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UPDATE: Lee Specialties fined $90,000 for sale to Iran

A Red Deer tool maker has been fined $90,000 for selling illegal goods to a buyer in Iran.

Lee Specialties pleaded guilty in Calgary provincial court on Monday afternoon to a charge of contravening an order under Canada’s Special Economics Measures Act, which prohibits the sale of certain products to countries including Iran.

The company, which operates across Canada and the United States, had been under investigation by Canada Border Services Agency and RCMP over the past three years in connection with a shipment of Viton O-rings, commonly used in oilfield drilling and testing equipment.

Viton is a synthetic material developed by DuPont. O-rings and gaskets made of the substance are resistant to high temperatures and therefore may be used in nuclear technology, the CBSA and RCMP said in a joint statement released on Monday.

Shipping Viton O-rings to Iran is specifically prohibited in Schedule 2 of the Special Economic Measures Act, say investigators in their joint statement.

Lee Specialities was charged with making a false statement under the Customs Act and contravening or failing to comply with an order under both the Special Economic Measures and the United Nations Acts.

The Customs and United Nations charges were withdrawn after the guilty plea was entered.

Court heard the total value of the 50 rings shipped was only $15.

A lawyer for the company told court that the rings were supposed to go to Dubai, but there was an address mix-up on the packaging.

As well as being the first company in Canada to be charged under the Special Economic Measures Act, Lee Specialities is only the third company to be charged under the United Nations Act.

The investigation opened and RCMP were called to assist in the spring of 2011, when CBSA officers at the Calgary International Airport intercepted and seized a shipment of O-rings destined for Iran.

“This seizure prevented these items, which can be used in nuclear applications, from landing in the wrong hands,” said Lauren Delgaty, regional director general for the CBSA Prairie Region.

Tim Creedon, executive director of the Red Deer Chamber of Commerce, said his agency has offered exporters help since 1923 in providing proof of origin documents for overseas shipments. However, the Chamber does not have any services available to assist exporters in determining whether their shipments may include prohibited materials.

Garrett Cupples, owner of Gentex Oilfield Manufacturing and a founding member of the Central Alberta Rural Manufacturers Association, said his company makes various pieces of equipment that use Viton O-rings and also supplies them as parts, including exports to companies in 19 countries.

Cupples said it would be simple enough for a junior or inexperienced parts person to make a sale and ship the parts, unaware of the prohibitions and restrictions.

Cupples said he contacts the trade commissioner in Calgary any time he has a question about exporting equipment and parts. Information on shipping restrictions and prohibitions is also available online from the Foreign Affairs website.

In light of the charges against Lee Specialties, Cupples plans to call a meeting with his staff to make sure everyone is aware of the potential risks in shipping across borders and how to avoid them.

“If you’re a manufacturer or supplier and you’re shipping to a country that there’s a trade sanction or an embargo against, you need to find that stuff out before you ship,” said Cupples.

“Everybody makes mistakes. We’ve been doing this for a while. If I’m not sure of something, I’ll pick up the phone.”

Most foreign orders come from emails, which would make it easy enough for an inexperienced sales person to accept a quick sale without doing the necessary checks, he said.

“We could have been in the same position.”

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