuclear applications.
Kuyumcu, the CEO of Global Metallurgy LLC in Woodside, New York, allegedly acted as an intermediary for a procurement network involving companies in Iran and Turkey. According to the complaint, an Iran-based procurement agent placed orders for the metallic powder with a metallurgical company based in Istanbul, Turkey. The owner of the Turkish company turned to Kuyumcu for help in fulfilling the orders. Kuyumcu obtained the metallic powder from a supplier in Ohio, providing the name of the Turkish company as the false end-user. The powder was then shipped from Global Metallurgical in New York to the Turkish company in Istanbul, after which it was sent to the unnamed end-user in Iran. The complaint alleges two illicit shipments of the powder: the first in March 2013 of 670 pounds of the powder worth $22,076.50; and the second in July 2013 of 330 pounds of the material worth $11,170.50.
This case fits the pattern of Iran-based procurement networks using Turkey as a transshipment point for illicit exports of U.S.-origin goods. Individuals and companies seeking to evade U.S. export restrictions rely on non-embargoed countries, such as Turkey, for transshipment to end-users in Iran. According to the complaint, Turkey is often a transshipment point for American goods destined for Iran—goods that are accompanied by falsified end-user information. In the Kuyumcu case, the Turkish metallurgical company was falsely represented to be the end-user of both shipments of the metallic powder. The scheme was uncovered through a post-shipment verification check conducted by the U.S. Department of Commerce at the Turkish company.
Other recent high-profile export control cases have also involved transshipment through Turkey. Arthur Shyu, a manager of Hosoda Taiwan Co. Ltd., was arrested in April 2015 for allegedly shipping sensitive U.S.-origin microelectronics to Iran using an Istanbul-based company called Golsad Istanbul Trading. AAG Makina, a Turkish equipment manufacturer, settled one charge in March 2015 of illegally forwarding U.S.-origin valve parts to Iranian petrochemical companies.
The Iranian procurement ring led by Hossein Tanideh that supplied specialized valves for the heavy water reactor at Arak in 2010 and 2011 also used Turkey as a transshipment point. In this case, the procurement agents set up shell companies in Istanbul to obtain the valves and then shipped them to Modern Industries Technique Company (MITEC), the Iranian firm responsible for the design and construction of the Arak reactor. MITEC, which had been under U.N., U.S., and E.U. sanctions, was removed from all three lists in January 2016, as part of the nuclear agreement.
As the cases described above demonstrate, Iran has relied on illicit procurement networks in strategic diversion points, such as Turkey, to advance its nuclear and missile programs. Even with the nuclear agreement in place, Iran may continue to procure missile and arms related items illicitly because it does not accept an ongoing U.N. ban on such trade. Therefore countries should exercise extra vigilance in exporting such items to known transshipment hubs, like Turkey. If these countries served as a hub for illicit trade in the past – when stringent international sanctions were in place – there is every chance that their role will expand in the future, as trade flows to Iran increase.