97-3537. Foreign Assets Control Regulations; Regulations Prohibiting Transactions Involving the Shipment of Certain Merchandise Between Foreign Countries; Cuban Assets Control Regulations: Civil Penalty Administrative Hearings

[Federal Register Volume 62, Number 31 (Friday, February 14, 1997)]
[Proposed Rules]
[Pages 6896-6910]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3537]


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DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Parts 500, 505 and 515


Foreign Assets Control Regulations; Regulations Prohibiting 
Transactions Involving the Shipment of Certain Merchandise Between 
Foreign Countries; Cuban Assets Control Regulations: Civil Penalty 
Administrative Hearings

AGENCY: Office of Foreign Assets Control, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Treasury Department proposes to amend the Foreign Assets 
Control Regulations and the Cuban Asset Control Regulations to add 
procedures for the conduct of administrative hearings in civil penalty 
cases and for settlement of civil penalty cases in lieu of 
administrative hearings. A conforming amendment is proposed to be made 
to the Transaction Control Regulations.

DATES: Written comments must be received by March 17, 1997.

ADDRESSES: Comments may be mailed to the Director, Office of Foreign 
Assets Control, U.S. Treasury Department, 1500 Pennsylvania Avenue, 
NW--Annex, Washington, DC 20220.

FOR FURTHER INFORMATION CONTACT: Mrs. B.S. Scott, Chief, Civil 
Penalties Program (tel.: [phone]), or William B. Hoffman, Chief 
Counsel (tel.: [phone]), Office of Foreign Assets Control, U.S. 
Treasury Department, Washington, DC 20220.

SUPPLEMENTARY INFORMATION:

Electronic and Facsimile Availability

    This document is available as an electronic file on The Federal 
Bulletin Board the day of publication in the Federal Register. By 
modem, dial 202/512-1387 and type ``/GO FAC,'' or call 202/512-1530 for 
disk or paper copies. This file is available for downloading without 
charge in WordPerfect 5.1, ASCII, and Adobe AcrobatTM readable 
(*.PDF) formats. For Internet access, the address for use with the 
World Wide Web (Home Page), Telnet, or FTP protocol is: 
fedbbs.access.gpo.gov. The document is also accessible for downloading 
in ASCII format without charge from Treasury's Electronic Library 
(``TEL'') in the ``Business, Trade and Labor Mall'' of the FedWorld 
bulletin board. By modem, dial 703/321-3339, and select the appropriate 
self-expanding file in TEL. For Internet access, use one of the 
following protocols: Telnet = fedworld.gov (192.239.93.3); World Wide 
Web (Home Page) = http://www.fedworld.gov; FTP = ftp.fedworld.gov 
(192.239.92.205). Additional information concerning the programs of the 
Office of Foreign Assets Control is available for downloading from the 
Office's Internet Home Page: http://www.ustreas.gov/treasury/services/
fac/fac.html, or in fax form through the Office's 24-hour fax-on-demand 
service: call 202/622-0077 using a fax machine, fax modem, or (within 
the United States) a touch-tone telephone.

Background

    The Foreign Assets Control Regulations, 31 CFR part 500, and the 
Cuban Asset Control Regulations, 31 CFR part 515 (jointly, the 
``Regulations''), are proposed to be amended to provide for detailed 
procedures governing administrative hearings, as provided in section 
1710(c) of the Cuban Democracy Act of 1992 (22 U.S.C. 6001-6010 -- the 
``CDA''). A conforming amendment is proposed to be made to Sec. 505.50 
of the Regulations Prohibiting Transactions Involving the Shipment of 
Certain Merchandise Between Foreign Countries, 31 CFR part 505, which 
incorporates by reference the penalty provisions of part 500. Because 
the CDA amends section 16 of the Trading with the Enemy Act (50 U.S.C. 
App. 16) to permit the imposition of civil monetary penalties and civil 
forfeiture with opportunity for hearing and discovery, subpart G of the 
Regulations is proposed to be revised to establish the procedures 
governing administrative hearings.
    Before this proposed rule is adopted as a final rule, consideration 
will be given to written comments (a signed original and 2 copies) that 
are timely submitted to the OFAC. All comments will be available for 
public inspection and copying.

Regulatory Flexibility Act

    It has been determined that this notice of proposed rulemaking is 
not a ``significant regulatory action'' as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It is hereby 
certified, pursuant to the Regulatory Flexibility Act (5 U.S.C. 
605(b)), that the proposed rule, if promulgated, will not have a 
significant economic impact on a substantial number of small entities, 
so that no regulatory flexibility analysis is required. The factual 
basis for this certification is as follows: Since civil penalty 
procedures under the Regulations were adopted (June 29, 1993, for part 
515; April 8, 1994, for part 500), all recipients of a prepenalty 
notice under the Regulations have been provided the opportunity to 
request an administrative hearing, with prehearing discovery, prior to 
imposition of a penalty. Secs. 500.702(b) & 515.702(b). As of December 
20, 1996, the cumulative number of hearing requests pending was 27. Of 
these, only 10 involved respondents that are small business entities 
with fewer than 500 employees. A respondent's decision to use the 
administrative hearing process is strictly voluntary, and any final 
agency action imposing a civil penalty, with or without an 
administrative hearing, remains appealable pursuant to section 702 of 
the Administrative Procedure Act (5 U.S.C. 553-596 -- the ``APA'').
    The collection of information in the proposed rules arises in the 
conduct of administrative actions or investigations by OFAC against 
specific individuals or entities and is, therefore, not subject to the 
requirements of the Paperwork Reduction Act pursuant to 44 U.S.C. 
3518(c)(1)(B)(ii).

List of Subjects

31 CFR Part 500

    Administrative practice and procedure, Banks, banking, Blocking of 
assets, Cambodia, Currency, Estates, Exports, Finance, Foreign claims, 
Foreign investment in the United States, Foreign trade, Imports, 
Information and informational materials, International organizations, 
North Korea, Penalties, Reporting and recordkeeping requirements, 
Securities, Services, Specially designated nationals, Terrorism, Travel 
restrictions, Trusts and trustees, Vessels, Vietnam.

31 CFR Part 505

    Administrative practice and procedure, Arms and munitions, Banks, 
banking, Communist countries, Exports, Finance, Foreign trade, Nuclear 
materials, Penalties, Reporting and recordkeeping requirements.

31 CFR Part 515

    Administrative practice and procedure, Air carriers, Banks, 
banking, Blocking of assets, Cuba, Currency,

[[Page 6897]]

Estates, Exports, Finance, Foreign investment in the United States, 
Foreign trade, Imports, Information and informational materials, 
Penalties, Reporting and recordkeeping requirements, Securities, 
Shipping, Specially designated nationals, Terrorism, Travel 
restrictions, Trusts and trustees, Vessels.

    For the reasons set forth in the preamble, 31 CFR parts 500, 505 
and 515 are proposed to be amended as set forth below:

PART 500--FOREIGN ASSETS CONTROL REGULATIONS

    1. The authority citation for part 500 is revised to read as 
follows:
    Authority: 50 U.S.C. App. 1-44; Pub. L. 104-132, 110 Stat. 1214, 
1254 (18 U.S.C. 2332d); Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 
2461 note); E.O. 9193, 7 FR 5205, 3 CFR, 1938-1943 Comp., p. 1174; 
E.O. 9989, 13 FR 4891, 3 CFR, 1943-1948 Comp., p. 748.

    2. Subpart G is revised to read as follows:

Subpart G--Penalties

Secs.
500.701 Penalties.
500.702 Prepenalty notice; contents; service.
500.703 Response to prepenalty notice; right to hearing and 
prehearing discovery; informal settlement.
500.704 Penalty imposition or withdrawal absent a hearing request.
500.705 Time and opportunity to request a hearing.
500.706 Hearing, discovery, and decision on the record.
500.707 Judicial review.
500.708 Referral to United States Department of Justice; 
administrative collection measures.

Subpart G--Penalties


Sec. 500.701  Penalties.

    (a) Attention is directed to section 16 of the Trading with the 
Enemy Act (50 U.S.C. App. 16), as adjusted pursuant to the Federal 
Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410, as 
amended, 28 U.S.C. 2461 note), which provides that:
    (1) Persons who willfully violate any provision of that act or any 
license, rule, or regulation issued thereunder, and persons who 
willfully violate, neglect, or refuse to comply with any order of the 
President issued in compliance with the provisions of that act shall, 
upon conviction, be fined not more than $1,000,000 or, if an 
individual, be fined not more than $100,000 or imprisoned for not more 
than 10 years, or both; and an officer, director, or agent of any 
corporation who knowingly participates in such violation shall, upon 
conviction, be fined not more than $100,000 or imprisoned for not more 
than 10 years, or both.
    (2) Any property, funds, securities, paper, or other articles or 
documents, or any vessel, together with its tackle, apparel, furniture, 
and equipment, concerned in a violation of the act may upon conviction 
be forfeited to the United States.
    (3) The Secretary of the Treasury may impose a civil penalty of not 
more than $55,000 per violation on any person who violates any license, 
order, or regulation issued under that act.
    (4) Any property, funds, securities, papers, or other articles or 
documents, or any vessel, together with its tackle, apparel, furniture, 
and equipment, that is the subject of a violation subject to a civil 
penalty issued pursuant to the act shall, at the discretion of the 
Secretary of the Treasury, be forfeited to the United States 
Government.
    (b) The criminal penalties provided in the Trading with the Enemy 
Act are subject to increase pursuant to 18 U.S.C. 3571.
    (c) Attention is directed to 18 U.S.C. 1001, which provides that 
whoever, in any matter within the jurisdiction of any department or 
agency of the United States, knowingly and willfully falsifies, 
conceals or covers up by any trick, scheme, or device a material fact, 
or makes any false, fictitious or fraudulent statements or 
representation or makes or uses any false writing or document knowing 
the same to contain any false, fictitious or fraudulent statement or 
entry, shall be fined under title 18, United States Code, or imprisoned 
not more than five years, or both.


Sec. 500.702  Prepenalty notice; contents; service.

    (a) When required. If the Director of the Office of Foreign Assets 
Control has reasonable cause to believe that there has occurred a 
violation of any provision of this part or a violation of the 
provisions of any license, ruling, regulation, order, direction or 
instruction issued by or pursuant to the direction or authorization of 
the Secretary of the Treasury pursuant to this part or otherwise under 
the Trading with the Enemy Act, and the Director determines that 
further proceedings are warranted, he shall issue to the person 
concerned a notice of his intent to impose a monetary penalty and/or 
forfeiture. The prepenalty notice may be issued whether or not another 
agency has taken any action with respect to this matter.
    (b) Contents--(1) Facts of violation. The prepenalty notice shall 
describe the violation, specify the laws and regulations allegedly 
violated, and state the amount of the proposed monetary penalty and/or 
forfeiture.
    (2) Respondent's rights--(i) Right to respond. The prepenalty 
notice shall also inform the respondent of respondent's right to 
respond to the notice within 30 days of the mailing or other service of 
the notice pursuant to paragraph (c) of this section, as to why a 
monetary penalty and/or forfeiture should not be imposed, or, if 
imposed, why it should be in a lesser amount than proposed.
    (ii) Right to request a hearing. The prepenalty notice shall also 
inform the respondent that, in the response provided for in paragraph 
(b)(2)(i) of this section, the respondent may also request a hearing 
conducted pursuant to 5 U.S.C. 554-557 to present the respondent's 
defenses to the imposition of a penalty and/or forfeiture and to offer 
any other information that the respondent believes should be included 
in the agency record prior to a final determination concerning the 
imposition of a penalty and/or forfeiture. Untimely response 
constitutes a waiver of a hearing.
    (iii) Right to request discovery prior to hearing. The prepenalty 
notice shall also inform the respondent of the right to discovery prior 
to a requested hearing. Discovery must be requested in writing in the 
response provided for in paragraph (b)(2)(i) of this section, jointly 
with respondent's request for a hearing. Untimely response constitutes 
a waiver of prehearing discovery.
    (c) Service. The prepenalty notice, or any amendment or supplement 
thereto, shall be served upon the respondent. Service shall be presumed 
completed:
    (1) Upon mailing a copy by registered or certified mail, return 
receipt requested, addressed to the respondent at the respondent's last 
known address; or
    (2) Upon presentment of a date-stamped postal receipt by the Office 
of Foreign Assets Control with respect to any respondent who has 
refused, avoided, or in any way attempted to decline delivery, tender, 
or acceptance of the registered or certified letter or has refused to 
recover a registered or certified letter served; or
    (3) Upon leaving a copy with the respondent or an officer, a 
managing or general agent, or any other agent authorized by appointment 
or by law to accept or receive service for the respondent, evidenced by 
a certificate of service signed by the individual making such service, 
stating the method of service and the identity of the individual with 
whom the prepenalty notice was left; or

[[Page 6898]]

    (4) Upon proof of service on a respondent who is not resident in 
the United States by any method of service permitted by the law of the 
jurisdiction in which the respondent resides or is located, provided 
the requirements of such foreign law satisfy due process requirements 
under United States law with respect to notice of administrative 
proceedings, and where applicable laws or intergovernmental agreements 
or understandings make the methods of service set forth in paragraphs 
(c)(1) through (3) of this section inappropriate or ineffective for 
service upon the nonresident respondent.


Sec. 500.703  Response to prepenalty notice; right to hearing and 
prehearing discovery; informal settlement.

    (a) Deadline for response. The respondent shall have 30 days from 
the date of mailing or other service of the prepenalty notice pursuant 
to Sec. 500.702(c) to respond thereto.
    (b) Form and contents of response--(1) In general. The written 
response need not be in any particular form, but shall contain 
information sufficient to indicate that it is in response to the 
prepenalty notice. It should be responsive to the allegations contained 
therein and set forth the nature of the respondent's defenses.
    (i) The response must admit or deny specifically each separate 
allegation of violation made in the prepenalty notice. If the 
respondent is without knowledge as to an allegation, the response shall 
so state, and such statement shall operate as a denial. Failure to 
deny, controvert, or object to any allegation will be deemed an 
admission of that allegation.
    (ii) The response must also set forth any additional or new matter 
or arguments the respondent seeks, or shall seek, to use in support of 
all defenses or claims for mitigation. Any defense or partial defense 
not specifically set forth in the response shall be deemed waived, and 
evidence thereon may be refused, except for good cause shown.
    (iii) The response must also accurately state, for each respondent, 
the respondent's full name and address for future service, including 
current telephone number and area code. Respondents are responsible for 
providing timely written notice to all interested parties of any 
subsequent changes in the information provided.
    (2) Request for hearing. Any request for an administrative hearing 
and prehearing discovery shall be made in the written response made 
pursuant to this section and within the 30-day time period specified in 
Sec. 500.705(a).
    (3) Informal settlement. In addition or as an alternative to a 
written response to a prepenalty notice pursuant to this section, the 
respondent or respondent's representative may contact the Office of 
Foreign Assets Control as advised in the prepenalty notice to propose 
the settlement of allegations contained in the prepenalty notice and 
related matters. In the event of settlement at the prepenalty stage, 
the prepenalty notice will be withdrawn, the respondent is not required 
to take a written position on allegations contained in the prepenalty 
notice, and the Office of Foreign Assets Control will make no final 
determination as to whether a violation occurred. The amount accepted 
in settlement of allegations in a prepenalty notice may vary from the 
civil penalty that might finally be imposed in the event of a formal 
determination of violation. In the event no settlement is reached, the 
30-day period specified in paragraph (a) of this section for written 
response to the prepenalty notice remains in effect unless additional 
time is granted by the Office of Foreign Assets Control. Untimely 
response constitutes a waiver of a hearing and prehearing discovery.


Sec. 500.704  Penalty imposition or withdrawal absent a hearing 
request.

    (a) No violation. If, after considering any presentations made in 
response to the prepenalty notice and any relevant facts, the Director 
determines that there was no violation by the respondent named in the 
prepenalty notice, the Director promptly shall notify the respondent in 
writing of that determination and that no civil monetary penalty or 
civil forfeiture pursuant to this subpart will be imposed.
    (b) Violation. If, after considering any presentations made in 
response to the prepenalty notice and any relevant facts, the Director 
determines that there was a violation by the respondent named in the 
prepenalty notice, the Director promptly shall issue a written notice 
of the imposition by the Office of Foreign Assets Control of the civil 
monetary penalty and/or civil forfeiture and/or other available 
disposition on that respondent.
    (1) The penalty/forfeiture notice shall inform the respondent that 
payment of the assessed penalty must be made within 30 days of the 
mailing of the penalty notice.
    (2) The penalty/forfeiture notice shall inform the respondent of 
the requirement to furnish respondent's taxpayer identification number 
pursuant to 31 U.S.C. 7701 and that the Department intends to use such 
number for the purposes of collecting and reporting on any delinquent 
penalty amount in the event of a failure to pay the penalty imposed.


Sec. 500.705  Time and opportunity to request a hearing.

    (a) Deadline for hearing request. Within 30 days of the date of 
mailing or other service of the prepenalty notice pursuant to 
Sec. 500.702(c), the respondent may file a written request for an 
agency hearing conducted pursuant to this section, to present the 
respondent's defenses to the imposition of a penalty and/or forfeiture, 
and to offer any other information found to be admissible into the 
agency record prior to a final determination concerning the imposition 
of a penalty and/or forfeiture.
    (b) Content of written response. If an agency hearing is requested 
by the respondent or by the respondent's counsel, the written hearing 
request must be accompanied by a written response to the prepenalty 
notice containing the information required by Sec. 500.703(b)(1)(i) 
through (iii). An untimely hearing request or written response to the 
prepenalty notice constitutes a waiver of a hearing.
    (c) Signature of filings. All hearing requests, motions, responses, 
interrogatories, requests for deposition transcripts, requests for 
protective orders, and all other filings relating to requests for and 
responses to discovery or pertaining to the hearing process, must be 
signed by each requesting party and, if represented, by each party's 
counsel.


Sec. 500.706  Hearing, discovery, and decision on the record.

    (a) Notice of hearing. (1) Any respondent requesting a hearing 
shall receive notice of the time and place of the hearing at the 
service address provided pursuant to Sec. 500.703(b)(1)(iii). Requests 
to change the time and place of a hearing may be submitted to the 
Administrative Law Judge, who may modify the original notice or 
subsequently set hearing dates. All requests for any change in time and 
place of a hearing must be received in the Administrative Law Judge's 
chambers and served upon all interested parties no later than 10 
working days before the scheduled hearing date.
    (2) The hearing shall be conducted in a manner consistent with 5 
U.S.C. 554-557, pursuant to section 1710(c) of the Cuban Democracy Act 
of 1992 (22 U.S.C. 6001-6010), and section 16 of the Trading with the 
Enemy Act (50 U.S.C. App. 16).
    (b) Powers. The Administrative Law Judge shall have all powers 
necessary to conduct the hearing, consistent with 5

[[Page 6899]]

U.S.C. 554-557, including the following powers:
    (1) To administer oaths and affirmations;
    (2) To require production of records or any information relative to 
any act or transaction subject to this part, including the imposition 
of sanctions available under Federal Rule of Civil Procedure 37(b)(2) 
(Fed. R. Civ. P. 37(b)(2), 28 U.S.C.) for a party's failure to comply 
with discovery requests;
    (3) To receive relevant and material evidence and to rule upon the 
admission of evidence and offers of proof;
    (4) To take or cause depositions to be taken as authorized by this 
part;
    (5) To regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (6) To hold scheduling or prehearing conferences as deemed 
necessary;
    (7) To consider and rule upon all procedural and other motions 
appropriate in an adjudicatory proceeding, provided that only the 
Secretary or the Secretary's designee shall have the power to grant any 
motion to dismiss the proceeding or to decide any other motion that 
results in a final determination of the merits of the proceeding;
    (8) To prepare and present to the Secretary or to the Secretary's 
designee a recommended decision as provided in paragraph (s) of this 
section;
    (9) To recuse himself on motion made by a party or on the 
Administrative Law Judge's own motion;
    (10) To establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing;
    (11) To perform all necessary or appropriate measures to discharge 
the duties of an Administrative Law Judge; and
    (12) To set fees and expenses for witnesses, including expert 
witnesses.
    (c) Appearance and practice in a civil penalty hearing--(1) 
Appearance before an Administrative Law Judge by counsel. Any member in 
good standing of the bar of the highest court of any state, 
commonwealth, possession, or territory of the United States, or the 
District of Columbia may represent respondents upon written request in 
a civil penalty hearing. A copy of the document appointing the counsel 
shall be presented to the Administrative Law Judge upon the first 
appearance of counsel.
    (2) Appearance before an Administrative Law Judge by a non-lawyer. 
A respondent may appear on his own behalf; a member of a partnership 
may represent the partnership; a duly authorized officer, director, or 
employee of any corporation may represent that corporation in a civil 
penalty hearing.
    (3) Office of Foreign Assets Control representation. The Office of 
Foreign Assets Control shall be represented by the Chief Counsel of the 
Office of Foreign Assets Control or by the Chief Counsel's designee.
    (d) Conflicts of interest--(1) Conflict of interest in 
representation. No individual shall appear as counsel for a party in a 
proceeding conducted pursuant to this subpart if it reasonably appears 
that such representation may be materially limited by that counsel's 
responsibilities to a third person, or by counsel's own interests.
    (2) Corrective Measures. The Administrative Law Judge may take 
corrective measures at any stage of a proceeding to cure a conflict of 
interest in representation, including the issuance of an order limiting 
the scope of representation or disqualifying an individual from 
appearing in a representative capacity for the duration of the 
proceeding.
    (e) Ex parte communications--(1) Definition. The term ex parte 
communication means any material oral or written communication not on 
the public record concerning the merits of an adjudicatory proceeding 
with respect to which reasonable prior notice to all parties is not 
given, on any material matter or proceeding covered by these 
regulations that takes place between:
    (i) A party to the proceeding, a party's counsel, or any other 
individual; and
    (ii) The Administrative Law Judge handling that proceeding, or the 
Secretary, or the Secretary's designee.
    (2) Exceptions. (i) A request for the status of the proceeding does 
not constitute an ex parte communication; and
    (ii) Settlement inquiries and discussions do not constitute ex 
parte communications.
    (3) Prohibition on ex parte communications. From the time a 
respondent requests a hearing until the date that the Secretary or the 
Secretary's designee issues a final decision, no party, interested 
person, or counsel therefor shall knowingly make or cause to be made an 
ex parte communication. The Administrative Law Judge, the Secretary, 
and the Secretary's designee shall not knowingly make or cause to be 
made to a party, or to any interested person or counsel therefor, any 
ex parte communication.
    (4) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by the Administrative Law Judge, the 
Administrative Law Judge shall cause all such written communication 
(or, if the communication is oral, a memorandum stating the substance 
of the communication) to be placed on the record of the proceeding and 
served on all parties. All parties to the proceeding shall have an 
opportunity, within 10 days of the receipt of service of the notice or 
of receipt of a memorandum of the ex parte communication, to file 
responses thereto and to recommend any sanctions, in accordance with 
paragraph (e)(5) of this section, appropriate under the circumstances, 
or may file an interlocutory appeal with the Secretary or the 
Secretary's designee.
    (5) Sanctions. Any respondent, respondent's counsel, or other party 
who makes a prohibited ex parte communication, or who encourages or 
solicits another to make any such communication, may be subject to any 
appropriate sanction or sanctions imposed by the Administrative Law 
Judge for good cause shown, or that may be imposed upon interlocutory 
appeal taken to the Secretary or the Secretary's designee, including, 
but not limited to, exclusion from the hearing and an adverse ruling on 
the issue which is the subject of the prohibited communication.
    (f) Time limits. Except as provided elsewhere in this subpart, the 
Administrative Law Judge shall establish all time limits for filings 
with regard to hearings conducted pursuant to this subpart, except for 
decisions on interlocutory appeals filed with the Secretary or the 
Secretary's designee.
    (g) Interlocutory Appeal. When exceptions, requests for extensions, 
or motions, including motions for summary disposition, are denied by 
the Administrative Law Judge, interlocutory appeals may be taken to the 
Secretary or to the Secretary's designee for a decision.
    (1) Interlocutory appeals must be filed no later than 10 working 
days after the matter being appealed has been decided in writing by the 
Administrative Law Judge.
    (2) Interlocutory appeals must be filed with the Secretary's 
Office, U.S. Treasury Department, 1500 Pennsylvania Avenue, NW, 
Washington, DC 20220, with certified copies served upon the 
Administrative Law Judge and the Office of Chief Counsel for the Office 
of Foreign Assets Control.
    (h) Opportunity for settlement. Any party may, at any time during 
the hearing, unilaterally submit written offers or proposals for 
settlement of a proceeding to the Secretary or the Secretary's 
designee, at the address listed in paragraph (g)(2) of this section.

[[Page 6900]]

Submission of a written settlement offer does not provide a basis for 
adjourning or otherwise delaying all or any portion of a hearing. No 
settlement offer or proposal, or any subsequent negotiation or 
resolution, is admissible as evidence in any hearing before this 
tribunal.
    (i) Failure to appear. The unexcused failure of a respondent to 
appear in person at a hearing or to have duly authorized counsel appear 
in respondent's place, constitutes a waiver of the respondent's right 
to a hearing and is deemed an admission of the violation alleged. 
Without further proceedings or notice to the respondent, the 
Administrative Law Judge shall file with the Secretary or the 
Secretary's designee a recommended decision finding a violation and the 
amount of penalty as indicated in the prepenalty notice.
    (j) Motions--(1) Written motions. Except as otherwise specifically 
provided herein, an application or request for an order or ruling must 
be made by written motion, in typed format.
    (i) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (ii) No oral argument may be held on written motions unless 
directed by the Administrative Law Judge. Written memoranda, briefs, 
affidavits, and other relevant material and documents may be filed in 
support of or in opposition to a motion.
    (2) Oral motions. A motion may be made orally on the record unless 
the Administrative Law Judge directs that such motion be made in 
writing.
    (3) Filing of motions--(i) In general. Motions must be filed with 
the Administrative Law Judge, and with the Office of Chief Counsel, 
Office of Foreign Assets Control, U.S. Treasury Department, 1500 
Pennsylvania Avenue, NW, Washington, DC 20220, with the envelope 
prominently marked, ``Urgent: Annex--Room 3133,'' unless otherwise 
directed by the Administrative Law Judge, or agreed to by Chief 
Counsel.
    (ii) Interlocutory appeals. Motions related to interlocutory 
appeals to the Secretary or the Secretary's designee must be sent by 
fax (fax number: 202/622-1188) and filed with the Secretary, U.S. 
Treasury Department, 1500 Pennsylvania Avenue, NW, Washington, DC 
20220, marked ``Attention: OFAC Interlocutory Appeal.''
    (4) Responses. (i) Any interested party may file a written response 
to a motion within 20 days of the date of mailing, by registered or 
certified letter service and pursuant to these regulations. If directed 
by the Administrative Law Judge response time may be shortened or 
extended. The Administrative Law Judge may allow each party to file a 
response before finally ruling upon any oral or written motion. The 
Administrative Law Judge may allow a rejoinder to responses for good 
cause shown. If a rejoinder is permitted, it must be filed within 15 
days of the date the response was filed and served upon all parties.
    (ii) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed to be consent by that party to the 
entry of an order substantially in the form of the order accompanying 
the motion.
    (5) Dilatory motions. Frivolous, dilatory, or repetitive motions 
are prohibited. The filing of such motions may form the basis for 
sanctions.
    (k) Discovery--(1) In general. The availability of information and 
documents through discovery is subject to the agency's assertion of 
privileges available to OFAC and/or to the Treasury and to the 
application of all exemptions afforded the agency pursuant to the 
Freedom of Information Act (5 U.S.C. 552(b)(1) through (9)) and the 
Privacy Act (5 U.S.C. 552a) to all facets of discovery, including 
interrogatories, depositions that seek the release of trade secrets, 
proprietary materials, third party confidential and/or commercially 
sensitive material, placement of information, documents and/or 
materials under seal and/or protective order, and interlocutory appeal 
to the Secretary or the Secretary's designee from any decision of the 
Administrative Law Judge.
    (2) Types of discovery. Parties may obtain discovery by one or more 
of the following methods: depositions upon oral examination or written 
questions; written interrogatories; production of documents or other 
evidence for inspection; and requests for admission. All depositions of 
federal employees must take place in Washington, DC, at the U.S. 
Treasury Department or at the location where the federal employee to be 
deposed performs his duties, whichever the federal employee's 
supervisor or Chief Counsel shall deem appropriate. All depositions of 
federal employees shall be held at a mutually agreed upon date and 
time, and for a mutually agreed upon length of time.
    (3) Interrogatories. Respondent's interrogatories must be served 
upon the Chief Counsel within 20 days of respondent's written request 
for a hearing. Chief Counsel must serve Chief Counsel's interrogatories 
within 30 days of the receipt of service of respondent's 
interrogatories or within 30 days of the receipt of respondent's 
written request for a hearing if no interrogatories are filed by 
respondent by that time. Parties have 30 days to respond to 
interrogatories from the date interrogatories are received. 
Interrogatories shall be limited to 20 questions only. Each subpart, 
section, or other designation of a part of a question shall be counted 
as one complete question in computing the permitted 20 question total. 
Where more than 20 questions are served upon a party, the receiving 
party may determine which of the 20 questions the receiving party shall 
answer.
    (4) Scope. Parties may obtain discovery regarding any matter not 
privileged, which has material relevance to the merits of the pending 
action. It is not a ground for objection that the information sought 
will be inadmissible at the hearing if the information sought appears 
reasonably calculated to lead to discovery of admissible evidence. The 
Administrative Law Judge may make any order which justice requires to 
ensure that requests are not unreasonable, oppressive, excessive in 
scope or unduly burdensome, including the issuance of an order to show 
cause why a particular discovery request is justified upon the motion 
of the objecting party.
    (5) Privileged matter. Privileged documents are not discoverable. 
Privileges include, inter alia, the attorney-client privilege, attorney 
work-product privilege, any government's or government agency's 
deliberative-process or classified information privilege, including 
materials classified pursuant to Executive Order 12958 (3 CFR, 1995 
Comp., p. 333) and any future Executive orders that may be issued 
relating to the treatment of national security information, and all 
materials and information exempted from release to the public pursuant 
to the Privacy Act (5 U.S.C. 552a) and the Freedom of Information Act 
(5 U.S.C. 552(b)(1) through (9)).
    (6) Updating discovery. Whenever a party receives new or additional 
information or documentation, all information produced, and all 
information required to be provided pursuant to the discovery and 
hearing process, must automatically be updated. The Administrative Law 
Judge may impose sanctions for failure to update, including prohibiting 
opposition to claims or defenses raised, striking pleadings or staying 
proceedings, dismissing the action or any part thereof, rendering a 
judgment by default, and holding a party in contempt.

[[Page 6901]]

    (7) Time limits. All discovery, including all responses to 
discovery requests, shall be completed no later than 20 days prior to 
the date scheduled for the commencement of the hearing. No exceptions 
to this time limit shall be permitted, unless the Administrative Law 
Judge finds on the record that good cause exists for waiving the 
requirements of this paragraph (k)(7).
    (l) Summary disposition--(1) In general. The Administrative Law 
Judge shall recommend that the Secretary or the Secretary's designee 
issue a final order granting a motion for summary disposition if the 
facts of the record show that:
    (i) There is no genuine issue as to any material fact; and
    (ii) The moving party is entitled to a decision in its favor as a 
matter of law.
    (2) Filing of motions and responses. (i) Any party who believes 
that there is no genuine issue of material fact to be determined and 
that he or she is entitled to a decision as a matter of law may move at 
any time for summary disposition in its favor of all or any part of the 
proceeding. Any party, within 20 days after service of such a motion, 
or within such time period as allowed by the Administrative Law Judge, 
may file a response to such motion.
    (ii) A motion for summary disposition must be accompanied by a 
statement of the material facts as to which the moving party contends 
there is no genuine issue. Such motion must be supported by documentary 
evidence, which may take the form of admissions in pleadings, 
stipulations, depositions, transcripts, affidavits, and any other 
evidentiary materials that the moving party contends support his 
position. The motion must also be accompanied by a brief containing the 
points and authorities in support of the moving party's arguments. Any 
party opposing a motion for summary disposition must file a statement 
setting forth those material facts as to which he or she contends a 
genuine dispute exists. Such opposition must be supported by evidence 
of the same type as that submitted with the motion for summary 
disposition and a brief containing the points and authorities in 
support of the contention that summary disposition would be 
inappropriate.
    (3) Hearing on motion. At the request of any party or on his own 
motion, the Administrative Law Judge may hear oral argument on the 
motion for summary disposition.
    (4) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the Administrative Law Judge 
shall determine whether the moving party is entitled to summary 
disposition. If the Administrative Law Judge determines that summary 
disposition is warranted, the Administrative Law Judge shall submit a 
recommended decision to that effect to the Secretary. If the 
Administrative Law Judge finds that no party is entitled to summary 
disposition, he or she shall make a ruling denying the motion.
    (5) Interlocutory appeal. Following receipt of the Administrative 
Law Judge's recommended decision relating to summary disposition, each 
party has the right to an interlocutory appeal to the Secretary or the 
Secretary's designee, within 20 days immediately following the 
Administrative Law Judge's decision.
    (m) Partial summary disposition. If the Administrative Law Judge 
determines that a party is entitled to summary disposition as to 
certain claims only, the Administrative Law Judge shall defer 
submission of a recommended decision as to those claims. A hearing on 
the remaining issues must be ordered and those claims for which the 
Administrative Law Judge has determined that summary disposition is 
warranted will be addressed in the recommended decision filed at the 
conclusion of the hearing.
    (n) Prehearing conferences and submissions--(1) Prehearing 
conferences. The Administrative Law Judge may, on his own motion, or at 
the request of any party for good cause shown, direct counsel for the 
parties to meet with him (in person, by telephone, or by 
teleconference) at a prehearing conference to address any or all of the 
following:
    (i) Simplification and clarification of the issues;
    (ii) Stipulations, admissions of fact, and the contents, 
authenticity and admissibility into evidence of documents;
    (iii) Matters of which official notice may be taken;
    (iv) Limitation of the number of witnesses;
    (v) Summary disposition of any or all issues;
    (vi) Resolution of discovery issues or disputes; and
    (vii) Such other matters as may aid in the orderly disposition of 
the proceeding.
    (2) Prehearing orders. At, or within a reasonable time following 
the conclusion of, any prehearing conference, the Administrative Law 
Judge shall serve on each party an order setting forth any agreements 
reached and any procedural determinations made.
    (3) Prehearing submissions. Within 40 days of the receipt of 
respondent's request for a hearing or at a time set by the 
Administrative Law Judge, the Office of Foreign Assets Control shall 
serve on the respondent and upon the Administrative Law Judge, the 
following:
    (i) Stipulations of fact, if any;
    (ii) A list of the exhibits to be introduced at the hearing along 
with a copy of each exhibit; and
    (iii) A list of witnesses to be called to testify at the hearing, 
including name and address of each witness and a short summary of the 
expected testimony of each witness.
    (4) Deadline for respondent's and other interested parties' 
submissions. Unless for good cause shown the Administrative Law Judge 
permits an extension of time to file, the respondent and other 
interested parties shall have 20 days from the date of the submission 
by the Office of Foreign Assets Control of the items set forth in 
paragraph (n)(3) of this section, and/or of another interested party's 
service of items set forth in this paragraph (n)(4), to serve upon the 
Administrative Law Judge and all parties, the following:
    (i) Its response to stipulations of fact, if any;
    (ii) A list of the exhibits to be introduced at the hearing along 
with a copy of each exhibit; and
    (iii) A list of witnesses to be called to testify at the hearing, 
including the name and address of each witness and a short summary of 
the expected testimony of each witness.
    (5) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraphs (n)(3) 
and (n)(4) of this section, except for good cause shown.
    (o) Public hearings--(1) In general. All hearings shall be open to 
the public, unless the Administrative Law Judge, at his discretion, 
determines at any time prior to or during the hearing, that holding an 
open hearing would be contrary to the public interest. Within 20 days 
of service of the notice, any party may file with the Administrative 
Law Judge a request for a closed hearing, and any party may file a 
pleading in reply to such a request. Failure to file a request or a 
reply is deemed a waiver of any objections regarding whether the 
hearing will be public or closed.
    (2) Filing document under seal. (i) The Office of Foreign Assets 
Control may file any documents or any part of a document under seal if 
disclosure of the document would be inconsistent

[[Page 6902]]

with the protection of the public interest or if justice requires 
protection of any person, including a source or a party, from 
annoyance, threat, oppression, or undue burden or expense, or the 
disclosure of the information would be, or might reasonably lead to a 
disclosure, contrary to Executive Order 12958 or other Executive orders 
concerning disclosure of information, U.S. Treasury Department 
regulations, the Privacy Act, or the Freedom of Information Act.
    (ii) The Administrative Law Judge shall also safeguard the security 
and integrity of any documents under seal and shall take all 
appropriate steps to preserve the confidentiality of such documents or 
any parts thereof, including closing portions of the hearing to the 
public. Release of any information under seal, in any form, or in any 
manner, is subject to the same sanctions and the exercise of the same 
authorities provided with respect to ex parte communications under 
paragraph (e)(5) of this section.
    (iii) Should the Administrative Law Judge deny placement of any 
documents under seal or under protective order, any interested party, 
and any person whose documents or materials are at issue, may file an 
interlocutory appeal to the Secretary or the Secretary's designee. In 
such cases the Administrative Law Judge must not release or expose any 
of the records or documents in question to the public or to any other 
parties for a period of 20 days from the date of the Administrative Law 
Judge's ruling, in order to permit a petitioner the opportunity to 
either withdraw the records and documents or to file an interlocutory 
appeal with the Secretary or the Secretary's designee requesting an 
order that the records be placed under seal.
    (iv) Upon settlement, final decision, or motion to the 
Administrative Law Judge for good cause shown, all materials (including 
all copies) under seal or protective order shall be returned to the 
respective parties, except when it may be necessary to retain a record 
until the judicial process is completed.
    (v) Written notice of all requests for release of protected 
documents or materials shall be given to all interested parties 
registered with the Administrative Law Judge at least 20 days prior to 
any permitted release and prior to any access not specifically 
authorized under the protective order. A copy of all requests for 
information, including the name, address, and telephone number of the 
requester, shall be provided to the petitioner. Each request for access 
to protected material must also provide the names, addresses, and 
telephone numbers of all persons represented by the requester, 
including those on whose behalf the requester seeks access to protected 
information. The Administrative Law Judge shall impose sanctions 
provided under paragraphs (e)(4) and (5) of this section for failure to 
provide this information.
    (p) Conduct of hearings--(1) In general--(i) Overview. Hearings 
shall be conducted to provide a fair and expeditious presentation of 
the relevant disputed issues and facts. Each party has the right to 
present its case or defense by oral and documentary evidence and to 
conduct such cross examination as may be required for full disclosure 
of the relevant facts.
    (ii) Order of hearing. The Office of Foreign Assets Control shall 
present its case-in-chief first, unless otherwise ordered in advance by 
the Administrative Law Judge or otherwise expressly specified by law or 
regulation. The Office of Foreign Assets Control shall be the first 
party to present an opening statement and a closing statement and may 
make a rebuttal statement after the respondent's closing statement.
    (iii) Stipulations. Unless the Administrative Law Judge directs 
otherwise, all stipulations of fact and law previously agreed upon by 
the parties, and all documents, the admissibility of which has been 
previously stipulated, will be admitted into evidence upon commencement 
of the hearing.
    (2) Transcript. A record of the hearing shall be made by manual or 
electronic means, including through the use of audio recorded diskettes 
or audio-visual cassettes, and transcribed unless the Administrative 
Law Judge rules otherwise. The transcript shall be made available to 
any party upon payment of the cost thereof. The Administrative Law 
Judge shall have authority to order the record corrected, either upon a 
motion to correct, upon a motion to stipulate by the parties for good 
cause shown, or following notice to the parties upon the Administrative 
Law Judge's own motion. The Administrative Law Judge shall serve notice 
upon all parties, at the addresses provided by the parties pursuant to 
Sec. 500.703(b)(1)(iii), that the certified transcript, together with 
all hearing exhibits and exhibits introduced but not admitted into 
evidence at the hearing, has been filed with the Administrative Law 
Judge.
    (q) Evidence--(1) Admissibility. (i) Except as is otherwise set 
forth in this section, evidence that is relevant and material is 
admissible to the fullest extent authorized by the Administrative 
Procedure Act and other applicable law.
    (ii) Evidence may be excluded if it is misleading or its probative 
value is substantially outweighed by the danger of unfair prejudice or 
confusion of the issues, considerations of undue delay or waste of 
time, or of needless presentation of cumulative evidence.
    (iii) Evidence that would be inadmissible under the Federal Rules 
of Evidence need not be deemed or ruled to be inadmissible in a 
proceeding conducted pursuant to this subpart if such evidence is 
relevant and material, and not unduly repetitive.
    (2) Official notice. (i) Official notice may be taken of any 
material fact which may be judicially noticed by a United States 
district court.
    (ii) All matters officially noticed by the Administrative Law Judge 
shall appear on the record.
    (iii) If official notice is requested or taken of any material 
fact, the parties, upon timely request, shall be afforded an 
opportunity to object.
    (3) Duplicate copies. A duplicate copy of a document is admissible 
to the same extent as the original, unless a genuine issue is raised as 
to whether the copy is in some material respect not a true and legible 
copy of the original.
    (4) Admissibility of evidence. Objections to the admissibility of 
evidence must be timely made and rulings on all objections must appear 
on the record. Failure to object to admission of evidence or to any 
ruling constitutes a waiver of the objection.
    (5) Rejected exhibits. The Administrative Law Judge shall retain 
rejected exhibits, adequately marked for identification, in the event 
of an interlocutory appeal.
    (6) Stipulations. The parties may stipulate as to any relevant 
matters of fact or to the authenticity of any relevant documents. Such 
stipulations may be received into evidence at a hearing and are binding 
on the parties with respect to the matters therein stipulated.
    (7) Depositions of unavailable witnesses. If a witness is 
unavailable to testify at a hearing, and that witness has testified in 
a deposition within the United States to which all parties to the 
proceeding have received timely notice and an opportunity to 
participate, a party may offer as evidence all or any part of the 
transcript of the deposition, including deposition exhibits. All costs 
of depositions shall be borne by the party requesting the deposition.
    (r) Proposed decision and supporting briefs--(1) Proposed 
decisions. Any party may file with the Administrative Law Judge a 
proposed decision within 30 days after the parties have received notice 
that the transcript has been filed

[[Page 6903]]

with the Administrative Law Judge, unless otherwise ordered by the 
Administrative Law Judge.
    (2) Reliance on relevant authorities. The proposed decision must be 
supported by citation to relevant authorities and by transcript page 
references to any relevant portions of the record. At the same time the 
proposed decision is filed, a post-hearing brief may be filed in 
support. The post-hearing brief shall be filed either as part of the 
same document or in a separate document.
    (3) Reply briefs. Reply briefs may be filed within 15 days after 
the date on which the parties' proposed decision is due. Reply briefs 
must be strictly limited to responding to new matters, issues, or 
arguments raised in another party's papers. A party who has not filed a 
proposed decision or a post-hearing brief may not file a reply brief.
    (4) Simultaneous filing required. Absent a showing of good cause 
for the use of another procedure, the Administrative Law Judge shall 
not order the filing by any party of any brief or reply brief in 
advance of the other party's filing of its brief.
    (s) Recommended decision and filing of record. Within 45 days after 
expiration of the time allowed for filing reply briefs, the 
Administrative Law Judge shall file with and certify to the Secretary 
or the Secretary's designee the record of the proceeding and the 
decision. The record must include the Administrative Law Judge's 
recommended decision, including a determination either that there was 
no violation by the person named in the prepenalty notice, or that 
there was a violation by the person named in the prepenalty notice, and 
the recommended monetary penalty and/or civil forfeiture and/or other 
disposition available to the Office of Foreign Assets Control. In 
addition to the proposed decision, the record must include all 
prehearing and hearing transcripts, exhibits, and rulings, and the 
motions, briefs, memoranda, and other supporting papers filed in 
connection with the hearing. The Administrative Law Judge shall have 
the recommended decision served upon each party.
    (t) Exceptions to the recommended decision. When the Administrative 
Law Judge has issued his recommended decision, the Administrative Law 
Judge or his representative shall contact each party by telephone at 
the telephone number provided by each party pursuant to 
Sec. 500.703(b)(1)(iii). Within 3 days of telephoning the parties, the 
recommended decision shall be mailed by the Administrative Law Judge to 
the parties. A party may file written exceptions to the recommended 
decision with the Secretary or the Secretary's designee within 30 days 
of the date the telephone call is placed by the Administrative Law 
Judge or his representative. A supporting brief may be filed at the 
time the exceptions are filed.
    (u) Final decision. The final decision of the Secretary or the 
Secretary's designee shall be based on a review of the proposed 
decision and the entire record of the proceeding. The final written 
decision shall be provided to all parties.


Sec. 500.707  Judicial review.

    Any person may seek judicial review as provided under 5 U.S.C. 702 
for a penalty and/or forfeiture imposed pursuant to this part.


Sec. 500.708  Referral to United States Department of Justice; 
administrative collection measures.

    In the event that the respondent does not pay the penalty imposed 
pursuant to this part within 30 days of the mailing of the written 
notice of the imposition of the penalty, the matter may be referred for 
administrative collection measures or to the United States Department 
of Justice for appropriate action to recover the penalty in a civil 
suit in a Federal district court.

PART 505--REGULATIONS PROHIBITING TRANSACTIONS INVOLVING THE 
SHIPMENT OF CERTAIN MERCHANDISE BETWEEN FOREIGN COUNTRIES

    1. The authority citation for part 505 is revised to read as 
follows:
    Authority: 50 U.S.C. App. 1-44; Pub. L. 101-410, 104 Stat. 890 
(28 U.S.C. 2461 note); E.O. 9193, 7 FR 5205, 3 CFR, 1938-1943 Comp., 
p. 1174; E.O. 9989, 13 FR 4891, 3 CFR, 1943-1948 Comp., p. 748.

    2. Section 505.50 is revised to read as follows:


Sec. 505.50  Penalties.

    For provisions relating to civil penalties and civil forfeiture, 
see subpart G of part 500 of this chapter.

PART 515--CUBAN ASSETS CONTROL REGULATIONS

    1. The authority citation for part 515 is revised to read as 
follows:
    Authority: 50 U.S.C. App. 1-44; 22 U.S.C. 6001-6010; 22 U.S.C. 
6021-6091; 22 U.S.C. 2370(a); Pub. L. 104-132, 110 Stat. 1214, 1254 
(18 U.S.C. 2332d); Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 
note); E.O. 9193, 7 FR 5205, 3 CFR, 1938-1943 Comp., p. 1174; E.O. 
9989, 13 FR 4891, 3 CFR, 1943-1948 Comp., p. 748; Proc. 3447, 27 FR 
1085, 3 CFR, 1959-1963 Comp., p. 157; E.O. 12854, 58 FR 36587, 3 
CFR, 1993 Comp., p. 614.

    2. Subpart G is revised to read as follows:

Subpart G--Penalties

Secs.
515.701 Penalties.
515.702 Prepenalty notice; contents; service.
515.703 Response to prepenalty notice; right to hearing and 
prehearing discovery; informal settlement.
515.704 Penalty imposition or withdrawal absent a hearing request.
515.705 Time and opportunity to request a hearing.
515.706 Hearing, discovery, and decision on the record.
515.707 Judicial review.
515.708 Referral to United States Department of Justice; 
administrative collection measures.

Subpart G--Penalties


Sec. 515.701  Penalties.

    (a) Attention is directed to section 16 of the Trading with the 
Enemy Act (50 U.S.C. App. 16), as adjusted pursuant to the Federal 
Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410, as 
amended, 28 U.S.C. 2461 note), which provides that:
    (1) Persons who willfully violate any provision of that act or any 
license, rule, or regulation issued thereunder, and persons who 
willfully violate, neglect, or refuse to comply with any order of the 
President issued in compliance with the provisions of that act shall, 
upon conviction, be fined not more than $1,000,000 or, if an 
individual, be fined not more than $100,000 or imprisoned for not more 
than 10 years, or both; and an officer, director, or agent of any 
corporation who knowingly participates in such violation shall, upon 
conviction, be fined not more than $100,000 or imprisoned for not more 
than 10 years, or both.
    (2) Any property, funds, securities, paper, or other articles or 
documents, or any vessel, together with its tackle, apparel, furniture, 
and equipment, concerned in a violation of the act may upon conviction 
be forfeited to the United States.
    (3) The Secretary of the Treasury may impose a civil penalty of not 
more than $55,000 per violation on any person who violates any license, 
order, or regulation issued under that act.
    (4) Any property, funds, securities, papers, or other articles or 
documents, or any vessel, together with its tackle, apparel, furniture, 
and equipment, that is the subject of a violation subject to a civil 
penalty issued pursuant to the act shall, at the discretion of the 
Secretary of the Treasury, be forfeited to the United States 
Government.

[[Page 6904]]

    (b) The criminal penalties provided in the Trading with the Enemy 
Act are subject to increase pursuant to 18 U.S.C. 3571.
    (c) Attention is directed to 18 U.S.C. 1001, which provides that 
whoever, in any matter within the jurisdiction of any department or 
agency of the United States, knowingly and willfully falsifies, 
conceals or covers up by any trick, scheme, or device a material fact, 
or makes any false, fictitious or fraudulent statements or 
representation or makes or uses any false writing or document knowing 
the same to contain any false, fictitious or fraudulent statement or 
entry, shall be fined under title 18, United States Code, or imprisoned 
not more than five years, or both.


Sec. 515.702  Prepenalty notice; contents; service.

    (a) When required. If the Director of the Office of Foreign Assets 
Control has reasonable cause to believe that there has occurred a 
violation of any provision of this part or a violation of the 
provisions of any license, ruling, regulation, order, direction or 
instruction issued by or pursuant to the direction or authorization of 
the Secretary of the Treasury pursuant to this part or otherwise under 
the Trading with the Enemy Act, and the Director determines that 
further proceedings are warranted, he shall issue to the person 
concerned a notice of his intent to impose a monetary penalty and/or 
forfeiture. The prepenalty notice may be issued whether or not another 
agency has taken any action with respect to this matter.
    (b) Contents--(1) Facts of violation. The prepenalty notice shall 
describe the violation, specify the laws and regulations allegedly 
violated, and state the amount of the proposed monetary penalty and/or 
forfeiture.
    (2) Respondent's rights--(i) Right to respond. The prepenalty 
notice shall also inform the respondent of respondent's right to 
respond to the notice within 30 days of the mailing or other service of 
the notice pursuant to paragraph (c) of this section, as to why a 
monetary penalty and/or forfeiture should not be imposed, or, if 
imposed, why it should be in a lesser amount than proposed.
    (ii) Right to request a hearing. The prepenalty notice shall also 
inform the respondent that, in the response provided for in paragraph 
(b)(2)(i) of this section, the respondent may also request a hearing 
conducted pursuant to 5 U.S.C. 554-557 to present the respondent's 
defenses to the imposition of a penalty and/or forfeiture and to offer 
any other information that the respondent believes should be included 
in the agency record prior to a final determination concerning the 
imposition of a penalty and/or forfeiture. Untimely response 
constitutes a waiver of a hearing.
    (iii) Right to request discovery prior to hearing. The prepenalty 
notice shall also inform the respondent of the right to discovery prior 
to a requested hearing. Discovery must be requested in writing in the 
response provided for in paragraph (b)(2)(i) of this section, jointly 
with respondent's request for a hearing. Untimely response constitutes 
a waiver of prehearing discovery.
    (c) Service. The prepenalty notice, or any amendment or supplement 
thereto, shall be served upon the respondent. Service shall be presumed 
completed:
    (1) Upon mailing a copy by registered or certified mail, return 
receipt requested, addressed to the respondent at the respondent's last 
known address; or
    (2) Upon presentment of a date-stamped postal receipt by the Office 
of Foreign Assets Control with respect to any respondent who has 
refused, avoided, or in any way attempted to decline delivery, tender, 
or acceptance of the registered or certified letter or has refused to 
recover a registered or certified letter served; or
    (3) Upon leaving a copy with the respondent or an officer, a 
managing or general agent, or any other agent authorized by appointment 
or by law to accept or receive service for the respondent, evidenced by 
a certificate of service signed by the individual making such service, 
stating the method of service and the identity of the individual with 
whom the prepenalty notice was left; or
    (4) Upon proof of service on a respondent who is not resident in 
the United States by any method of service permitted by the law of the 
jurisdiction in which the respondent resides or is located, provided 
the requirements of such foreign law satisfy due process requirements 
under United States law with respect to notice of administrative 
proceedings, and where applicable laws or intergovernmental agreements 
or understandings make the methods of service set forth in paragraphs 
(c)(1) through (3) of this section inappropriate or ineffective for 
service upon the nonresident respondent.


Sec. 515.703  Response to prepenalty notice; right to hearing and 
prehearing discovery; informal settlement.

    (a) Deadline for response. The respondent shall have 30 days from 
the date of mailing or other service of the prepenalty notice pursuant 
to Sec. 515.702(c) to respond thereto.
    (b) Form and contents of response--(1) In general. The written 
response need not be in any particular form, but shall contain 
information sufficient to indicate that it is in response to the 
prepenalty notice. It should be responsive to the allegations contained 
therein and set forth the nature of the respondent's defenses.
    (i) The response must admit or deny specifically each separate 
allegation of violation made in the prepenalty notice. If the 
respondent is without knowledge as to an allegation, the response shall 
so state, and such statement shall operate as a denial. Failure to 
deny, controvert, or object to any allegation will be deemed an 
admission of that allegation.
    (ii) The response must also set forth any additional or new matter 
or arguments the respondent seeks, or shall seek, to use in support of 
all defenses or claims for mitigation. Any defense or partial defense 
not specifically set forth in the response shall be deemed waived, and 
evidence thereon may be refused, except for good cause shown.
    (iii) The response must also accurately state, for each respondent, 
the respondent's full name and address for future service, including 
current telephone number and area code. Respondents are responsible for 
providing timely written notice to all interested parties of any 
subsequent changes in the information provided.
    (2) Request for hearing. Any request for an administrative hearing 
and prehearing discovery shall be made in the written response made 
pursuant to this section and within the 30-day time period specified in 
Sec. 515.705(a).
    (3) Informal settlement. In addition or as an alternative to a 
written response to a prepenalty notice pursuant to this section, the 
respondent or respondent's representative may contact the Office of 
Foreign Assets Control as advised in the prepenalty notice to propose 
the settlement of allegations contained in the prepenalty notice and 
related matters. In the event of settlement at the prepenalty stage, 
the prepenalty notice will be withdrawn, the respondent is not required 
to take a written position on allegations contained in the prepenalty 
notice, and the Office of Foreign Assets Control will make no final 
determination as to whether a violation occurred. The amount accepted 
in settlement of allegations in a prepenalty notice may vary from the 
civil penalty that might finally be imposed in the event of a formal 
determination of violation. In the event no settlement is reached, the 
30-day period specified in paragraph (a) of this

[[Page 6905]]

section for written response to the prepenalty notice remains in effect 
unless additional time is granted by the Office of Foreign Assets 
Control. Untimely response constitutes a waiver of a hearing and 
prehearing discovery.


Sec. 515.704  Penalty imposition or withdrawal absent a hearing 
request.

    (a) No violation. If, after considering any presentations made in 
response to the prepenalty notice and any relevant facts, the Director 
determines that there was no violation by the respondent named in the 
prepenalty notice, the Director promptly shall notify the respondent in 
writing of that determination and that no civil monetary penalty or 
civil forfeiture pursuant to this subpart will be imposed.
    (b) Violation. If, after considering any presentations made in 
response to the prepenalty notice and any relevant facts, the Director 
determines that there was a violation by the respondent named in the 
prepenalty notice, the Director promptly shall issue a written notice 
of the imposition by the Office of Foreign Assets Control of the civil 
monetary penalty and/or civil forfeiture and/or other available 
disposition on that respondent.
    (1) The penalty/forfeiture notice shall inform the respondent that 
payment of the assessed penalty must be made within 30 days of the 
mailing of the penalty notice.
    (2) The penalty/forfeiture notice shall inform the respondent of 
the requirement to furnish respondent's taxpayer identification number 
pursuant to 31 U.S.C. 7701 and that the Department intends to use such 
number for the purposes of collecting and reporting on any delinquent 
penalty amount in the event of a failure to pay the penalty imposed.


Sec. 515.705  Time and opportunity to request a hearing.

    (a) Deadline for hearing request. Within 30 days of the date of 
mailing or other service of the prepenalty notice pursuant to 
Sec. 515.702(c), the respondent may file a written request for an 
agency hearing conducted pursuant to this section, to present the 
respondent's defenses to the imposition of a penalty and/or forfeiture, 
and to offer any other information found to be admissible into the 
agency record prior to a final determination concerning the imposition 
of a penalty and/or forfeiture.
    (b) Content of written response. If an agency hearing is requested 
by the respondent or by the respondent's counsel, the written hearing 
request must be accompanied by a written response to the prepenalty 
notice containing the information required by Sec. 515.703(b)(1)(i) 
through (iii). An untimely hearing request or written response to the 
prepenalty notice constitutes a waiver of a hearing.
    (c) Signature of filings. All hearing requests, motions, responses, 
interrogatories, requests for deposition transcripts, requests for 
protective orders, and all other filings relating to requests for and 
responses to discovery or pertaining to the hearing process, must be 
signed by each requesting party and, if represented, by each party's 
counsel.


Sec. 515.706  Hearing, discovery, and decision on the record.

    (a) Notice of hearing. (1) Any respondent requesting a hearing 
shall receive notice of the time and place of the hearing at the 
service address provided pursuant to Sec. 515.703(b)(1)(iii). Requests 
to change the time and place of a hearing may be submitted to the 
Administrative Law Judge, who may modify the original notice or 
subsequently set hearing dates. All requests for any change in time and 
place of a hearing must be received in the Administrative Law Judge's 
chambers and served upon all interested parties no later than 10 
working days before the scheduled hearing date.
    (2) The hearing shall be conducted in a manner consistent with 5 
U.S.C. 554-557, pursuant to section 1710(c) of the Cuban Democracy Act 
of 1992 (22 U.S.C. 6001-6010), and section 16 of the Trading with the 
Enemy Act (50 U.S.C. App. 16).
    (b) Powers. The Administrative Law Judge shall have all powers 
necessary to conduct the hearing, consistent with 5 U.S.C. 554-557, 
including the following powers:
    (1) To administer oaths and affirmations;
    (2) To require production of records or any information relative to 
any act or transaction subject to this part, including the imposition 
of sanctions available under Federal Rule of Civil Procedure 37(b)(2) 
(Fed. R. Civ. P. 37(b)(2), 28 U.S.C.) for a party's failure to comply 
with discovery requests;
    (3) To receive relevant and material evidence and to rule upon the 
admission of evidence and offers of proof;
    (4) To take or cause depositions to be taken as authorized by this 
part;
    (5) To regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (6) To hold scheduling or prehearing conferences as deemed 
necessary;
    (7) To consider and rule upon all procedural and other motions 
appropriate in an adjudicatory proceeding, provided that only the 
Secretary or the Secretary's designee shall have the power to grant any 
motion to dismiss the proceeding or to decide any other motion that 
results in a final determination of the merits of the proceeding;
    (8) To prepare and present to the Secretary or to the Secretary's 
designee a recommended decision as provided in paragraph (s) of this 
section;
    (9) To recuse himself on motion made by a party or on the 
Administrative Law Judge's own motion;
    (10) To establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing;
    (11) To perform all necessary or appropriate measures to discharge 
the duties of an Administrative Law Judge; and
    (12) To set fees and expenses for witnesses, including expert 
witnesses.
    (c) Appearance and practice in a civil penalty hearing--(1) 
Appearance before an Administrative Law Judge by counsel. Any member in 
good standing of the bar of the highest court of any state, 
commonwealth, possession, or territory of the United States, or the 
District of Columbia may represent respondents upon written request in 
a civil penalty hearing. A copy of the document appointing the counsel 
shall be presented to the Administrative Law Judge upon the first 
appearance of counsel.
    (2) Appearance before an Administrative Law Judge by a non-lawyer. 
A respondent may appear on his own behalf; a member of a partnership 
may represent the partnership; a duly authorized officer, director, or 
employee of any corporation may represent that corporation in a civil 
penalty hearing.
    (3) Office of Foreign Assets Control representation. The Office of 
Foreign Assets Control shall be represented by the Chief Counsel of the 
Office of Foreign Assets Control or by the Chief Counsel's designee.
    (d) Conflicts of interest--(1) Conflict of interest in 
representation. No individual shall appear as counsel for a party in a 
proceeding conducted pursuant to this subpart if it reasonably appears 
that such representation may be materially limited by that counsel's 
responsibilities to a third person, or by counsel's own interests.
    (2) Corrective Measures. The Administrative Law Judge may take 
corrective measures at any stage of a proceeding to cure a conflict of 
interest in representation, including the

[[Page 6906]]

issuance of an order limiting the scope of representation or 
disqualifying an individual from appearing in a representative capacity 
for the duration of the proceeding.
    (e) Ex parte communications--(1) Definition. The term ex parte 
communication means any material oral or written communication not on 
the public record concerning the merits of an adjudicatory proceeding 
with respect to which reasonable prior notice to all parties is not 
given, on any material matter or proceeding covered by these 
regulations that takes place between:
    (i) A party to the proceeding, a party's counsel, or any other 
individual; and
    (ii) The Administrative Law Judge handling that proceeding, or the 
Secretary, or the Secretary's designee.
    (2) Exceptions. (i) A request for the status of the proceeding does 
not constitute an ex parte communication; and
    (ii) Settlement inquiries and discussions do not constitute ex 
parte communications.
    (3) Prohibition on ex parte communications. From the time a 
respondent requests a hearing until the date that the Secretary or the 
Secretary's designee issues a final decision, no party, interested 
person, or counsel therefor shall knowingly make or cause to be made an 
ex parte communication. The Administrative Law Judge, the Secretary, 
and the Secretary's designee shall not knowingly make or cause to be 
made to a party, or to any interested person or counsel therefor, any 
ex parte communication.
    (4) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by the Administrative Law Judge, the 
Administrative Law Judge shall cause all such written communication 
(or, if the communication is oral, a memorandum stating the substance 
of the communication) to be placed on the record of the proceeding and 
served on all parties. All parties to the proceeding shall have an 
opportunity, within 10 days of the receipt of service of the notice or 
of receipt of a memorandum of the ex parte communication, to file 
responses thereto and to recommend any sanctions, in accordance with 
paragraph (e)(5) of this section, appropriate under the circumstances, 
or may file an interlocutory appeal with the Secretary or the 
Secretary's designee.
    (5) Sanctions. Any respondent, respondent's counsel, or other party 
who makes a prohibited ex parte communication, or who encourages or 
solicits another to make any such communication, may be subject to any 
appropriate sanction or sanctions imposed by the Administrative Law 
Judge for good cause shown, or that may be imposed upon interlocutory 
appeal taken to the Secretary or the Secretary's designee, including, 
but not limited to, exclusion from the hearing and an adverse ruling on 
the issue which is the subject of the prohibited communication.
    (f) Time limits. Except as provided elsewhere in this subpart, the 
Administrative Law Judge shall establish all time limits for filings 
with regard to hearings conducted pursuant to this subpart, except for 
decisions on interlocutory appeals filed with the Secretary or the 
Secretary's designee.
    (g) Interlocutory Appeal. When exceptions, requests for extensions, 
or motions, including motions for summary disposition, are denied by 
the Administrative Law Judge, interlocutory appeals may be taken to the 
Secretary or to the Secretary's designee for a decision.
    (1) Interlocutory appeals must be filed no later than 10 working 
days after the matter being appealed has been decided in writing by the 
Administrative Law Judge.
    (2) Interlocutory appeals must be filed with the Secretary's 
Office, U.S. Treasury Department, 1500 Pennsylvania Avenue, NW, 
Washington, DC 20220, with certified copies served upon the 
Administrative Law Judge and the Office of Chief Counsel for the Office 
of Foreign Assets Control.
    (h) Opportunity for settlement. Any party may, at any time during 
the hearing, unilaterally submit written offers or proposals for 
settlement of a proceeding to the Secretary or the Secretary's 
designee, at the address listed in paragraph (g)(2) of this section. 
Submission of a written settlement offer does not provide a basis for 
adjourning or otherwise delaying all or any portion of a hearing. No 
settlement offer or proposal, or any subsequent negotiation or 
resolution, is admissible as evidence in any hearing before this 
tribunal.
    (i) Failure to appear. The unexcused failure of a respondent to 
appear in person at a hearing or to have duly authorized counsel appear 
in respondent's place, constitutes a waiver of the respondent's right 
to a hearing and is deemed an admission of the violation alleged. 
Without further proceedings or notice to the respondent, the 
Administrative Law Judge shall file with the Secretary or the 
Secretary's designee a recommended decision finding a violation and the 
amount of penalty as indicated in the prepenalty notice.
    (j) Motions--(1) Written motions. Except as otherwise specifically 
provided herein, an application or request for an order or ruling must 
be made by written motion, in typed format.
    (i) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (ii) No oral argument may be held on written motions unless 
directed by the Administrative Law Judge. Written memoranda, briefs, 
affidavits, and other relevant material and documents may be filed in 
support of or in opposition to a motion.
    (2) Oral motions. A motion may be made orally on the record unless 
the Administrative Law Judge directs that such motion be made in 
writing.
    (3) Filing of motions--(i) In general. Motions must be filed with 
the Administrative Law Judge, and with the Office of Chief Counsel, 
Office of Foreign Assets Control, U.S. Treasury Department, 1500 
Pennsylvania Avenue, NW, Washington, DC 20220, with the envelope 
prominently marked, ``Urgent: Annex--Room 3133,'' unless otherwise 
directed by the Administrative Law Judge, or agreed to by Chief 
Counsel.
    (ii) Interlocutory appeals. Motions related to interlocutory 
appeals to the Secretary or the Secretary's designee must be sent by 
fax (fax number: 202/622-1188) and filed with the Secretary, U.S. 
Treasury Department, 1500 Pennsylvania Avenue, NW, Washington, DC 
20220, marked ``Attention: OFAC Interlocutory Appeal.''
    (4) Responses. (i) Any interested party may file a written response 
to a motion within 20 days of the date of mailing, by registered or 
certified letter service and pursuant to these regulations. If directed 
by the Administrative Law Judge response time may be shortened or 
extended. The Administrative Law Judge may allow each party to file a 
response before finally ruling upon any oral or written motion. The 
Administrative Law Judge may allow a rejoinder to responses for good 
cause shown. If a rejoinder is permitted, it must be filed within 15 
days of the date the response was filed and served upon all parties.
    (ii) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed to be consent by that party to the 
entry of an order substantially in the form of the order accompanying 
the motion.
    (5) Dilatory motions. Frivolous, dilatory, or repetitive motions 
are prohibited. The filing of such motions may form the basis for 
sanctions.

[[Page 6907]]

    (k) Discovery--(1) In general. The availability of information and 
documents through discovery is subject to the agency's assertion of 
privileges available to OFAC and/or to the Treasury and to the 
application of all exemptions afforded the agency pursuant to the 
Freedom of Information Act (5 U.S.C. 552(b)(1) through (9)) and the 
Privacy Act (5 U.S.C. 552a) to all facets of discovery, including 
interrogatories, depositions that seek the release of trade secrets, 
proprietary materials, third party confidential and/or commercially 
sensitive material, placement of information, documents and/or 
materials under seal and/or protective order, and interlocutory appeal 
to the Secretary or the Secretary's designee from any decision of the 
Administrative Law Judge.
    (2) Types of discovery. Parties may obtain discovery by one or more 
of the following methods: depositions upon oral examination or written 
questions; written interrogatories; production of documents or other 
evidence for inspection; and requests for admission. All depositions of 
federal employees must take place in Washington, DC, at the U.S. 
Treasury Department or at the location where the federal employee to be 
deposed performs his duties, whichever the federal employee's 
supervisor or Chief Counsel shall deem appropriate. All depositions of 
federal employees shall be held at a mutually agreed upon date and 
time, and for a mutually agreed upon length of time.
    (3) Interrogatories. Respondent's interrogatories must be served 
upon the Chief Counsel within 20 days of respondent's written request 
for a hearing. Chief Counsel must serve Chief Counsel's interrogatories 
within 30 days of the receipt of service of respondent's 
interrogatories or within 30 days of the receipt of respondent's 
written request for a hearing if no interrogatories are filed by 
respondent by that time. Parties have 30 days to respond to 
interrogatories from the date interrogatories are received. 
Interrogatories shall be limited to 20 questions only. Each subpart, 
section, or other designation of a part of a question shall be counted 
as one complete question in computing the permitted 20 question total. 
Where more than 20 questions are served upon a party, the receiving 
party may determine which of the 20 questions the receiving party shall 
answer.
    (4) Scope. Parties may obtain discovery regarding any matter not 
privileged, which has material relevance to the merits of the pending 
action. It is not a ground for objection that the information sought 
will be inadmissible at the hearing if the information sought appears 
reasonably calculated to lead to discovery of admissible evidence. The 
Administrative Law Judge may make any order which justice requires to 
ensure that requests are not unreasonable, oppressive, excessive in 
scope or unduly burdensome, including the issuance of an order to show 
cause why a particular discovery request is justified upon the motion 
of the objecting party.
    (5) Privileged matter. Privileged documents are not discoverable. 
Privileges include, inter alia, the attorney-client privilege, attorney 
work-product privilege, any government's or government agency's 
deliberative-process or classified information privilege, including 
materials classified pursuant to Executive Order 12958 (3 CFR, 1995 
Comp., p. 333) and any future Executive orders that may be issued 
relating to the treatment of national security information, and all 
materials and information exempted from release to the public pursuant 
to the Privacy Act (5 U.S.C. 552a) and the Freedom of Information Act 
(5 U.S.C. 552(b)(1) through (9)).
    (6) Updating discovery. Whenever a party receives new or additional 
information or documentation, all information produced, and all 
information required to be provided pursuant to the discovery and 
hearing process, must automatically be updated. The Administrative Law 
Judge may impose sanctions for failure to update, including prohibiting 
opposition to claims or defenses raised, striking pleadings or staying 
proceedings, dismissing the action or any part thereof, rendering a 
judgment by default, and holding a party in contempt.
    (7) Time limits. All discovery, including all responses to 
discovery requests, shall be completed no later than 20 days prior to 
the date scheduled for the commencement of the hearing. No exceptions 
to this time limit shall be permitted, unless the Administrative Law 
Judge finds on the record that good cause exists for waiving the 
requirements of this paragraph (k)(7).
    (l) Summary disposition--(1) In general. The Administrative Law 
Judge shall recommend that the Secretary or the Secretary's designee 
issue a final order granting a motion for summary disposition if the 
facts of the record show that:
    (i) There is no genuine issue as to any material fact; and
    (ii) The moving party is entitled to a decision in its favor as a 
matter of law.
    (2) Filing of motions and responses. (i) Any party who believes 
that there is no genuine issue of material fact to be determined and 
that he or she is entitled to a decision as a matter of law may move at 
any time for summary disposition in its favor of all or any part of the 
proceeding. Any party, within 20 days after service of such a motion, 
or within such time period as allowed by the Administrative Law Judge, 
may file a response to such motion.
    (ii) A motion for summary disposition must be accompanied by a 
statement of the material facts as to which the moving party contends 
there is no genuine issue. Such motion must be supported by documentary 
evidence, which may take the form of admissions in pleadings, 
stipulations, depositions, transcripts, affidavits, and any other 
evidentiary materials that the moving party contends support his 
position. The motion must also be accompanied by a brief containing the 
points and authorities in support of the moving party's arguments. Any 
party opposing a motion for summary disposition must file a statement 
setting forth those material facts as to which he or she contends a 
genuine dispute exists. Such opposition must be supported by evidence 
of the same type as that submitted with the motion for summary 
disposition and a brief containing the points and authorities in 
support of the contention that summary disposition would be 
inappropriate.
    (3) Hearing on motion. At the request of any party or on his own 
motion, the Administrative Law Judge may hear oral argument on the 
motion for summary disposition.
    (4) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the Administrative Law Judge 
shall determine whether the moving party is entitled to summary 
disposition. If the Administrative Law Judge determines that summary 
disposition is warranted, the Administrative Law Judge shall submit a 
recommended decision to that effect to the Secretary. If the 
Administrative Law Judge finds that no party is entitled to summary 
disposition, he or she shall make a ruling denying the motion.
    (5) Interlocutory appeal. Following receipt of the Administrative 
Law Judge's recommended decision relating to summary disposition, each 
party has the right to an interlocutory appeal to the Secretary or the 
Secretary's designee, within 20 days immediately following the 
Administrative Law Judge's decision.
    (m) Partial summary disposition. If the Administrative Law Judge

[[Page 6908]]

determines that a party is entitled to summary disposition as to 
certain claims only, the Administrative Law Judge shall defer 
submission of a recommended decision as to those claims. A hearing on 
the remaining issues must be ordered and those claims for which the 
Administrative Law Judge has determined that summary disposition is 
warranted will be addressed in the recommended decision filed at the 
conclusion of the hearing.
    (n) Prehearing conferences and submissions--(1) Prehearing 
conferences. The Administrative Law Judge may, on his own motion, or at 
the request of any party for good cause shown, direct counsel for the 
parties to meet with him (in person, by telephone, or by 
teleconference) at a prehearing conference to address any or all of the 
following:
    (i) Simplification and clarification of the issues;
    (ii) Stipulations, admissions of fact, and the contents, 
authenticity and admissibility into evidence of documents;
    (iii) Matters of which official notice may be taken;
    (iv) Limitation of the number of witnesses;
    (v) Summary disposition of any or all issues;
    (vi) Resolution of discovery issues or disputes; and
    (vii) Such other matters as may aid in the orderly disposition of 
the proceeding.
    (2) Prehearing orders. At, or within a reasonable time following 
the conclusion of, any prehearing conference, the Administrative Law 
Judge shall serve on each party an order setting forth any agreements 
reached and any procedural determinations made.
    (3) Prehearing submissions. Within 40 days of the receipt of 
respondent's request for a hearing or at a time set by the 
Administrative Law Judge, the Office of Foreign Assets Control shall 
serve on the respondent and upon the Administrative Law Judge, the 
following:
    (i) Stipulations of fact, if any;
    (ii) A list of the exhibits to be introduced at the hearing along 
with a copy of each exhibit; and
    (iii) A list of witnesses to be called to testify at the hearing, 
including name and address of each witness and a short summary of the 
expected testimony of each witness.
    (4) Deadline for respondent's and other interested parties' 
submissions. Unless for good cause shown the Administrative Law Judge 
permits an extension of time to file, the respondent and other 
interested parties shall have 20 days from the date of the submission 
by the Office of Foreign Assets Control of the items set forth in 
paragraph (n)(3) of this section, and/or of another interested party's 
service of items set forth in this paragraph (n)(4), to serve upon the 
Administrative Law Judge and all parties, the following:
    (i) Its response to stipulations of fact, if any;
    (ii) A list of the exhibits to be introduced at the hearing along 
with a copy of each exhibit; and
    (iii) A list of witnesses to be called to testify at the hearing, 
including the name and address of each witness and a short summary of 
the expected testimony of each witness.
    (5) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraphs (n)(3) 
and (n)(4) of this section, except for good cause shown.
    (o) Public hearings--(1) In general. All hearings shall be open to 
the public, unless the Administrative Law Judge, at his discretion, 
determines at any time prior to or during the hearing, that holding an 
open hearing would be contrary to the public interest. Within 20 days 
of service of the notice, any party may file with the Administrative 
Law Judge a request for a closed hearing, and any party may file a 
pleading in reply to such a request. Failure to file a request or a 
reply is deemed a waiver of any objections regarding whether the 
hearing will be public or closed.
    (2) Filing document under seal. (i) The Office of Foreign Assets 
Control may file any documents or any part of a document under seal if 
disclosure of the document would be inconsistent with the protection of 
the public interest or if justice requires protection of any person, 
including a source or a party, from annoyance, threat, oppression, or 
undue burden or expense, or the disclosure of the information would be, 
or might reasonably lead to a disclosure, contrary to Executive Order 
12958 or other Executive orders concerning disclosure of information, 
U.S. Treasury Department regulations, the Privacy Act, or the Freedom 
of Information Act.
    (ii) The Administrative Law Judge shall also safeguard the security 
and integrity of any documents under seal and shall take all 
appropriate steps to preserve the confidentiality of such documents or 
any parts thereof, including closing portions of the hearing to the 
public. Release of any information under seal, in any form, or in any 
manner, is subject to the same sanctions and the exercise of the same 
authorities provided with respect to ex parte communications under 
paragraph (e)(5) of this section.
    (iii) Should the Administrative Law Judge deny placement of any 
documents under seal or under protective order, any interested party, 
and any person whose documents or materials are at issue, may file an 
interlocutory appeal to the Secretary or the Secretary's designee. In 
such cases the Administrative Law Judge must not release or expose any 
of the records or documents in question to the public or to any other 
parties for a period of 20 days from the date of the Administrative Law 
Judge's ruling, in order to permit a petitioner the opportunity to 
either withdraw the records and documents or to file an interlocutory 
appeal with the Secretary or the Secretary's designee requesting an 
order that the records be placed under seal.
    (iv) Upon settlement, final decision, or motion to the 
Administrative Law Judge for good cause shown, all materials (including 
all copies) under seal or protective order shall be returned to the 
respective parties, except when it may be necessary to retain a record 
until the judicial process is completed.
    (v) Written notice of all requests for release of protected 
documents or materials shall be given to all interested parties 
registered with the Administrative Law Judge at least 20 days prior to 
any permitted release and prior to any access not specifically 
authorized under the protective order. A copy of all requests for 
information, including the name, address, and telephone number of the 
requester, shall be provided to the petitioner. Each request for access 
to protected material must also provide the names, addresses, and 
telephone numbers of all persons represented by the requester, 
including those on whose behalf the requester seeks access to protected 
information. The Administrative Law Judge shall impose sanctions 
provided under paragraphs (e)(4) and (5) of this section for failure to 
provide this information.
    (p) Conduct of hearings--(1) In general--(i) Overview. Hearings 
shall be conducted to provide a fair and expeditious presentation of 
the relevant disputed issues and facts. Each party has the right to 
present its case or defense by oral and documentary evidence and to 
conduct such cross examination as may be required for full disclosure 
of the relevant facts.
    (ii) Order of hearing. The Office of Foreign Assets Control shall 
present its case-in-chief first, unless otherwise ordered in advance by 
the Administrative Law Judge or otherwise

[[Page 6909]]

expressly specified by law or regulation. The Office of Foreign Assets 
Control shall be the first party to present an opening statement and a 
closing statement and may make a rebuttal statement after the 
respondent's closing statement.
    (iii) Stipulations. Unless the Administrative Law Judge directs 
otherwise, all stipulations of fact and law previously agreed upon by 
the parties, and all documents, the admissibility of which has been 
previously stipulated, will be admitted into evidence upon commencement 
of the hearing.
    (2) Transcript. A record of the hearing shall be made by manual or 
electronic means, including through the use of audio recorded diskettes 
or audio-visual cassettes, and transcribed unless the Administrative 
Law Judge rules otherwise. The transcript shall be made available to 
any party upon payment of the cost thereof. The Administrative Law 
Judge shall have authority to order the record corrected, either upon a 
motion to correct, upon a motion to stipulate by the parties for good 
cause shown, or following notice to the parties upon the Administrative 
Law Judge's own motion. The Administrative Law Judge shall serve notice 
upon all parties, at the addresses provided by the parties pursuant to 
Sec. 515.703(b)(1)(iii), that the certified transcript, together with 
all hearing exhibits and exhibits introduced but not admitted into 
evidence at the hearing, has been filed with the Administrative Law 
Judge.
    (q) Evidence--(1) Admissibility. (i) Except as is otherwise set 
forth in this section, evidence that is relevant and material is 
admissible to the fullest extent authorized by the Administrative 
Procedure Act and other applicable law.
    (ii) Evidence may be excluded if it is misleading or its probative 
value is substantially outweighed by the danger of unfair prejudice or 
confusion of the issues, considerations of undue delay or waste of 
time, or of needless presentation of cumulative evidence.
    (iii) Evidence that would be inadmissible under the Federal Rules 
of Evidence need not be deemed or ruled to be inadmissible in a 
proceeding conducted pursuant to this subpart if such evidence is 
relevant and material, and not unduly repetitive.
    (2) Official notice. (i) Official notice may be taken of any 
material fact which may be judicially noticed by a United States 
district court.
    (ii) All matters officially noticed by the Administrative Law Judge 
shall appear on the record.
    (iii) If official notice is requested or taken of any material 
fact, the parties, upon timely request, shall be afforded an 
opportunity to object.
    (3) Duplicate copies. A duplicate copy of a document is admissible 
to the same extent as the original, unless a genuine issue is raised as 
to whether the copy is in some material respect not a true and legible 
copy of the original.
    (4) Admissibility of evidence. Objections to the admissibility of 
evidence must be timely made and rulings on all objections must appear 
on the record. Failure to object to admission of evidence or to any 
ruling constitutes a waiver of the objection.
    (5) Rejected exhibits. The Administrative Law Judge shall retain 
rejected exhibits, adequately marked for identification, in the event 
of an interlocutory appeal.
    (6) Stipulations. The parties may stipulate as to any relevant 
matters of fact or to the authenticity of any relevant documents. Such 
stipulations may be received into evidence at a hearing and are binding 
on the parties with respect to the matters therein stipulated.
    (7) Depositions of unavailable witnesses. If a witness is 
unavailable to testify at a hearing, and that witness has testified in 
a deposition within the United States to which all parties to the 
proceeding have received timely notice and an opportunity to 
participate, a party may offer as evidence all or any part of the 
transcript of the deposition, including deposition exhibits. All costs 
of depositions shall be borne by the party requesting the deposition.
    (r) Proposed decision and supporting briefs--(1) Proposed 
decisions. Any party may file with the Administrative Law Judge a 
proposed decision within 30 days after the parties have received notice 
that the transcript has been filed with the Administrative Law Judge, 
unless otherwise ordered by the Administrative Law Judge.
    (2) Reliance on relevant authorities. The proposed decision must be 
supported by citation to relevant authorities and by transcript page 
references to any relevant portions of the record. At the same time the 
proposed decision is filed, a post-hearing brief may be filed in 
support. The post-hearing brief shall be filed either as part of the 
same document or in a separate document.
    (3) Reply briefs. Reply briefs may be filed within 15 days after 
the date on which the parties' proposed decision is due. Reply briefs 
must be strictly limited to responding to new matters, issues, or 
arguments raised in another party's papers. A party who has not filed a 
proposed decision or a post-hearing brief may not file a reply brief.
    (4) Simultaneous filing required. Absent a showing of good cause 
for the use of another procedure, the Administrative Law Judge shall 
not order the filing by any party of any brief or reply brief in 
advance of the other party's filing of its brief.
    (s) Recommended decision and filing of record. Within 45 days after 
expiration of the time allowed for filing reply briefs, the 
Administrative Law Judge shall file with and certify to the Secretary 
or the Secretary's designee the record of the proceeding and the 
decision. The record must include the Administrative Law Judge's 
recommended decision, including a determination either that there was 
no violation by the person named in the prepenalty notice, or that 
there was a violation by the person named in the prepenalty notice, and 
the recommended monetary penalty and/or civil forfeiture and/or other 
disposition available to the Office of Foreign Assets Control. In 
addition to the proposed decision, the record must include all 
prehearing and hearing transcripts, exhibits, and rulings, and the 
motions, briefs, memoranda, and other supporting papers filed in 
connection with the hearing. The Administrative Law Judge shall have 
the recommended decision served upon each party.
    (t) Exceptions to the recommended decision. When the Administrative 
Law Judge has issued his recommended decision, the Administrative Law 
Judge or his representative shall contact each party by telephone at 
the telephone number provided by each party pursuant to 
Sec. 515.703(b)(1)(iii). Within 3 days of telephoning the parties, the 
recommended decision shall be mailed by the Administrative Law Judge to 
the parties. A party may file written exceptions to the recommended 
decision with the Secretary or the Secretary's designee within 30 days 
of the date the telephone call is placed by the Administrative Law 
Judge or his representative. A supporting brief may be filed at the 
time the exceptions are filed.
    (u) Final decision. The final decision of the Secretary or the 
Secretary's designee shall be based on a review of the proposed 
decision and the entire record of the proceeding. The final written 
decision shall be provided to all parties.


Sec. 515.707  Judicial review.

    Any person may seek judicial review as provided under 5 U.S.C. 702 
for a penalty and/or forfeiture imposed pursuant to this part.

[[Page 6910]]

Sec. 515.708  Referral to United States Department of Justice; 
administrative collection measures.

    In the event that the respondent does not pay the penalty imposed 
pursuant to this part within 30 days of the mailing of the written 
notice of the imposition of the penalty, the matter may be referred for 
administrative collection measures or to the United States Department 
of Justice for appropriate action to recover the penalty in a civil 
suit in a Federal district court.

    Dated: December 23, 1996.
R. Richard Newcomb,
Director, Office of Foreign Assets Control.
    Approved: December 31, 1996.
James E. Johnson,
Assistant Secretary (Enforcement).
[FR Doc. 97-3537 Filed 2-13-97; 8:45 am]
BILLING CODE 4810-25-F