OFAC’s Pegasus Worldwide Logistics Settlement: Why a $5,950 Shipment Cost a Freight Forwarder $175,015

Quick take: On October 9, 2026, OFAC announced a $175,015 settlement with Pegasus Worldwide Logistics, a California freight forwarder with about a dozen employees. Pegasus arranged the import of a $5,950 packet-filling machine from Youli Technology Development Co., Ltd., a Chinese supplier OFAC designated under Executive Order 14059 for selling pill presses to counterfeit-pill makers. Youli had changed its name after designation, and Pegasus screened only the new name. Pegasus then certified to OFAC that it had no records responsive to an administrative subpoena and took six months to correct that answer. OFAC cited four apparent violations of the Illicit Drug Trade Sanctions Regulations and six violations of its subpoena rule. By our calculation, the subpoena failure drove roughly 85 percent of the $205,900 base penalty.

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Enforcement Snapshot

What Happened

1. May 30, 2023: OFAC designates Youli under E.O. 14059, listing its phone number and email address on the SDN List. Youli later renames itself Huizhou Youli Fushi Co., Ltd.; its other identifiers stay the same.
2. August 2023: A U.S. nutritional supplement company engages Pegasus to coordinate the purchase and shipment of a $5,950 sugar packet-filling machine from Youli.
3. September 12, 2023: Pegasus emails Youli at the listed address to arrange shipping through a Chinese agent. The shipping documents carry the new name but the listed phone number. Pegasus files an Importer Security Filing with U.S. Customs and Border Protection.
4. Late September 2023: Pegasus screens only “Huizhou Youli Fushi Co., Ltd.” against the SDN List, gets no match, and pays the Chinese agent $146.33.
5. November 3, 2023: CBP detains the machine at Long Beach and issues a Detention Notice naming OFAC. Pegasus does not investigate, pays $1,463.55 in duties and fees, and collects $2,358.62 from the purchaser.
6. December 6, 2023: CBP seizes the machine as blocked property. OFAC had just served Pegasus with a subpoena that listed Youli’s email address and phone number.
7. February 1, 2024: Pegasus certifies that it has no responsive information. OFAC then shows Pegasus the arrival notice Pegasus itself had issued.
8. August 8, 2024: Pegasus files a revised response detailing its role and explains that it had not given its attorney all the necessary information the first time.

Why the Screening Failed

Pegasus had a written policy. Since early 2023, it had required employees to compare parties’ names, addresses, emails, and phone numbers against the SDN List. The policy did not say when to screen, so the check came only after the shipping documents arrived, days before the machine left China. By then, according to OFAC, Pegasus had already emailed a blocked person at a listed address and filed with CBP on the shipment’s behalf. The employee screened the name alone. OFAC’s point is direct: a basic internet search of the phone number or email address would have returned Youli.

The lesson extends beyond this case. Designated parties change names, while identifiers tend to survive. In OFAC’s September 2025 settlement with freight forwarder Fracht FWO, a blocked aircraft had been re-registered under a new tail number, but its manufacturer’s serial number remained on the SDN List. Here, the supplier’s name changed while its phone number and email did not. Screening that stops at the name field misses precisely the evasion OFAC tells industry to expect.

How OFAC Reached $205,900

OFAC treated the case as non-egregious and not voluntarily self-disclosed, so the base penalty was the “applicable schedule amount” for each apparent violation under the Economic Sanctions Enforcement Guidelines. OFAC did not itemize the $205,900, but the figures align. Appendix A sets the penalty for failing to furnish information under § 501.602 at up to $29,150 for each month the failure continues. Six months and six violations equal $174,900. The four dealings in blocked property, each valued under $10,000, carry schedule amounts that account for the remaining $31,000. On that calculation, the delayed subpoena response drove roughly 85 percent of the base penalty. The $5,950 machine did not.

The General Factors moved the number only modestly. OFAC identified four aggravating factors: reckless disregard in failing to screen identifiers Pegasus already held and in ignoring the CBP detention; awareness that the equipment came from Youli; the benefit to an SDN and the delay to OFAC’s investigation; and the heightened risk inherent in freight forwarding. It credited three mitigating factors: no enforcement history in the prior five years; a small company and low-value transactions; and extensive remedial commitments, including an outside sanctions consultant and detailed periodic reports to OFAC. The result was $175,015, 15 percent below the base.

One procedural note: OFAC’s new Sanctions Penalties Regulations, 31 C.F.R. Part 505, became effective September 25, 2026. They consolidate the IEEPA penalty process without substantive change. Appendix A remains the operative guideline.

Frequently Asked Questions

Why was the penalty so large for a $5,950 shipment?

Because an incomplete response to an OFAC subpoena is penalized separately and monthly. Appendix A sets that penalty at up to $29,150 per month, so six months equals six violations and $174,900. The four dealings in blocked property account for the remaining $31,000 of the $205,900 base penalty.

Is a freight forwarder liable if its customer chose the sanctioned supplier?

Yes. Section 599.201 prohibits any dealing by a U.S. person in property in which a blocked person has an interest, regardless of who selected the supplier. OFAC treats trade intermediaries as gatekeepers and expects them to screen every party to a shipment, including the shipper.

What should a company do when it receives an OFAC administrative subpoena?

Calendar the deadline, issue a litigation hold, and search email, shipping records, customs filings, and payment records before anyone certifies a response. Answer request by request, follow OFAC’s Production Submission Standards, and supplement promptly if more records surface. Cooperation can reduce a penalty; an incomplete certified response forfeits that credit.

Does responding to an OFAC subpoena count as a voluntary self-disclosure?

No. Appendix A states that responding to an administrative subpoena or other OFAC inquiry is not a voluntary self-disclosure. A voluntary self-disclosure must be self-initiated and precede discovery by OFAC or another government agency. Substantial cooperation without a voluntary self-disclosure can still reduce the base penalty.

About Ferrari & Associates

Ferrari & Associates is a Washington, D.C. boutique law firm practicing exclusively in U.S. economic sanctions law. Since 2009, the firm has represented companies and individuals in OFAC enforcement matters, including administrative subpoena responses, voluntary self-disclosures, and Pre-Penalty Notice defense, as well as SDN delisting petitions, specific license applications, and federal court litigation against OFAC.

This post is provided for informational purposes only and does not constitute legal advice or create an attorney-client relationship. Attorney advertising.