06-4420. Revised Appeal Procedure for Persons Designated as Related Persons to Denial Orders

AGENCY:

Bureau of Industry and Security, Commerce.

ACTION:

Final rule.

SUMMARY:

This rule revises Section 766.23(c) of the Export Administration Regulations (EAR) to make the appeal procedure for any person named as a related person to the respondent in an order denying export privileges identical to the appeal procedure for the respondent in that order.

DATES:

This rule is effective May 12, 2006.

FOR FURTHER INFORMATION CONTACT:

William Arvin, Regulatory Policy Division, Bureau of Industry and Security, e-mail [e-mail], fax [phone], tel. [phone].

SUPPLEMENTARY INFORMATION:

Background

Section 766.23 of the EAR sets forth the process for making applicable to a related person an order denying export privileges issued pursuant to any provision of part 766 of the EAR. Specifically, Section 766.23(a) provides that “[i]n order to prevent evasion,” orders denying export privileges may be made applicable to “persons then or thereafter related to the respondent [in a denial order] by ownership, control, position of responsibility, affiliation, or other connection in the conduct of trade or business.” Section 766.23 may be used to make applicable to a related person an order denying export privileges issued pursuant to any provision of part 766. Prior to publication of this rule, Section 766.23(c) provided that any person named by BIS as a related person “may file an appeal with the administrative law judge.” Section 766.23(c) further provided that “[t]he recommended decision and order of the administrative law judge shall be reviewed by the Under Secretary in accordance with the procedures set forth in Section 766.22 of this part.” This rule amends Section 766.23(c) of the EAR to provide that an administrative law judge's decision pertaining to a related person to whom an order issued pursuant to Section 766.25 has been made applicable may be appealed to the Under Secretary for Industry and Security under part 756. This rule revises Section 766.23(c) to eliminate three procedural inconsistencies involving: Appeal by a related person of an order imposed under Section 766.25 for violation of a specified statute; a decision by the administrative law judge that makes an order issued for a violation related to part 760 applicable to a related person; or an order issued pursuant to Section 766.24 to prevent an imminent violation of the Export Administration Act, the EAR, or any order, license or authorization issued thereunder.

Changes Made By This Rule

Section 766.25 provides the procedure for imposing denials of export privileges for up to ten years for persons convicted of violations of statutes specified in Section 11(h) for the Export Administration Act. Prior to publication of this rule, a person named as a related person to an order issued pursuant to Section 766.25 had a right of appeal to the administrative law judge. In contrast, the respondent in such an order had a right of appeal to the Under Secretary under part 756 of the EAR. These separate and distinct appeals procedures could unnecessarily bifurcate administrative proceedings. Therefore, this rule amends Section 756.1 by including as a type of action appealable under part 756 appeals from actions making an order issued under Section 766.25 applicable to a related person.

In addition, prior to publication of this rule, Section 766.23(c) provided that any recommended decision and order of the administrative law judge making an order applicable to a related person “shall be reviewed by the Under Secretary in accordance with the procedures set forth in Section 766.22 * * *.” (Emphasis added.) This mandatory review process is consistent with the procedure for respondents in orders issued for violations of the EAR that are not related to part 760. However, procedures for the respondent to appeal the administrative law judge's order for a violation related to part 760 (restrictive trade practices and boycotts) are set forth in Section 766.21, which provides that the administrative law judge's decision “may” be appealed to the Under Secretary. (Emphasis added.) This difference could create unnecessarily inconsistent and bifurcated proceedings because the administrative law judge decision making an order issued for a violation related to part 760 applicable to a related person would be subject to mandatory Under Secretary review, whereas the decision of the administrative law judge with respect to the respondent in that same order would become the final agency action absent an appeal to the Under Secretary. Therefore, this rule revises Section 766.23 to provide that a decision of the administrative law judge making an order issued for a violation related to part 760 to the EAR applicable to a related person may be appealed pursuant to the procedures in Section 766.21 and that the recommended decision of the administrative law judge making an order issued pursuant to Section 766.24 applicable to a related person shall be reviewed by the Under Secretary in accordance with the procedures set forth in Section 766.24(e).

Finally, prior to publication of this rule, Section 766.24(d)(3)(ii) provided that a person designated as a related person to a temporary denial order issued pursuant to Section 766.24 may file an appeal in accordance with Section 766.2(3)(c) (sic). Section 766.23(c) provided that recommended decisions of the administrative law judge be reviewed in accordance with the procedures set forth in Section 766.22. The procedures set forth in Section 766.22 differ from the procedures for review of recommended decisions by the administrative law judge with respect to orders issued pursuant to Section 766.24. Therefore, this rule makes a necessary technical correction to Section 766.24(d)(3)(ii).

Effect of This Rule

This rule removes potential causes of unnecessarily bifurcated proceedings by revising: (1) The appeal procedures for related persons to orders issued under Section 766.25; (2) orders issued for violations related to part 760 of the EAR; and (3) orders issued pursuant to Section 766.24 to prevent imminent violations to make each related person appeal procedure match the appeal procedure for the respondent in the underlying proceeding. Upon publication of this rule, the appeal procedure for a related person to any denial order is identical to that of the respondent(s) in that same order. This rule does not change the substantive grounds for making an order applicable to a related person, nor does it change the issues to be decided on appeal of such an action.

Rulemaking Requirements

1. This rule has been determined to be not significant for the purposes of Executive Order 12866.

2. Notwithstanding any other provision of law, no person is required to respond to nor be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), unless that collection of information displays a currently valid Office of Management and Budget (OMB) Control Number. This rule does not involve any collections of information that are subject to the Paperwork Reduction Act.

3. This rule does not contain policies with Federalism implications as this term is defined in Executive Order 13132.

4. Pursuant to 5 U.S.C. 553, the provisions of the Administrative Procedure Act requiring a notice of proposed rulemaking and the opportunity for public comment are waived, because this regulation involves a rule of agency procedure. No other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule under the Administrative Procedure Act or by any other law, the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) are not applicable.

List of Subjects

15 CFR Part 756

• Administrative practice and procedure
• Exports
• Penalties

15 CFR Part 766

• Administrative practice and procedure
• Confidential business information
• Exports
• Law enforcement
• Penalties

Accordingly, parts 756 and 766 of the Export Administration Regulations (15 CFR parts 730-799) are amended as follows:

PART 756—[AMENDED]

1. The authority citation for 15 CFR part 756 is revised to read:

Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 2, 2005, 70 FR 45273 (August 5, 2005).

2. Section 756.1(a)(2) is revised to read as follows:

§ 756.1

Introduction.

(a) * * *

(2) Denial or probation orders, civil penalties, sanctions, or other actions under parts 764 and 766 of the EAR, except that, any appeal from an action taken under § 766.25 and any appeal from an action taken in accordance with § 766.23 to make an action taken under § 766.25 applicable to a related person shall be subject to the appeals procedures described in this part 756.

* * * * *

PART 766—[AMENDED]

3. 1. The authority citation for 15 CFR Part 766 is revised to read:

Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 2, 2005, 70 FR 45273 (August 5, 2005).

4. Section 766.23(c) is revised to read as follows:

§ 766.23

Related persons.

* * * * *

(c) Appeals. Any person named by BIS in an order as related to the respondent may appeal that action. The sole issues to be raised and ruled on in any such appeal are whether the person so named is related to the respondent and whether the order is justified in order to prevent evasion.

(1) A person named as related to the respondent in an order issued pursuant to § 766.25 may file an appeal with the Under Secretary for Industry and Security pursuant to part 756 of the EAR.

(2) A person named as related to the respondent in an order issued pursuant to other provisions of this part may file an appeal with the administrative law judge.

(i) If the order made applicable to the related person is for a violation related to part 760 of the EAR, the related person may file an appeal with the administrative law judge. The related person may appeal the initial decision and order of the administrative law judge to the Under Secretary in accordance with the procedures set forth in § 766.21.

(ii) If the order made applicable to the related person is issued pursuant to § 766.24 of this part to prevent an imminent violation, the recommended decision and order of the administrative law judge shall be reviewed by the Under Secretary in accordance with the procedures set forth in § 766.24(e) of this part.

(iii) If the order made applicable to the related person is for a violation of the EAR not related to part 760 of the EAR and not issued pursuant to § 766.24 of this part, the recommended decision and order of the administrative law judge shall be reviewed by the Under Secretary in accordance with the procedures set forth in § 766.22 of this part.

5. In § 766.24 paragraph (d)(3)(ii) is revised to read as follows:

§ 766.24

Temporary denials.

* * * * *

(d) * * *

(3) * * *

(ii) Any person designated as a related person may not oppose the issuance or renewal of the temporary denial order, but may file an appeal in accordance with § 766.23(c) of this part.

* * * * *

Dated: May 2, 2006.

Matthew S. Borman,

Deputy Assistant Secretary for Export Administration.