[Federal Register Volume 64, Number 144 (Wednesday, July 28, 1999)]
[Notices]
[Pages 40820-40821]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19246]



[[Page 40820]]

-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

Bureau of Export Administration
[Docket Number 98-BXA-09]


Action Affecting Export Privileges; Export Materials, Inc.; 
Decision and Order

    In the Matter of: Export Materials, Inc., 3227 Greenbrier Drive, 
No. 108, Stafford, Texas 77477, Respondent.

    On August 12, 1998, the Office of Export Enforcement, Bureau of 
Export Administration, United States Department of Commerce 
(hereinafter ``BXA''), issued a charging letter initiating an 
administrative proceeding against Export Materials, Inc. (hereinafter 
``Export Materials''). The charging letter alleged that Export 
Materials committed 112 violations of the Export Administration 
Regulations (currently codified at 15 CFR Parts 730-774 (1999)) 
(hereinafter the ``Regulations''),\1\ issued pursuant to the Export 
Administration Act of 1979, as amended (50 U.S.C.A. app. Secs. 2401-
2420 (1991 & Supp. 1999)) (hereinafter the ``Act'').\2\
---------------------------------------------------------------------------

    \1\ The alleged violations occurred during 1994, 1995, and 1996. 
The Regulations governing the violations at issue are found in the 
1994, 1995 and 1996 versions of the Code of Federal Regulations (15 
CFR Parts 786-799 (1994 and 1995) and 15 CFR Parts 768-799 (1996), 
as amended (61 FR 12714, March 25, 1996)) (hereinafter the ``former 
Regulations''). The March 25, 1996 Federal Register publication 
redesignated, but did not republish, the existing Regulations as 15 
CFR Parts 768A-799A. In addition, the March 25, 1996 Federal 
Register publication restructured and reorganized the Regulations, 
designating them as an interim rule at 15 CFR Parts 730-774, 
effective Aprl 24, 1996. The former Regulations define the 
violations that BXA alleges occurred. The reorganized and 
restructured Regulations establish the procedures that apply to this 
matter.
    \2\ The Act expired on August 20, 1994. Executive Order 12924 (3 
CFR., 1994 Comp. 917 (1995)), extended by Presidential Notices of 
August 15, 1995 (3 CFR., 1995 Comp. 501 (1996)), August 14, 1996 (3 
CFR., 1996 Comp. 298 (1997), August 13, 1997 (3 CFR., 1997 Comp. 306 
(1998)), and August 13, 1998 (3 CFR., 1998 Comp. 294 (1999)), 
continued the Regulations in effect under the International 
Emergency Economic Powers Act (currently codified at 50 U.S.C.A. 
Secs. 1701-1706 (1991 & Supp. 1999)).
---------------------------------------------------------------------------

    Specifically, the charging letter alleged that, beginning in June 
1994 and continuing through about July 1996, Export Materials conspired 
with Thane-Coat, Inc., Jerry Vernon Ford, Preston John Engebretson, and 
TIC Ltd. to bring about acts that constituted violations of the Act, or 
any regulation, order, or license issued thereunder. The purpose of the 
conspiracy was for Export Materials and the others to export U.S.-
origin commodities to Libya, a country subject to a comprehensive 
economic sanctions program. To accomplish their purpose, the 
conspirators devised and employed a scheme to export U.S.-origin items 
from the United States through the United Kingdom to Libya, without 
applying for and obtaining the export authorizations that the 
conspirators knew or had reason to know were required under U.S. law, 
including the Regulations. See 15 CFR Sec. 746.4, previously codified 
at 15 CFR Sec. 785.7 of the former Regulations, and 15 CFR Sec. 772.1 
of the former Regulations. BXA alleged that, by conspiring or acting in 
concert with one or more persons in any manner or for any purpose to 
bring about or to do any act that constitutes a violation of the Act, 
or any regulation, order or license issued thereunder, Export Materials 
violated Section 787.3(b) (redesignated as Section 787A.3(b) on March 
25, 1996) of the former Regulations.
    BXA alleged that, in furtherance of the conspiracy described above, 
on 37 separate occasions between on or about February 12, 1995 and on 
or about April 25, 1996, Export Materials, as a co-conspirator, 
exported polyurethane (isocyanate/polyol) and polyether polyurethane 
(hereinafter collectively referred to as ``pipe coating materials'') 
from the United States to Libya, without obtaining from the Department 
the validated export licenses that Export Materials knew or had reason 
to know were required under Section 772.1(b) (redesignated as Section 
772A.1(b) on March 25, 1996) of the former Regulations. BXA alleged 
that, by exporting U.S.-origin commodities to any person or to any 
destination in violation of or contrary to the provisions of the Act, 
or any regulation, order, or license issued thereunder, Export 
Materials, as a co-conspirator, violated Section 787.6 or Section 
787A.6 of the former Regulations in connection with each shipment. 
Specifically, BXA alleged that Export Materials, as a co-conspirator, 
committed 32 violations of Section 787.6 and five violations of Section 
787A.6 of the former Regulations, for a total of 37 violations.
    BXA also alleged that, by selling, transferring, or forwarding 
commodities exported or to be exported from the United States with 
knowledge or reason to know that a violation of the Act, or any 
regulation, order, or license issued thereunder occurred, was about to 
occur, or was intended to occur with respect to the transactions, 
Export Materials, as a co-conspirator, violated Section 787.4(a) or 
Section 787A.4(a) of the former Regulations in connection with each 
shipment. Specifically, BXA alleged that Export Materials committed 32 
violations of Section 787.4(a) and five violations of Section 787A.4(a) 
of the former Regulations, for a total of 37 violations.
    Finally, BXA also alleged that, in furtherance of the conspiracy 
described above and to effect the 37 exports described above, on 37 
separate occasions between on or about February 12, 1995 and on or 
about April 25, 1996, Export Materials used Shipper's Export 
Declarations or Bills of Lading, export control documents as defined in 
Section 770.2 (redesignated as Section 770A.2 on March 25, 1996) of the 
former Regulations, on which it represented that the commodities 
described thereon, pipe coating materials, were destined for ultimate 
end-use in the United Kingdom. In fact, the pipe coating materials were 
ultimately destined for Libya. BXA alleged that, by making false or 
misleading statements of material fact directly or indirectly to a 
United States agency in connection with the use of export control 
documents to effect exports from the United States, Export Materials, 
as a co-conspirator, violated Section 787.5(a) or Section 787A.5(a) of 
the former Regulations in connection with each shipment. Specifically, 
BXA alleged that Export Materials committed 32 violations of Section 
787.5(a) and five violations of Section 787A.5(a) \3\ of the former 
Regulations, for a total of 37 violations.
---------------------------------------------------------------------------

    \3\ BXA noted in its motion that, because of a typographical 
error, the charging letter incorrectly cites to Section 785A.4(a) 
and requested that the ALJ authorize an amendment to the charging 
letter to provide the correct citation to the regulatory provision 
that spells out the false statement violation, Section 787A.5(a). 
The ALJ granted BXA's request and amended the charging letter to 
correct the citation to Section 787A.5(a).
---------------------------------------------------------------------------

    Thus, BXA alleged that Export Materials committed one violation of 
Section 787.3(b) (redesignated as Section 787A.3(b) on March 25, 1996); 
32 violations of Section 787.4(a), five violations of Section 
787A.4(a), 32 violations of Section 787.5(a); five violations of 
Section 787A.5(a), 32 violations of Section 787.6, and five violations 
of Section 787A.6, for a total of 112 violations of the former 
Regulations.
    BXA presented evidence that the charging letter was served on 
Export Materials in accordance with Section 766.3 of the Regulations 
but that Export Materials failed to answer it, as required by 766.7 of 
the Regulations, and is therefore in default. Thus, pursuant to Section 
766.7 of the Regulations, BXA moved that the Administrative Law Judge 
(hereinafter the ALJ) find the facts to be as alleged in the charging 
letter and render a Recommended Decision and Order.

[[Page 40821]]

    Following BXA's motion, the ALJ issued a Recommended Decision and 
Order in which he found the facts to be as alleged in the charging 
letter, and concluded that those facts constitute one violation of 
Section 787.3(b) (redesignated as Section 787A.3(b) March 25, 1996); 32 
violations of Section 787.4(a); five violations of Section 787A.4(a); 
32 violations of Section 787.5(a); five violations of Section 
787A.5(a); violations of Section 787.6, and five violations of Section 
787A.6, for a total of 112 violations of the former Regulations by 
Export Materials, as BXA alleged. The ALJ also agreed with BXA's 
recommendation that the appropriate penalty to be imposed for that 
violation is a denial, for a period of 20 years, of all of Export 
Materials's export privileges. As provided by Section 766.22 of the 
Regulations, the Recommended Decision and Order has been referred to me 
for final action.
    Based on my review of the entire record, I affirm the findings of 
fact and conclusions of law in the Recommended Decision and Order of 
the ALJ.
    Accordingly, it is therefore ordered,
    First, that, for a period of 20 years from the date of this Order, 
Export Materials Inc., 3727 Greenbrier Drive, No. 108, Stafford, Texas 
77477, and all of its successors or assigns, officers, representatives, 
agents, and employees when acting for or on behalf of Export Materials 
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 or to be 
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.
    Second, that no person may, directly or indirectly, do any of the 
following:
    A. Export or reexport to or on behalf of the denied person any item 
subject to the Regulations;
    B. Take any action that facilitates the acquisition or attempted 
acquisition by the denied person 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 the denied person 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 the denied person of any item subject to 
the Regulations that has been exported from the United States;
    D. Obtain from the denied person 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 from the United States; or
    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 that is owned, possessed or controlled by the denied person, or 
service any item, of whatever origin, that is owned, possessed or 
controlled by the denied person 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.
    Third, that, after notice and opportunity for comment as provided 
in Section 766.23 of the Regulations, any person, firm, corporation, or 
business organization related to the denied person 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.
    Fourth, that 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.
    Fifth, that this Order shall be served on Export Materials and on 
BXA, and shall be published in the Federal Register.
    This Order, which constitutes the final agency action in this 
matter, is effective immediately.

    Dated: July 12, 1999.
William A. Reinsch,
Under Secretary for Export Administration.
[FR Doc. 99-19246 Filed 7-27-99; 8;45 am]
BILLING CODE 3510-DT-M