A recent enforcement action by the United States targeted a scheme to procure export controlled U.S. and Canadian equipment, most with nuclear applications, on behalf of an end user in Iran. The case bears several hallmarks of illicit Iranian procurement, including the involvement of Iranian nationals based overseas, the use of multiple freight forwarders to disguise Iran as the ultimate end user, reliance on Dubai as a transshipment point for the equipment, and the submission of false and forged shipping documents to avoid license requirements. The timing of the conspiracy – from 2015 to 2018 – highlights Iran’s continued efforts to illicitly obtain Western technology despite the implementation of the Joint Comprehensive Plan of Action (JCPOA) in January 2016.
A 21-count indictment charging Mehdi Hashemi and Feroz Khan was unsealed in August following Hashemi’s arrest in Los Angeles International Airport upon his arrival from Turkey. The men are accused of illegally exporting and attempting to export machine tools on numerous occasions, among other charges. Hashemi (a.k.a. Eddie Hashemi) is a dual citizen of the United States and Iran who formerly lived in Los Angeles and ran a company there called Earth Best Products Inc. Kahn (a.k.a. Feros Khan) is based in the United Arab Emirates (UAE) and remains at large. The trial is scheduled to begin on February 11, 2020 in Los Angeles.
Evading Export Controls and Sanctions
Between at least June 2015 and April 2018, Hashemi conspired with Khan and others who are not named in the indictment to evade and avoid U.S. trade controls and sanctions as well as the requirements for nuclear-related trade with Iran set forth in the JCPOA.
Hashemi procured machine tools and related parts from nine suppliers in Canada and the United States. Most of these machine tools, including various computer numerical control (CNC) vertical machining and turning centers, are controlled by the United States for nuclear non-nonproliferation reasons and require a license for export to Iran and the UAE. Their import or transit through the UAE likewise requires a license from the UAE’s Federal Authority for Nuclear Regulation (FANR).
These items are also listed by the multilateral Nuclear Suppliers Group (NSG) as dual-use items and technologies “that can make a major contribution to an unsafeguarded nuclear fuel cycle or nuclear explosive activity.” The transfer to Iran of any item listed by the NSG as dual-use first must be reviewed by the Procurement Working Group created by the JCPOA and ultimately approved by the U.N. Security Council. Some of the machine tools are controlled by the United States for anti-terrorism reasons and require a license for export to Iran but not to the UAE. At no time did Hashemi seek an export license from the United States or approval from the Security Council.
Hashemi sought the machine tools for an unnamed company based in Tehran, Iran, that claims to manufacture textiles, medical and automotive components, and spare parts. The indictment describes Hashemi as an employee of this company. As part of the conspiracy, Hashemi relied on six freight forwarders in the Canada, Iran, the UAE, and the United States, to facilitate the shipments from Canada and the Unites States to the UAE. Khan then facilitated transshipment through the UAE to Iran.
The indictment describes five attempted exports, four of which appear to have been successful.
A successful export arranged between June 2015 and April 2016 involved the procurement of a CNC lathe from a supplier in Canada and a CNC turning center from a supplier in Illinois. Hashemi and Khan employed a UAE freight forwarder and falsified the customer, supplier, and total value of the goods. The shipment was successfully exported in February 2016.
Hashemi used similar methods in a second successful export arranged between March and June 2016 that involved four CNC vertical machining centers obtained from a supplier in Ohio. He gave false information to a U.S. freight forwarder – including the customer, salesperson, and total value – causing the freight forwarder to file inaccurate export information forms with the U.S. Department of Commerce. At Khan’s request, Hashemi also lowered the listed value of the goods (from approximately $27,500 to $3,200) in order to avoid UAE import duties. On May 4, the equipment was sent from Norfolk, VA to the UAE’s Jebel Ali Port on Maersk Line shipping. Khan asked that Hashemi avoid using Maersk in the future as “they are not allowing transshipments to Iran.”
Subsequent exports by Hashemi and his co-conspirators appear to have faced increased scrutiny from U.S. enforcement authorities. An attempted export in October 2017 via New York, which involved two CNC vertical machining centers and two CNC turning centers acquired from suppliers in Ohio and Arizona, appears to have failed.
Between August 2017 and February 2018, Hashemi sought a CNC vertical machining center from California, a manual lathe from a supplier in Florida, and other machine tools from various U.S. suppliers. He falsified information about the proposed exports in correspondence with several freight forwarders based in the UAE and the United States, providing false information about the consignee, customer, exporter, supplier, and value. Despite Hashemi’s efforts to evade export controls, the shipment was detained in Long Beach, CA. In November, Hashemi gave U.S. Customs and Border Protection (CBP) an incomplete purchase list indicating a false value and assured a CBP agent that an unnamed co-conspirator in the UAE was the end-user. Hashemi reshipped the equipment in December 2017.
The final attempted export was arranged between October 2017 and April 2018. Hashemi employed freight forwarders in Toronto and Illinois to export CNC machines. He once more gave inaccurate information about the shipment, which was detained in Long Beach, CA. In response to questions from CPB, Hashemi asserted that the CNC machines being shipped were not export controlled, named the UAE as the destination country, and gave false purchaser and consignee information. Hashemi successfully exported the machines in January 2018.
Hashemi also made several false statements to an agent from the Department of Commerce’s Bureau of Industry and Security when questioned in February 2018. Hashemi told the agent that the final destination and buyer of the CNC machines was an affiliate of a UAE-based freight forwarder, that he never intended to export the machines to Iran, and that none of the machines were sent to Iran. He also claimed to be unaware that the machines required a license for export from the United States.
Charges and Next Steps
On August 19, 2019, Hashemi and Khan were charged in the Central District of California with conspiring to violate the International Emergency Economic Powers Act (IEEPA), violating the IEEPA, smuggling, money laundering, unlawful export information activities, and making false statements. Hashemi entered a not guilty plea and is being held without bond. His trial was set to begin on October 15 but has been postponed until February 11, 2020. If found guilty on all 21 counts, Hashemi would face up to 320 years in federal prison.
 Indictment, United States v. Mehdi Hashemi, Case No: 2:19-cr-00254-PSG, Central District of California, April 23, 2019, p. 22, available via PACER, accessed on October 3, 2019; “Man Taken into Custody after Being Charged with Illegally Exporting Prohibited Manufacturing Equipment to Iran,” U.S. Department of Justice, August 20, 2019, available at https://www.iranwatch.org/library/governments/united-states/executive-branch/department-justice/man-taken-custody-after-being-charged-illegally-exporting-prohibited, accessed on October 3, 2019.
 “Guidelines,” Nuclear Suppliers Group, available at https://www.nuclearsuppliersgroup.org/en/guidelines, accessed on October 30, 2019.
 “Annex IV – Joint Commission” in “Joint Comprehensive Plan of Action,” pp. 3-6, Vienna, July 14, 2015, https://www.iranwatch.org/sites/default/files/iran_joint_comprehensive_plan_of_action.pdf, accessed on October 31, 2019.
 Indictment, United States v. Mehdi Hashemi, Case No: 2:19-cr-00254-PSG, Central District of California, April 23, 2019, p. 22, available via PACER, accessed on October 3, 2019.