Costco (NASDAQ:COST) said on Tuesday (June 11) that it has violated U.S. economic sanctions against Iran—but not very much, and not on purpose, and besides, it stopped. In a filing with the U.S. Securities and Exchange Commission (SEC), the retailer said it discovered that it had issued three business memberships to Iranians: two at the Iranian Embassy in Tokyo, Japan, and the other in the U.K. in the name of Iran Air.
The chain has canceled the memberships, but the ones in Japan were used to buy about $5,500 in merchandise since November 2012.
All this came to light because the SEC now specifically requires publicly traded companies to report revenue and profits with direct ties to Iran. Naturally, it's impossible for most U.S. retailers to know whether a customer in London or Tokyo—or anywhere else, for that matter—is connected with Iran if they pay with cash. Costco is on the hook for tracking customer origins because its customers must sign up as members.
But other U.S. retailers might face the same problem if they have evidence of, say, Iranian diplomatic personnel who have joined a loyalty program. It's unclear how hard the SEC would come down on a chain that didn't bother to check, but there's no lower limit to how little a retailer is required to report. In Costco's case, the total sales were $5,497 with a profit of less than $168.
Here's how Costco reported it on its 10-Q:
During the second and third fiscal quarters of 2013, we had as cardholders at our subsidiary in Japan four individuals under two business memberships in the name of the Embassy of the Islamic Republic of Iran ("Embassy"). In the same time period, we had as cardholders in our United Kingdom subsidiary two individuals under one business membership in the name of Iran Air. Gross revenue in the second and third quarters of 2013 attributable to the memberships associated with the Iran Embassy was approximately $5,178, and our estimated profit on these transactions was less than $160. The Company recognized no revenue or profit attributable to the Iran Air membership in the second and third quarters of 2013.
The Iran Air membership and one of the Iran Embassy memberships were canceled during the second quarter of 2013, and the remaining Iran Embassy membership was canceled in June 2013, prior to which time an additional $319 in revenue and less than $8 in estimated net profits were earned in the fourth quarter of 2013. The Company does not intend to continue these activities.
- See this Quartz story
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