[Federal Register Volume 70, Number 107 (Monday, June 6, 2005)]
[Notices]
[Pages 32743-32756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-10983]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

[Docket No. 04-BIS-11]


In the Matter of: Petrom GmbH International Trade, Maria-Theresa 
Strasse 26, Munich 81675, Germany, Respondent; Decision and Order

    On March 29, 2004, the Bureau of Industry and Security (``BIS'') 
filed a charging letter against the respondent, Petrom GmbH 
International Trade (``Petrom''), that alleged one violation of Section 
764.2(d), and six violations each of Sections 764.2(c) and 764.2(e) of 
the Export Administration Regulations (``Regulations''),\1\ which were 
issued under the Export Administration Act of 1979, as amended (50 
U.S.C. app. 2401-2420 (2000)) (``Act'').\2\
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    \1\ The violations charged occurred in 1999 and 2000. The 
Regulations governing the violations at issue are found in the 1999 
and 2000 versions of the Code of Federal Regulations (15 CFR Parts 
730-774 (1999-2000)). The 2005 Regulations establish the procedures 
that apply to this matter.
    \2\ From August 21, 1994 through November 12, 2000, the Act was 
in lapse. During that period, the President, through Executive Order 
12924, which had been extended by successive Presidential Notices, 
the last of which was August 3, 2000 (3 CFR, 2000 Comp. 397 (2001)), 
continued the Regulations in effect under the International 
Emergency Economic Powers Act (50 U.S.C. 1701-1706 (2000)) 
(``IEEPA''). On November 13, 2000, the Act was reauthorized by Pub. 
L. 106-508 (114 Stat. 2360 (2000)) and it remains in effect through 
August 20, 2001. Executive Order 13222 of August 17, 2001 (3 CFR, 
2001 Comp., p. 783 (2002)), which has been extended by successive 
Presidential Notices, the most recent being that of August 6, 2004 
(69 FR 48763, August 10, 2004), continues the Regulations in effect 
under IEEPA.
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    Specifically, the charging letter alleged that from on or about 
March 1999 to on or about May 2000, Petrom conspired and acted in 
concert with others, known and unknown, to bring about acts that 
constitute violations of the Regulations by arranging the export from 
the United States to Iran via Germany of items subject to the 
Regulations and the Iran Transaction Regulations without the required 
U.S. Government authorizations. In doing so, Petrom committed one 
violation of Section 764.2(d) of the Regulations. These items included 
check valves, regulatory valves, test kits, electrical equipment, ship 
tire curing bladders, and other spare parts, all of which were 
classified as EAR99 items under the Regulations.
    The charging letter also alleged that from on or about March 1999 
to on or about May 2000, Petrom solicited on six separate occasions 
violations of the Regulations by ordering the shipment of the items at 
issue from the United States to Iran via Germany. Petrom thereby 
committed six violations of Section 764.2(c) of the Regulations. 
Furthermore, the charging letter alleged that in making each of these 
six unlawful solicitations, Petrom acted with knowledge that a 
violation of the Regulations was intended to occur, as Iran was the 
intended ultimate destination of the items. The charging letter alleged 
that at all relevant times, Petrom knew that prior authorization was 
required from the U.S. Government to ship the items at issue to Germany 
for further shipment to Iran, and ordered the shipment of the items 
knowing that the shipment would occur without the required 
authorizations. In doing so, Petrom violated Section 764.2(e) of the 
Regulations.
    On July 5, 2004, Petrom filed an answer denying the formal charges. 
As ordered by the Administrative Law Judge (``ALJ''), on October 20, 
2004, BIS filed a Memorandum and Submission of Evidence To Supplement 
the Record (``Agency Brief'') and, on November 26, 2004, Petrom filed 
its submission to

[[Page 32744]]

supplement the record. On January 24, 2005, BIS filed a Memorandum of 
Proposed Findings of Fact and Conclusions of Law. Petrom did not submit 
any further filings to the ALJ.
    Based on the record before it, on April 25, 2005, the ALJ issued a 
Recommended Decision and Order (``Recommended Decision and Order'') in 
which he found that Petrom committed the 13 violations of the 
Regulations described above. In considering the record as a whole, the 
ALJ found that Petrom conspired or acted in concert with others, mainly 
Sunshine Technology and Supplies, Inc. (``Sunshine''), to export items 
subject to the Regulations to Iran without authorization from the 
Department of Treasury's Office of Foreign Assets Control (``OFAC'') in 
violation of Section 746.7 of the Regulations. According to the ALJ, 
Petrom developed a scheme to facilitate the ordering of parts, 
equipment, and other items from U.S. companies, mainly through 
Sunshine, for export to Germany with the intent to reexport the items 
to Iran. The ALJ found that Sunshine was established in March 1999 to 
serve as a front company in the United States for procuring U.S.-origin 
items. See Recommended Decision and Order, 39. Indeed, the agreement 
that Petrom was the ``actual owner'' of Sunshine, and that Sunshine was 
established to ``exclusively carry out [the] business activities of 
Petrom. Petrom shall provide the necessary info, instructions, payment 
etc. for such business activities.'' Agency Brief, Exhibit 25.
    In addition, the ALJ found that BIS proved by the preponderance of 
evidence that Petrom solicited on six separate occasions unauthorized 
exports for parts, equipment, and other items subject to the EAR from 
the United States to Iran via Germany in violation of Section 764.2(c) 
of the Regulations. According to the ALJ, based on ``pertinent, 
reliable, and credible'' evidence provided by the German Customs 
Authority, Petrom used a client identification system in its orders, 
invoices, and correspondence that included unique identifiers for 
Iranian customers. Recommended Decision and Order, 32. Based on these 
unique identifiers, as well as invoices, facsimiles, letters, and other 
documents related to the specific transactions at issue, BIS 
established that Petrom ordered parts, equipment, and items subject to 
the EAR for export to Iran, as alleged in the charging letter. See 
Recommended Decision and Order, 32-33.
    In each of these six solicitations, the ALJ found by the 
preponderance of the evidence that Petrom ordered the parts, equipment, 
and other items at issue with knowledge that a violation of the 
Regulations was intended to occur. According to the ALJ, Petrom 
possessed ``actual knowledge'' that the United States maintained an 
embargo against Iran. Recommended Decision and Order, 38. In February 
2000, in correspondence to the German Customs Authority, Petrom states 
that ``it is the expressed business policy of our company to also 
consider embargo regulations of other States,'' and that a particular 
transaction involving Iran would have been executed only ``after 
clarification if it is permissible according to American regulations.'' 
Agency Brief, Exhibit 28. In June 1992, Petrom directed a company in 
the United States to obtain export licenses from the Department of 
Commerce for a shipment to Iran. See Recommended Decision and Order, 
38. In light of these facts, the ALJ held that Petrom committed one 
violation of Section 764.2(d), and six violations each of Sections 
764.2(c) and 764.2(e) of the Regulations. He also recommended the 
penalty proposed by BIS--denial of Petrom's export privileges for 20 
years and a civil monetary sanction of $143,000.
    Pursuant to Section 766.22 of the Regulations, the ALJ's 
Recommended Decision and Order has been referred to me for final 
action. Based on my review of the entire record,\3\ I find that the 
record supports the ALJ's findings of fact and conclusions of law 
regarding the above-referenced charge.\4\ I also find that the penalty 
recommended by the ALJ is appropriate given Petrom's severe disregard 
and contempt for U.S. export control laws, the extensive and far-
reaching nature of the violations, and the importance of preventing 
future unauthorized exports to Iran, a country against which the United 
States maintains an economic embargo because of its support for 
international terrorism. Specifically, Petrom attempted to circumvent 
U.S. export control laws by setting up and conspiring with a front 
company in the United States in an effort to order U.S.-origin items 
for ultimate delivery to Iran though Germany. It ordered these items 
for export to Iran knowing that such exports would violate the U.S. 
embargo on Iran. In addition, the proposed denial order is consistent 
with penalties imposed in recent cases under the Regulations involving 
shipments to Iran. See In the Matter of Adbulamir Mahdi, 68 FR 57406 
(October 3, 2003) (affirming the recommendations of the ALJ that a 20-
year denial was appropriate where violations involved multiple 
shipments of EAR99 items as part of a conspiracy to ship such items 
through Canada to Iran); In the Matter of Arian Transportvermittlungs 
GmbH, 69 FR 28120 (May 18, 2004) (affirming the recommendations of the 
ALJ that a 10-year denial order was appropriate where knowing 
violations involved a shipment of a controlled item to Iran); and In 
the Matter of Jabal Damavand General Trading Company, 67 FR 32009 (May 
13, 2002) (affirming the recommendations of the ALJ that a 10-year 
denial was appropriate where knowing violations involved a shipment of 
an EAR99 item to Iran). In light of these circumstances, I affirm the 
findings of fact and conclusions of law of the ALJ's Recommended 
Decision and Order.
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    \3\ On May 12, 2005, BIS submitted a response to the ALJ's 
Recommended Decision and Order, but failed to file its response by 
the deadline set forth in the Regulations. Under Section 766.22(b) 
of the Regulations, parties have 12 days from the date of issuance 
of the ALJ's Recommended Decision and Order in which to submit a 
response. As the Recommended Decision and Order was issued on April 
25, 2005, responses were due no later than May 9, 2005. BIS, 
however, filed its response on May 12, 2005. As BIS failed to file 
its response by the deadline set forth in the Regulations, the 
response was considered in the Under Secretary's deliberations 
concerning this matter. Petrom did not file a response to the ALJ's 
Recommended Decision and Order.
    \4\ There are two minor clarifications to the Recommended 
Decision and Order that need to be made:
    (1) On pages 9 and 28, the Recommended Decision and Order states 
that the Respondent's Answer to the Memorandum and Submission of 
Evidence To Supplement the Record Submitted by the Bureau of 
Industry and Security was dated November 24, 2004. The correct date 
of this submission was November 26.
    (2) On page 39, in the second paragraph of the section entitled 
``Conspiracy or Acting in Concert,'' the first sentence should read 
``Further, Petrom's compliance with all German export laws does not 
shield it from violating United States export laws.'' (emphasis 
added).
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    It is hereby ordered,
    First, that a civil penalty of $143,000 is assessed against Petrom 
GmbH International Trade (``Petrom''), which shall be paid to the U.S. 
Department of Commerce within 30 days from the date of entry of this 
Order. Payment shall be made in the manner specified in the attached 
instructions.
    Second, that, pursuant to the Debt Collection Act of 1982, as 
amended (31 U.S.C. Sec. Sec.  3701-3702E (2000)), the civil penalty 
owed under this Order accrues interest as more fully described in the 
attached Notice, and, if payment is not made by the due date specified 
herein, Petrom will be assessed, in addition to the full amount of the 
civil penalty and interest, a penalty charge and an administrative 
charge, as further described in the attached Notice.

[[Page 32745]]

    Third, that, for a period of twenty years from the date on which 
this Order takes effect, Petrom GmbH International Trade, Maria-Theresa 
Strasse 26, Munich 81675, Germany, and all of its successors or 
assigns, and when acting for or on behalf of Petrom, its officers, 
representatives, agents, and employees (individually referred to as ``a 
Denied Person''), 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 connection with any other activity subject to 
the Regulations.
    Fourth, that no person may, directly or indirectly, do any of the 
following:
    A. Export or reexport to or on behalf of a Denied Person any item 
subject to the Regulations;
    B. Take any action that facilitates the acquisition or attempted 
acquisition by a 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 a 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 a Denied Person of any item subject to 
the Regulations that has been exported from the United States.
    D. Obtain from a 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, exported 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 an 
that is owned, possessed, or controlled by a Denied Person, or service 
any item, of whatever origin, that is owned, possessed, or controlled 
by a 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.
    Fifth, 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 a 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.
    Sixth, that this Order shall be served on the Denied Person and on 
BIS, and shall be published in the Federal Register. In addition, the 
ALJ's Recommended Decision and Order, except for the section related to 
the Recommended Order, shall be published in the Federal Register.
    This Order, which constitutes the final agency action in this 
matter, is effective upon publication in the Federal Register.

    Dated: May 26, 2005.
Peter Lichtenbaum,
Acting Under Secretary of Commerce for Industry and Security.

Instructions for Payment of Civil Penalty

    1. The civil penalty check should be made payable to: U.S. 
Department of Commerce.
    2. The check should be mailed to: U.S. Department of Commerce, 
Bureau of Industry and Security, Export Enforcement Team, Room H-6883, 
14th Street and Constitution Avenue, NW., Washington, DC 20230, Attn: 
Sharon Gardner.

Notice

    The Order to which this Notice is attached describes the reasons 
for the assessment of the civil monetary penalty. It also specifies the 
amount owed and the date by which the civil penalty is due and payable.
    Under the Debt Collection Act of 1982, as amended (31 U.S.C. 3701-
3720E (2000)), and the Federal Claims Collection Standards (31 CFR 
parts 900-904 (2002)), interest accrues on any and all civil monetary 
penalties owed and unpaid under the Order, from the date of the Order 
until paid in full. The rate of interest assessed respondent is the 
rate of the current value of funds to the U.S. Treasury on the date 
that the Order was entered. However, interest is waived on any portion 
paid within 30 days of the date of the Order. See 31 U.S.C.A. 3717 and 
31 CFR 901.9.
    The civil monetary penalty will be delinquent if not paid by the 
due date specified in the Order. If the penalty becomes delinquent, 
interest will continue to accrue on the balance remaining due and 
unpaid, and respondent will also be assessed both an administrative 
charge to cover the cost of processing and handling the delinquent 
claim, and a penalty charge of six percent per year. Although the 
penalty charge will be computed from the date that the civil penalty 
becomes delinquent, it will be assessed only on sums due and unpaid for 
over 90 days after that date. See 31 U.S.C.A. 3717 and 31 CFR 901.9.
    The foregoing constitutes the initial written notice and demand to 
respondent in accordance with section 901.2(b) of the Federal Claims 
Collection Standards (31 CFR 901.2(b)).

Recommended Decision and Order

Before: Honorable Walter J. Brudzinski, Administrative Law Judge, 
United States Coast Guard.
Appearances: For the Bureau of Industry and Security: Philip K. Ankel, 
Esq., Office of Chief Counsel, Bureau of Industry and Security.
For the Respondent: Dr. B. Khadjavi-Gostard, Esq., Dr. Veronika 
Hausmann, Esq., Khadjavi Hausmann Steinbruck, Brienner Strasse 10 
(Arco-Palais).

Table of Contents

Preliminary Statement
Findings of Fact
    General Findings Reported Under the ZKA Report
    Relationship Between Petrom and Sunshine Technology and 
Supplies, Inc.
    Solicitation of Exports to Iran
    Acting with Knowledge that a Violation was Intended to Occur
    Items Subject to the EAR
    Request for Office of Foreign Assets Control Licenses
Ultimate Findings of Fact and Conclusions of Law
Discussion
    Petrom's Response
    Applicable Laws and Regulations
    Solicitation of an Unauthorized Export or Reexport
    Acting With Knowledge of a Violation
    Conspiracy or Acting in Concert
Basis of Sanction
Recommended Order
Certificate of Service
Index of the Official Record
Notice to the Parties Regarding Review by Under Secretary

[[Page 32746]]

Preliminary Statement

    On March 29, 2004, the Bureau of Industry and Security (``BIS'' or 
``Agency'') filed a formal Complaint against Petrom GmbH International 
Trade, (``Petrom'' or ``Respondent'') charging thirteen (13) counts of 
violation of the Export Administration Act of 1979 (``EAA'') and the 
Export Administration Regulations (``EAR'' or ``Regulations'').\1\ See 
50 U.S.C. App. 2401-20 (1991), amended by Pub. L. 106-508, 114 Stat. 
2360 (Supp. 2002); 15 CFR parts 730-74. The EAA and its underlying 
Regulations were created to establish a ``system of controlling exports 
by balancing national security, foreign policy and domestic supply 
needs with the interest of encouraging export to enhance * * * the 
economic well being'' of the United States. See Times Publ'g Co. v. 
United States Dep't of Commerce, 236 F.3d 1286, 1290 (22th Cir. 2001); 
see also 50 U.S.C. App. 2401-02.\2\ The Charging Letter asserts that 
for the period of time from on or about March 1999 to on or about May 
2000, Petrom engaged in unauthorized acts in violation of the Export 
Administration Regulations under 15 CFR 764.2, in that, they conspired 
to export items to Iran without U.S. government approval, solicited 
exports to Iran without U.S. government approval, and ordered parts and 
equipment with the knowledge that a violation was intended to occur. 
The March 29, 2004 Charging Letter alleges the following.
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    \1\ Due to the nature of this transaction, the items in question 
are also subject to the Iranian Transactions Regulations under the 
jurisdiction of the Department of Treasury's Office of Foreign 
Assets Control (OFAC).
    \2\ The EAA and all regulations under it expired on August 20, 
2001. See 50 U.S.C. App. 2419. Three (3) days before its expiration, 
the President declared that the lapse of the EAA constitutes a 
national emergency. See Exec. Order. No. 13222, reprinted in 3 CFR 
at Sec. Sec.  783-84, (2002). Exercising authority under the 
International Emergency Economic Powers Act (IEEPA), 50 U.S.C. 1701-
06 (2002), the President maintained the effectiveness of the EAA and 
its underlying regulations throughout the expiration period by 
issuing Exec. Order. No. 13222 (Aug. 17, 2001). The effectiveness of 
the export control laws and regulations were further extended by 
Notice issued by the President on August 14, 2002 and August 7, 
2003. See Notice of August 14, 2002; Continuation of Emergency 
Regarding Export Control Regulations, reprinted in 3 CFR at 306 
(2003) and 68 FR 47833, August 11, 2003. Courts have held that the 
continued operation and effectiveness of the EAA and its regulations 
through the issuance of Executive Orders by the President 
constitutes a valid exercise of authority. See Wisconsin Project on 
Nuclear Arms Control v. United States Dep't of Commerce, 317 F.3d 
275, 278-79 (D.C. Cir. 2003).
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Charge 1 (15 CFR 764.2(d)-Conspiracy To Export Check Valves and Spare 
Parts to Iran Without the Required U.S. Government Authorization)

    From on or about March 1999 to on or about May 2000, Petrom 
conspired and acted in concert with others, known and unknown, to 
bring about acts that constitute violations of the Regulations by 
arranging the export from the United States to Iran via Germany of 
items subject to the Regulations and the Iranian Transactions 
Regulations without the required U.S. Government authorizations. 
Pursuant to Section 746.7 of the Regulations, authorizations were 
required from the Office of Foreign Assets Control, U.S. Department 
of Treasury (``OFAC'') before the items could be exported to Iran. 
In furtherance of the conspiracy, Petrom and its co-conspirators 
devised and employed a scheme under which the U.S. exporter would 
send the items to Petrom in Germany, which would then forward the 
items to their ultimate destination in Iran. In so doing, Petrom 
committed one violation of Section 764.2(d) of the Regulations.

Charge 2 (15 CFR 764.2(c)-Soliciting an Export to Iran Without the 
Required U.S. Government Authorization)

    On or about March 30, 1999, Petrom solicited a violation of the 
Regulations when it ordered check valves and spare parts from a U.S. 
company for export to Iran via Germany without the required U.S. 
Government authorization. Pursuant to Section 746.7 of the 
Regulations authorization from OFAC was required for the export of 
check valves and spare parts, items subject to the Regulations and 
the Iranian Transactions Regulations, from the United States to 
Iran. No OFAC authorization was obtained for the export. In so 
doing, Petrom committed one violation of Section 764.2(c) of the 
Regulations.

Charge 3 (15 CFR 764.2(d)-Ordering Check Valves and Spare Parts With 
Knowledge That a Violation of the Regulations Was Intended To Occur)

    In connection with facts referenced in Charge 2, Petrom ordered 
check valves and spare parts with knowledge that a violation of the 
Regulations was intended to occur. At all times relevant hereto, 
Petrom knew that prior authorization was required from OFAC to 
export the check valves and spare parts, items subject to the 
Regulations and the Iranian Transactions Regulations, to Iran. 
Petrom ordered the check valves and spare parts knowing that they 
would be exported to Iran without the required U.S. Government 
authorization. In so doing, Petrom committed one violation of 
Section 764.2(e) of the Regulations.

Charge 4 (15 CFR 764.2(c)--Soliciting an Export to Iran Without the 
Required U.S. Government Authorization)

    On or about July 8, 1999, Petrom solicited a violation of the 
Regulations when it ordered a [Pyrogent] Plus test kit from a U.S. 
company for export to Iran via Germany without the required U.S. 
Government authorization. Pursuant to Section 746.7 of the 
Regulations authorization from OFAC was required for the export of a 
[Pyrogent] Plus test kit, an item subject to the Regulations and the 
Iranian Transactions Regulations, from the United States to Iran. No 
OFAC authorization was obtained for the export. In so doing, Petrom 
committed one violation of Section 764.2(c) of the Regulations.

Charge 5 (15 CFR 764.2 (e)--Ordering [a Pyrogent Plus test kit] With 
Knowledge That a Violation of the Regulations Was Intended To Occur)

    In connection with facts referenced in Charge 4, Petrom ordered 
a [Pyrogent] Plus test kit with knowledge that a violation of the 
Regulations was intended to occur. At all times relevant hereto, 
Petrom knew that prior authorization was required from OFAC to 
export a [Pyrogent] Plus Test Kit, an item subject to the 
Regulations and the Iranian Transactions Regulations, from the 
United States to Iran. Petrom ordered the [Pyrogent] Plus test kit 
knowing that they would be exported to Iran without the required 
U.S. Government authorization. In so doing, Petrom committed one 
violation of Section 764.2(e) of the Regulations.

Charge 6 (15 CFR 764.2(c)--Soliciting an Export to Iran Without the 
Required U.S. Government Authorization)

    On or about September 14, 1999, Petrom solicited a violation of 
the Regulations when it ordered a freight forwarder in the United 
States to ship tire curing bladders from the United States to 
Germany. The ultimate destination of the tire curing bladders was 
Iran and such shipment was to occur without the required U.S. 
Government authorization. Pursuant to Section 746.7 of the 
Regulations authorization from OFAC was required for the export of 
the tire curing bladders, items subject to the Regulations and the 
Iranian Transactions Regulations, from the United States to Iran. No 
OFAC authorization was obtained for the intended export, which was 
detained prior to export by the Department of Commerce. In so doing, 
Petrom committed one violation of Section 764.2(c) of the 
Regulations.

Charge 7 (15 CFR 764.2(e)--Ordering Tire Curing Bladders With Knowledge 
That a Violation of the Regulations Was Intended To Occur)

    In connection with facts referenced in Charge 6, Petrom ordered 
tire curing bladders to be shipped to Germany with knowledge that a 
violation of the Regulations was intended to occur as Iran was the 
intended ultimate destination of the bladders. At all times relevant 
hereto. Petrom knew that prior authorizaiton was required from OFAC 
to ship tire curing bladders, items subject to the Regulations and 
the Iranian Transactions Regulations, to Germany for further 
shipment to Iran. Petrom ordered the shipment of tire curing 
bladders to Germany knowing that Iran was the intended ultimate 
destination of the bladders and that the shipment would occur 
without the required U.S. Government authorization. In so doing, 
Petrom committed one violation of Section 764.2(e) of the 
Regulations.

[[Page 32747]]

Charge 8 (15 CFR 764.2(c)--Soliciting an Export to Iran Without the 
Required U.S. Government Authorization)

    On or about September 1999, Petrom solicited a violation of the 
Regulations when it ordered tire curing bladders from a U.S. company 
for export to Iran via Germany without the required U.S. Government 
authorization. Pursuant to Section 746.7 of the Regulations 
authorization from OFAC was required for the export of tire curing 
bladders, items subject to the Regulations and the Iranian 
Transactions Regulations, from the United States to Iran. No OFAC 
authorization was obtained for the export, which was detained prior 
to export by the Department of Commerce. In so doing, Petrom 
committed one violation of Section 764.2(c) of the Regulations.

Charge 9 (15 CFR 764.2(e)--Ordering Tire Curing Bladders with Knowledge 
That a Violation of the Regulations Was Intended To Occur)

    In connection with facts referenced in Charge 8, Petrom ordered 
tire curing bladders with knowledge that a violation of the 
Regulations was intended to occur. At all times relevant hereto, 
Petrom knew that prior authorization was required from OFAC to 
export tire curing bladders, items subject to the Regulations and 
the Iranian Transactions Regulations from the United States to Iran. 
Petrom ordered the bladders knowing that they would be exported to 
Iran without the required U.S. Government authorization. In so 
doing, Petrom committed one violation of Section 764.2(e) of the 
Regulations.

Change 10 (15 CFR 764.2(c)--Soliciting an Export to Iran Without the 
Required U.S. Government Authorization)

    On or about August 10, 1999, Petrom solicited a violation of the 
Regulations when it ordered regulator valves and repair kit from a 
U.S. company for export to Iran via Germany without the required 
U.S. Government authorization. Pursuant to Section 746.7 of the 
Regulations authorization from OFAC was required for the export of 
regulator valves and repair it, items subject to the Regulations and 
the Iranian Transaction Regulations, from the United States to Iran. 
No OFAC authorization was obtained for the export, which was 
detained prior to export by the Department of Commerce. In so doing, 
Petrom committed one violation of Section 764.2(c) of the 
Regulations.

Charge 11 (15 CFR 764.2(e)--Ordering Regulator Valves and a Repair Kit 
With Knowledge That a Violation of the Regulations Was Intended To 
Occur)

    In connection with facts referenced in Charge 10, Petrom ordered 
regulator valves and a repair kit with knowledge that a violation of 
the Regulations was intended to occur. At all times relevant hereto, 
Petrom knew that prior authorization was required from OFAC to 
export regulator valves and repair kit, items subject to the 
Regulations and the Iranian Transactions Regulations, from the 
United States to Iran. Petrom ordered the shipment knowing that the 
regulator valves and repair kit would be exported to Iran without 
the required U.S. Government authorization. In so doing, Petrom 
committed one violation of Section 764.2(e) of the Regulations.

Charge 12 (15 CFR 764.2(c)--Soliciting an Export to Iran Without the 
Required U.S. Government Authorization)

    On or about June 18, 1999, Petrom solicited a violation of the 
Regulations when it order electrical equipment\3\ from a U.S. 
company for export to Iran via Germany without the required U.S. 
Government authorization. Pursuant to Section 746.7 of the 
Regulations authorization from OFAC was required for the export of 
electrical equipment, items subject to the Regulations and the 
Iranian Transactions Regulations, from the United States to Iran. No 
OFAC authorization was obtained for the export, which was never 
shipped from the manufacturer. In so doing, Petrom committed one 
violation of section 764.2(c) of the Regulations.
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    \3\ In its Memorandum and Submission of Evidence to Supplement 
the Record, dated October 20, 2004, BIS refers to the Electrical 
Equipment identified in Charges 12 and 13 as ``Mercury Thermal 
Systems and [thermowells].''
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Charge 13 (15 CFR 764.2(e)--Ordering Electrical Equipment With 
Knowledge That a Violation of the Regulations Was Intended To Occur)

    In connection with facts referenced in Charge 12, Petrom ordered 
electrical equipment with knowledge that a violation of the 
Regulations was intended to occur. At all times relevant hereto, 
Petrom knew that prior authorization was required from OFAC to 
export electrical equipment, items subject to the Regulations and 
the Iranian Transactions Regulations, from the United States to 
Iran, Petrom ordered the equipment from a U.S. company knowing that 
the equipment would be exported to Iran without the required U.S. 
Government authorization. In so doing, Petrom committed one 
violation of Section 764.2(e) of the Regulations.

    Following the grant of several extensions of time to file an 
Answer, on July 5, 2004, Petrom, through its attorney, Dr. B. 
Khadjavia-Gontard, filed a formal Answer denying ``any intention to 
reexport to Iran the subject goods.'' Petrom stated that the goods 
imported to Germany ``were not reexported to Iran'' and with regard to 
the Charges six (6) through nine (9), that a ``misunderstanding as to 
the destination of the shipment had been caused by a mistaken review of 
[] order reference numbers * * *'' In its Answer, Petrom did not 
formally demand a hearing and on July 27, 2004, this matter was 
assigned pursuant to 15 CFR 766.15 to the Honorable Peter A. 
Fitzpatrick, Administrative Law Judge (ALJ), Norfolk. BIS regulations 
provide that a written demand for hearing must be explicitly stated. 
Id. As in this case, Respondent's failure to formally demand a hearing 
is deemed a waiver of Respondent's right to a hearing and this 
Recommended Decision and Order is hereby issued on the basis of the 
submitted record.\4\ See id. and Sec.  766.6(c).
---------------------------------------------------------------------------

    \4\ No witness testimony was received in this proceeding. The 
case Index on the official record provides the exclusive listing of 
documents received in this matter. A copy of the Index is provided 
as Attachment A.
---------------------------------------------------------------------------

    On August 18, 2004, an Order to File Briefs was issued directing 
the parties to file the necessary, ``Affidavits or declarations, 
depositions, admissions, answers to interrogatories and stipulations'' 
to supplement the record. In that Order, the parties were placed on 
notice that proceeding on the record ``does not relieve the parties 
from the necessity of proving the facts supporting their charges or 
defenses.'' (citation provided to Sec.  766.15).
    On September 7, 2004, Petrom filed a response, reasserting the 
defenses raised in their July 5, 2004 Answer and requested that 
``Respondent should be informed by the Court about the facts presented 
to BIS'' in order to comply with the ALJ's August 18, 2004 Order to 
file briefs or documents. On September 8, 2004, the Honorable Peter A. 
Fitzpatrick issued an Order stating that the burden of proof in this 
administrative proceeding lies with the agency and that any submission 
regarding same must be served upon Respondent. Respondent was then 
given an opportunity to submit documentation in support of its defense 
following the receipt of Agency materials. On September 20, 2004, the 
parties were granted a thirty (30) day stay to file briefs following 
the parties' request to allow ``further [discussion of] the factual 
basis for Respondent's response and to discuss resolution of this 
matter.''
    On October 20, 2004, the Agency filed its Memorandum and Submission 
of Evidence to Supplement the Record (Agency Brief). The Agency's Brief 
contained thirty-nine (39) exhibits. Several of the exhibits were 
translated from German to English by AB Si Translation Services, Inc., 
8350 NW. 52nd Terrace, Suite 209, Miami, Florida 33166. Following 
receipt of the Agency's Brief, Respondent sought an additional 
extension of time in order to prepare its submission. Respondent's 
request for an additional extension of time was granted by Order dated 
November 4, 2004.
    On November 24, 2004, Respondent filed its submission to supplement 
the record entitled, Respondent's Answer to the Memorandum and 
Submission of Evidence to Supplement the Record Submitted by the Bureau 
of Industry and Security (Respondent's Brief). At this point, 
Respondent's defense can

[[Page 32748]]

generally be characterized as the failure by the Agency to show that 
Respondent either, exported or intended to export, or had knowledge 
that the items in question were to be exported to Iran and that 
Respondent ``does not accept and acknowledge the extraterritorial 
effect of the U.S. Iranian Transaction Regulations as claimed by the 
BIS.''
    On December 28, 2004, this matter was reassigned by the Chief 
Administrative Law Judge to the undersigned Judge. On January 3, 2005, 
an Order to File Pre-decisional Briefs was issued to provide the 
parties with an opportunity to file any:
    1. Exceptions to any ruling made by this Administrative Law Judge 
or to the admissibility of evidence proffered in this matter;
    2. Proposed findings of fact and conclusions of law;
    3. Supporting legal arguments for the exceptions and proposed 
findings and conclusions submitted; and
    4. A proposed order.
    On January 24, 2005, BIS filed its Memorandum of Proposed Findings 
of Fact and Conclusions of Law, which included a proposed monetary 
sanction in the amount of $143,000 and a denial of export privileges 
for twenty (20) years. Respondent did not file any proposed findings. 
Given that the parties have been provided an ample amount of time and 
opportunity to supplement the record and, in keeping with the 
procedures set forth in 15 CFR part 766, I find that this matter is now 
ripe for decision.
    For the reasons that follow, I hereby find that the Bureau of 
Industry and Security has met its burden as shown in the written record 
by the preponderance of substantial, reliable, and probative evidence 
that Petrom GmbH International Trade violated the Export Administration 
Act and its supporting Regulations as alleged in the March 29, 2004 
Charging Letter.

Findings of Fact

    1. On May 6, 1995, the President of the United States signed 
Executive Order 12959 to prohibit certain transaction, including the 
export and reexport of certain items with respect to Iran (``Iranian 
Embargo''). Exhibit 29, Agency Brief, 60 FR 24757, May 9, 1995.\5\
---------------------------------------------------------------------------

    \5\ Unless noted, the citations provided hereunder reference the 
exhibit numbers associated with the Agency's Memorandum and 
Submission of Evidence to Supplement the Record (``Agency Brief'') 
and Respondent's reply to the Agency's Brief (``Respondent's 
Brief''). Several of the Agency's exhibits were translated from 
German to English as provided for by AB Si Translation Services, 
Inc., 8350 NW. 52nd Terrace, Suite 209, Miami, Florida 33166. To the 
extent provided the Agency's Proposed Findings of Facts and 
Conclusions of Law are accepted and incorporated herein. The 
Respondent did not submit any Proposed Findings of Facts and 
Conclusions of Law.
---------------------------------------------------------------------------

    2. Executive Order 12959 prohibits the export or reexport of 
virtually all U.S. commercial transactions with Iran, unless a license 
has been previously issued or the transaction is exempt by statute. 
Exhibit 2, Agency Brief.
    3. The United States Department of Treasury, Office of Foreign 
Assets Control (OFAC) administers the Iranian Transactions Regulations 
(31 CFR Part 560) under the authority of the International Emergency 
Economic Powers Act (IEEPA) (50 U.S.C. 1701 et seq.), the National 
Emergencies Act, (50 U.S.C. 1601 et seq.), and the International 
Security and Development Cooperation Act of 1985, (22 U.S.C. 2349aa-9). 
Exhibit 1 and 2, Agency Brief.
    4. The OFAC is charged with administering the Iranian Embargo, 
which includes items subject to the Export Administration Regulation 
(``EAR''). The Bureau of Industry and Security also administers 
licensing requirements under the EAR for items that may be exported or 
reexported to Iran. Exhibit 2, Agency Brief, see also 15 CFR 
746.7(a)(2).
    5. The United States of America and the Federal Republic of Germany 
signed a mutual agreement regarding custom related activities and will 
end assistance to each respective Custom Agency in order to facilitate 
trade cooperation between nations. Exhibit 3 and 6, Agency Brief.
    6. The German Customs Authority is named Zollkriminalamt or 
``ZKA.'' In response is a request by the U.S. Customs Service, known 
presently as the Bureau of Immigration and Customs Enforcement 
(``ICE''), the ZKA provided assistance with regard to the activities of 
Petrom. The ZKA issued a report (``ZKA Report'') on March 21, 2000, 
which was translated by Heike Spelt and is provided as Exhibit 4 and 5, 
Agency's Brief.

General Findings Reported Under the ZKA Report \6\
---------------------------------------------------------------------------

    \6\ Unless noted otherwise, all citations in this subsection 
pertain to Exhibit 4 (ZKA Report), Agency's Brief.
---------------------------------------------------------------------------

    7. Petrom GmbH International Trade is a company registered in the 
Commercial Registry of Muchen, Germany. Since 1997, Petrom's commercial 
address is Maria Theresia Str. 26, D-81675 Munchen.
    8. Petrom's commercial objective is ``trade of any kind, especially 
import and export of industry products, raw materials and agriculture 
products.''
    9. The sole proprietor is Majid Rashmanifar. His last name be 
spelled as ``Rahmani'' or ``Rahmanifar.'' The Respondent's Attorney 
indicates that Mr. Majid Rahmani-Far is the Chief Executive Officer of 
Petrom. See Respondent's request for extension of time, dated June 18, 
2004.
    10. Born April 28, 1961 in Teheran, Iran and is presently an 
Iranian citizen, Mr. Rashmanifar has further ventures in other 
companies, including one company named Petrom International Trade S.I., 
located in Madrid, Spain.
    11. Petrom used an invoice numbering system with the following 
convention: `` `client number, / ES (=Enquiry Sale) + consecutive 
numbers per client / RE 1 (if partial delivery then RE2. * * *' '' 
``For example: 10121/ES-07 RE 1.''
    12. A client list provided by the ZKA Report indicates the 
following pertinent information concerning Petrom's client 
identification numbers:

------------------------------------------------------------------------
         Client  number              Client name and place of business
------------------------------------------------------------------------
10816...........................  Iran Tire Manufacturing Company,
                                   Teheran, Iran.
11308...........................  Kian Tire Manufacturing Co., Teheran,
                                   Iran.
11602...........................  Razzi Vaccine and Serum Inst., Teheran/
                                   Karaj, Iran.
10821...........................  Iran Aircraft Manufacturing
                                   Industries, Teheran, Iran.
10332...........................  Darou Pakhsh Co., Teheran, Iran.
10817...........................  Iran Research Organisation for Science
                                   and Technology, Teheran, Iran.
------------------------------------------------------------------------

Exhibit 5, Agency Brief.
    13. The ZKA Report concerning Petrom's client numbering system that 
identifies Iran as an ultimate export destination was also corroborated 
and demonstrated by:
11602--Razzi Vaccine and Serum Inst.
    a. In an undated export for 300 kg of Casamino Acid delivered to 
Razzi Vaccine and Serum Institute located at Karaj, Iran, the ZKA 
Report identified the export order number corresponding to Razzi 
Vaccine and Serum Institute as 11602. Exhibit 5, (ZKA Report), Agency 
Brief.
    b. Under Invoice No. 3341/97, dated August 13, 1997, from Sunshine 
Textiles, Inc., to Petrom, it referenced ``YOUR ORDER P.O. 11602/ES-
12.'' The order comprised of ``22 ITEMS LABORATORY CHEMICALS'' valued 
at ``USD 9021.95.'' Exhibit 35, Agency Brief.
    The ZKA Report disclosed that ``SEVEN DAYS TRADE CO. LTD.,

[[Page 32749]]

Teheran, Iran had asked PETROM in lieu of RAZZI VACCINE whether the 
chemical products could be delivered.'' In its communication with Seven 
Days Trade, Co., Ltd., Petrom referenced the invoice number ``B/1205/
11602/ES-12/Q2.'' Exhibit 5, (ZKA Report), Agency Brief.
    The ZKA Report identifies client no. 11602 as, Razzi Vaccine and 
Serum Inst., located in Teheran/Karaj, Iran. Exhibit 5, (ZKA Report), 
Agency Brief.
    In further support, a Shippers Export Declaration (``SED'') form 
issued on August 23, 1997 for Sunshine Textiles, Inc., which referenced 
laboratory chemicals valued at $9021.00. The SED lists Razi Vaccine and 
Serum Inst., Teheran, Iran as the ultimate consignee with a port of 
unloading designated as Teheran, Iran. Exhibit 36, Agency Brief.
10816--Iran Tire Manufacturing Co.
    c. On February 13, 1995, Petrom sent a facsimile to Sunshine 
Textiles, Inc. concerning an order from Antares where they ``mention 
that the goods are destined for Iran.'' The facsimile referenced 
``10816/ES-20.'' Exhibit 37, Agency Brief.
    The ZKA Report identified customer no. 10816 as the Iran Tire 
Manufacturing Co., located in Teheran, Iran. Exhibit 5 (ZKA Report), 
Agency Brief.
    d. In an invoice dated January 19, 1993, from Penberthy, Inc. to 
Petrom for the export of hydraulic power equipment, it referenced a 
customer order no. 10816/ES-05/PP12. While the invoice showed that the 
export was to be shipped to Petrom in Munich, Germany, it also 
contained the words ``EXPORT IRAN'' on the form. Exhibit 38, Agency 
Brief. A second document entitled, Certificate of Origin was issued by 
Penberthy, Inc. that provided similar information containing the words 
``Export Iran'' on the form. Exhibit 39, Agency Brief.
    The ZKA Report identified customer no. 10816 as the Iran Tire 
Manufacturing Co., located in Teheran, Iran. Exhibit 5 (ZKA Report), 
Agency Brief.
10821--Iran Aircraft Manufacturing Industries
    e. In an invoice dated March 3, 1995, from Sunshine Textiles, Inc. 
to Petrom, it referenced order number 10821/ES-02. The exported item 
was delivered to the Iran Aircraft Manufacturing Industries located in 
Isfahan, Iran.
    In another undated export from Sunshine Textiles, Inc. to the Iran 
Aircraft Manufacturing Industries, the ZKA Report identifies the export 
order number as 10821/ES-06/RE 1. Exhibit 5 (ZKA Report), Agency Brief.
    The ZKA Report identified customer no. 10821 as the Iran Aircraft 
Manufacturing Industries, located in Teheran, Iran. Exhibit 5 (ZKA 
Report), Agency Brief.
10332--Darou Pakhsh Co.
    f. In an invoice dated May 7, 1996, for an export by Petrom to 
Darou Pakhsh Co., Teheran, Iran, it referenced order number ``10332/ES-
29/RE1.'' Exhibit 5 (ZKA Report), Agency Brief.
    In another invoice dated April 16, 1996, for an export by Petrom to 
Darou Pakhsh Co., Teheran, Iran, it referenced order number ``10332/ES-
28/RE1.'' Exhibit 5 (ZKA Report), Agency Brief.
    The ZKA Report identified client number 10332 as the Darou Pakhsh 
Co. located in Teheran, Iran. Exhibit 5, (ZKA Report), Agency Brief.

Relationship Between Petrom and Sunshine Technology and Supplies, Inc.

    14. On May 6, 1999, Petrom entered into an agreement with Mr. Hadi 
Sadeli and Mrs. Maray Blanco (Mr. Saheli's wife) for the purpose of 
establishing a United States based company to purchase products made by 
U.S. companies for import to Europe. The company was named, Sunshine 
Technology and Supplies, Inc. (``Sunshine'').\7\ Exhibit 25, Agency 
Brief.
---------------------------------------------------------------------------

    \7\ This company is distinguished from Sunshine Textiles, Inc., 
who also performed considerable activities with Petrom.
---------------------------------------------------------------------------

    15. Under the agreement, it was agreed that Sunshine's business 
address was to be the same as Mr. Saheli's residential address, 14230 
SW., 45 Terrace, Miami, Florida 33175. Sunshine was not required to 
``pay any rent whatsoever.'' Exhibit 24, 25, 26, Agency Brief.
    16. Petrom was the ``actual owner'' of Sunshine and bore ``all 
costs of registration and other costs for running the company * * * as 
well as corporate and other taxes as well as respective legal fees * * 
*.'' Sunshine was created to ``exclusively carry out business 
activities of Petrom. Petrom shall provide the necessary info, 
instructions, payment etc. for such business activity.'' In addition, 
Mr. Saheli would receive monthly compensation from Petrom. Exhibit 25, 
Agency Brief.

Solicitation of Exports to Iran

Check Valves and Parts
    17. In March of 1999, Petrom through Sunshine ordered ``600 PCS 
CHECK VALVES AND PARTS'' as indicated by Invoice No. 1161/99 for 
shipment from the United States to Germany. The invoice referenced 
``Your order P.O. 18016/ES-99.'' The shipment, as indicated by a 
Certificate of Origin was made by ``United States Postal Service Air'' 
to Petron's address, Maria-Theresia Str. 26, Munich 81675 Germany. The 
reference number provided on the Certificate of Origin was 10816/ES-99/
PP01. Exhibit 7 and 8, Agency Brief.
    18. The client number code for 10816 is the Iran Tire Manufacturing 
Company located in Teheran, Iran. Exhibit 4 and 5 (ZKA Report), Agency 
Brief.
Pyrogent Test Kit
    19. In August of 1999, Petrom, directed Sunshine to contact Bio 
Whittaker (``BW'') to order the following, ``Pyrogent Plus, Single Test 
Kit, 24 Single Test Vials Lysate, 1x1 ml Vial Endotoxin, Certificate of 
Analysis'' (``Pyrogent Test Kit''). Exhibit 9, Agency Brief. On or 
about August 16, 1999, BW shipped the Pyrogent Test Kit to Sunshine. 
Exhibit 11, Agency Brief. On the BW shipment form, ``10332/ES-40'' was 
hand written along with other notes. Id. On or about August 18, 1999, 
Sunshine shipped the Pyrogent Test Kit to Petrom, Munich, Germany. 
Exhibit 10, Agency Brief.
    20. The client number code for 10332 is the Darou Pakhsh Co. 
located in Teheran, Iran. Exhibit 4 and 5 (ZKA Report), Agency Brief.
Tire Curing Bladders
    21. In September of 1999, Petrom directly contacted Danzas AG 
(``Danzas''), a freight forwarding firm and requested a detailed offer 
for shipment of one (1) palette of tire curing bladders that would be 
shipped from ``Bryan, OH'' to Teheran via Germany. Exhibit 12, Agency 
Brief. In a following letter from Petrom to Danzas, it references 
``Shipment ex Cleveland'' where Petrom states, ``Please instruct Danzas 
in Cleveland to contact Sunshine'' regarding the shipment. Exhibit 13, 
Agency Brief. Danzas has an office located in Cleveland, Ohio. 
Respondent's Answer, dated July 5, 2004.
    22. In an e-mail dated September 21, 1999 from Michael Mittasch, 
Danzas GmbH, Inc. to Harry Walton, Airfreight Manager, Danzas, 
Cleveland, Mr. Mittash states ``please contact [Sunshine for] the 
following shmt * * * ready at Byron, Ohio for our customer Petrom, 
GmbH, Munich.'' He further states, ``Please note that shmt has to go to 
FRA not MUC, as we have to send it from there to THR, Iran'' Exhibit 
15, Agency Brief.
    23. The shipment of the curing bladders from Danzas' Cleveland 
office was never completed as the Danzas

[[Page 32750]]

Cleveland office ``decided not to serve Petrom with this transport'' as 
it involved ``the embargo U.S. to IRAN.'' Id. The shipment was however, 
already in route to Cleveland when that decision was made. Id.
    24. On September 30, 1999, a shipment of four (4) tire curing 
bladders was seized by special agents from the Office of Export 
Enforcement in Middleburg Heights, Ohio. The Report of Investigation 
states that the curing bladders had been shipped from a U.S. tire 
manufacturer as requested by Sunshine for the consignee, Petrom with an 
ultimate destination of Iran. Exhibit 17, Agency Brief.
    25. By Invoice dated September 22, 1999, Sunshine notified Petrom 
concerning ``Your Order P.O. 11308/ES-82/EP-01'' for ``4 pcs Curing 
Bladders.'' Exhibit 16, Agency Brief.
    26. In addition, in a letter dated November 4, 1999, Petrom sent 
confirmation to Danzas referencing, ``Shipment ex Cleveland.'' Petrom's 
letter provided, ``Our ref.: 11308/ES-82/TI-01.'' Exhibit 14, Agency 
Brief.
    27. The client number code for 11308 is the Kian Tire Manufacturing 
Co. located in Teheran, Iran. Exhibit 4 and 5 (ZKA Report), Agency 
Brief.
    28. By letter dated November 4, 1999 from Danzas to Petrom, Danzas 
stated that a ``misunderstanding'' had occurred ``regarding a shipment 
by Sunshine Technology & Supplies to Petrom GmbH International Trade.'' 
The letter concerned a shipment and its subsequent seizure, on or about 
September 30, 1999, of four (4) curing bladders by the Office of Export 
Enforcement. Danzas stated that ``[b]ecause of a similarity in internal 
reference numbers, we mistakenly believed that your shipment of tire 
bladders was destined to Iran.'' Respondent's Answer, dated July 5, 
2004.
Regular Valves and Repair Kit
    29. On August 11, 1999, Petrom contacted Sunshine directing them to 
send a purchase request, ``no. 10816/ES-117/ep-11'' to Copes-Vulcan, 
Inc. as represented by RME Associates, Inc., Lutz, Florida. Exhibit 18, 
Agency Brief.
    30. Sunshine forwarded the purchase order requesting two (2) 
thermostatic regulating valves and other various parts. The request 
referenced purchase order no. 10816/ES-117/ep-11 and was billed as 
$11,147.06. Exhibit 19, Agency Brief.
    31. Copes-Vulcan, Inc. sold the items in question to Sunshine as 
indicated by invoice signed on August 26, 1999. The billing invoice 
referenced Sunshine's purchase order no. 10816/ES-117/ep-11 and was 
billed at $11,147.00. Exhibit 20, Agency Brief.
    32. By letter dated November 12, 1999, Sunshine notified Petrom 
regarding Invoice No. 4162/99 which referenced ``2 VALVES AND ONE SET 
REPAIR KIT'' in the amount of ``USD 11,147.06.'' Exhibit 21, Agency 
Brief.
    33. On November 18, 1999, special agents from the Office of Export 
Enforcement seized the shipment in Hapeville, Georgia. The shipment was 
destined to Sunshine and was labeled ``P/O: 10816/ES-117/EP-11.'' 
Exhibit 22, Agency Brief.
    34. The client number code for 10816 is the Iran Tire Manufacturing 
Company, located in Teheran, Iran. Exhibit 4 and 5 (ZKA Report), Agency 
Brief.
Mercury Thermal Systems and Thermowells
    35. On September 25, 1997, Petrom contacted Sunshine Textiles, Inc. 
and inquired about ordering pen recorders, mercury thermal system and 
thermowells, and bourdon pressure elements. Petrom stated they 
initially tried to contact ``Tom at ABB'' and requested that Sunshine 
Textiles, Inc. inform ABB that ``we need the following for export South 
America--Brazil.'' Exhibit 23, Agency Brief.
    It is noted that the ZKA Report stated that Sunshine Textiles, Inc. 
had previously listed Brazil, on or about August 30, 1997, as the 
ultimate destination for a Petrom export, which was later determined to 
be a reexport to Teheran, Iran via Germany. Exhibit 4, (ZKA Report), 
Agency Brief. It is further noted that Sunshine Textiles, Inc. employed 
a similar strategy in another order to Petrom, where it provided the 
end user as ``R.P.C. comercio Ltda, Rio de Janeiro/Brazil.'' According 
to the Airway bill dated April 30, 1996, the export was initially 
delivered to Germany, but was later forwarded on May 10, 1996 to Darou 
Parhsh in Iran. Id.
    36. Although Petrom initially contacted Sunshine Textiles, Inc., it 
was Sunshine, who later issued a purchase order providing, ``Our Ref: 
11308/ES-26/PP-01A'' and ``Your Ref.: Fax quotation dated Oct. 07, 
1999.'' The purchase order was directed to ABB Instrumentation, Inc., 
Rochester, NY and ordered eighty (80) Mercury Thermal Systems (plus 
thermowells) and seventy (70) Bourdon pressure elements. Exhibit 26, 
Agency Brief.
    37. On September 23, 1999, an order acknowledgment was printed by 
ABB Automation Inc., Warminster, PA for Sunshine detailing a shipment 
that contained, among other items, eighty (80) ``04A-WELL PER PRINT,'' 
seventy (70) ``BOURDON SPRING PRESSURE,'' and eighty (80) ``CONSTR. 
CARD-MERCURY SYSTEM.'' Exhibit 27, Agency Brief.
    38. As referenced by the ABB order acknowledgment, it indicated 
``REF., P.O. 11808/ES-26/PP01.'' On the last page of the order 
acknowledgment is a hand written correction, with an arrow and question 
mark pointing to the reference P.O. number. The handwritten number 
provided was 11308 versus the printed number, 11808. Exhibit 27, Agency 
Brief.
    39. As referenced earlier by the agreement signed between Petrom 
and Sunshine (May 6, 1999), Mr. Saheli, who represented Petrom's direct 
interest in Sunshine, ``received an amount of USD 25,000 for relaying 
to ABB/Taylor, as down payment for order no. 11308/ES-26.'' This amount 
was paid to ABB/Taylor, Exhibit 25, Agency Brief.
    40. The client number code for 11308 is the Kian Tire Manufacturing 
Co. located in Teheran, Iran. Exhibit 4 and 5 (ZKA Report), Agency 
Brief.

Acting With Knowledge That a Violation Was Intended To Occur

    41. On June 15, 1992, prior to the issuance of the United States 
embargo on Iran, Petrom had contacted Sunshine Textiles, Inc. regarding 
a shipment destined for Iran. Petrom later requested that Sunshine 
Textiles, Inc. obtain export license applications from the 
International Trade Administration, U.S. Department of Commerce to 
export these materials to Iran. Exhibit 30 and 31, Agency Brief.
    42. On August 5, 1992, Sunshine received a facsimile transmission 
from DIFCO Laboratories that provided excerpts from the Regulations 
governing exports to Iran. Exhibit 32, Agency Brief. In the facsimile, 
Sunshine was appraised of the license requirements concerning exports 
to Iran. DIFCO Laboratories later stated, ``We regret to inform you 
that due to current governmental restrictions, we cannot enter into any 
business proceedings with your country.'' Exhibit 33, Agency Brief.
    43. On February 13, 1998, Petrom sent payment instructions for the 
Commerzbank Corp. to credit the Republic Bank of Miami for the 
designated beneficiary of Mr. Hadi Saheli in the amount of $73,937.00. 
The instructions stated, ``Intended use P.O. No. 10816/ES-78/PP01, 
10816/ES-81/PP04, PP05, 11308/ES-58, Down Payment for 11308/ES-26.'' 
The country of purchase was listed as ``Iran.'' Exhibit 34, Agency 
Brief.

[[Page 32751]]

    44. By letter dated February 15, 2000, Mr. Rahmanifar, on behalf of 
Petrom indicated ``that it is the expressed business policy of our 
company to also consider embargo regulations of other States.'' Exhibit 
28, Agency Brief.

Items Subject to the EAR

    45. By letter dated July 26, 2000, the Office of Export Enforcement 
(OEE) received a response from the Office of Strategic Trade and 
Foreign Policy Controls regarding the OEE's request for export 
classification for the following equipment:

    Ethyl cellulose for use as either an adhesive or a protective 
coating in tire manufacturing; tire curing bladders, electrical 
spare parts for the curing press used in tire manufacturing 
equipment, a two-inch CL 250 class iron threaded B1 regulator/W type 
``R'' thermostat, and a strut tension relief and repair kit 
consisting of plugs, cages, pins, packing and gaskets, all for 
export to Iran between January 1, 1995 and February 15, 2000* * *

    The Office of Strategic Trade and Foreign Policy Controls stated 
that ``all of the commodities are classified as EAR99.'' Exhibit 1, 
Agency Brief.

Request for Office of Foreign Assets Control Licenses

    46. By letter dated January 14, 2000, the Office of Export 
Enforcement (OEE) received a response from the Office of Foreign Assets 
Control (OFAC) stating that a review of their files from ``August 1995 
to the present'' revealed that no OFAC licenses had ever been issued to 
either:
    a. Mary Blanco.
    b. Mary Saheli.
    c. Hadi Saheli.
    d. Sunshine Technology Supply Inc.
    e. Petrom GmbH.
    f. Petrom International.
    g. The Iran Tire Manufacturing Co.
    h. Milano International Co.
    i. Sunshine Textiles Inc.
    OFAC further states that ``the above names were checked against the 
current list of OFAC Specially Designated Nationals (``SDN''). None of 
the names appear on the list.'' Exhibit 2, Agency Brief.

Ultimate Findings of Fact and Conclusions of Law

    1. Petrom GmbH International Trade and the subject matter of this 
case are properly within the jurisdiction of the Bureau of Industry and 
Security in accordance with the Export Administration Act of 1979 (50 
U.S.C. App. 2401-20) and the Export Administration Regulations (15 CFR 
parts 730-74).
    2. The Bureau of Industry and Security established by a 
preponderance of the evidence that Petrom GmbH International Trade 
violated 15 CFR 764.2(d) by conspiring or acting in concert with others 
in a manner or for the purpose of bringing about or doing an act to 
export items subject to the EAR without U.S. Government authorization 
in violation of the EAA, or the EAR, or any order, license or 
authorization issued thereunder.
    3. The Bureau of Industry and Security established by a 
preponderance of the evidence that Petrom GmbH International Trade 
violated 15 CFR 764.2(c) by soliciting in the unauthorized export of 
equipment and items subject to the Export Administration Regulations 
from the United States to the Islamic Republic of Iran.
    4. The Bureau of Industry and Security established by a 
preponderance of the evidence that Petrom GmbH International Trade 
violated 15 CFR 764.2(e) by acting with knowledge that a violation of 
the EAA, the EAR or any order, license or authorization issued 
thereunder, has occurred, is about to occur, or is intended to occur by 
the unauthorized export of equipment and items subject to the Export 
Administration Regulations from the United States to the Islamic 
Republic of Iran.
    5. Given the facts and circumstances of this matter, the Bureau of 
Industry and Security's proposed assessment of civil penalties for the 
denial of export privileges against Petrom GmbH International Trade for 
the period of twenty (20) years and a civil monetary penalty of 
$143,000 is justified and reasonable.

Discussion

    The Export Administration Act and the supporting Export 
Administration Regulations provides broad and extensive authority for 
the control of exports from the United States. See In the Matter of: 
Abdulamir Madhi, et al. 68 FR 57406 (October 3, 2003); see also 50 
U.S.C. App. 2402(2)(A), 2404(a)(1), 2405(a)(1), and 15 CFR 730.2. 
Additional authority, providing explicit export controls by regulations 
and Executive Orders apply specifically to exports to Iran and other 
restricted countries. In 1987, the President, through an Executive 
Order, invoked import sanctions against Iran, which in general, 
prohibited the export of any goods, technology or services from the 
United States to Iran without expressed authorization. See Exec. Order 
No. 12613, reprinted in 52 FR 41940 (Oct. 30, 1987); see also Exec. 
Order No. 12959, reprinted in 60 FR 24757 (May 6, 1995) (expanding 
sanctions imposed against Iran); Exec. Order No. 12957, reprinted in 60 
FR 14615 (Mar. 15, 1995) (declaring actions and policies with respect 
to the Iranian Government to be a national emergency); see also 31 CFR 
560.204, 560.501. Iran is listed under the EAR as a country having 
special export and embargo controls. See 15 CFR 746.7.
    The burden in this Administrative Proceeding lies with the Bureau 
of Industry and Security to prove the charged violations by the 
preponderance of the evidence. See In the Matter of: Abdulamir Madhi et 
al., 68 FR 57406 (October 3, 2003). The preponderance of evidence 
standard is demonstrated by reliable, probative, and substantial 
evidence. See Steadman v. S.E.C., 450 U.S. 91, 102 (1981). The Agency, 
in simple terms, must demonstrate ``that the existence of a fact is 
more probable than its nonexistence.'' Concrete Pipe & Products v. 
Construction Laborers Pension Trust, 508 U.S. 602, 622 (1993).
    In this matter, Petrom is charged with thirteen (13) violations of 
the Export Administration Regulations occurring from, on or about, 
March 1999 to, on or about, May 2000. Briefly stated, the March 29, 
2004 Charging Letter charges Petrom with one count of conspiracy under 
15 CFR 764.2(d), six (6) counts of solicitation under 15 CFR 764.2(c), 
and six (6) counts of acting with knowledge that a violation of the 
Regulations would occur under 15 CFR 764.2(e).

Petrom's Response

    At the onset, Petrom stated that it is ``a German limited company 
duly established and registered in accordance with German law.'' 
Petrom's position is that it has ``acted in accordance with the 
applicable German laws and regulations and had no knowledge and/or 
intention to violate any export regulations of other countries such as 
the United States of America, when performing its trade activities 
which to the understanding of [Petrom] have no binding force on [] its 
management as a German legal entity and/or German individuals.'' 
Petrom's Request for Extension of Time, dated April 7, 2004.
    In its formal Answer, dated July 5, 2004, Petrom denied the 
allegations charged by BIS. It specifically addressed Charges six (6) 
through nine (9) (tire curing bladders) as a simple mistake made by a 
freight forward company because of the ``similarity in internal 
reference numbers.'' Petrom stated, ``Acting on this mistaken 
information, the Danzas office in Cleveland, Ohio notified the U.S. 
Government that the shipment was destined for Iran.'' Respondent's 
Answer, dated July 5,

[[Page 32752]]

2004. Petrom included a letter from Danzas, dated November 4, 1999, 
which was provided in response to a request from Petrom. The Danzas 
letter stated, this ``is to clarify a misunderstanding regarding a 
shipment by Sunshine Technology & Supplies to Petrom GmbH International 
Trade of four curing bladders, which we understand was seized and 
detained in Cleveland, Ohio * * *. Because of a similarity in internal 
reference numbers, we mistakenly believed that your shipment of tire 
bladders was destined for Iran.'' Danzas further provided, ``to the 
best of our knowledge, the four curing bladders are intended for use in 
Germany, not in Iran.''
    With regard to the remaining charges, Petrom denied in its Answer 
any intent to reexport the items in question from Germany to Iran and 
that ``the mere fact that Petrom has done business in the past also 
with Iranian national is obviously not sufficient to prove such an 
intention.'' Categorically stated, Petrom denies that it intended to 
reexport the subject items to Iran and that none of the items were, in 
fact, reexported to Iran.
    On November 24, 2004, Petrom filed its response to the Agency's 
Brief entitled, Respondent's Answer to the Memorandum and Submission of 
Evidence to Supplement this Record Submitted by the Bureau of Industry 
and Security (Respondent's Brief). Respondent's opposition was divided 
into three (3) main arguments; Applicable Export Controls, Evidentiary 
Submission by the BIS, and Extraterritorial effect of the Regulations.

Applicable Export Controls

    Petrom states that it ``understands that during the time period in 
question * * * it has been a violation of the Regulations to export 
items subject to both the Iranian Transactions Regulations and the 
Regulations without a license * * * [and that items] intended 
specifically for transshipment to Iran are items subject to both the 
Iranian Transactions Regulations and the Regulations and were not 
allowed [to] be exported without an OFAC license.'' Petrom concludes 
that BIS failed to sufficiently prove ``the crucial question in these 
proceedings'' which is to demonstrate that Petrom had any intent ``to 
transship to Iran the items imported from the United States.''

Evidentiary Submission by the BIS

    Responding to the Agency's Brief and Exhibits, Petrom states that 
the invoice numbering system detailed by the ZKA ``that forms the basis 
for the charges'' is not ``sufficient evidence to prove the intention 
of Respondent to transship the respective items from Germany to Iran. 
Even if the client number used in [a] transaction between Respondent 
and [a] U.S. export firm referred to an Iranian customer, this does not 
prove that the respective items imported from the United States to 
Germany were definitely destined to be transshipped afterwards from 
Germany to the respective Iranian client.''
    Petrom argues that ``If a criminal offense does not refer to 
certain acts committed by the charted person, but only to the intention 
of such person to commit certain acts in the future, the evidence of 
such intention has to be clearly established. This requirement is not 
met by the mere reference to certain client numbers in the invoices 
made out by the U.S. export firm to Respondent.''
    Regarding Charges 3, 5, 7, 9, 11, and 13 (knowledge that a 
violation was to occur), Petrom ``clearly denies to have had actual 
knowledge of the specific restrictions and limitations contained in the 
Regulations with regard to the reexport to Iran * * *.'' Petrom 
acknowledged that the United States ``announced certain restrictions 
for the export to Iran'' but it ``has not been aware * * * that the 
mere intention to transship goods imported from the U.S. to Germany at 
a future date to Iran had been sufficient to be charged under the 
Regulation.'' Petrom argues that it is common knowledge that certain 
military equipment and items were covered by the Regulations but that 
it had ``no knowledge that the items [in question] imported from the 
U.S. * * * [were also covered].''

Extraterritorial Effect of the Regulations

    Petrom ``takes the view that Respondent, as a German company with 
seat and business establishment in Munich, only had to comply with the 
requirements of German and international law as far as export 
restrictions are concerned.'' ``As a German company acting from its 
German business establishment Respondent cannot be expected, by 
contrast, to be informed about regulations on foreign trade of third 
countries, like the U.S., when doing business with Iran.'' Petrom's 
overall legal position is that it ``does not accept and acknowledge the 
extraterritorial effect of the U.S. Iranian Transaction Regulations as 
claimed by the BIS * * *.''

Applicable Laws and Regulations

    The Regulations provide that ``No person may engage in any conduct 
prohibited by or contrary to * * * any conduct required by, the EAA,* * 
*.'' 15 CFR 764.2(a). Specifically, as it pertains to this matter;

    No person may conspire or act 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 EAA, the EAR, or any order, 
license or authorization issued thereunder. Id. at Sec.  764.2(d).
    No person may solicit or attempt a violation of the EAA, the 
EAR, or any order, license or authorization issued thereunder. Id. 
at Sec.  764.2(c).
    No person may order, buy, remove, conceal, store, use, sell, 
loan, dispose of, transfer, transport, finance, forward, or 
otherwise service, in whole or in part, any item exported from the 
United States, or that is otherwise subject to the EAR, with 
knowledge that a violation of the EAA, the EAR, or any order, 
license or authorization issued thereunder has occurred, is about to 
occur, or is intended to occur in connection with this item. Id. at 
764.2(e).

    The term ``Export means an actual shipment or transaction of items 
subject to the EAR from the United States * * *.'' Id. at Sec.  
734.2(b)(1). The term ``Reexport means an actual shipment or 
transmission of items subject to the EAR from one foreign country to 
another foreign country * * *.'' Id. at Sec.  734.2(b)(4). The export 
or reexport of items subject to the EAR through another country for the 
purpose of transshipping the items to a new country is considered to be 
an export to that new country. Id. at Sec.  734.2(b)6).
    BIS has jurisdiction for all items ``subject to the EAR,'' which 
generally are listed on the Commerce Control List (CCL), but for 
certain items that are not so listed, the Regulations provide, ``for 
ease of reference and classification purposes, items subject to the EAR 
which are not listed on the CCL are designated as `EAR99.' '' Id. at 
Sec.  734.3(c). The items at issue in this matter are classified as 
``EAR99,'' see Exhibit 1, Agency Brief, and are therefore, ``subject to 
the EAR'' pursuant to 15 CFR 734.3(c). In addition, the items in 
question are also subject to the Iranian Transactions Regulations 
administered by the OFAC and may not be exported without an OFAC 
license. 15 CFR 734.3(b)(1)(ii) and 746.7, and 31 CFR 560.204.
    Given the response by Petrom, it is important to note that the 
rules provide that a person, whether or not they are complying with 
foreign laws or regulations ``is not relieved of the responsibility of 
complying with U.S. laws and regulations, including the EAR.'' Id. at 
Sec.  734.12.

[[Page 32753]]

Solicitation of an Unauthorized Export or Reexport

    In considering the record taken as a whole, BIS has proved by the 
preponderance of evidence that Petrom solicited unauthorized exports 
for equipment and items subject to the EAR from the United States to 
Iran via Germany in violation of 15 CFR 764.2(c). By mutual agreement 
between the United States of America and the Federal Republic of 
Germany, the German Customs Authority, the Zollkriminalamt (``ZKA''), 
provided pertinent, reliable, and credible evidence to establish that 
Petrom used a client identification numbering system in its orders, 
invoices, and correspondence. The client identification system was 
clearly demonstrated by Petrom's own use and business practice to 
associate its Iranian customers with unique identifiers. As shown by 
the ZKA Report, Petrom used the client identification system for 
shipments and orders that occurred prior to and during the present 
embargo against Iran. Some of the documents form the basis of the 
Charges presented, while others were provided for illustrative or other 
evidentiary purposes. For example, in certain facsimile transmissions, 
invoices, forms, or communications, Petrom would list Iran as the 
utimate destination and use the client identifiers as outlined by the 
AKA Report. See Exhibit 4, 36, 37, 39, Agency's Brief. Concerning the 
pertinent exports charged here, Petrom's continued use of the same 
client identifiers is evidenced by its own invoices, documents, and 
correspondence. All of which reliably indicate by the preponderance of 
the evidence that Petrom continued to order parts, equipment, and 
items, which were subject to the EAR for export to Iran.
    The Agency submitted reliable, probative and substantial evidence, 
which in its entirety, demonstrate that Petrom solicited orders for:
    1. Check valves and parts for client number 10816, which was 
identified by the ZKA Report as the Iran Tire Manufacturing Company, 
Teheran, Iran;
    2. Pyrogent test kit for client number 10332, which was identified 
by the ZKA Report as the Darou Pakhsh Company, Teheran, Iran;
    3. Tire curing bladders ordered directly by Petrom through a 
freight forwarder and indirectly through Sunshine for client number 
11308, which was identified by the ZKA Report as the Kian Tire 
Manufacturing Company, Teheran, Iran;
    4. Regulator valves and repair kit for client number 10816, which 
was identified by the ZKA Report as the Iran Tire Manufacturing 
Company, Teheran, Iran; and
    5. Mercury thermal systems, thermowells, and other equipment for 
client number 11308, which was identified by the ZKA Report as the Kian 
Tire Manufacturing Company, Teheran, Iran.
    Regarding Charges six (6) through nine (9) concerning the orders 
for the tire curing bladders, Petrom submits the November 4, 1999 
letter by Danzas as a defense. The Danzas letter indicates that Danzas 
made a mistake regarding an order reference number where it mistakenly 
believed that the tire curing bladders were destined to Iran. Based on 
this mistaken belief, Danzas contacted local U.S. Government 
authorities. Upon review of the record taken as a whole, the Danzas 
letter, which was prompted by a request from Petrom does not comport 
with the evidence submitted by BIS. In Exhibit 12, Agency's Brief, a 
telefax sent by Petrom to Danzas, documents ``inquiry No. 11308/ES-82/
T1-01,'' and states that the shipment of tire curing bladders will be 
made from Byron, Ohio, ``to Germany via air freight'' and ``Onward to: 
from Germany ``collect'' via Iran Air to Teheran.'' In addition, 
Sunshine sent an invoice to Petrom, dated September 22, 1999, for 
purchase order number 11308/ES-82/EP-01, which listed ``4 pcs Curing 
Bladders'' valued at $1851.04. The client identifier listed in both 
communications is the Kian Tire Manufacturing Company, located in 
Teheran, Iran. Exhibit 4 and 5 (ZKA Report), Agency Brief. Based on the 
above, the November 4, 1999 Danzas letter is outweighed by the evidence 
demonstrating that Petrom possessed the knowledge that the shipments 
were ordered for an Iranian client.
    In addition, BIS charged Petrom with two separate violations of 
soliciting orders for tire curing bladders, Charges six (6) and eight 
(8). The first solicitation was a direct order from Petrom to the 
freight forwarding company, Danzas, AG. See Exhibit 12, Agency Brief. 
This order was labeled as ``inquiry No. 11308/ES-82/T1-01'' for ``1 
palette'' of curing bladders. In a separate communication from Petrom 
to Danzas, Petrom instructs Danzas ``to contact Sunshine so that they 
can have the merchandise delivered to Cleveland.'' Exhibit 13, Agency 
Brief. The record does not show whether or not this communication ever 
occurred. However, Sunshine would send an invoice to Petrom 
referencing, ``4 pcs Curing Bladders'' for ``Your Order P.O. 11308/ES-
82/EP-01.'' Exhibit 16, Agency Brief. The ``enquiry sale'' numbers (ES-
82) are the same for both documents; however, the last part of the 
invoice numbers are different, T1-01 versus EP-01. Looking to the ZKA 
Report, no further definition is provided except to state that this 
section can indicate partial delivery by using the code ``RE.'' The 
record also does not indicate whether or not ``1 palette'' of curing 
bladders is equivalent to ``4 pcs Curing Bladders.'' Given the 
distinctions presented, the record demonstrates that Sunshine was 
solicited at some point to procure tire curing bladders in addition to 
Petrom's direct solicitation to Danzas.
    The Regulations proscribing the acts charged apply to a ``person'' 
and provide separate and distinct sanctions for ``each violation.'' 15 
CFR 764.2, 764.3. The Regulations therefore contemplate separate 
violations to allow for cumulative penalties. See FAA v. M. Marshall 
Landy & Int'l Aircraft Leasing, Inc., 705 F.2d 624, 636 (2nd Cir. 
1983). In this instance, each solicitation of the tire curing bladders 
required an additional act on the part of Petrom. The record supports 
the position that Petrom acted on at least two (2) occasions to solicit 
orders for tire curing bladders. The issue as to whether or not the 
solicitations were directed to the same order does not have to be 
reached. See United States v. Technic Services, Inc., 314 F.3d 1031, 
1046 (9th Cir. 2002) (holding that ``The test for multiplicity is 
whether each count `requires proof of an additional fact which the 
other does not.' '') (quoting Blockburger v.  United States, 284 U.S. 
299, 304 (1932)). A person can be charged under the same regulation 
based on related conduct and may be sanctioned with multiple violations 
``if the conduct underlying each violation involves a separate and 
distinct act.'' Id. see also United States v. Vaughn, 797 F.2d 1485 
(9th Cir. 1986) and United States v. Wiga, 663 F.2d 1325 (9th Cir. 
1981).
    Based on the above, it is hereby held that Petrom committed two (2) 
solicitations regarding the order for tire curing bladders.
    Petrom also raises the argument that the items in question were 
never actually reexported from Germany to Iran. While the record 
demonstrates that certain transactions did not occur due to the 
intervention by the Department of Commerce, the record provides that 
other transactions were in fact exported to Germany. The facts 
presented however, are that all of the items in question were 
ultimately destined for delivery to Iran. Under the Regulations, it is 
a violation to solicit or attempt a

[[Page 32754]]

violation of the EAA or EAR. The fact that a shipment never reached its 
final destination is not an element of the charged act. See 15 CFR 
764.2(c).
    Given all of the reliable and credible information presented, it is 
found that Petrom solicited exports, either directly or indirectly from 
U.S. companies for export to Germany, with an ultimate destination of 
Iran. All of which occurred without U.S. government authorization in 
violation of the EAA and EAR.

Acting With Knowledge of a Violation

    One of Petrom's main arguments is that BIS has failed to 
demonstrate that Petrom possessed the intent to transship or reexport 
the items in question to Iran. In one of its responses, Petrom also 
refers to a ``criminal offense'' and states, ``evidence of such 
intention has to be clearly established.'' This proceeding however, is 
not criminal in nature and the evidentiary standards presented here are 
certainly different from those required in a criminal proceeding.
    Here, Petrom is charged with acting with knowledge that a violation 
``has occurred, is about to occur, or is intended to occur * * *.'' 15 
CFR 764.2(e). From the previous discussion, it is clear that Petrom 
ordered the items in question for export to its clients located in 
Iran. Petrom's argument that the client or invoice numbering system 
cannot support the position that Petrom intended to transship or 
reexport the items in question to Iran fails on several points.
    a. First, it was the German Customs Authority (``ZKA'') who 
compiled and identified the client information concerning Petrom's 
order numbering system. The ZKA compiled this information from Petrom's 
own records. The ZKA Report demonstrates Petrom's ongoing business 
practice and reasonably and reliably indicates that Pertom was 
soliciting exports from the Unites States with an ultimate destination 
of Iran without the required U.S. Government authorization in violation 
of the EAA and EAR. It is the customer identification number along with 
the compilation of documents, invoices, facsimiles, and letters that 
provide by a preponderance of evidence that Petrom ordered equipment 
and items from U.S. companies with the intent to transship or reexport 
the items to Iran without the required U.S. Government authorization. 
In one of many examples presented in the record, Petrom was shown to 
issue payment instruments to Commerzbank, in which Petrom provided 
purchase order numbers for payment. The client identifiers presented in 
the purchase order numbers follow the same format outlined in the ZKA 
Report. The ZKA Report designates the client identifiers in the payment 
instruction as Iranian customers. In further support of the record, 
Petrom provides in the payment instructions to Commerzbank that the 
country of purchase is ``Iran.'' Exhibit 34, Agency Brief.
    b. Second, the formation of Sunshine Technology and Supplies, Inc. 
is nothing more than a corporate front established by Petrom to foster 
its ability to deal directly with U.S. companies. The record clearly 
demonstrates that Sunshine was exclusively owned, controlled, organized 
funded, and operated by Petrom.
    In addition to the above, the record shows that Petrom possessed 
actual knowledge that a U.S. embargo was present against Iran. In a 
telefax issued prior to 1995, Petrom directed Sunshine Textile, Inc. to 
contact the International Trade Administration for the Department of 
Commerce to obtain export license applications to allow it to export to 
Iran. Exhibit 30 and 31, Agency Brief. Petrom's own policy statement 
issued by Mr. Rahmanifar is that Petrom will consider ``embargo 
regulations of other states.'' Exhibit 28, Agency Brief. Furthermore, 
in a 1992 transaction, Sunshine, who acted on behalf of Petrom, was 
given with a copy of the Regulations concerning certain export controls 
to Iran. In the facsimile sent from DIFCO Laboratories, Sunshine was 
appraised of the Regulations that required export licenses for Iran. 
See Exhibit 32, Agency Brief. DIFCO Laboratories would later inform 
Sunshine ``that due to current governmental restrictions, we cannot 
enter into any business proceedings with your country.'' Exhibit 33, 
Agency Brief.
    Given the above, I find that Petrom was in possession of the 
knowledge that the United States had placed an embargo and other trade 
restrictions for exporting or reexporting items from the United States 
to Iran. It is hereby held that Petrom, with this knowledge, continued 
to order equipment and items without the required U.S. Government 
authorization knowing that a violation of the EAA, the EAR or any 
order, license or authorization issued thereunder would occur.

Conspiracy or Acting in Concert

    Given that Petrom solicited the items in question for the period of 
time starting on or about March 1999, it is clear that Petrom conspired 
or acted in concert with others, mainly Sunshine Technology and 
Supplies, Inc. to export items subject to the EAR to Iran without U.S. 
Government authorization in violation of the EAA and EAR. Petrom 
developed a scheme to facilitate the ordering of equipment and items 
from U.S. companies, mainly through Sunshine Technology and Supplies, 
Inc., for export to Germany without the knowledge and or intent that it 
would reexport the items to Iran.
    Further, Petrom's compliance with all German export laws does 
shield it from violating United States export laws. See In the Matter 
of: Abdulamir Madhi, et al, 68 FR 57406, (October 3, 2003); 15 CFR 
734.12. In addition, without any expressed requirements to demonstrate 
knowledge or intent, the Regulations on their face can be treated on 
the basis of strict liability with regard to the imposition of civil 
penalties. See In the matter of: Aluminum Company of America, 64 FR 
42641-02 (Aug. 5, 1999) (finding that ``liability and administrative 
sanctions are imposed on a strict liability basis once the Respondent 
commits the proscribed act''); Iran Air v. Kugelman, 996 F.2d 1253 
(D.C. Cir. 1993) (reaffirming the Agency's position that knowledge is 
not an ``essential element of proof for the imposition of civil 
penalties''). ``Moreover, knowledge of the Act and Regulations properly 
may be impouted to a Respondent who, from abroad, was actively engaged 
in an effort to export an unlicensed controlled commodity from the 
United States.'' In the Matter of Doron Rotler Individually a/d/a/ Ram 
Robotics Ltd., aka Ram Robotic Automation Manufacturing Systems Ltd., 
58 FR 62095, 62099 n.16 (November 24, 1993).
    Given all of the above, which demonstrates that Petrom solicited 
and acted with knowledge that a violation would occur and acted in 
concert with Sunshine and others, it is hereby held that Petrom 
conspired in a manner or purpose that was designed to bring about or 
commit an act in violation of the EAA or EAR in prohibition of 15 CFR 
764.2(d).

Basis of Sanction

    The Bureau of Industry and Security has authority to assess civil 
penalties and suspensions from practice, including the denial of export 
privileges before the Department of Commerce. See 15 CFR 764.3. Here, 
BIS recommends a twenty (20) year period of denial of export privileges 
and a civil monetary sanction of $143,000 against Petrom GmbH 
International Trade for its unlawful conduct in this matter. BIS argues 
that Petrom GmbH International Trade disregarded U.S. export laws and 
Regulations with the knowledge that a

[[Page 32755]]

major embargo exists between the United States and Iran.
    The record shows that Petrom did not apply for any U.S. Government 
authorization to export the items from the United States to Iran. It 
instead chose to create and conspire with others, including Sunshine 
Technology and Supplies, Inc. in a scheme to order U.S. equipment and 
items for export to Germany with the knowledge or intent that these 
items would be reexported to Iran. BIS proposes the above civil penalty 
sanctions due to Petrom's ``severe disregard and contempt for U.S. 
export control laws.'' BIS argues that a twenty (20) year period of 
denial is also consistent with other cases of this nature. See In the 
Matter of: Arian Transportvermittlungs Gmbh, 69 FR 28120, (May 18, 
2004) (assessing a ten (10) year denial period in connection with an 
Iranian transaction); In the Matter of: Abdulamir Madhi, et al, 68 FR 
57406, (October 3, 2003) (assessing a twenty (20) year denial period in 
connection with an Iranian transaction); In the Matter of: Jubal 
Damavand General Trading Co., 67 FR 32009, (May 13, 2002) (assessing a 
ten (10) year denial period in connection with an Iranian transaction).
    Of particular note and by all appearances, the record demonstrates 
that Petrom sought to circumvent U.S. export control laws by setting up 
a front company in Sunshine Technologies and Supplies, Inc. in an 
effort to order U.S. origin equipment and parts for eventual export to 
Iran. While the burden rests with the Agency to prove the facts 
alleged, Petrom offered very little, if not any, countervailing 
evidence in its defense. Petrom could not challenge the ZKA Report 
which outlines Petrom's own business practice and methodology. It was 
shown that Petrom possessed knowledge of the U.S. embargo on Iran when 
it sought export license approvals prior to the incidents in question. 
The record also demonstrates that Sunshine was provided copies of the 
Regulations concerning the export of certain materials to Iran. The 
Agency contends that Petrom ``has not taken responsibility for its 
actions'' and ``cannot be trusted to comply with U.S. export control 
laws'' and, in particular, dealing with a country that this nation 
maintains an embargo against due to its support for international 
terrorism. See also 15 CFR 746.7 (stating ``Iran has been designated by 
the Secretary of State as a country that has repeatedly provided 
support for acts of international terrorism'').
    Due to the severe nature of the violations and the veiled arguments 
raised by Petrom, I find that the Agency's proposed assessment is fair, 
reasonable, and justified.

Recommended Order

    Wherefore, it is hereby recommended that the Under Secretary for 
Export Administration issue a denial order and civil penalty assessment 
as follows:
    First, that a civil penalty of $143,000 is assessed against Petrom 
GmbH International Trade which shall be paid to the U.S. Department of 
Commerce within thirty (30) days from the date of entry of this Order.
    Second, pursuant to the Debt Collection Act of 1982, as amended, 31 
U.S.C. 3701-20E, the civil penalty owed under this Order accrues 
interest as provided and if payment is not made by the due date 
specified, Petrom will be assessed, in addition to the full amount of 
the civil penalty and interest, a penalty and administrative charge.
    Third, that for a period of twenty (20) years from the date of this 
Order, Petrom GmbH International Trade, Maria-Theresa Strasse 26, 
Munich 81674, Germany and all of their successors or assigns, and when 
acting for or on behalf of Petrom, its officers, representatives, 
agents, and employees (``Denied Person''), 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.
    Fourth, that no person may, directly or indirectly, do any of the 
following:
    A. Export or reexport to or on behalf of a Denied Person any item 
subject to the Regulations;
    B. Take any action that facilitates the acquisition or attempted 
acquisition by a 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 a 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 a Denied Person of any item subject to 
the Regulations that has been exported from the United States;
    D. Obtain from a 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, exported 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 a Denied Person, or 
service any item, of whatever origin, that is owned, possessed or 
controlled by a 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.
    Fifth, 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 a 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.
    Sixth, that this Order does not prohibit any 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.
    Seventh, that the Charging Letter and this Order shall be made 
available to the public.
    Eighth, that this Order shall be served on the Denied Persons and 
on BIS, and shall be published in the Federal Register.
    This Recommended Decision and Order is being referred to the Under 
Secretary for review and final action by express mail as provided under 
15 CFR 766.17(b)(2). Due to the short period of time for review by the 
Under Secretary, all papers filed with the Under Secretary in response 
to this Recommended Decision and Order must be sent by personal 
delivery, facsimile,

[[Page 32756]]

express mail, or other overnight carrier as provided in Sec.  
766.22(a). Submissions by the parties must be filed with the Under 
Secretary for Export Administration, Bureau of Industry and Security, 
U.S. Department of Commerce, Room H-3898, 14th Street and Constitution 
Avenue, NW., Washington, DC 20230, within twelve (12) days from the 
date of issuance of this Recommended Decision and Order. Thereafter, 
the parties have eight (8) days from receipt of any response(s) in 
which to submit replies.
    Within thirty (30) days after receipt of this Recommended Decision 
and Order, the Under Secretary shall issue a written order, affirming, 
modifying or vacating the Recommended Decision and Order. See Sec.  
766.22(c). A copy of the Agency Regualtions for Review by the Under 
Secretary is attached.

    Done and dated this 25th day of April 2005 in New York, New 
York.
Walter J. Brudzinski,
Administrative Law Judge, U.S. Coast Guard.
[FR Doc. 05-10983 Filed 6-3-05; 8:45 am]
BILLING CODE 3510-33-M