The cosmetics giant company, Elf Beauty, was found guilty of violating North Korea’s Sanctions for importing false eyelashes, which lead the company to pay an astounding $1 million to settle its case!
According to reports, Elf Beauty imported more than 156 shipments containing false eyelashes and kits from two major suppliers in China. The value of the said shipments amounts to a staggering $4.43 million. According to the investigation conducted, the said eyelashes originated from North Korea and imported between April 1, 2012 – January 28, 2017.
To settle the reported violation, Elf Beauty agrees to pay nearly $1 million for more than 156 violations the company committed for North Korea Sanctions Regulations.
The company also reveals they hold accountable for the civil liability they incurred. According to Tarang Amin, Elf Beauty’s CEO, the company discovered the source of materials used in producing fake eyelashes came from North Korea as they conducted routine auditing in early 2017.
Despite the said violation they committed unknowingly, Amin assures the false eyelashes, and kits only represent less than 1% of the company’s revenue in the same year.
The US Treasury Department‘s branch, Office of Foreign Assets Control seconded Elf Beauty’s claim. According to the agency, the company was not made aware around 2/3 of the materials were sourced from North Korea. Aside from that, the revenue they accumulated from the said fake eyelash kits didn’t take up a significant portion to their sales and profit.
According to the renowned Attorney Seth Berenzwqeig, emerging problems with suppliers’ compliance is pretty common in typical cases.
However, the Elf Beauty’s predicament is quite unusual and complicated not only because it involves North Korean sanctions, but also because the compliance issue existed more than half a decade – which accumulates their violations up to 156.
Since August 2018, the Trump Administration has been sanctioning businesses and companies aiding North Korea. Some of the countries affected by the said sanctions were Russia, China, and Singapore.
According to the Treasury Department, some companies from these countries violated the North Korean Sanctions imposed by the United Nations and U.S.A when it comes to the exportation and importation of alcohol, cigarette, tobacco, oil, as we all as other products sourced from North Korea.
According to the department’s secretary, Steven Mnuchin, they will continue to take actions like blocking the ports, vessels, exportation, and shipments of these who provide revenue for North Korea. They also urged the companies to abide by the U.S. Laws and Sanctions or else they’ll impose themselves into severe consequences and risks. Fortunately, Elf Beauty took the steps to self-report the said violation, so they’re off the hook easily.
The Positive Outlook
Despite the setback the company faced, Amin says they still maintain their high-quality and robust quality assurance to make sure they abide with international laws and compliance guidelines by doing the right thing. The company also takes pride in delivering high-quality products that are cost-effective.
The sanctions they receive serve as their challenge to improve their QA programs to ensure they only offer great products legally and responsibly.
Meanwhile, Berenzweig says Elf Beauty’s sanctions must serve as a warning for other retailers to practice “caution” when it comes to inspecting their supply chain, especially for overseas imports.
The only reason why the Treasury Department was lenient because Elf Beauty took the initiative to report the said issue. Both parties put damage control on the sanctions before the problem exacerbates.
Furthermore, the company took some action to make sure they avoid committing the same mistake in the future. For those companies who practice negligence, Berenzweig says the Treasury Department may not be lenient in dealing with cases like this if anyone else is found guilty.