[Federal Register Volume 60, Number 214 (Monday, November 6, 1995)]
[Notices]
[Pages 56039-56045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27377]
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DEPARTMENT OF COMMERCE
Bureau of Export Administration
[Docket Number AB1-95]
Stair Cargo Services, Inc.; Final Decision and Order Affirming
Order of the Administrative Law Judge
Before me for decision is the appeal of Respondent, Stair Cargo
Services, Inc. (Stair Cargo), from the decision and order of the
Administrative Law Judge (ALJ). The ALJ found that Stair Cargo violated
Sections 769.2(d)(1)(iv) and 769.6 of the Export Administration
Regulations (15 CFR 769.2(d)(1)(iv) and 769.6) (the ``Regulations'')
when it submitted information for the Kuwait boycott office about one
of the manufacturers in a shipment that Stair Cargo was forwarding to
Kuwait. For violating Sec. 769.2(d)(1)(iv), the ALJ assessed a penalty
of $8,000 and for violating Sec. 769.6, Stair Cargo was assessed a
penalty of $2,000, both pursuant to Sec. 788.3(4) of the Regulations.
I. Introduction
On December 17, 1993, the Office of Antiboycott Compliance (OAC)
issued a charging letter alleging that, during December of 1988, Stair
Cargo committed one violation of Sec. 769.2(d)(1)(iv) and one violation
of Sec. 769.6 of the Regulations, issued pursuant to the Export
Administration Act of 1979, as amended (hereinafter referred to as the
``Act'') (currently codified at 50 U.S.C. app. 2401-2420 (1991, Supp.
1993, and Pub. L. No. 103-277, July 5, 1994).\1\ Specifically, the
charging letter alleged that Stair Cargo intentionally complied with an
unsanctioned foreign boycott in connection with activities involving
the sale or transfer of goods (including information) between the
United States and Kuwait and that these activities occurred in the
foreign commerce of the United States.
\1\ The Export Administration Act expired on August 20, 1994.
Executive Order 12924 (59 FR 43437, August 23, 1994) continued the
Regulations in effect under the International Emergency Economic
Powers Act (50 U.S.C. app. 1701-1706 (1991)).
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Section 769.2(d)(1)(iv) provides that ``(1) No United States Person
may furnish or knowingly agree to furnish information concerning his or
any other person's past, present or proposed business relationships--
(iv) With any other person who is known or believed to be restricted
from having any business relationship with or in a boycotting
country.''
Section 769.6(a)(1) provides that ``(1) A United States person who
receives a request to take any action which has the effect of
furthering or supporting a restrictive trade practice or boycott
fostered or imposed by a foreign country against a country friendly to
the United States or against any United States person must report such
request to the Department of Commerce in accordance with the
requirements of this section.''
OAC and Stair Cargo, on March 10, 1995 and March 16, 1995,
respectively, requested that issues raised by the charges be resolved
on the written record, without an oral hearing. OAC filed a reply on
March 31, 1995 and Stair Cargo filed one on April 3, 1995. On April 24,
1995, Stair Cargo filed a motion for an oral argument which was denied
by the ALJ.
[[Page 56040]]
II. Facts
The ALJ made Findings of Fact in his Initial Decision, and the
parties entered into a Stipulation of Facts (see Exhibit 16 of the
Record) dated February 22, 1995, both of which essentially set forth
the following facts.
At the time of the violations alleged in the charging letter, Stair
Cargo was a California-based branch of Stair Cargo Services, Inc., a
Florida company engaged in freight-forwarding services, including
international freight forwarding. In 1988, Stair Cargo was to forward
U.S. origin goods to Palms Agro-Production (Palms Agro) in Safat,
Kuwait, on behalf of Spears Manufacturing company. To finance the
purchase of the goods from Spears Manufacturing, Palms Agro, on October
13, 1988, asked the National Bank of Kuwait to establish an irrevocable
letter of credit in favor of Spears Manufacturing. Among the
requirements set forth in the letter of credit was the following:
Available by draft(s) without recourse at sight on you for 100
percent of the invoice value and accompanied by the following
documents marked (X) below:
* * * * *
(X) Certificate of origin in duplicate * * * (Please see special
instructions) Invoices and certificates of origin must evidence that
goods have been manufactured/produced by: M/S Spear [sic]
Manufacturing Co., U.S.A.
Paragraph 1 of the ``SPECIAL INSTRUCTIONS'' prescribed that the name
and nationality of the manufacturing/producing company appear on the
certificate of origin.
However, Spears Manufacturing was not the sole manufacturer of the
goods to be shipped to Kuwait. Rather, I.P.S. Corporation of Gardena,
California, produced some of the items to be sent to Palms Agro. As the
terms of the letter of credit required information regarding each
manufacturer or producer of goods, Stair Cargo drafted an amendment to
the letter of credit, reflecting the name and nationality/origin of
both Spears Manufacturing and I.P.S. Corporation. On December 19, 1988,
Stair Cargo sent the amendment by fax transmission to Spears
Manufacturing. The amendment provided in pertinent part:
Credit amended to read signed invoices in triplicate showing the
name and nationality/origin of manufacturers or producers of each
item of manufactured or produced goods as follows:
Nationality: U.S.A. origin * * * Manufactured/produced I.P.S.
Corp. 17109 S. Main St. Gardena, CA 90247 U.S.A. All remaining items
manufactured/produced by M/S Spears Manufacturing Co. 15853 Olden
St. Sylmar, CA 91342 U.S.A.
That same day, Spears Manufacturing sent the amendment to Palms Agro so
that the Kuwaiti firm could have the letter of credit amended.
Shortly thereafter, on December 22, 1988, Palms Agro sent a fax
transmission to Spears Manufacturing, requesting the full name of the
company that, in addition to Spears Manufacturing, was supplying
products to fill Palms Agro's order. Palms Agro explained that the
initials of I.P.S. Corp. were not acceptable to the boycott office and
that, until the full name was provided, the National Bank of Kuwait
could not clear I.P.S. Corp. with the boycott authorities. The request
stated:
Please provide complete name of M/S/I.P.S. Corp. as abrivated
[sic] names are not acceptable to local boycott office, as before
adding to L/C our bank will get the name cleared from boycott
authorities.
Please ensure that after receiving the amendment your bank will
send the documents by DHL (not on our cost) to our bank because
carrying vessel is due on 28/12/88.
Appreciate your reply by return.
This fax was subsequently transmitted to Stair Cargo. By fax dated
December 22, 1988, Stair Cargo responded directly to Palms Agro. The
fax transmission stated:
The complete name of M/S I.P.S. Corp. is as follows: Industrial
Polychemical Services, Inc.
This fax transmission became the basis for the ALJ's finding that
Stair Cargo ``furnished information concerning its or another person's
past, present, or proposed business relationships with known or
believed to be restricted from having any business relationship with or
in a boycotting country,'' in violation of Sec. 769.2(d)(1)(iv).
III. Analysis of Appeal \2\
A. Deference To Be Accorded to ALJ's Decision
As a threshold matter, Stair Cargo argues that the Under Secretary
is not bound by, nor is there any deference due to, the findings of the
initial decision of the ALJ, citing 5 U.S.C. 557(b). This provision
provides:
\2\ Arguments raised by Stair Cargo not discussed have been
considered and rejected as being without merit or as being
immaterial to the final decision. The conclusions reached are based
on consideration of the record as a whole.
On appeal from or review of the initial decision, the agency has
all the powers which it would have in making the initial decision
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except on notice or by rule.
I agree that the initial decision of the ALJ is not absolutely binding
on me. Town & Country Plastics, Inc., Docket Number AB1-89, May 11,
1995. However, while deference to a decision may be at its strongest
where credibility is at issue, I still believe that there is sufficient
reason to accord great weight to the AJL's decision in a case decided
on cross motions for summary judgment.
B. Denial of Stair Cargo's Request for a Hearing Was Appropriate
Stair Cargo argues that it was entitled to a hearing on questions
of law and controverted material issues of fact, citing 11(c)(2)(B) of
the Act, 50 U.S.C. app. 2410(c)(2)(B), which provides that an
administrative sanction imposed under the antiboycott provisions ``may
be imposed only after notice and opportunity for an agency hearing on
the record in accordance with [the Administrative Procedure Act].''
Stair Cargo also argues that Rule 56 of the Federal Rules of Civil
Procedure (FRCP) is applicable in this case because the procedures
which govern enforcement proceedings do not provide for summary
disposition. Accordingly, because summary judgment, as provided for in
Rule 56, is a drastic measure and available only when there are no
genuine issues of material fact, Stair Cargo asserts that a resolution
of this case is not proper without a hearing with respect to the
genuine issues that exist. Finally, Stair Cargo argues that it did not
waive its right to a hearing during the course of the proceeding.
Contrary to Stair Cargo's assertions, it is clear that the FRCP do
not apply to proceedings under the Act, which are, in fact, governed by
the Regulations. See Sec. 788.1. Although the Regulations do not
specifically authorize motions for judgment on the pleadings, such
motions fall within the discretion of the ALJ pursuant to Sec. 788.12
of the Regulations, which grants ample discretion to dispose of matters
in the most expeditious manner, provided that all other procedural
requirements are followed.\3\
\3\ Sec. 788.12 provides in pertinent part:
(a) The Administrative Law Judge, on his own motion or on the
request of a party, may direct the parties to attend a pre-hearing
conference to consider:
(1) simplification of issues;
(2) the necessity or desirability of amendments to pleadings;
(3) obtaining stipulations of fact and of documents to avoid
unnecessary proof; or
(4) such other matters as may expedite the disposition of the
proceedings * * *
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In addition, Stair Cargo cites Town & Country Plastics, Inc.,
Docket Number AB1-89, May 11, 1995, for the proposition that in the
absence of a specific rule under the Regulations, the FRCP ``govern.''
However, while Town
[[Page 56041]]
& Country Plastics held that ``the procedural rules relating to
antiboycott appeals should be construed in conjunction with the Federal
Rules of Civil Procedure,'' the case did not hold that the FRCP
``govern'' or are binding. Rather, Town & Country Plastics should be
read to mean that the FRCP can provide guidance or solutions on a case-
by-case basis when necessary to cover a situation not specifically
dealt with by the Regulations.\4\ Accordingly, Rule 56 of the FRPC is
not applicable to this case and therefore does not dictate that Stair
Cargo was entitled to a hearing.\5\
\4\ In Town & Country Plastics, Rule 6 of the FRCP provided
guidance and resolution of an issue concerning a filing day which
fell on Sunday, allowing an appeal to be timely filed on the next
applicable business day, when there was nothing in the Regulations
explicitly extending the time for filing documents when the last day
falls on a Sunday.
\5\ Moreover, as will become apparent from the subsequent
discussion on waiver, there was no genuine issue of disputed
material fact that would alter the current disposition of this case
even if Rule 56 of the FRCP were, in fact, to apply.
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With regard to Stair Cargo's argument that it did not waive its
right to a hearing, a review of the record in this case indicates
otherwise. Although Stair Cargo did request a hearing in its Answer
(Exhibit 4 of the Record), circumstances changed as the litigation
progressed, and, as set forth in its Motion for Summary Initial
Decision (Exhibit 22 of the Record), Stair Cargo waived its right to a
full blown hearing. Stair Cargo clearly stated in its motion that
``counsel for the parties have by agreement pursued this avenue of
resolution in order to obviate the need for a hearing'' and that ``it
is appropriate to note that motions for summary judgment are
appropriate when there are no questions of material facts.'' There was
obviously no mention of a desire for a hearing.
It was, moreover, agreed at a pre-hearing conference in Washington,
DC, on February 22, 1995, that the essential facts were not at issue
and that, because the only issues that remained to be resolved were
those of a legal nature, the case could be disposed of on cross-motions
for summary judgment. In fact, at the pre-hearing conference, Stair
Cargo answered in the affirmative when the ALJ asked if the stipulation
of facts were comprehensive enough so that he could reference it in
resolving the legal issues to be presented in the parties' motions.
Exhibit 24 of the Record, Transcript of Prehearing Conference, at 20.
It was not until after receiving OAC's response to its motion for
summary initial decision that Stair Cargo moved to set a date for oral
argument, submitting that oral argument could ``provide better
exposition of the complex legal issues raised by each party in their
respective memoranda and replies.'' Stair Cargo, however, did not
contend that controverted facts remained. In sum, the ALJ appropriately
denied the request for a hearing.
C. The ALJ Ruled Correctly That OAC Did Not Have To Present Evidence
That Kuwait Maintains an Unsanctioned Boycott Against Israel or That
Kuwait Maintains a Blacklist or Restrictions on Persons Because of the
Boycott
In its appeal, Stair Cargo argues that the ALJ's decision is
inconsistent with OAC's burden of proof when he found that it violated
Sec. 769.2(d)(1)(iv) without requiring OAC to present evidence
establishing that Kuwait maintained a blacklist and further, that the
ALJ was not entitled to take official notice of alleged Kuwait boycott
practices, without giving notice to Stair Cargo pursuant to Section
556(e) of the Administrative Procedure Act (APA). More specifically,
Stair Cargo claims that OAC failed to sustain its burden of proof by
failing to establish or to provide any contemporaneous legal
authorities as to Kuwait's actual boycott laws, regulations, or
practices. Stair Cargo alleges that proof of a violation of
Sec. 769.2(d)(1)(iv) requires that OAC prove that Kuwait does in fact
maintain and enforce a secondary or tertiary boycott by blacklisting
non-Israeli firms from doing business in Kuwait because of their
relations with Israel or other blacklisted firms.
The ALJ found that OAC was not required to establish that the
particular request was related to an unsanctioned foreign boycott of
Israel by Kuwait, nor prove that Kuwait maintains a blacklist or
restrictions on persons because of the boycott. The ALJ stated:
These are both underlying assumptions that led Congress to enact
section 8(a) of the Export Administration Act which prohibits
providing information under the circumstances presented here. The
agency does not have to justify the statue or properly promulgated
rules under which it acts when it seeks to enforce them.
Initial Decision, at 9, n. 5.
I agree with the Initial Decision. Neither the Act nor the
implementing Regulations requires that OAC present evidence that Kuwait
participated in blacklisting activities. Regardless of the information
provided by Stair Cargo with respect to the lack of adherence by some
of the countries of the Arab League to certain aspects of the boycott,
the statute is unambiguous and does not provide for exceptions in
instances where a country does not strictly adhere to an acknowledged
boycott. It merely states that a ``United States person may [not]
furnish * * * information concerning his or any other person's * * *
relationships * * * with any person who is * * * believed to be
restricted from having any business relationship with or in a
boycotting country.''
Moreover, it is an irrefutable fact that, at the time of the
violations at issue, Kuwait was a member of the Arab League which
maintained an unsanctioned foreign boycott of Israel. Congressional
action with respect to the Act was motivated by and responded to this
very issue.\6\ Congress enacted the Act as ``necessary to prevent a
boycotting country from using United States persons to supply
information necessary to boycott enforcement.'' Report of the Committee
on Banking, Housing and Urban Affairs, S. Rep. No. 95-104, 95th Cong.,
1st Sess. 25 (1977). Thus, Congress sought to terminate the flow of
information which was commonly used for boycott enforcement purposes by
making it increasingly difficult for the participating Arab states to
gather such information.
\6\ For an excellent discussion of the history concerning the
formation of the Arab League boycott of Israel and the response of
the United States Congress in enacting the antiboycott provisions of
the Export Administration Act, see Briggs & Stratton Corp. v.
Baldridge, 539 F. Supp. 1307, 1309 (ED Wis. 1982), affirmed 728 F.2d
915 (7th Cir. 1984) (adopting the district court's opinion at 916),
cert denied 469 U.S. 826 (1984).
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Accordingly, in my view, anytime information is requested by a
boycott office of a member of the Arab League, a presumption arises
that such information is to be used in furtherance of the Arab League
boycott. Whether Kuwait does or does not strictly enforce the voluntary
provisions of the secondary and tertiary boycotts is irrelevant; the
more pertinent question is whether providing the full name of the
I.P.S. Corporation supplied the boycott office with information with
which it could further the intent of the boycott. Until the Arab League
boycott no longer exists or unless Kuwait withdraws from the Arab
League, Kuwait should be presumed to be a participant and a beneficiary
of the terms of the boycott.\7\ Therefore, OAC does not have to
establish that Kuwait itself maintained an unsanctioned boycott against
Israel or that Kuwait maintains a blacklist or actively
[[Page 56042]]
participated in secondary or tertiary boycotts.\8\
\7\ According to information compiled by the OAC, the following
Arab countries currently participate in one or more aspects of the
Arab boycott of Israel: Bahrain, Iran, Iraq, Jordan, Kuwait,
Lebanon, Libya, Oman, Qatar, Saudi Arabia, Syria, the United Arab
Emirates, and the Yemen Arab Republic. Egypt terminated its
participation in the boycott after signing a peace agreement with
Israel.
\8\ In response to Stair Cargo's argument concerning official
notice, whether and to what extent Kuwait actually enforces the
boycott policy of the Arab League are not material facts relevant to
this proceeding, since the policy or goal of the Arab League members
is to maintain such a boycott, and Kuwait remains a member of the
Arab League. There is no dispute as to the existence of the boycott.
OAC thus is no resting on official notice of a material fact for
purposes of APA Section 556(e), and accordingly, OAC does not have
to give notice with respect to the unsanctioned boycott.
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D. The ALJ Found Correctly That Stair Cargo Furnished Business
Relationship Information in Violation of Section 769.2(d)(1)(iv)
In its appeal, Stair Cargo argues that OAC must prove that I.P.S.
Corporation was, in fact, blacklisted, or that Stair Cargo knew or
believed that I.P.S. Corporation was, in fact, blacklisted. Stair
Cargo's argument misconstrues both the meaning and intent of
Sec. 769.2(d)(1)(iv). Under the Act and implementing Regulations, in
order to establish a violation, OAC is required to show that the
information sought and subsequently furnished was information about a
U.S. person's business relationship(s), or lack thereof, with someone
who may be blacklisted for boycott reasons. The ALJ found that OAC had
met its burden of proof.
The information that Palms Agro sought and Stair Cargo furnished
was information about Stair Cargo's and/or Spears' business
relationships, or lack thereof, with I.P.S. Corporation, a person that
may be blacklisted for boycott reasons. Whether or not Stair Cargo or
OAC knew or believed that I.P.S. Corporation was restricted within the
meaning of the Regulations is irrelevant. The ``belief'' requirement is
not one that either party must have; rather, it is the document in
question which provides the requisite ``belief'' by the requesting
party that I.P.S. Corporation may be a blacklisted person. The question
thereafter is whether a reasonable person would conclude that the
information being requested or subsequently furnished was for the
purpose of ascertaining whether or not I.P.S. Corporation was on a
blacklist.
This interpretation is supported by Sec. 8(a)(1)(D) of the Act
which provides in pertinent part:
[f]urnishing information about whether any person has, has had
or proposes to have any business relationship * * * with any other
person which is known or believed to be restricted from having any
business relationship with or in the boycotting country.
This section of the Act does not support Stair Cargo's proposition that
it must know or believe that the person about whom it is providing the
prohibited information is restricted. Rather, the wording is passive in
nature; Congress was silent with regard to the source of the knowledge
or belief and opted, instead, for a broad interpretation, in that the
knowledge or belief had to be about someone ``known or believed'' to be
blacklisted without specifying who had to have that knowledge or
belief. Accordingly, this interpretation is consistent with the lack of
specificity in the statute, neither expanding nor contracting its plain
language and intent.\9\
\9\ Stair Cargo argues that to read Sec. 769.2(d)(1)(iv) as not
requiring proof that the subject of the communication is restricted
renders much of the subsection as surplusage, which is contrary to
accepted principles of statutory construction. However, contrary to
Stair Cargo's claim, the interpretation established in this opinion
would not render the subsection meaningless. Specifically, the
prohibition in subsection (iv) must be read in context with the
other three sections. These subsections prevent a United States
person from furnishing or agreeing to furnish information about
past, present, or future relationships (i) with or in a boycotted
country; (ii) with any business concern organized under the laws of
a boycotted country; or (iii) with any national or resident of a
boycotted country. It is self-evident that these pertain to related,
but separate, violations from those under (iv). The first three are
more ``direct'' violations in that the relationships are between the
parties. Subsection (iv) is a broader prohibition that prevents the
party in question from divulging information about any other person
who may be restricted from having a relationship with or in a
boycotting country, and does not affect or encroach upon the
prohibitions set forth in subsections (i), (ii), and (iii).
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Similarly, Sec. 769.2(d)(1)(iv) specifies neither that Stair Cargo
nor OAC must know or believe that the person about whom it is providing
information is restricted from having a business relationship with or
in a boycotting country. The Regulation is as broad as the Act that it
implements. In addition, examples (x) and (xviii), which provide
guidelines and illustrate the manner in which the Regulations are
interpreted, do not support Stair Cargo's argument that there is a
specific knowledge requirement.
Example (x) provides:
U.S. Company A, in the course of negotiating a sale of its goods
to a buyer in boycotting country Y, is asked to certify that its
supplier is not on Y's blacklist.
A may not furnish the information about its supplier's blacklist
status, because this is information about A's business relationships
with another person who is believed to be restricted from having any
business relationships with or in boycotting country.
The rationable whereby A is prohibited from furnishing the requested
information in the example has nothing to do with any knowledge or
belief that A has. Rather, an answer to the request is prohibited
because the information is about A's business relationships with a
person that may be blacklisted, whether or not this belief or knowledge
actually exists. Moreover, a reasonable person analysis is consistent
with this application of the statute.
Example (xviii), likewise, supports the interpretation of this
decision. It provides:
U.S. company, A is asked by boycotting country Y to certify that
it is not * * * in any way affiliated with any blacklisted
company.
A may not furnish such a certification because it is information
about whether A has a business relationship with another person who
is known or believed to be restricted from having any business
relationship with or in a boycotting country.
As with the previous example, example (xviii) does not specify that A
must know or believe that it is not affiliated with a blacklisted
company. On the contrary, the implication suggests otherwise--it would
be impossible for A to have any such knowledge or belief without
knowing who was on any one of a number of blacklists. Given the
``negative basket'' wording of the request, it is clear that A need not
have knowledge or belief about the blacklist status of any specific
company. Rather, the prohibition applies because, in the context of
which the information is sought, it is clear that the requesting party
is seeking information about A's business relationships with anyone who
may be blacklisted for boycott reasons.
Stair Cargo also claims that proof that Kuwait has blacklisted or
otherwise restricted I.P.S. Corporation is essential to OAC's case and
disputes the rationale that it would be too difficult to prove who is
actually blacklisted. However, to require what Stair Cargo suggests
would be contrary to Congressional intent in enacting the antiboycott
provisions of the Act, and would make it virtually impossible to
establish a violation of Sec. 769.2(d)(1)(iv). Stair Cargo's
interpretation would require that OAC establish that it had a basis for
knowing or believing I.P.S. Corporation's blacklisted status. Such a
showing would require an excessive level of proof and would be
difficult, given that blacklists are not publicly available and are not
constantly being reviewed and updated. See Report of the Committee on
International Relations, H.R. Rep. No. 95-190, 95th Cong., 1st Sess.
49(1977). As the Arab countries participating in the boycott of Israel
prepare and individually use their own blacklists, each may contain
names of different persons. As the ALJ
[[Page 56043]]
appropriately noted in his decision, ``it is difficult to actually know
who is restricted by the boycott because of the complex, pervasive, and
often unpredictable, system for maintaining the boycott.'' Initial
Decision, at 7, n.3. This view was recognized by the court in Briggs &
Stratton Corp. v. Baldrige, supra, at 1309. In that case, the court
found that ``[d]ecisions to blacklist a company are made haphazardly''
and that sometimes the boycott countries continue to trade with a
company despite activity that could be deemed inconsistent with boycott
principles.
Morever, the OAC has no statutory or regulatory responsibility to
maintain copies of the numerous blacklists in use by Arab countries
participating in the boycott of Israel. In fact, it would be contrary
to the policy of the United States, as set forth in Sec. 3(5) of the
Act, for OAC to promulgate or maintain any document purporting to be a
blacklist.
Accordingly, the fact that OAC may or may not have access to the
boycott lists of any one country is not relevant and, in the event such
access were to exist, would not necessitate that it be exploited for
purposes of these types of proceedings. Where access to information of
certain countries is available, the same cannot be said of others.
Violations and enforcement of regulations obviously must be done on a
uniform basis, and an interpretation of the statute requiring a level
of proof suggested by Stair Cargo is impractical.
Given the foregoing analysis, the ALJ found that the information
sought by Palms Agro and furnished by Stair Cargo was information about
Speaker Manufacturing's and/or Stair Cargo's business relationships
with I.P.S. Corporation, a person ``known or believed'' to be
blacklisted. The only reasonable interpretation of the request suggests
that there was uncertainty as to the blacklist status of I.P.S.
Corporation.
The request stated, in relevant part:
Please provide complete name of M/S/I.P.S. Corp. as
abrivated[sic] names are not acceptable to local boycott office as
before adding to L/C our bank will get the name cleared from boycott
authorities.
If it were known that I.P.S. Corporation was not blacklisted, no reason
would exist to request its complete name for submission to and
clearance by the boycott authorities. The sole reason stated for the
request was for the purpose of getting the name ``I.P.S. Corp.''
cleared by the boycott authorities; there was no reference to any other
requirement, whether it be a customs, import, or shipping requirement,
to which the request pertained.\10\ Thus, the request demonstrates
quite conclusively that, contrary to Stair Cargo's arguments at the
time of the communication, the only reason the company's full name was
desired was so that it could be used for boycott purposes.\11\
\10\ Stair Cargo in its Rebuttal to OAC's Reply to its Appeal
argues that, looking at the entire commercial transaction, the
requirement for the full name of ``I.P.S. Corp.'' was a pure simple
technical clerical requirement without reference to any implied
blacklist status. However, the context of the critical
communications of December 22, 1988 belie that argument.
\11\ See also Sec. 769.2(d)(4) which provides that no
information about business relationships with blacklisted persons
may be furnished in response to a boycott request, even if the
information is publicly available. Requests for such information
from a boycott office will be presumed to be boycott-based.
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Finally, Stair Cargo argues in its appeal that the decision in Town
& Country Plastics, Inc., AB1-89, September 21, 1990, should serve as
persuasive authority in this case, although in my Final Decision and
Order Affirming in Part Order of the Administrative Law Judge, AB1-89,
May 11, 1995, I specifically held that the Town & Country Plastics case
would not serve as precedent regarding the knowledge element. In Town &
Country Plastics, the ALJ found that OAC had failed to establish that
the information provided in response to a name clarification request
for the Saudi Arabian Customs Office was boycott-related. Accordingly,
the ALJ found that OAC had failed to establish that the company, about
whom clarification was sought, was known or believed to be restricted
from having any business relationships with or in a boycotting country.
I do not find the Town & Country Plastics decision to be persuasive
authority for the case at hand because the two cases are clearly
distinguishable on the facts. The request in the former was for the
Saudi Arabian Customs Office and contained no reference to a boycott of
Israel which would raise a reasonable belief that the request was
boycott-related. The request was reasonably perceived as a routine name
clarification. While in this case, there was no doubt that the request
was boycott-related and the information was sought for Kuwait's boycott
authorities. Thus, Stair Cargo clearly knew or believed, from the
context of the communications on December 22, 1988, that they related
to boycott matters.
E. The ALJ Found Correctly That Section 769.3 Does Not Apply to Stair
Cargo's Prohibited Furnishing of Business Relationship Information \12\
Section 769.3(b) of the Regulations provides that a United States
person, in shipping goods to a boycotting country, may comply or agree
to comply with the import and shipping document requirements of that
country, with respect to (1) the country of origin of the goods; (2)
the name of the carrier; (3) the route of the shipment; (4) the name of
the supplier of the shipment; and (5) the name of the provider of other
services. The only qualification that appears in the text of the
Regulations is that ``all such information must be stated in positive,
non-blacklisting, non-exclusionary terms.'' Sec. 769.3(b)(2).
\12\ Stair Cargo argues in its appeal that the decision of the
ALJ should be reversed because he ``failed to determine respondent's
defense that the response was excepted from the prohibitions'' under
Sec. 769.3(b). Contrary to Stair Cargo's allegation that the ALJ did
not respond to its arguments, the ALJ did discuss compliance with
Kuwait shipping document requirements on page 5 of his Initial
Decision and makes specific reference to Stair Cargo's underlying
argument with respect to Sec. 769.3(b) on pages five and six. The
lack of a specific reference to Sec. 769.3(b) does not translate
into a determination that the ALJ did not consider the argument.
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Arguing that the entire commercial context should be taken into
account, Stair Cargo alleges that the furnishing of the complete name
of a supplier of goods, regardless of boycott intent, in order to
comply with the import or shipping requirements of the importing
country, falls within the parameters of Sec. 769.3(b).
However, regardless of the extent to which Stair Cargo protests
that the motivation behind the supplying of the information was not
boycott-related, the facts and the documentation show otherwise. It is
not required that intent to comply with the boycott be the sole reason
that Stair Cargo complied with the request. As long as it was one of
the motivating factors, then Stair Cargo was found appropriately to
have violated Sec. 769.2(d)(1)(iv). The Regulations provide in
pertinent part:
(2) A United States person has the intent to comply with,
further, or support an unsanctioned boycott when such a boycott is
at least one of the reasons for that person's decision to take a
particular prohibited action. So long as that is at least one of the
reasons for that person's action, a violation occurs regardless of
whether the prohibited action is also taken for non-boycott reasons.
Stated differently, the fact that such action was taken for
legitimate business reasons does not remove that action from the
scope of this part if compliance with an unsanctioned foreign
boycott was also a reason for the action.
[[Page 56044]]
Sec. 769.1(e). Viewing the entire context of the commercial transaction
does not change that result. Legislative history is quite illustrative
on this point:
Intent to comply with a boycott could be presumed, subject to
rebuttal, where from all the circumstances it is reasonably clear
that the information is sought for boycott enforcement purposes * *
* On the other hand, where the information is sought in a context
which does not make it reasonably clear that the purpose is boycott
related, no illegal intent should be presumed.
S. Rep. No. 95-104, 95th Cong., 1st Sess. 40 (1977), quoted in Briggs &
Stratton v. Baldrige, supra, 539 F. Supp. at 1313-14. It is clear from
the nature and purpose of the request in this case that at least one of
Stair Cargo's reasons for furnishing the complete name of the I.P.S.
Corporation was to comply with Kuwait boycott enforcement procedures.
The name was given in order to be cleared by the boycott authorities
prior to being added to the letter of credit, and not to comply with
Kuwait import and shipping requirements.\13\ Stair Cargo, as an
experienced freight forwarder participating in international trade was,
or should have been, aware of the nature of the request and, therefore,
was on notice with regard to the purpose for which the complete name
was to be utilized.
\13\ It is doubtful that Sec. 769.3(b) would be triggered by the
facts of this case, as a letter of credit is neither an import
document nor a shipping document. Specifically, a letter of credit
does not reflect a movement of goods, as do shipping documents, but,
rather, is a contract which embodies a bank's obligation to a
beneficiary. It is ``an original undertaking by one party to
substitute his financial strength for that of another, with that
undertaking to be conditioned on the presentation of a draft or a
demand for payment, and most often, other documents. John F. Dolan,
The Law of Letters of Credit, Sec. 2.02 (2d Ed. 1991), at 2-4. As
set forth in the definition, there is a distinction between the
letter of credit itself and the ``other documents'' called for in
the letter of credit that may be required to satisfy it. Such
documents, called ``transport documents'' in the Uniform Customs and
Practices for Documentary Credits (1983 Revision), those which
indicate loading on board, dispatch, or taking charge of the goods,
are synonymous with the term ``shipping documents.'' However, as
described in the preceding body of text, Stair Cargo furnished the
full name of the I.P.S. Corporation in order to have it cleared by
Kuwait boycott authorities prior to amending the letter of credit,
and even if this was done to also comply with shipping requirements,
as argued by Stair Cargo, Sec. 769.1(e) would dictate that it was
also done to comply with a boycott-related request in violation of
Sec. 769.2(d)(1)(iv).
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F. The ALJ Found Correctly That Stair Cargo Failed To Report to the
Department of Commerce Its Receipt of a Boycott-Related Request in
Violation of Section 769.6
Stair Cargo argues that Sec. 769.6(a)(5) sets out certain
exceptions to the reporting requirements that apply regardless of
whether or not the requests are boycott-related. Pursuant to
Sec. 769.6(a)(5)(iv), an exception exists where there is:
(iv) a request to supply an affirmative statement or certificate
regarding the name of the supplier or manufacturer of the goods
shipped or the name of the provider of services.
According to Stair Cargo, since the request in this case was for an
affirmative statement of the full name of I.P.S. Corporation, the
manufacturer of goods which had already been shipped, the request from
Palms Agro fits squarely within the exception set forth above.
However, Stair Cargo's attempt to latch on to the exception set
forth in Sec. 769.6(a)(5)(iv) misinterprets the language and proper
application of this regulation, particularly the part preceding the
listing of specific requests that are not reportable under the
Regulations. The preambular language indicates that the specific
exceptions to the reporting requirements came about for three reasons,
one of which was that certain terms were used for boycott and non-
boycott purposes. The language recognizes that certain terms, depending
on their context, would in some circumstances be seen as boycott-
related, while in other circumstances, they would not be. In the
instant case, there are no ambiguous terms in the request from Palms
Agro. It is abundantly clear that the request sought to procure the
complete name of the I.P.S. Corporation for submission to the Kuwait
boycott office for boycott clearance. Accordingly, Stair Cargo
misconstrues the exceptions of Sec. 769.6(a)(5) when it argues that
information can be furnished regardless of whether the request is
boycott-related.
G. The ALJ properly assessed the penalty
In its appeal, Stair Cargo argues that assessment of a penalty in
this case is ``arbitrary, capricious and an abuse of discretion * * *
[given that] FRCP Rule 56 contemplates that motions for summary
judgment may be entered with respect to the liability issues only,
while leaving questions relating to damages to subsequent
proceedings.'' Stair Cargo further contends that it did not waive its
right to a hearing and that ``the consideration of aggravating and
mitigating factors, are questions of material fact with respect to
which the parties have a right to a hearing under Sec. 788.13. The
denial of Respondent's request for a hearing was therefore arbitrary
and capricious.''
As explained in section III.B. of this Final Decision, I have
already determined that a review of the record in this case indicates
that Stair Cargo did, in fact, waiver its right to a hearing. As
further explained in section III.B., the FRCP are inapplicable to
administrative proceedings under the Regulations, which do not provide
for a separate hearing in order to determine the nature and extent of
damages. Nothing in Sec. 788.13 of the Regulations contemplates any
sort of bifurcated procedure as suggested by Stair Cargo. On the
contrary, Sec. 788.16 provides that, if the ALJ finds that one or more
violations have occurred, he shall order an appropriate disposition of
the case and ``may issue an order imposing administrative sanctions,
including civil penalties as provided in Sec. 788.3, or take such other
action as he deems appropriate.'' Sec. 788.16(b)(1).
Addressing the aggravating and mitigating factors which it claims
are disputed issues of material fact, Stair Cargo had the opportunity
to include such arguments in its motion or its response to OAC's motion
for summary judgment. Stair Cargo was aware that the case was going to
be disposed of on the pleadings and should have taken the opportunity
to make every relevant argument at that time. Stair Cargo, however,
presented no mitigating factors addressing OAC's request for the
imposition of a $10,000 civil penalty in its motions.
Finally, Stair Cargo argues that too much weight was given to the
fact that it is a freight forwarder and that the penalty was excessive.
However, my review indicates that OAC could have sought the imposition
of both a $20,000 civil penalty and other administrative sanctions, the
denial of Stair Cargo's export privileges and/or excluding its
employees from practice before the Department of Commerce. Instead, OAC
sought no more than a civil penalty commensurate with the circumstances
of the violations, both as an appropriate penalty and as a deterrent to
ensure future compliance with the Export Administration Act and the
Regulations. After consideration of all the factors in this case, OAC
did not even seek the maximum amount allowed. Thus, the ALJ properly
imposed a civil penalty of $8,000 for the violation of
Sec. 769.2(d)(1)(iv), and a $2,000 penalty for the violation of
Sec. 769.6. Such penalties are not excessive.\14\
\14\ Guidelines for settlement negotiations have indicated that
OAC would be willing to accept $4,000 for a simple furnishing of
information. However, when a name is furnished, the settlement
penalty is increased to $10,000. After weighing several factors, OAC
opted not to seek the full $10,000 penalty for Stair Cargo's
violation of Sec. 769.2(d)(1)(iv) of the Regulations. See United
States Department Of Commerce Reply To Respondent's Appeal From
Administrative Law Judge's Order, p. 31, n. 16.
[[Page 56045]]
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IV. Decision and Order
Based on review of the administrative record and for the reasons
stated above, the order of the ALJ granting summary decision on the
written record; assessing a civil penalty of $8,000 for violating
Sec. 769.2(d)(1)(iv) and a civil penalty of $2,000 for violating
Sec. 769.6 against Stair Cargo Services, Inc.; and denying Stair
Cargo's request to dismiss the charges and to present oral argument and
submit additional evidence is hereby AFFIRMED.
Dated: October 30, 1995.
William A. Reinsch,
Under Secretary for Export Administration.
[FR Doc. 95-27377 Filed 11-3-95; 8:45 am]
BILLING CODE 3510-DT-M