01-18594. In the Matter of: Jabal Damavand General Trading Company, Dubai, United Arab Emirates, Respondent; Decision and Order

On June 14, 2001, the Administrative Law Judge (hereinafter the “ALJ”) issued a Recommended Decision and Order in the above-captioned matter. The Recommended Decision and Order, a copy of which is attached hereto and made a part hereof, has been referred to me for final action. The Recommended Decision and Order sets forth the procedural history of the case, the facts of the case, and the detailed findings of fact and conclusions of law. The findings of fact and conclusions of law concern whether Jabal Damavand General Trading Company (hereinafter “Jabal Damavand”) committed three violations of the Export Administration Regulations (hereinafter the “Regulations”)^[1] and a recommended penalty for those violations.

Based on my review of the record and pursuant to Section 766.22(c) of the Regulations, I am vacating the June 14, 2001 Recommended Decision and Order and referring this case back to the ALJ for further proceedings not inconsistent with this determination.

I. The ALJ's Findings of Fact Are Not Sufficient To Constitute a Violation of Section 764.2(b) or Section 764.2(e) of the Regulations

The facts as found in the Recommended Decision and Order are not sufficient to constitute a violation of either Section 764.2(b) or Section 764.2(e) of the Regulations. The ALJ found that Jabal Damavand violated Section 764.2(b) of the Regulations by causing, aiding, or abetting the reexport of U.S.-origin ferrography lab equipment from the United Arab Emirates to Iran without obtaining from the Commerce Department's Bureau of Export Administration (hereinafter “BXA”) the reexport authorization that it knew or had reason to know was required by Section 742.8(a)(2) and Section 746.7 of the Regulations. In addition and in connection with the violation of Section 764.2(b), the ALJ found that Jabal Damavand violated Section 764.2(e) of the Regulations by selling, transferring, or forwarding commodities exported or to be exported from the United States with knowledge or reason to know that a violation of the Act, or any regulation, order, license, or authorization issued thereunder occurred, was about to occur, or was intended to occur with respect to the reexport.

Licensing requirements imposed under Section 742.8(a)(2) and Section 746.7 of the Regulations for reexports of U.S.-origin items to Iran are determined by the classification of the item at issue within the Commerce Control List (hereinafter “CCL”). The Recommended Decision and Order did not include a finding regarding the classification within the CCL of the ferrography lab equipment reexported to Iran by Jabal Damavand. In order to establish that Jabal Damavand violated the reexport licensing requirements contained in Section 742.8(a)(2) or Section 746.7 of the Regulations, there must be a finding that the ferrography lab equipment is classified within an Export Control Classification Number (hereinafter “ECCN”) that is subject to reexport licensing controls imposed by these sections. Without a finding determining the classification of the ferrography lab equipment, I cannot affirm the ALJ's decision and Jabal Damavand violated Section 764.2(b) and Section 764.2(e) of the Regulations by reexporting the equipment to Iran without a license or other authorization required by the Regulations.

The only mention of the classification of the ferrography lab equipment in the record is BXA's assertion in its May 21, 2001 Motion for Default Order to the ALJ that the equipment is classified as EAR99.^[2] If the ferrography lab equipment indeed is classified as EAR99, then neither Section 742.8(a)(2) nor Section 746.7 of the Regulations would require Jabal Damavand to obtain a license or other authorization to reexport the equipment to Iran. Both Section 742.8(a)(2) and Section 746.7 of the Regulations impose reexport licensing requirements based on the classification of an item within certain ECCNs, or based on certain reasons for control (e.g., national security controls, nuclear nonproliferation controls). EAR99 items are not classified within a specific ECCN and are not controlled for any of the specific reasons for control listed in either Section 742.8(a)(2) or Section 746.7. Thus, if the classification of the ferrography lab equipment is EAR99, then the alleged facts would not be sufficient to constitute a violation of Section 764.2(b) or Section 764.2(e) of the Regulations.

Accordingly, I am vacating the ALJ's finding that Jabal Damavand violated Section 764.2(b) and Section 764.2(e) of the Regulations by reexporting the ferrography lab equipment to Iran without a license or other authorization required by Section 742.8(a)(2) and Section 746.7 of the Regulations. I am referring this case back to the ALJ for further proceedings to determine the classification of the ferrography lab equipment within the CCL, to ascertain the reexport licensing requirements based on the proper classification of the equipment, and to determine whether Jabal Damavand violated Section 764.2(b) or Section 764.2(e) of the Regulations by reexporting this equipment to Iran without obtaining a required license or other authorization.

II. The ALJ Shall Determine Whether and to What Extent To Consider Jabal Damavand's Late Answer to the Charging Letter

The ALJ's Recommended Decision and Order in this case was issued as a result of BXA's motion for default because Jabal Damavand did not respond to the allegations in the charging letter within the 30-day deadline for the answer set forth in Section 766.6 of the Regulations. However, since the time of the Recommended Decision and Order, the ALJ docketing center has received a response to the charging letter from Jabal Damavand that is dated June 19, 2001. (A copy of this letter was forwarded to me and received in my office on July 11, 2001.)

Although Jabal Damavand's answer to the charging letter was received well after the deadline for the answer set forth in the Regulations, it appears to contain facts that may be directly relevant to the charges. In administrative enforcement actions conducted pursuant to Part 766 of the Regulations, it is the ALJ's responsibility to compile the administrative record, to evaluate the weight and sufficiency of evidence presented, and to render a recommended decision and order based on that record. In this connection, Section 766.16(b) grants the ALJ the authority—either at the request of a party or at the ALJ's own initiative—to extend the time to file an answer to a charging letter, even after the deadline for filing the answer has expired. Accordingly, as part of my referral of this case back to the ALJ for further proceedings, I am instructing the ALJ to determine whether and to what extent Jabal Damavand's answer to the charging letter should be considered in those proceedings.

III. The ALJ Shall Reconsider the Recommended Penalty in Light of Any New Findings of Fact or Conclusions of Law

Finally, in addition to the findings regarding violations of Section 764.2(b) and Section 764.2(e) that I am vacating, the ALJ also found that Jabal Damavand committed a violation of Section 764.2(g) of the Regulations by making a false or misleading statement of material fact directly to BXA or indirectly through any other person for the purpose of or in connection with effecting an export, reexport, or other activity subject to the Regulations. Based on these three violations of the Regulations, the ALJ recommended a penalty of a ten-year denial of Jabal Damavand's export privileges.

Although I agree that the facts as found by the ALJ support the finding that Jabal Damavand committed a violation of Section 764.2(g) of the Regulations, I am nonetheless vacating that finding as well as the recommended penalty for the following reasons. First, the ALJ's recommended findings and conclusion with respect to the violation of Section 764.2(g) may change in light of new information, if any, that is presented during the further proceedings. Second, the violation of Section 764.2(g) was only one of three violations of the Regulations found by the ALJ. The ALJ recommended a ten-year denial of exporting privileges for Jabal Damavand based on three violations of the Regulations, and not on the single violation constituting a false statement or misrepresentation.

Accordingly, I believe the best course of action is to vacate the Recommended Decision and Order in its entirety, and instruct the ALJ to make a new finding whether Jabal Damavand violated Sections 764.2(b), and 764.2(e), and 764.2(g) of the Regulations based on any new information that is available, and to instruct the ALJ to reconsider his recommendation of a ten-year denial period in light of the results of these findings.

Accordingly, it is Therefore Ordered,

First, the June 14, 2001 Recommended Decision and Order is vacated;

Second, this case shall be referred back to the ALJ for further proceedings not inconsistent with this Order during which the ALJ shall determine the classification of the ferrography lab equipment within the CCL, ascertain the proper reexport licensing requirements for the equipment based on its classification, and determine whether Jabal Damavand violated Section 764.2(b) or Section 764.2(e) of the Regulations by reexporting this equipment to Iran without obtaining a license or other authorization required by the Regulations;

Third, the ALJ shall determine whether and to what extent to consider Jabal Damavand's June 19, 2001 response to the charging letter;

Fourth, the ALJ shall reconsider his finding that Jabal Damavand committed a violation of Section 764.2(g) of the Regulations, as well as his recommended penalty of a ten-year denial of Jabal Damavand's export privileges, in light of any new findings of fact or conclusions of law reached as a result of these further proceedings; and

Fifth, this Order shall be served on Jabal Damavand and on BXA, and shall be published in the Federal Register.

This order is effective immediately.

Dated: July 19, 2001.

Kenneth I. Juster,

Under Secretary of Commerce for Export Administration.

Recommended Decision and Order

On January 4, 2001, the Office of Export Enforcement, Bureau of Export Administration, United States Department of Commerce (BXA), issued a charging letter initiating this administrative proceeding against Jabal Damavand General Trading Company (hereinafter referred to as “Jabal Damavand”). The charging letter alleged that Jabal Damavand committed one violation of Section 764.2(b), one violation of Section 764.2(e) and one violation of 764.2(g) of the Export Administration Regulations ^[1] issued under the Export Administration Act of 1979, as amended (50 U.S.C.A. app. §§ 2401-2420 (1991 & Supp. 2000)) (the Act).^[2]

Specifically, the charging letter alleged that on or about July 6, 1998, Jabal Damavand caused, aided, or abetted the reexport of U.S.-origin ferrography lab equipment from the United Arab Emirates to Iran without obtaining from BXA the reexport authorization that it knew or had reason to know was required by Sections 742.8(a)(2) and 746.7 of the Regulations. BXA alleged that by engaging in conduct prohibited by or contrary to the Regulations, Jabal Damavand committed one violation of Section 764.2(b) of the Regulations. BXA also alleged that, by selling, transferring, or forwarding commodities exported or to be exported from the United States with knowledge or reason to know that a violation of the Act, or any regulation, order, license or authorization issued thereunder occurred, was about to occur, or was intended to occur with respect to the shipment, Jabal Damavand committed one violation of Section 764.2(e) of the Regulations.

The charging letter further alleged that, on or about December 11, 1997, prior to shipping the U.S.-origin ferrography lab equipment to Jabal Damavand, the supplier requested end user and final destination information. In response to the request, Jabal Damavand informed the supplier that the item would be installed in the United Arab Emirates, when in fact Jabal Damavand reexported the U.S.-origin ferrography lab equipment to Iran. BXA alleged that, by making a false or misleading statement of material fact either directly to BXA or indirectly through any other person for the purpose of or in connection with effecting an export, reexport or other activity subject to the Regulations, Jabal Damavand committed one violation of Section 764.2(g) of the Regulations.

Section 766.3(b)(1) of the Regulations provides that notice of issuance of a charging letter shall be served on a respondent by mailing a copy by registered or certified mail addressed to the respondent at respondent's last known address. In accordance with that section, January 4, 2001, BXA sent to Jabal Damavand at its address in Dabai, United Arab Emirates, notice that it had issued a charging letter against it.

BXA received a signed return receipt on February 2, 2001, indicating that the charging letter had been delivered. Because the receipt was returned from the United Arab Emirates undated, BXA does not know the exact date of service. Under these circumstances, and for the purpose of this default proceeding, BXA has designated February 2, 2001, the day BXA received the return receipt, as the date of service.

To date, Jabal Damavand has not filed an answer to the charging letter. Accordingly, because Jabal Damavand has not answered the charging letter as required by and in the manner set forth in Section 766.6 of the Regulations, Jabal Damavand is in default.

Pursuant to the default procedures set forth in Section 766.7 of the Regulations, I therefore find the facts to be as alleged in the charging letter, and hereby determine the Jabal Damavand committed one violation of Section 764.2(b), one violation of Section 764.2(e) and one violation of 764.2(g) of the Regulations.

Section 764.3 of the Regulations establishes the sanctions available to BXA for the violations charged in this default proceeding. The applicable sanctions as set forth in the Regulations are a civil monetary penalty, suspension from practice before the Department of Commerce, and/or a denial of export privileges. See 15 CFR 764.3 (2000).

BXA's motion stated that an appropriate sanction for Jabal Damavand's commission of three violations of the Regulations is issuance of a standard denial order to deny of all of Jabal Damavand's export privileges for 10 years.^[3] Jabal Damavand violated the Regulations by causing, aiding, or abetted the reexport of U.S.-orgin ferrography lab equipment from the United States Arab Emirates to Iran without obtaining from BXA the reexport authorization that it knew or had reason to know was required by Sections 742.8(a)(2) and 746.7 of the Regulations and Jabal Damavand made a false and misleading statement to obtain and reexport the U.S.-origin ferrography lab equipment to Iran.

In light of the nature of the violations, I concur with BXA, and recommend that the Under Secretary for Export Administration enter an Order ^[4] against Jabal Dasmavand General Trading Company denying all export privileges for a period of 10 years.

Dated: June 14, 2001.

Edwin M. Bladen,

Administrative Law Judge.

Footnotes

1.  The Regulations governing the violations at issue are found in the 1998 version of the Code of Federal Regulations. The Regulations are codified at 15 CFR parts 730-774 (1998) and, to the degree to which they pertain to this matter, are substantially the same as the 2000 version.

2.  An Item is classified as EAR99 when the item is “subject to” the Regulations (as defined in Section 734.3 of the Regulations), but is not identified within any specific ECCN on the CCL.

1.  The Regulations governing the violation at issue are found in the 1998 version of the Code of Federal Regulations. The Regulations are codified at 15 CFR Parts 730-774 (1998) and, to the degree to which they pertain to this mater, are substantially the same as the 2000 version.

2.  The Act expired on August 20, 1994. Executive Order 12924 (3 CFR, 1994 Comp. 917 (1995)), which had been extended by successive Presidential Notices, the most recent being that of August 3, 2000 (65 FR 48347, August 8, 2000), continued the Regulations in effect under the International Emergency Economic Powers Act (50 U.S.C.A. 1701-1706 (1991 & Supp. 2000)) until November 13, 2000 when the Act was reauthorized See Pub. L. No. 106-508.

3.  Denial orders can be either “standard” or “non-standard.” A standard order denying export privileges is appropriate in this case. The terms of a standard denial order are set forth in Supplement No. 1 to Part 764 of the Regulations.

4.  Pursuant to Section 13(c)(1) of the Act and Section 766.17(b)(2) of the Regulations, in export control enforcement cases, the Administrative Law Judge issues a recommended decision which is reviewed by the Under Secretary for Export Administration who issues the final decision for the agency.