[Federal Register Volume 62, Number 124 (Friday, June 27, 1997)]
[Notices]
[Pages 34688-34690]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16822]
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DEPARTMENT OF COMMERCE
Bureau of Export Administration
[Docket Number 97-BXA-9]
Action Affecting Export Privileges; Thane-Coat, Inc., Jerry
Vernon Ford, Preston John Engebretson, Export Materials, Inc. and
Thane-Coat, International, Ltd.; Decision and Order
IN THE MATTER OF:
Thane-Coat, Inc., 12725 Royal Drive, Stafford, Texas 77477,
Jerry Vernon Ford, President, Thane-Coat, Inc., 12725 Royal Drive,
Stafford, Texas 77477, and with an address at 7707 Augustine Drive,
Houston, Texas 77036,
Preston John Engebretson, Vice-President, Thane-Coat, Inc., 12725
Royal Drive, Stafford, Texas 77477, and with an address at 8903
Bonhomme Road, Houston, Texas 77074,
Export Materials, Inc., 3727 Greenbriar Drive, No. 108, Stafford,
Texas 77477,
and
Thane-Coat, International, Ltd., Suite C, Regent Centre, Explorers
Way, P.O. Box F-40775, Freeport, The Bahamas,
Respondents
The respondents appeal from an order issued on May 5, 1997, by the
Acting Assistant Secretary for Export Enforcement which temporarily
denies their U.S. export privileges pursuant to Section 766.24 of the
Export Administration Regulations (15 CFR Parts 730-74). I have
reviewed the files and records of this matter including the Recommended
Decision and Order of the Administrative Law Judge which is attached
hereto. Based upon the findings and conclusions of the Administrative
Law Judge, I find that the Acting Assistant Secretary's decision to
issue the order was fully supported by the facts and is consistent with
the applicable law. Accordingly, the issuance of the Order Temporarily
Denying Export Privileges to Thane-Coat, Inc., Jerry Vernon Ford,
Preston John Engebretson, Export Materials, Inc., and Thane-Coat
International, Ltd., is affirmed.
Dated this 19th day of June, 1997, Washington, D.C.
William A. Reinsch,
Under Secretary for Export Administration.
Recommended Decision and Order
Preliminary Statement
This proceeding is an appeal from an Order Temporarily Denying
Export Privileges, and brought pursuant to the Export Administration
Act of 1979, (hereinafter ``The Act''), 50 U.S.C.A. app. Secs. 2401-
2420 (1991 & Supp. 1997), and provisions of Section 766.24 of the
Export Administration Regulations codified at 15 CFR Parts 730-774
(1997). On May 1, 1997, the Office of Export Enforcement, Bureau of
Export Administration, United States Department of Commerce,
(hereinafter ``BXA''), requested that the Acting Assistant Secretary
for Export Enforcement issue an order, (hereinafter ``TDO''),
temporarily denying all United States export privileges to Respondents.
The Acting Assistant Secretary, on May 5, 1997, issued the TDO on an ex
parte basis. On May 23, 1997,\1\ the Respondents appealed this order to
the Administrative Law Judge.
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\1\ The Appeal was not received in the Office of the
Administrative Law Judge until May 28, 1997.
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Findings of Fact \2\
1. Thane-Coat was founded in 1982 as a sole proprietorship engaged
in the business of manufacturing and applying industrial paints and
coatings (Respondent's Exhibit 1, hereinafter ``Resp. Ex.'').
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\2\ Neither Respondent nor Agency submitted Proposed Findings of
Fact. As a result, no rulings are made hereon.
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2. The company was incorporated in Texas in 1984. (Id.).
3. Thane-Coat markets its products through direct sales, commission
representatives, distributors, and license agreements. The products
include: coatings for steel pipes; materials for the repair of steel
pipe coatings; epoxy materials for coating sewer manholes; coatings for
concrete pipes; liquid casting materials; truck-bed liner coatings;
fiberglass replacement materials for automotive after market products;
and, coal tar pipe coating paint. (Id.).
4. During 1991, Respondents Ford and Engebreston sought a contract
with the Great Man-Made River Authority of the Government of Libya to
provide coating needed for the PCCP for the second stage of the Great
Man-Made River Project. (Government's Exhibit 1, hereinafter ``Gov.
Ex.'').
5. Thane-Coat also sought the advice of counsel regarding corporate
restructuring. (Id.).
6. On September 5, 1991, Thane-Coat's counsel, in memorandum,
advised Respondent to apply for a license to sell products to Libya.
(Id.). Respondents did not do so.
7. On September 20, 1991, Respondent Engebreston contacted the
Bahamian Transportation Office, stating that he was interested in
establishing a ``manufacturing/blending facility'' in the free trade
area of Freeport. (Id.).
8. On, or about, October 9, 1991, the name ``Thane-Coat
International Limited'' was reserved as a Bahamian Ordinary Company.
(Id.).
9. In Mid-1992, Respondents Ford and Engebreston traveled to Libya
to purse a contract to provide coating for the external surface of the
PCCP for the second phase of the Great Man-Made River Project. This
contract was not procured. (Id.).
10. On, or about, March 17, 1993, Respondents Ford and Engebreston
incorporated Thane-Coat International Limited in the Commonwealth of
the Bahamas. (Id.).
11. During 1995 and the first half of 1996, a significant portion
of the company's revenues was derived from exports. (Resp. Ex. 1).
[[Page 34689]]
12. On September 11, 1995, TIC, Ltd. purchased 256 drums of a
corrosive, synthetic resin (hereinafter ``coating materials''), from
Everest Coatings of Spring, Texas, a manufacturer of chemicals. (Gov.
Ex. 1 at Ex. 4).
13. The cosignee of the shipments was Harkmel International in
Middlesex, United Kingdom. (Id.).
14. On, or about, September 23, 1995, the coating material was
exported from Houston Texas to Felixstowe, U.K., in four 40-foot
containers, each containing 64 pallets. (Gov. Ex. 1 at Ex. 4).
15. In the U.K., the coating material was unloaded and taken to a
warehouse by a U.K. freight forwarder, where it was repackaged into
four 20-foot containers before transfer to Harwich, U.K. (Id).
16. At Harwick, the four 20-foot containers were loaded aboard the
``Norlandia'' for delivery to Marsa El Brega, Libya. (Id).
17. On July 5, 1996, the Respondents were targeted in a federal
investigation regarding the alleged export of concrete pipe coating
materials and technology to Libya when a search warrant was executed on
Thane-Coat's business premises and a large volume of documents was
seized in relation to Respondents' business Resp. Ex. 1).
18. On April 28, 1997, a civil forfeiture action was initiated by
the Government in rem against certain real and personal property owned
by the Respondents. (Id).
19. The complaint filed therein alleged that the Respondents had
performed one or more contracts to provide concrete pipe coating
materials and technology to the government of Libya between January
1994 and July 1996. It is further alleged that the materials were sold
through certain Bahamian companies with knowledge that they would be
used in connection with the construction of a large-scale aqueduct
project designed to transfer freshwater from internal regions of Libya
to cities related to its coast. (Id).
20. On April 28, 1997, United States Magistrate Judge for the
Southern District of Texas, authorized the arrest and seizure of the
defendant property. This order has been appealed, the resolution of
which is still pending. (Id).
21. On May 5, 1997, based upon an ex parte application of the
Bureau of Export Administration's Office of Enforcement, the Acting
Assistant Secretary for Export Enforcement issued a TDO to the
Respondents.
22. The TDO was issued based upon the belief of BXA that the
Respondents had made approximately 100 shipments of U.S.-origin pipe
coating materials, machines, and parts to a concern in Libya during the
period from June 1994 through July 1996, for use in coating the
internal surface of pre-stressed concrete cylinder pipe for the
Government of Libya's Great Man-Made River project. (Gov. Ex. 1).
23. The TDO bars Respondents from further participation in any
exports from the United States that are subject to the EAR, or engaging
in any other activity that is subject to the EAR for 180 days. Gov.Ex.
1).
Ultimate Findings of Fact and Conclusions of Law
1. The Acting Assistant Secretary's decision to issue a TDO is
supported by the record.
2. A violation is ``imminent'' if ``the general circumstances of
the matter under investigation demonstrate a likelihood of future
violations. To indicate the likelihood of future violations, BXA may
show that the violation under investigation ``is significant,
deliberate, covert and/or likely to occur again.''
3. The Administrative Law Judge does not have the authority to
decide whether or not the Regulations as applied against the
Respondents violate Due Process. Frost v. Weinberg, 375 F. Supp. 1312,
1320, (E.D.N.Y 1974), rev'd on other grounds, 515 F.2d 57 (2d Cir.
1975), cert. denied, 424 U.S. 958 (1976).
4. The Administrative Law Judge does not have the authority to
determine whether or not the deprivation of Respondent's export
privileges violates their right to procedural due process. D'Amico v.
Schweiker, 698 F.2d 903, 906 (7th Cir. 1983); Steiberger v. Heckler,
615 F. Supp. 1315, 1386 (S.D.N.Y. 1985); Association of Administrative
Law Judges v. Heckler, 594 F. Supp. 1132, 1141 (D.D.C. 1984).
5. The Administrative Law Judge does not have the authority to
decide whether or not the TDO will prevent further proceedings to
impose additional penalties on respondents for any alleged past
violations and Fifth Amendment concerns. Frost v. Weinberg, 375 F.
Supp. 1312, 1320. (E.D.N.Y 1974), rev'd on other grounds, 515 F.2d 57
(2d Cir. 1975), cert. Denied, 424 U.S. 958 (1976).
Opinion
1. Due Process and the Validity of the Regulations
Respondents initially urge vacation of the Temporary Denial of
Export Privileges Order by averring that the Regulations, as applied to
Respondents are inconsistent with the Act and the Constitution. First,
Respondents contend that the issuance of a Temporary Denial Order based
upon the regulatory requirement of a showing that a violation is
``imminent'', is in conflict with the Terms of the Act, and
inconsistent with its intent. Second, Respondents contends that the
allowance of the imposition of a TDO based upon ``the general
circumstances of the matter under investigation,'' \3\ or because the
alleged violation is significant instead of technical is
unconstitutionally vague and violates Due Process. Third, Respondents
argue that the imposition of a TDO on an ex parte basis denies the
Respondents their rights to procedural Due Process. Lastly Respondents
contend that due to the Double Jeopardy clause of the Fifth Amendment,
the TDO will prevent any further proceedings to impose additional
penalties on Respondents for any alleged violations of the past.
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\3\ (Respondent's Brief at 16.).
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Regardless of the validity, or invalidity, of these arguments, the
Administrative Law Judge does not have the authority to consider them.
See Frost v. Weinberg, 375 F. Supp. 1312, 1320, (E.D.N.Y. 1974), rev'd
on other grounds, 515 F.2d 57 (2d Cir. 1975), cert. denied, 424 U.S.
958 (1976) (holding that an administrative law judge is precluded from
passing upon the constitutionality of the very procedures he is called
upon to administer);. See also D'Amico v. Schweiker, 698 F.2d 903, 906
(7th Cir. 1983); Steiberger v. Heckler, 615 F. Supp. 1315, 1386
(S.D.N.Y. 1985); Association of Administrative Law Judges v. Heckler,
594 F. Supp. II 32, 1141 (D.D.C. 1984). Wherefore, consideration of
these arguments will not be undertaken.
2. The Temporary Denial Order and the Definition of ``Imminent''
Respondents contend that the purpose of this proceeding ``is not to
determine whether any of the Respondents ever allegedly violated the
Act, the EAR, or any order of license issued thereunder,'' but rather
to determine whether ``BXA has proved that it is entitled to emergency,
ex parte relief to prevent Respondents from commiting future, imminent,
violations of the Act, the EAR, an order or a license.'' (Resp. Brief
at 1). Respondents further contend that in so determining this issue,
the definition of the term ``imminent'' should be ``likely to happen
without delay.'' As a result, Respondents aver that a TDO may only be
issued where violations are likely to happen presently and cannot be
issued for past, suspected violations of the Act. I cannot agree with
this statement of the issue at hand.
The Regulations provide that a Temporary Denial of Export
Privileges
[[Page 34690]]
may be granted if the Secretary finds that the order is necessary in
the public interest to prevent an imminent violation. 15 CFR 766.24. A
Respondent may appeal the imposition of any such TDO on the grounds
that the finding that the order is necessary in the public interest to
prevent an imminent violation is unsupported. 15 CFR 766.24(e)(4). The
relevant issue at hand, therefore, is whether or not the finding that a
TDO was necessary to prevent an ``imminent'' violation is supported.
The Regulations provide that a violation is ``imminent'' if:
[T]he general circumstances of the matter under investigation
demonstrate a likelihood of future violations. To indicate the
likelihood of future violations, BXA may show that the violation
under investigation is significant, deliberate, covert and/or likely
to occur again, rather than technical or negligent, and that it is
appropriate to give notice to companies in the United States and
abroad to ceased along with the person in U.S.-origin items in order
to reduce the likelihood that a person under investigation continues
to export or acquire abroad such items, risking subsequent
disposition contrary to export control requirements.
15 CFR 766.24(b)(3) (emphasis added).
The BXA introduced the following in suppport of its argument that
the violation under investigation is significant, deliberate and
covert. First, BXA avers, and I concur, that the activities under
question involved exports of U.S.-origin commodities to Libya. Libya,
is a country which is subject to restrictive economic controls. See
Libyan Sanction Regulations, 31 CFR Part 550 (1996). Under the
regulation virtually all exporting and re-exporting to Libya are
monitored and controlled, requiring a license issued by the Office of
Foreign Assets Control (hereinafter ``OFAC''). This off ice has no
record of Thane-Coat, Inc. or TIC, Ltd. ever requesting such a license.
Gov. Ex. 1, Ex. 15).
Second, an export scheme was undertaken to complete the export of
pipe coating materials to Libya. Thane-Coat, Inc. through Ford and
Engebretson, using TIC, Ltd. as the exporter of record, obtained
coating products from U.S. manufacturers and had those items delivered
to U.S. ports for export to Fleixstow, United Kingdom, (Gov. Ex. 1).
Once in the U.K., Harkmel International ``re-stuffed'' the cargo,
unloading it from 40-foot containers at the U.K. port of Felixstowe and
reloading it into 20-foot containers. These containers were re-stuffed
based upon the advice from Harkmel that use of the same containers
would be ``a flag for person following movements to country.'' (Gov.
Ex. 1). The repackaged containers were then sent to Marsa El Brega,
Libya. (Id.).
Based upon the above evidence, BXA has shown that Respondents
committed a violation that was both significant, deliberate and covert.
In light of this, the Acting Assistant Secretary's decision to issue a
TDO is clearly supportable.
Conclusion
In light of the fact that Respondents entered into a scheme of
violations which were not only deliberate, but also covert, it is
hereby strongly recommended that the decision of the Acting Assistant
Secretary to temporarily deny export privileges to the Respondents for
a period of 180 days be affirmed.
Recommendation
It is Hereby Recommended That the issuance of the Order Temporarily
Denying Export Privileges to Thane-Coat, Inc., Jerry Vernon Ford,
Preston John Engebretson, Export Materials, Inc. and Thane-Coat
International, Ltd., be Affirmed.
Dated on the 11th day of June 1997, Baltimore, Maryland.
Hon. Joseph N. Ingolia,
Chief Administrative Law Judge, United States Coast Guard.
Certificate of Mailing
I hereby certify that I forwarded the attached document by federal
express to the following persons:
Jeffrey M. Joyner, Esq., Office of Chief Counsel for Export
Administration, Bureau of Export Administration, United States
Department of Commerce, H3839, 14th and Constitution, NW.,
Washington, DC 20230.
Samuel J. Buffone, Thomas B. Smith, Ropes & Gray, 1301 K Street,
NW., Suite 800 East, Washington, DC 20005.
Undersecretary for Export Administration, Bureau of Export
Administration, United States Department of Commerce, 14th and
Constitution, NW., Washington, DC 20230.
Dated this 11th day of June 1997, Baltimore, Maryland.
Joi L. Johnson,
Legal Assistant to Chief Judge Ingolia.
[FR Doc. 97-16822 Filed 6-26-97; 8:45 am]
BILLING CODE 3510-DT-M