Córdoba Music Group LLC (Córdoba), a manufacturer of musical instruments based in California, has agreed to pay USD41,591 to "settle its potential civil liability for apparent violations of sanctions" on Iran. On nine occasions, Córdoba shipped instruments and related accessories that it knew were ultimately destined for Iran.

Between June 4, 2014 and October 30, 2018, Córdoba maintained a distribution agreement with a Dubai-based company for sales in the Middle East, including Iran. In 2018, Córdoba sought to amend the agreement with the Dubai company to remove Iran from the territory because it had not successfully generated any sales in Iran and Córdoba believed that a new sales channel would help
generate business.

Córdoba had previously become acquainted with an Iranian company at a trade show in Anaheim, California, and entered into an informal arrangement for it to distribute Córdoba products in Iran. Córdoba’s sales through this new partner began in November 2019. The new Iranian distributor instructed Córdoba to bill and ship products to a Dubai-based general trading company, which then shipped the products to Iran. Pursuant to this arrangement, Córdoba shipped instruments and related accessories valued at $118,831 that it knew to be ultimately destined for Iran on nine occasions between November 26, 2019 and March 30, 2022.

In February 2023, Córdoba was acquired by another U.S. company. On April 4, 2023, two months after the acquisition, a member of Córdoba’s sales team forwarded to the new parent a draft distribution agreement with the Iranian distributor providing that it would sell Córdoba’s products solely in Iran. Upon receiving the email, the new parent’s leadership directed Córdoba to terminate its business relationship and any pending transactions with the distributor and then began investigating the activity and submitted a voluntary self-disclosure.

Although Córdoba knew the products were destined for Iran, it apparently did not realise that indirect exports to Iran violated U.S. sanctions. This failure to understand the regulations was due to a lack of sanctions and export compliance training, interactions with Iranian distributors at domestic and international trade conferences, competitors allegedly selling their products in Iran,
and the mistaken belief that indirect musical instrument sales to Iran were not prohibited.

Córdoba’s conduct resulted in nine shipments ultimately destined for Iran between November 26, 2019 and March 30, 2022, valued at $118,831, in apparent violation of the ITSR, 31 C.F.R. § 560.204(a), which prohibits, as relevant here, the exporta. re-export, sale, or supply of goods, technology, or services, from the United States, or by a United States person, wherever located, to a person in a third country, when there is knowledge that such goods, technology, or services are intended specifically for supply, transshipment, or re-export, directly or indirectly, to Iran.

Just one question: what was an Iranian company doing at a trade show in California?

There were "aggravating factors":
(1) Córdoba failed to exercise due caution or care for its compliance obligations by engaging in
trade with Iran without taking steps to ensure such trade would not violate U.S. law.
(2) There was a clear understanding among Córdoba employees that these products were
ultimately destined for Iran; Córdoba’s then CEO also was aware of the sales to Iran