[Federal Register Volume 66, Number 144 (Thursday, July 26, 2001)]
[Notices]
[Pages 39007-39009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-18594]


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DEPARTMENT OF COMMERCE

Bureau of Export Administration

[01-BXA-01]


In the Matter of: Jabal Damavand General Trading Company, Dubai, 
United Arab Emirates, Respondent; Decision and Order

    On June 14, 2001, the Administrative Law Judge (hereinafter the 
``ALJ'') issued a Recommended Decision and Order in the above-captioned 
matter. The Recommended Decision and Order, a copy of which is attached 
hereto and made a part hereof, has been referred to me for final 
action. The Recommended Decision and Order sets forth the procedural 
history of the case, the facts of the case, and the detailed findings 
of fact and conclusions of law. The findings of fact and conclusions of 
law concern whether Jabal Damavand General Trading Company (hereinafter 
``Jabal Damavand'') committed three violations of the Export 
Administration Regulations (hereinafter the ``Regulations'')\1\ and a 
recommended penalty for those violations.
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    \1\ The Regulations governing the violations at issue are found 
in the 1998 version of the Code of Federal Regulations. The 
Regulations are codified at 15 CFR parts 730-774 (1998) and, to the 
degree to which they pertain to this matter, are substantially the 
same as the 2000 version.
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    Based on my review of the record and pursuant to Section 766.22(c) 
of the Regulations, I am vacating the June 14, 2001 Recommended 
Decision and Order and referring this case back to the ALJ for further 
proceedings not inconsistent with this determination.

I. The ALJ's Findings of Fact Are Not Sufficient To Constitute a 
Violation of Section 764.2(b) or Section 764.2(e) of the 
Regulations

    The facts as found in the Recommended Decision and Order are not 
sufficient to constitute a violation of either Section 764.2(b) or 
Section 764.2(e) of the Regulations. The ALJ found that Jabal Damavand 
violated Section 764.2(b) of the Regulations by causing, aiding, or 
abetting the reexport of U.S.-origin ferrography lab equipment from the 
United Arab Emirates to Iran without obtaining from the Commerce 
Department's Bureau of Export Administration (hereinafter ``BXA'') the 
reexport authorization that it knew or had reason to know was required 
by Section 742.8(a)(2) and Section 746.7 of the Regulations. In 
addition and in connection with the violation of Section 764.2(b), the 
ALJ found that Jabal Damavand violated Section 764.2(e) of the 
Regulations 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, 
license, or authorization issued thereunder occurred, was about to 
occur, or was intended to occur with respect to the reexport.
    Licensing requirements imposed under Section 742.8(a)(2) and 
Section 746.7 of the Regulations for reexports of U.S.-origin items to 
Iran are determined by the classification of the item at issue within 
the Commerce Control List (hereinafter ``CCL''). The Recommended 
Decision and Order did not include a finding regarding the 
classification within the CCL of the ferrography lab equipment 
reexported to Iran by Jabal Damavand. In order to establish that Jabal 
Damavand violated the reexport licensing requirements contained in 
Section 742.8(a)(2) or Section 746.7 of the Regulations, there must be 
a finding that the ferrography lab equipment is classified within an 
Export Control Classification Number (hereinafter ``ECCN'') that is 
subject to reexport licensing controls imposed by these sections. 
Without a finding determining the classification of the ferrography lab 
equipment, I cannot affirm the ALJ's decision and Jabal Damavand 
violated Section 764.2(b) and Section 764.2(e) of the Regulations by 
reexporting the equipment to Iran without a license or other 
authorization required by the Regulations.
    The only mention of the classification of the ferrography lab 
equipment in the record is BXA's assertion in its May 21, 2001 Motion 
for Default Order to the ALJ that the equipment is classified as 
EAR99.\2\ If the ferrography lab equipment indeed is classified as 
EAR99, then neither Section 742.8(a)(2) nor Section 746.7 of the 
Regulations would require Jabal Damavand to obtain a license or other 
authorization to reexport the equipment to Iran. Both Section 
742.8(a)(2) and Section 746.7 of the Regulations impose reexport 
licensing requirements based on the classification of an item within 
certain ECCNs, or based on certain reasons for

[[Page 39008]]

control (e.g., national security controls, nuclear nonproliferation 
controls). EAR99 items are not classified within a specific ECCN and 
are not controlled for any of the specific reasons for control listed 
in either Section 742.8(a)(2) or Section 746.7. Thus, if the 
classification of the ferrography lab equipment is EAR99, then the 
alleged facts would not be sufficient to constitute a violation of 
Section 764.2(b) or Section 764.2(e) of the Regulations.
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    \2\ An Item is classified as EAR99 when the item is ``subject 
to'' the Regulations (as defined in Section 734.3 of the 
Regulations), but is not identified within any specific ECCN on the 
CCL.
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    Accordingly, I am vacating the ALJ's finding that Jabal Damavand 
violated Section 764.2(b) and Section 764.2(e) of the Regulations by 
reexporting the ferrography lab equipment to Iran without a license or 
other authorization required by Section 742.8(a)(2) and Section 746.7 
of the Regulations. I am referring this case back to the ALJ for 
further proceedings to determine the classification of the ferrography 
lab equipment within the CCL, to ascertain the reexport licensing 
requirements based on the proper classification of the equipment, and 
to determine whether Jabal Damavand violated Section 764.2(b) or 
Section 764.2(e) of the Regulations by reexporting this equipment to 
Iran without obtaining a required license or other authorization.

II. The ALJ Shall Determine Whether and to What Extent To Consider 
Jabal Damavand's Late Answer to the Charging Letter

    The ALJ's Recommended Decision and Order in this case was issued as 
a result of BXA's motion for default because Jabal Damavand did not 
respond to the allegations in the charging letter within the 30-day 
deadline for the answer set forth in Section 766.6 of the Regulations. 
However, since the time of the Recommended Decision and Order, the ALJ 
docketing center has received a response to the charging letter from 
Jabal Damavand that is dated June 19, 2001. (A copy of this letter was 
forwarded to me and received in my office on July 11, 2001.)
    Although Jabal Damavand's answer to the charging letter was 
received well after the deadline for the answer set forth in the 
Regulations, it appears to contain facts that may be directly relevant 
to the charges. In administrative enforcement actions conducted 
pursuant to Part 766 of the Regulations, it is the ALJ's responsibility 
to compile the administrative record, to evaluate the weight and 
sufficiency of evidence presented, and to render a recommended decision 
and order based on that record. In this connection, Section 766.16(b) 
grants the ALJ the authority--either at the request of a party or at 
the ALJ's own initiative--to extend the time to file an answer to a 
charging letter, even after the deadline for filing the answer has 
expired. Accordingly, as part of my referral of this case back to the 
ALJ for further proceedings, I am instructing the ALJ to determine 
whether and to what extent Jabal Damavand's answer to the charging 
letter should be considered in those proceedings.

III. The ALJ Shall Reconsider the Recommended Penalty in Light of 
Any New Findings of Fact or Conclusions of Law

    Finally, in addition to the findings regarding violations of 
Section 764.2(b) and Section 764.2(e) that I am vacating, the ALJ also 
found that Jabal Damavand committed a violation of Section 764.2(g) of 
the Regulations by making a false or misleading statement of material 
fact directly to BXA or indirectly through any other person for the 
purpose of or in connection with effecting an export, reexport, or 
other activity subject to the Regulations. Based on these three 
violations of the Regulations, the ALJ recommended a penalty of a ten-
year denial of Jabal Damavand's export privileges.
    Although I agree that the facts as found by the ALJ support the 
finding that Jabal Damavand committed a violation of Section 764.2(g) 
of the Regulations, I am nonetheless vacating that finding as well as 
the recommended penalty for the following reasons. First, the ALJ's 
recommended findings and conclusion with respect to the violation of 
Section 764.2(g) may change in light of new information, if any, that 
is presented during the further proceedings. Second, the violation of 
Section 764.2(g) was only one of three violations of the Regulations 
found by the ALJ. The ALJ recommended a ten-year denial of exporting 
privileges for Jabal Damavand based on three violations of the 
Regulations, and not on the single violation constituting a false 
statement or misrepresentation.
    Accordingly, I believe the best course of action is to vacate the 
Recommended Decision and Order in its entirety, and instruct the ALJ to 
make a new finding whether Jabal Damavand violated Sections 764.2(b), 
and 764.2(e), and 764.2(g) of the Regulations based on any new 
information that is available, and to instruct the ALJ to reconsider 
his recommendation of a ten-year denial period in light of the results 
of these findings.
    Accordingly, it is Therefore Ordered,
    First, the June 14, 2001 Recommended Decision and Order is vacated;
    Second, this case shall be referred back to the ALJ for further 
proceedings not inconsistent with this Order during which the ALJ shall 
determine the classification of the ferrography lab equipment within 
the CCL, ascertain the proper reexport licensing requirements for the 
equipment based on its classification, and determine whether Jabal 
Damavand violated Section 764.2(b) or Section 764.2(e) of the 
Regulations by reexporting this equipment to Iran without obtaining a 
license or other authorization required by the Regulations;
    Third, the ALJ shall determine whether and to what extent to 
consider Jabal Damavand's June 19, 2001 response to the charging 
letter;
    Fourth, the ALJ shall reconsider his finding that Jabal Damavand 
committed a violation of Section 764.2(g) of the Regulations, as well 
as his recommended penalty of a ten-year denial of Jabal Damavand's 
export privileges, in light of any new findings of fact or conclusions 
of law reached as a result of these further proceedings; and
    Fifth, this Order shall be served on Jabal Damavand and on BXA, and 
shall be published in the Federal Register.
    This order is effective immediately.

    Dated: July 19, 2001.
Kenneth I. Juster,
Under Secretary of Commerce for Export Administration.

Recommended Decision and Order

    On January 4, 2001, the Office of Export Enforcement, Bureau of 
Export Administration, United States Department of Commerce (BXA), 
issued a charging letter initiating this administrative proceeding 
against Jabal Damavand General Trading Company (hereinafter referred 
to as ``Jabal Damavand''). The charging letter alleged that Jabal 
Damavand committed one violation of Section 764.2(b), one violation 
of Section 764.2(e) and one violation of 764.2(g) of the Export 
Administration Regulations \1\ issued under the Export 
Administration Act of 1979, as amended (50 U.S.C.A. app. Secs. 2401-
2420 (1991 & Supp. 2000)) (the Act).\2\
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    \1\ The Regulations governing the violation at issue are found 
in the 1998 version of the Code of Federal Regulations. The 
Regulations are codified at 15 CFR Parts 730-774 (1998) and, to the 
degree to which they pertain to this mater, are substantially the 
same as the 2000 version.
    \2\ The Act expired on August 20, 1994. Executive Order 12924 (3 
CFR, 1994 Comp. 917 (1995)), which had been extended by successive 
Presidential Notices, the most recent being that of August 3, 2000 
(65 FR 48347, August 8, 2000), continued the Regulations in effect 
under the International Emergency Economic Powers Act (50 U.S.C.A. 
1701-1706 (1991 & Supp. 2000)) until November 13, 2000 when the Act 
was reauthorized See Pub. L. No. 106-508.
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    Specifically, the charging letter alleged that on or about July 
6, 1998, Jabal Damavand

[[Page 39009]]

caused, aided, or abetted the reexport of U.S.-origin ferrography 
lab equipment from the United Arab Emirates to Iran without 
obtaining from BXA the reexport authorization that it knew or had 
reason to know was required by Sections 742.8(a)(2) and 746.7 of the 
Regulations. BXA alleged that by engaging in conduct prohibited by 
or contrary to the Regulations, Jabal Damavand committed one 
violation of Section 764.2(b) of the Regulations. 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, license 
or authorization issued thereunder occurred, was about to occur, or 
was intended to occur with respect to the shipment, Jabal Damavand 
committed one violation of Section 764.2(e) of the Regulations.
    The charging letter further alleged that, on or about December 
11, 1997, prior to shipping the U.S.-origin ferrography lab 
equipment to Jabal Damavand, the supplier requested end user and 
final destination information. In response to the request, Jabal 
Damavand informed the supplier that the item would be installed in 
the United Arab Emirates, when in fact Jabal Damavand reexported the 
U.S.-origin ferrography lab equipment to Iran. BXA alleged that, by 
making a false or misleading statement of material fact either 
directly to BXA or indirectly through any other person for the 
purpose of or in connection with effecting an export, reexport or 
other activity subject to the Regulations, Jabal Damavand committed 
one violation of Section 764.2(g) of the Regulations.
    Section 766.3(b)(1) of the Regulations provides that notice of 
issuance of a charging letter shall be served on a respondent by 
mailing a copy by registered or certified mail addressed to the 
respondent at respondent's last known address. In accordance with 
that section, January 4, 2001, BXA sent to Jabal Damavand at its 
address in Dabai, United Arab Emirates, notice that it had issued a 
charging letter against it.
    BXA received a signed return receipt on February 2, 2001, 
indicating that the charging letter had been delivered. Because the 
receipt was returned from the United Arab Emirates undated, BXA does 
not know the exact date of service. Under these circumstances, and 
for the purpose of this default proceeding, BXA has designated 
February 2, 2001, the day BXA received the return receipt, as the 
date of service.
    To date, Jabal Damavand has not filed an answer to the charging 
letter. Accordingly, because Jabal Damavand has not answered the 
charging letter as required by and in the manner set forth in 
Section 766.6 of the Regulations, Jabal Damavand is in default.
    Pursuant to the default procedures set forth in Section 766.7 of 
the Regulations, I therefore find the facts to be as alleged in the 
charging letter, and hereby determine the Jabal Damavand committed 
one violation of Section 764.2(b), one violation of Section 764.2(e) 
and one violation of 764.2(g) of the Regulations.
    Section 764.3 of the Regulations establishes the sanctions 
available to BXA for the violations charged in this default 
proceeding. The applicable sanctions as set forth in the Regulations 
are a civil monetary penalty, suspension from practice before the 
Department of Commerce, and/or a denial of export privileges. See 15 
CFR 764.3 (2000).
    BXA's motion stated that an appropriate sanction for Jabal 
Damavand's commission of three violations of the Regulations is 
issuance of a standard denial order to deny of all of Jabal 
Damavand's export privileges for 10 years.\3\ Jabal Damavand 
violated the Regulations by causing, aiding, or abetted the reexport 
of U.S.-orgin ferrography lab equipment from the United States Arab 
Emirates to Iran without obtaining from BXA the reexport 
authorization that it knew or had reason to know was required by 
Sections 742.8(a)(2) and 746.7 of the Regulations and Jabal Damavand 
made a false and misleading statement to obtain and reexport the 
U.S.-origin ferrography lab equipment to Iran.
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    \3\ Denial orders can be either ``standard'' or ``non-
standard.'' A standard order denying export privileges is 
appropriate in this case. The terms of a standard denial order are 
set forth in Supplement No. 1 to Part 764 of the Regulations.
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    In light of the nature of the violations, I concur with BXA, and 
recommend that the Under Secretary for Export Administration enter 
an Order \4\ against Jabal Dasmavand General Trading Company denying 
all export privileges for a period of 10 years.
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    \4\ Pursuant to Section 13(c)(1) of the Act and Section 
766.17(b)(2) of the Regulations, in export control enforcement 
cases, the Administrative Law Judge issues a recommended decision 
which is reviewed by the Under Secretary for Export Administration 
who issues the final decision for the agency.

    Dated: June 14, 2001.
Edwin M. Bladen,
Administrative Law Judge.
[FR Doc. 01-18594 Filed 7-25-01; 8:45 am]
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