[Federal Register Volume 62, Number 215 (Thursday, November 6, 1997)]
[Notices]
[Pages 60063-60065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29377]
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DEPARTMENT OF COMMERCE
Bureau of Export Administration
[No. 97-BXA-9]
Decision and Order on Renewal of Temporary Denial Order
In the Matters of: Thane-Coat, Inc. 12725 Royal Drive, Stafford,
Texas 77477; Jerry Vernon Ford, President, Thane-Coat, Inc., 12725
Royal Drive, Stafford, Texas 77477; and with an address at 7707
Augustine Drive, Houston, Texas 77036; Preston John Engebretson,
Vice-President, Thane-Coat, Inc., 12725 Royal Drive, Stafford, Texas
77477; and with an address at 8903 Bonhomme Road, Houston, Texas
77074; Export Materials, Inc., 3727 Greenbrier Drive, No. 108,
Stafford, Texas 77477; and Thane-Coat International, LTD., Suite C,
Regent Centre, Explorers Way, P.O. Box F-40775, Freeport, The
Bahamas, Respondents.
Background
On May 5, 1997, I entered an Order temporarily denying all United
States export privileges to Thane-Coat, Inc.; Jerry Vernon Ford,
president, Thane-Coat, Inc.; Preston John Engebretson, vice-president,
Thane-Coat, Inc. (hereinafter collectively referred to as ``T-CF&E''),
located in the State of Texas; Export Materials, Inc. (hereinafter
referred to as ``EMI''), located in the State of Texas; and Thane-Coat
International, Ltd. (hereinafter referred to as ``TCIL''), located in
Freeport, the Bahamas.
[[Page 60064]]
T-CF&E, EMI and TCIL appealed the Temporary Denial Order
hereinafter ``TDO'') to an Administrative Law Judge (hereinafter the
``ALJ''). On June 11, 1997, the ALJ recommended to the Under Secretary
for Export Administration that the TDO be affirmed. The Under Secretary
affirmed the TDO on June 20, 1997. T-CF&E, EMI and TCIL appealed the
issuance of the TDO in the U.S. District Court in the Southern District
of Texas.
The TDO will expire on November 1, 1997. Pursuant to Section 766.24
of the Export Administration Regulations (15 C.F.R. parts 730-774
(1997)) (hereinafter the ``Regulations''), issued pursuant to the
Export Administration Act of 1979, as amended (50 U.S.C.A. app
Secs. 2401-2420 (1991 & Supp. 1997)) (hereinafter the ``Act''),\1\ the
Office of Export Enforcement, Bureau of Export Administration, United
States Department of Commerce (hereinafter ``BXA'') has requested that
I renew the TDO against T-CF&E, EMI and TCIL for an additional 180
days.
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\1\ The Act expired on August 20, 1994. Executive Order 12924 (3
C.F.R., 1994 Comp. 917 (1995)), extended by Presidential Notices of
August 15, 1995 (3 C.F.R., 1995 Comp. 501 (1996)), and August 14,
1996 (3 C.F.R., Comp. 298 (1997)), continued the Regulations in
effect under the International Emergency Economic Powers Act (50
U.S.C.A. Secs. 1701-1706 (1991 & Supp. 1997)).
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T-CF&E, through its attorneys, opposed the Department's request and
sought a hearing as authorized by Section 766.24(d)(3)(i) of the
Regulations. The hearing was held on October 28, 1997.
Neither EMI nor TCIL filed written submissions opposing renewal of
the TDO.
Discussion
The sole issue presented is whether the TDO should be renewed to
prevent an imminent violation of the Regulations. A violation may be
``imminent'' either in time or likelihood. To establish grounds for a
temporary denial order, BXA may show either that a violation is about
to occur or that the general circumstances of the matter under
investigation demonstrate a likelihood of future violations. BXA may
show that the violation under investigation or charges is significant,
deliberate, covert and/or likely to occur again, rather than technical
or negligent. BXA may show that it is appropriate to give notice to
companies in the United States and abroad to cease dealing with the
persons in U.S.-origin goods and technology in order to reduce the
likelihood that the persons under investigation or charges continue to
export or acquire abroad such goods and technology, risking subsequent
disposition contrary to export control requirements. Lack of
information establishing the precise time a violation may occur does
not preclude a finding that a violation is imminent, so long as there
is sufficient reason to believe the likelihood of a violation. BXA may
request renewal of a TDO if BXA believes the TDO is necessary in the
public interest to prevent an imminent violation. 15 CFR 766.24.
In its request, BXA states that, as a result of an ongoing
investigation, it has reason to believe that, during the period from
approximately June 1994 through approximately July 1996, Thane-Coat,
Inc., through Ford and Engebretson, and using its affiliated companies,
TCIL and EMI, made approximately 100 shipments of U.S.-origin pipe
coating materials, machines and parts to the Dong Ah Consortium in
Benghazi, Libya. BXA asserts the approximate value of these shipments
was $35 million. These items were used in coating the internal surface
of prestressed concrete cylinder pipe for the Government of Libya's
Great Man-Made River Project, which is ongoing. BXA's investigation
gives it reason to believe that T-CF&E, EMI and TCIL employed a scheme
to export U.S.-origin products from the United States, through the
United Kingdom or Italy, to Libya, a country subject to a comprehensive
economic sanctions program, without the authorizations required under
U.S. law and regulations, including the Regulations.
BXA believes that the violations T-CF&E, EMI and TCIL are suspected
of having committed were significant, deliberate, covert and/or likely
to occur again unless a temporary denial order naming T-CF&E, EMI and
TCIL is issued. Additionally, BXA believes that a temporary denial
order is necessary to give notice to companies in the United States and
abroad that they should cease dealing with T-CF&E, EMI and TCIL in
export-related transactions involving U.S.-origin goods.
Counsel for T-CF&E argues that BXA has not shown that a TDO is
needed to prevent an imminent violation of law and that evidence of
past alleged violations of the Act do not show that a future violation
is imminent.\2\ Counsel's arguments are not persuasive.
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\2\ ``Opposition To Request for Renewal of Order Temporarily
Denying Export Privileges'', dated October 24, 1997.
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Counsel argues that the TDO is void and should not be renewed
because the Act has expired. I do not accept Counsel's argument.
Counsel argues that evidence of the violations upon which BXA bases
its request is contained in privileged communications. Counsel further
argues that privileged communications may not be considered in deciding
whether to renew the TDO. The showing by BXA, that renewal of the TDO
is appropriate, is compelling even without the communications to which
counsel claims privilege. I do not concur in Counsel's argument.
Counsel argues that the TDO is over-broad and, if renewed, should
be narrowed. In its showing, BXA described an elaborate international
scheme put in place by T-CF&E, EMI and TCIL. BXA argues that, if the
TDO is not renewed, T-CF&E can establish a similar scheme and commit
additional violations. Based on the showing by BXA, the scope of the
TDO is in the public interest to prevent additional violations. BXA's
argument is persuasive.
Counsel offers declarations by Jerry Vernon Ford, president of
Thane-Coat, Inc., and Preston John Engebretson, vice-president of
Thane-Coat, Inc. Each certified, under penalty of perjury, that neither
he nor Thane-Coat, Inc. will enter into any contract, agreement,
understanding, or arrangement with any other party to sell, export,
ship or transmit any coating products, of any kind, to any entity in
any country subject to a general embargo, as indicated in Section
746.1(a) of the Regulations. Messrs. Ford and Engebretson, on behalf of
themselves and Thane-Coat, Inc., also consent to pre-export and post-
export monitoring by BXA of all export transactions entered into by
Thane-Coat.
The pledge by Messrs. Ford and Engebretson, to comply with Section
746.1(a) of the Regulations, is not persuasive in light of the showing
by BXA.
Counsel requests that BXA produce documents related to the matters
associated with transactions to Libya involving T-CF&E, EMI and TCIL.
At this point, this matter is not ripe for discovery.
Findings
Based on the record in this matter, including the submissions of
the parties and the oral arguments at the hearing held on October 28,
1997, I find that it is necessary to renew the order temporarily
denying the export privileges of Thane-Coat, Inc.; Jerry Vernon Ford;
Preston John Engebretson; Export Materials, Inc.; and Thane-Coat
International, Ltd. I find such renewal is in the public interest to
prevent an imminent violation of the Regulations
[[Page 60065]]
and to give notice to companies in the United States and abroad to
cease dealing with these entities in goods and technical data subject
to the Regulations. I find such renewal is in the public interest in
order to reduce the substantial likelihood that they will engage in
activities which are in violation of the Regulations.
Order
Accordingly, it is hereby ordered that:
All outstanding validated export licenses in which Thane-Coat,
Inc., 12725 Royal Drive, Stafford, Texas; Jerry Vernon Ford, president,
Thane-Coat, Inc., 12725 Royal Drive, Stafford, Texas 77477, with an
address at 7707 Augustine Drive, Houston, Texas 77036; Preston John
Engebretson, vice-president, Thane-Coat, Inc., 12725 Royal Drive,
Stafford, Texas 77477, with an address at 8903 Bonhomme Road, Houston,
Texas 77074; Export Materials, Inc., 3727 Greenbrier Drive, No. 108,
Stafford, Texas 77477; and/or Thane-Coat International, Ltd., Suite C,
Regent Center, Explorers Way, P.O. Box F-40775, Freeport, The Bahamas,
appear or participate, in any manner or capacity, are hereby revoked
and shall be returned forthwith to the Office of Export Licensing for
cancellation. Further, all privileges of T-CF&E, EMI and TCIL of
participating, in any manner or capacity, in any special licensing
procedure, including, but not limited to, distribution licenses, are
hereby revoked.
Thane-Coat, Inc., and all of its successors or assigns, officers,
representatives, agents, and employees when acting on its behalf; Jerry
Vernon Ford; Preston John Engebretson; Export Materials, Inc., and all
of its successors or assigns, officers, representatives, agents, and
employees when acting on its behalf; and Thane-Coat International,
Ltd., and all of its successors or assigns, officers, representatives,
agents, and employees when acting on its behalf, may not directly or
indirectly, participate in any way in any transaction involving any
commodity, software or technology (hereinafter collectively referred to
as ``item'') exported from the United States that is subject to the
Regulations, or in any other activity subject to the Regulations,
including, but not limited to:
A. Applying for, obtaining, or using any license, License
Exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying,
receiving, using, selling, delivering, storing, disposing of,
forwarding, transporting, financing, or otherwise servicing in any way,
any transaction involving any item exported or to be exported from the
United States that is subject to the Regulations, or in any other
activity subject to the Regulations; or
C. Benefiting in any way from any transaction involving any item
exported, or to be exported, from the United States that is subject to
the Regulations, or in any other activity subject to the Regulations.
No person may, directly or indirectly, do any of the following:
A. Export or reexport to or on behalf of any of the denied persons
any item subject to the Regulations;
B. Take any action that facilitates the acquisition, or attempted
acquisition, by any of the denied persons of the ownership, possession,
or control of any item subject to the Regulations that has been or will
be exported from the United States, including financing or other
support activities related to a transaction whereby any of the denied
persons acquires, or attempts to acquire, such ownership, possession or
control;
C. Take any action to acquire from, or to facilitate the
acquisition or attempted acquisition from, any of the denied persons of
any item subject to the Regulations that has been exported from the
United States;
D. Obtain from any of the denied persons in the United States any
item subject to the Regulations with knowledge or reason to know that
the item will be, or is intended to be, exported from the United
States;
E. Engage in any transaction to service any item subject to the
Regulations that has been or will be exported from the United States
and which is owned, possessed or controlled by any of the denied
persons, or service any item, of whatever origin, that is owned,
possessed or controlled by any of the denied persons if such service
involves the use of any item subject to the Regulations that has been
or will be exported from the United States. For purposes of this
paragraph, servicing means installation, maintenance, repair,
modification or testing.
After notice and opportunity for comment, as provided in Section
766.23 of the Regulations, any person, firm, corporation, or business
organization related to any of the denied persons by affiliation,
ownership, control, or position of responsibility in the conduct of
trade or related services, may also be made subject to the provisions
of this Order.
This order does not prohibit any export, reexport, or other
transaction subject to the Regulations where the only items involved
that are subject to the Regulations are the foreign-produced direct
product of U.S.-origin technology.
In accordance with the provisions of Section 766.24(e) of the
Regulations, T-CF&E, EMI, and/or TCIL may, at any time, appeal this
Order by filing a full written statement in support of the appeal with
the Office of the Administrative Law Judge, U.S. Coast Guard ALJ
Docketing Center, 40 South Gay Street, Baltimore, Maryland 21202-4022.
This order is effective immediately and shall remain in effect for
180 days.
In accordance with Section 766.24 of the Regulations, the
Department may seek renewal of this TDO by filing a written request not
later than 20 days before the expiration date. Any respondent may
oppose a request to renew this TDO by filing a written submission with
the Assistant Secretary for Export Enforcement, which must be received
no later than seven days before the expiration of this order.
A copy of this order shall be served on each respondent and this
order shall be published in the Federal Register.
Entered this 31st day of October 1997.
Frank W. Deliberti,
Acting Assistant Secretary for Export Enforcement.
[FR Doc. 97-29377 Filed 11-5-95; 8:45 am]
BILLING CODE 3510-DT-M
