[Federal Register Volume 62, Number 215 (Thursday, November 6, 1997)]
[Notices]
[Pages 60063-60065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29377]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

Bureau of Export Administration
[No. 97-BXA-9]


Decision and Order on Renewal of Temporary Denial Order

    In the Matters 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 Greenbrier 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.

Background

    On May 5, 1997, I entered an Order temporarily denying all United 
States export privileges to Thane-Coat, Inc.; Jerry Vernon Ford, 
president, Thane-Coat, Inc.; Preston John Engebretson, vice-president, 
Thane-Coat, Inc. (hereinafter collectively referred to as ``T-CF&E''), 
located in the State of Texas; Export Materials, Inc. (hereinafter 
referred to as ``EMI''), located in the State of Texas; and Thane-Coat 
International, Ltd. (hereinafter referred to as ``TCIL''), located in 
Freeport, the Bahamas.

[[Page 60064]]

    T-CF&E, EMI and TCIL appealed the Temporary Denial Order 
hereinafter ``TDO'') to an Administrative Law Judge (hereinafter the 
``ALJ''). On June 11, 1997, the ALJ recommended to the Under Secretary 
for Export Administration that the TDO be affirmed. The Under Secretary 
affirmed the TDO on June 20, 1997. T-CF&E, EMI and TCIL appealed the 
issuance of the TDO in the U.S. District Court in the Southern District 
of Texas.
    The TDO will expire on November 1, 1997. Pursuant to Section 766.24 
of the Export Administration Regulations (15 C.F.R. parts 730-774 
(1997)) (hereinafter the ``Regulations''), issued pursuant to the 
Export Administration Act of 1979, as amended (50 U.S.C.A. app 
Secs. 2401-2420 (1991 & Supp. 1997)) (hereinafter the ``Act''),\1\ the 
Office of Export Enforcement, Bureau of Export Administration, United 
States Department of Commerce (hereinafter ``BXA'') has requested that 
I renew the TDO against T-CF&E, EMI and TCIL for an additional 180 
days.
---------------------------------------------------------------------------

    \1\ The Act expired on August 20, 1994. Executive Order 12924 (3 
C.F.R., 1994 Comp. 917 (1995)), extended by Presidential Notices of 
August 15, 1995 (3 C.F.R., 1995 Comp. 501 (1996)), and August 14, 
1996 (3 C.F.R., Comp. 298 (1997)), continued the Regulations in 
effect under the International Emergency Economic Powers Act (50 
U.S.C.A. Secs. 1701-1706 (1991 & Supp. 1997)).
---------------------------------------------------------------------------

    T-CF&E, through its attorneys, opposed the Department's request and 
sought a hearing as authorized by Section 766.24(d)(3)(i) of the 
Regulations. The hearing was held on October 28, 1997.
    Neither EMI nor TCIL filed written submissions opposing renewal of 
the TDO.

Discussion

    The sole issue presented is whether the TDO should be renewed to 
prevent an imminent violation of the Regulations. A violation may be 
``imminent'' either in time or likelihood. To establish grounds for a 
temporary denial order, BXA may show either that a violation is about 
to occur or that the general circumstances of the matter under 
investigation demonstrate a likelihood of future violations. BXA may 
show that the violation under investigation or charges is significant, 
deliberate, covert and/or likely to occur again, rather than technical 
or negligent. BXA may show that it is appropriate to give notice to 
companies in the United States and abroad to cease dealing with the 
persons in U.S.-origin goods and technology in order to reduce the 
likelihood that the persons under investigation or charges continue to 
export or acquire abroad such goods and technology, risking subsequent 
disposition contrary to export control requirements. Lack of 
information establishing the precise time a violation may occur does 
not preclude a finding that a violation is imminent, so long as there 
is sufficient reason to believe the likelihood of a violation. BXA may 
request renewal of a TDO if BXA believes the TDO is necessary in the 
public interest to prevent an imminent violation. 15 CFR 766.24.
    In its request, BXA states that, as a result of an ongoing 
investigation, it has reason to believe that, during the period from 
approximately June 1994 through approximately July 1996, Thane-Coat, 
Inc., through Ford and Engebretson, and using its affiliated companies, 
TCIL and EMI, made approximately 100 shipments of U.S.-origin pipe 
coating materials, machines and parts to the Dong Ah Consortium in 
Benghazi, Libya. BXA asserts the approximate value of these shipments 
was $35 million. These items were used in coating the internal surface 
of prestressed concrete cylinder pipe for the Government of Libya's 
Great Man-Made River Project, which is ongoing. BXA's investigation 
gives it reason to believe that T-CF&E, EMI and TCIL employed a scheme 
to export U.S.-origin products from the United States, through the 
United Kingdom or Italy, to Libya, a country subject to a comprehensive 
economic sanctions program, without the authorizations required under 
U.S. law and regulations, including the Regulations.
    BXA believes that the violations T-CF&E, EMI and TCIL are suspected 
of having committed were significant, deliberate, covert and/or likely 
to occur again unless a temporary denial order naming T-CF&E, EMI and 
TCIL is issued. Additionally, BXA believes that a temporary denial 
order is necessary to give notice to companies in the United States and 
abroad that they should cease dealing with T-CF&E, EMI and TCIL in 
export-related transactions involving U.S.-origin goods.
    Counsel for T-CF&E argues that BXA has not shown that a TDO is 
needed to prevent an imminent violation of law and that evidence of 
past alleged violations of the Act do not show that a future violation 
is imminent.\2\ Counsel's arguments are not persuasive.
---------------------------------------------------------------------------

    \2\ ``Opposition To Request for Renewal of Order Temporarily 
Denying Export Privileges'', dated October 24, 1997.
---------------------------------------------------------------------------

    Counsel argues that the TDO is void and should not be renewed 
because the Act has expired. I do not accept Counsel's argument.
    Counsel argues that evidence of the violations upon which BXA bases 
its request is contained in privileged communications. Counsel further 
argues that privileged communications may not be considered in deciding 
whether to renew the TDO. The showing by BXA, that renewal of the TDO 
is appropriate, is compelling even without the communications to which 
counsel claims privilege. I do not concur in Counsel's argument.
    Counsel argues that the TDO is over-broad and, if renewed, should 
be narrowed. In its showing, BXA described an elaborate international 
scheme put in place by T-CF&E, EMI and TCIL. BXA argues that, if the 
TDO is not renewed, T-CF&E can establish a similar scheme and commit 
additional violations. Based on the showing by BXA, the scope of the 
TDO is in the public interest to prevent additional violations. BXA's 
argument is persuasive.
    Counsel offers declarations by Jerry Vernon Ford, president of 
Thane-Coat, Inc., and Preston John Engebretson, vice-president of 
Thane-Coat, Inc. Each certified, under penalty of perjury, that neither 
he nor Thane-Coat, Inc. will enter into any contract, agreement, 
understanding, or arrangement with any other party to sell, export, 
ship or transmit any coating products, of any kind, to any entity in 
any country subject to a general embargo, as indicated in Section 
746.1(a) of the Regulations. Messrs. Ford and Engebretson, on behalf of 
themselves and Thane-Coat, Inc., also consent to pre-export and post-
export monitoring by BXA of all export transactions entered into by 
Thane-Coat.
    The pledge by Messrs. Ford and Engebretson, to comply with Section 
746.1(a) of the Regulations, is not persuasive in light of the showing 
by BXA.
    Counsel requests that BXA produce documents related to the matters 
associated with transactions to Libya involving T-CF&E, EMI and TCIL. 
At this point, this matter is not ripe for discovery.

Findings

    Based on the record in this matter, including the submissions of 
the parties and the oral arguments at the hearing held on October 28, 
1997, I find that it is necessary to renew the order temporarily 
denying the export privileges of Thane-Coat, Inc.; Jerry Vernon Ford; 
Preston John Engebretson; Export Materials, Inc.; and Thane-Coat 
International, Ltd. I find such renewal is in the public interest to 
prevent an imminent violation of the Regulations

[[Page 60065]]

and to give notice to companies in the United States and abroad to 
cease dealing with these entities in goods and technical data subject 
to the Regulations. I find such renewal is in the public interest in 
order to reduce the substantial likelihood that they will engage in 
activities which are in violation of the Regulations.

Order

    Accordingly, it is hereby ordered that:
    All outstanding validated export licenses in which Thane-Coat, 
Inc., 12725 Royal Drive, Stafford, Texas; Jerry Vernon Ford, president, 
Thane-Coat, Inc., 12725 Royal Drive, Stafford, Texas 77477, with an 
address at 7707 Augustine Drive, Houston, Texas 77036; Preston John 
Engebretson, vice-president, Thane-Coat, Inc., 12725 Royal Drive, 
Stafford, Texas 77477, with an address at 8903 Bonhomme Road, Houston, 
Texas 77074; Export Materials, Inc., 3727 Greenbrier Drive, No. 108, 
Stafford, Texas 77477; and/or Thane-Coat International, Ltd., Suite C, 
Regent Center, Explorers Way, P.O. Box F-40775, Freeport, The Bahamas, 
appear or participate, in any manner or capacity, are hereby revoked 
and shall be returned forthwith to the Office of Export Licensing for 
cancellation. Further, all privileges of T-CF&E, EMI and TCIL of 
participating, in any manner or capacity, in any special licensing 
procedure, including, but not limited to, distribution licenses, are 
hereby revoked.
    Thane-Coat, Inc., and all of its successors or assigns, officers, 
representatives, agents, and employees when acting on its behalf; Jerry 
Vernon Ford; Preston John Engebretson; Export Materials, Inc., and all 
of its successors or assigns, officers, representatives, agents, and 
employees when acting on its behalf; and Thane-Coat International, 
Ltd., and all of its successors or assigns, officers, representatives, 
agents, and employees when acting on its behalf, may not directly or 
indirectly, participate in any way in any transaction involving any 
commodity, software or technology (hereinafter collectively referred to 
as ``item'') exported from the United States that is subject to the 
Regulations, or in any other activity subject to the Regulations, 
including, but not limited to:
    A. Applying for, obtaining, or using any license, License 
Exception, or export control document;
    B. Carrying on negotiations concerning, or ordering, buying, 
receiving, using, selling, delivering, storing, disposing of, 
forwarding, transporting, financing, or otherwise servicing in any way, 
any transaction involving any item exported or to be exported from the 
United States that is subject to the Regulations, or in any other 
activity subject to the Regulations; or
    C. Benefiting in any way from any transaction involving any item 
exported, or to be exported, from the United States that is subject to 
the Regulations, or in any other activity subject to the Regulations.
    No person may, directly or indirectly, do any of the following:
    A. Export or reexport to or on behalf of any of the denied persons 
any item subject to the Regulations;
    B. Take any action that facilitates the acquisition, or attempted 
acquisition, by any of the denied persons of the ownership, possession, 
or control of any item subject to the Regulations that has been or will 
be exported from the United States, including financing or other 
support activities related to a transaction whereby any of the denied 
persons acquires, or attempts to acquire, such ownership, possession or 
control;
    C. Take any action to acquire from, or to facilitate the 
acquisition or attempted acquisition from, any of the denied persons of 
any item subject to the Regulations that has been exported from the 
United States;
    D. Obtain from any of the denied persons in the United States any 
item subject to the Regulations with knowledge or reason to know that 
the item will be, or is intended to be, exported from the United 
States;
    E. Engage in any transaction to service any item subject to the 
Regulations that has been or will be exported from the United States 
and which is owned, possessed or controlled by any of the denied 
persons, or service any item, of whatever origin, that is owned, 
possessed or controlled by any of the denied persons if such service 
involves the use of any item subject to the Regulations that has been 
or will be exported from the United States. For purposes of this 
paragraph, servicing means installation, maintenance, repair, 
modification or testing.
    After notice and opportunity for comment, as provided in Section 
766.23 of the Regulations, any person, firm, corporation, or business 
organization related to any of the denied persons by affiliation, 
ownership, control, or position of responsibility in the conduct of 
trade or related services, may also be made subject to the provisions 
of this Order.
    This order does not prohibit any export, reexport, or other 
transaction subject to the Regulations where the only items involved 
that are subject to the Regulations are the foreign-produced direct 
product of U.S.-origin technology.
    In accordance with the provisions of Section 766.24(e) of the 
Regulations, T-CF&E, EMI, and/or TCIL may, at any time, appeal this 
Order by filing a full written statement in support of the appeal with 
the Office of the Administrative Law Judge, U.S. Coast Guard ALJ 
Docketing Center, 40 South Gay Street, Baltimore, Maryland 21202-4022.
    This order is effective immediately and shall remain in effect for 
180 days.
    In accordance with Section 766.24 of the Regulations, the 
Department may seek renewal of this TDO by filing a written request not 
later than 20 days before the expiration date. Any respondent may 
oppose a request to renew this TDO by filing a written submission with 
the Assistant Secretary for Export Enforcement, which must be received 
no later than seven days before the expiration of this order.
    A copy of this order shall be served on each respondent and this 
order shall be published in the Federal Register.

    Entered this 31st day of October 1997.
Frank W. Deliberti,
Acting Assistant Secretary for Export Enforcement.
[FR Doc. 97-29377 Filed 11-5-95; 8:45 am]
BILLING CODE 3510-DT-M