[Federal Register Volume 77, Number 241 (Friday, December 14, 2012)]
[Notices]
[Pages 74458-74466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-29789]
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DEPARTMENT OF COMMERCE
Bureau of Industry and Security
[11-BIS-0005]
Enterysys Corporation, with Last Known Addresses of: 1307 Muench
Court, San Jose, CA 95131 and Plot No. 39, Public Sector, Employees
Colony, New Bowenpally 500011, Secunderabad, India, Respondent; Final
Decision and Order
This matter is before me upon a Recommended Decision and Order
(``RDO'') of an Administrative Law Judge (``ALJ''), as further
described below.\1\
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\1\ I received the certified record from the ALJ, including the
original copy of the RDO, for my review on November 2, 2012. The RDO
is dated October 15, 2012. BIS timely submitted a response to the
RDO, while Respondent has not filed a response to the RDO.
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I. Background
On July 11, 2011, the Bureau of Industry and Security (``BIS'')
issued a Charging Letter alleging that Respondent, Enterysys
Corporation, of San Jose, California and Secunderabad, India
(``Enterysys'' or ``Respondent''), committed sixteen violations of the
Export Administration Regulations (``Regulations''),\2\ issued pursuant
to the Export Administration Act of 1979, as amended (50 U.S.C. app.
2401-2420 (2000)) (``Act'').\3\ The Charging Letter included the
following specific allegations:
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\2\ The Regulations currently are codified at 15 CFR parts 730-
774 (2012). The charged violations occurred in 2005 through 2007.
The Regulations governing the violations at issue are found in the
2005 through 2007 versions of the Code of Federal Regulations. In
addition, citations to Section 764.2 of the Regulations elsewhere in
this Order are to the 2005-2007 versions of the Regulations, as
applicable. For ease of reference, I note that the 2005-2007
versions of the Regulations are the same as the 2012 version with
regard to the provisions of Section 764.2 cited herein. This
proceeding was instituted in 2011. The 2012 version of the
Regulations currently governs the procedural aspects of this case.
The 2011 and 2012 versions of the Regulations are the same with
respect to the provisions of Part 766 cited herein.
\3\ Since August 21, 2001, the Act has been in lapse and the
President, through Executive Order 13,222 of August 17, 2001 (3 CFR,
2001 Comp. 783 (2002)), which has been extended by successive
Presidential Notices, the most recent being that of August 15, 2012
(77 FR 49,699 (Aug. 16, 2012)), has continued the Regulations in
effect under the International Emergency Economic Powers Act (50
U.S.C. Sec. 1701, et seq.).
Charge 1 15 CFR 764.2(h)--Evasion
In or about May 2006, Enterysys engaged in a transaction and
took other actions with intent to evade the provisions of the
Regulations. Through false statements to a U.S. manufacturer and
freight forwarder, Enterysys obtained and exported to India twenty
square meters of ceramic cloth, an item subject to the Regulations,
classified under Export Control Classification Number (``ECCN'')
1C010, controlled for National Security reasons, and valued at
$15,460, without obtaining the required license pursuant to Section
742.4 of the Regulations. Enterysys purchased the ceramic cloth from
a U.S. manufacturer and arranged for the manufacturer to ship the
item to a freight forwarder identified by Enterysys, knowing that a
license was required for the export of the ceramic cloth to India.
On or about May 1, 2006, when Enterysys asked that the U.S.
manufacturer to ship the ceramic cloth to Enterysys's freight
forwarder instead of directly to Enterysys, Enterysys was informed
by the manufacturer that the material ``is a controlled commodity in
terms of export to India,'' and the manufacturer asked Enterysys for
assurance and a ``guarantee'' that the ceramic cloth would not be
exported to India. In response, also on or about May 1, 2006,
Enterysys stated, ``This is not going out of USA.'' In addition, in
arranging for the purchase from the U.S. manufacturer, Enterysys
asked the manufacturer not to put any packing list, invoice or
certificate of conformance in the box with the ceramic cloth, but
rather to fax the documents to Enterysys. Enterysys also arranged
for its freight forwarder to ship the ceramic cloth to Enterysys in
India. Once the manufacturer shipped the ceramic cloth to the
freight forwarder identified by Enterysys, Enterysys provided the
freight forwarder with shipping documentation on or about May 2,
2006, including a packing list and invoice that falsely identified
the ceramic cloth as twenty square meters of ``used waste material''
with a value of $200. The ceramic cloth arrived at the freight
forwarder on or about May 3, 2006, and was exported pursuant to
Enterysys's instructions to India on or about May 5, 2006. Enterysys
undertook these acts to facilitate the export of U.S.-origin ceramic
cloth to India without the required Department of Commerce license
and to avoid detection by law enforcement. In so doing, Enterysys
committed one violation of Section 764.2(h) of the Regulations.
Charge 2 15 CFR 764.2(a)--Engaging in Prohibited Conduct by Exporting
Ceramic Cloth to India Without the Required License
On or about May 5, 2006, Enterysys engaged in conduct prohibited
by the Regulations by exporting to India twenty square meters of
ceramic cloth, an item subject to the Regulations, classified under
ECCN 1C010, controlled for National Security reasons and valued at
$15,460, without the Department of Commerce license required
pursuant to Section 742.4 of the Regulations. In so doing, Enterysys
committed one violation of Section 764.2(a) of the Regulations.
Charges 3-13 15 CFR 764.2(a)--Engaging in Prohibited Conduct by
Exporting Electronic Components to a Listed Entity Without the Required
Licenses
On eleven occasions between on or about August 12, 2005 and
November 27, 2007, Enterysys engaged in conduct prohibited by the
Regulations by exporting various
[[Page 74459]]
electronic components, designated as EAR99 items \4\ and valued at a
total of $38,527, from the United States to Bharat Dynamics Limited
(``BDL'') in Hyderabad, India, without the Department of Commerce
license required by Section 744.1 and Supplement No. 4 to Part 744
of the Regulations. BDL is an entity that is designated in the
Entity List set forth in Supplement No. 4 to Part 744 of the
Regulations, and at all times pertinent hereto that designation
included a requirement that a Department of Commerce license was
required for all exports to BDL. In so doing, Enterysys committed
eleven violations of Section 764.2(a) of the Regulations.
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\4\ EAR99 is a designation for items subject to the Regulations
but not listed on the Commerce Control List. 15 CFR 734.3(c) (2005-
07).
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Charge 14 15 CFR 764.2(e)--Acting With Knowledge of a Violation
On or about July 11, 2007, in connection with the transaction
described in Charge 11, above, Enterysys ordered, bought, stored,
transferred, transported and forwarded electronic components,
designated as EAR99 items and valued at $8,644, that were to be
exported from the United States to BDL in Hyderabad, India, with
knowledge that a violation of the Regulations was about to occur or
was intended to occur in connection with the items. Enterysys had
knowledge that exports to BDL required authorization from the
Department of Commerce because, in or around May 2007, Enterysys
provided these items to a freight forwarder and was informed by the
freight forwarder that items being exported to BDL required an
export license and that BDL was on the Entity List. The freight
forwarder also directed Enterysys to the BIS Web site. The freight
forwarder then returned the items to Enterysys. Subsequently,
Enterysys provided the items to a second freight forwarder for
export to BDL even though Enterysys knew that an export license was
required and had not been obtained. In so doing, Enterysys committed
one violation of Section 764.2(e) of the Regulations.
Charges 15-16 15 CFR 764.2(e)--Acting with Knowledge of a Violation
On two occasions on or about November 7, 2007 and November 27,
2007, in connection with the transactions described in Charges 12
and 13, above, Enterysys ordered, bought, stored, transferred,
transported and forwarded electronic components, designated as EAR99
items and valued at $11,266.85, that were to be exported from the
United States to BDL in Hyderabad, India, with knowledge that a
violation of the Regulations was about to occur or was intended to
occur in connection with the items. Enterysys had knowledge that
exports to BDL required authorization from the Department of
Commerce because, in or around May 2007, Enterysys was informed by a
freight forwarder that items being exported to BDL required a
license and that BDL was on the Entity List. The freight forwarder
also directed Enterysys to the BIS Web site. Subsequently, Enterysys
wrote an email on or about October 11, 2007, to the Department of
Commerce requesting guidance about license requirements to BDL, and
in response was provided with a copy of the Entity List, advised,
among other things, that all exporting companies need to check
transactions against certain lists, and provided with a link to such
lists on the BIS Web site. Thereafter, on October 24, 2007,
Enterysys's President Shekar Babu wrote an email stating that he was
``working directly with US Govt on the export license'' and that the
license would ``take a month.'' Nevertheless, Enterysys did not
apply for or obtain the required export license. In so doing,
Enterysys committed two violations of Section 764.2(e) of the
Regulations.
Charging Letter at 1-3.\5\
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\5\ The Charging Letter also includes a Schedule of Violations
that provides additional detail concerning the underlying
transactions. The Charging Letter, including the Schedule of
Violations, will be posted on BIS's ``eFOIA'' Web page along with a
copy of this Order (and a copy of the RDO except for the RDO section
related to the Recommended Order).
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In accordance with Sec. 766.3(b)(1) of the Regulations, on July
11, 2011, BIS mailed the notice of issuance of the Charging Letter to
Enterysys at Enterysys's two last known locations: one in California,
by certified mail, and one in India, by registered mail. RDO at 5. BIS
received a signed return receipt showing that Respondent received the
Charging Letter in California by certified mail on July 26, 2011. Id.
BIS also received a return receipt for international mail showing that
the Respondent received the Charging Letter in India by registered
mail. Id. Although the date on the registered mail return receipt is
difficult to discern, it appears to be July 25, 2011. Id. at 5-6. The
return receipts establish that delivery occurred no later than July 26,
2011. Respondent thus was obligated to answer the Charging Letter by no
later than August 25, 2011.
Moreover, on August 2, 2011, Shekar Babu, the President of
Enterysys, sent an email to BIS's counsel further acknowledging receipt
of the Charging Letter. On August 15, 2011, via an email from BIS's
counsel, Mr. Babu was reminded of the August 25, 2011 deadline for
filing an answer. Id. at 6-7.
Under Section 766.6(a) of the Regulations, the ``respondent must
answer the charging letter within 30 days after being served with
notice of issuance'' of the charging letter. Section 766.7(a) of the
Regulations provides, in turn, that the ``[f]ailure of the respondent
to file an answer within the time provided constitutes a waiver of the
respondent's right to appear and contest the allegations in the
charging letter,'' and that ``on BIS's motion and without further
notice to the respondent, [the ALJ] shall find the facts to be as
alleged in the charging letter[.]''
Enterysys did not answer the Charging Letter by August 25, 2011,
and in fact had not done so by September 14, 2012, when pursuant to
Section 766.7 of the Regulations, BIS filed its Motion for Default
Order. The Motion for Default Order recommended that Enterysys's export
privileges under the Regulations be denied for a period of at least ten
years. Id. at 15. In addition to the serious nature and extensive
number of Enterysys's violations, BIS's submission stated its
understanding that Enterysys's principal currently is located in India,
indicating that a monetary penalty may be difficult to collect and may
not serve a sufficient deterrent effect.
On October 15, 2012, based on the record before him, the ALJ issued
the RDO, in which he found Enterysys in default, found the facts to be
as alleged in the Charging Letter, and concluded that Enterysys had
committed the sixteen violations alleged in the Charging Letter,
specifically, one violation of 15 CFR 764.2(h), three violations of 15
CFR 764.2(e), and twelve violations of 15 CFR 764.2(a). Id. at 7. The
RDO contains a detailed review of the facts and applicable law relating
to both merits and sanctions issues in this case.
Based on the record, the ALJ determined, inter alia, that, in or
about May 2006, Enterysys took actions with intent to evade the
applicable licensing requirement and avoid detection by law enforcement
in connection with the export of ceramic cloth, an item subject to the
Regulations and controlled for national security reasons, to India.
These acts included falsely assuring the U.S. manufacturer in writing
that the ceramic cloth would not be exported and providing transaction
documentation to the freight forwarder that falsely identified the item
as ``used waste material.'' Id. at 13. The ALJ determined, in addition,
that Enterysys violated the Regulations on one occasion by exporting
the ceramic cloth to India without the required license. Id.
The ALJ also determined that Enterysys violated the Regulations on
eleven other occasions by exporting various electronic components
subject to the Regulations to Bharat Dynamics Limited (``BDL''), an
Indian entity on BIS's Entity List at all times pertinent hereto,
without the required licenses. Id. at 13-14.\6\ Finally, the ALJ
determined
[[Page 74460]]
that after being informed that BDL was on the Entity List and that a
license was required for exports to BDL, Enterysys nevertheless on
three occasions ordered, bought, stored, transferred, transported and
forwarded electronic components subject to the Regulations for export
from the United States to BDL without the required licenses, thereby
acting with knowledge that a violation of the Regulations was about or
intended to occur in connection with the items. Id. at 14.
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\6\ BDL was placed on the Entity List in 1998 through a rule
published in the Federal Register establishing an entity-specific
license requirement for certain entities, including BDL, that were
``determined to be involved in nuclear or missile activities.'' See
India and Pakistan Sanctions and Other Measures, 63 FR 64,322 (Nov.
19, 1998). BDL remained on the Entity List at all times pertinent to
this case, and in fact until January 25, 2011, more than three years
after Enterysys's violations at issue here, which occurred between
August 12, 2005 and November 27, 2007. See U.S.-India Bilateral
Understanding: Revisions to U.S. Export and Reexport Controls Under
the Export Administration Regulations, 76 FR 4,228 (Jan. 25, 2011).
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The ALJ also recommended that the Under Secretary deny Enterysys's
export privileges for a period of ten years, citing, inter alia,
Enterysys's ``evasive and knowing misconduct and * * * series of
unlawful exports,'' including ``deliberate efforts to evade the
Regulations in connection with the export of * * * an item controlled
for national security reasons,'' and its three similar ``knowledge
violations in connection with the unlicensed export of electronic
components to BDL.'' Id. at 15-16. The ALJ further noted that,
``Respondent's misconduct exhibited a severe disregard for the
Regulations and U.S. export controls and a monetary penalty is not
likely to be an effective deterrent in this case.'' Id. at 17-18.
II. Review Under Section 766.22
The RDO, together with the entire record in this case, has been
referred to me for final action under Section 766.22 of the
Regulations. BIS submitted a timely response to the RDO pursuant to
Section 766.22(b); however, Respondent has not submitted a response to
the RDO.
I find that the record supports the ALJ's findings of fact and
conclusions of law that Respondent did not file an answer, is in
default, and committed the sixteen violations of the Regulations
alleged in the Charging Letter: Acting with intent to evade the
Regulations on one occasion in violation of Section 764.2(h); acting
with knowledge of a violation on three occasions in violation of
Section 764.2(e); and engaging in prohibited conduct on eleven
occasions in violation of Section 764.2(a).
I also find that the ten-year denial order recommended by the ALJ
upon his review of the entire record is appropriate, given, as
discussed in further detail in the RDO, the nature and number of the
violations, the facts of this case, and the importance of deterring
Respondent and others from acting to evade the Regulations and
otherwise knowingly violate the Regulations.
Accordingly, based on my review of the entire record, I affirm the
findings of fact and conclusions of law in the RDO without
modification.
Accordingly, it is therefore ordered:
First, that for a period of ten years from the date this Order is
published in the Federal Register, Enterysys Corporation
(``Enterysys''), with last known addresses of 1307 Muench Court, San
Jose, California 95131, and Plot No. 39, Public Sector, Employees
Colony, New Bowenpally, 500011, Secunderabad, India, and its successors
and assigns, and when acting for or on its behalf, its directors,
officers, employees, representatives, or agents (hereinafter
collectively referred to as ``Denied Person'') may not participate,
directly or indirectly, 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 ordering, buying, receiving,
using, selling, delivering, storing, disposing of, forwarding,
transporting, financing, or otherwise servicing in any way, any
transaction involving any item exported or to be exported from the
United States that is subject to the Regulations, or in any other
activity subject to the Regulations; or
C. Benefiting in any way from any transaction involving any item
exported or to be exported from the United States that is subject to
the Regulations, or in any other activity subject to the Regulations.
Second, that no person may, directly or indirectly, do any of the
following:
A. Export or reexport to or on behalf of the Denied Person any item
subject to the Regulations;
B. Take any action that facilitates the acquisition or attempted
acquisition by the Denied Person of the ownership, possession, or
control of any item subject to the Regulations that has been or will be
exported from the United States, including financing or other support
activities related to a transaction whereby the Denied Person acquires
or attempts to acquire such ownership, possession or control;
C. Take any action to acquire from or to facilitate the acquisition
or attempted acquisition from the Denied Person of any item subject to
the Regulations that has been exported from the United States;
D. Obtain from the Denied Person in the United States any item
subject to the Regulations with knowledge or reason to know that the
item will be, or is intended to be, 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 which is owned, possessed or controlled by the Denied Person, or
service any item, of whatever origin, that is owned, possessed or
controlled by the Denied Person if such service involves the use of any
item subject to the Regulations that has been or will be exported from
the United States. For purposes of this paragraph, servicing means
installation, maintenance, repair, modification or testing.
Third, that, after notice and opportunity for comment as provided
in Section 766.23 of the Regulations, any person, firm, corporation, or
business organization related to the Denied Person by affiliation,
ownership, control, or position of responsibility in the conduct of
trade or related services may also be made subject to the provisions of
this Order.
Fourth, that this Order does not prohibit any export, reexport, or
other transaction subject to the Regulations where the only items
involved that are subject to the Regulations are the foreign-produced
direct product of U.S.-origin technology.
Fifth, that this Order shall be served on 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 final agency action in this matter,
is effective upon publication in the Federal Register.
Dated: December 3, 2012.
Eric L. Hirschhorn,
Under Secretary of Commerce for Industry and Security.
Certificate of Service
I hereby certify that, on this 4th day of December, 2012, I have
served the foregoing final decision and order signed by Eric L.
Hirschhorn, Under Secretary of Commerce for Industry and Security, in
the matter of Enterysys
[[Page 74461]]
Corporation (Docket No: 11-BIS-0005) to be sent via Federal Express:
Enterysys Corporation, Shekar Babu, 1307 Muench Court, San Jose, CA
95131 and Plot No. 39, Public Sector, Employees Colony, New Bowenpally
500011, Secunderabad, India and Hand-Delivered to: John T. Masterson,
Jr., Esq., Joseph V. Jest, Esq., Thea Kendler, Esq., Attorneys for the
Bureau of Industry and Security, Office of the Chief Counsel for
Industry and Security, U.S. Department of Commerce, 14th & Constitution
Avenue NW., Room H-3839, Washington, DC 20230.
Harold Henderson,
Executive Secretariat, Office of the Under Secretary for Industry and
Security.
Order Granting Motion for Default Order and Recommended Decision and
Order
Issued: October 15, 2012.
Issued by: Hon. Parlen L. McKenna, Acting Chief Administrative Law
Judge, United States Coast Guard.
For the Agency, John T. Masterson, Jr., Chief Counsel, Joseph V.
Jest, Chief, Enforcement and Litigation, Thea D. R. Kendler, Senior
Counsel, Office of Chief Counsel for Industry and Security, U.S.
Department of Commerce, Room H-3839, 14th Street & Constitution Avenue
NW., Washington, DC 20230.
For the Respondent, Enterysys Corporation, Shekar Babu, 1307 Muench
Court, San Jose, CA 95131, Plot No. 39, Public Sector, Employees
Colony, New Bowenpally 500011, Secunderabad, India.
I. Preliminary Statement
On July 11, 2011, the Bureau of Industry and Security (``BIS'')
filed a Charging Letter against Respondent, Enterysys Corporation
(``Enterysys''), which alleged sixteen violations of the Export
Administration Regulations (currently codified at 15 CFR parts 730-774
(2012) (the ``Regulations'')), issued pursuant to the Export
Administration Act of 1979, as amended (50 U.S.C. app. 2401-2420) (the
``EAA'' or ``Act'').\7\
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\7\ Currently, the Regulations are codified at 15 CFR parts 730-
774 (2012). The charged violations occurred in 2005 through 2007.
The Regulations governing the violations are found in the 2005
through 2007 versions of the Code of Federal Regulations. 15 CFR
Parts 730-774 (2005-07). The 2012 Regulations establish the
procedures that apply to this matter. The 2011 and 2012 versions of
the Regulations are the same with respect to the provisions of
section 764.2 and part 766 cited herein. Since August 21, 2001, the
Act has been in lapse. The President, through Executive Order 13222
of August 17, 2001 (3 CFR, 2001 Comp. 783 (2002)), which has been
extended by successive Presidential Notices, the most recent being
that of August 15, 2012 (77 FR 49,699 (Aug. 16, 2012)), has
continued the Regulations in effect under the International
Emergency Economic Powers Act (50 U.S.C. 1701 et seq.).
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On September 14, 2012, BIS filed a Motion for Default Order under
15 CFR 766.7. BIS moved for the issuance of a default order for failure
to file an answer as required by 15 CFR 766.6. Therefore, BIS requested
that the Court issue a recommended decision and order: (1) Finding
Enterysys in default; (2) finding the facts to be as alleged in the
Charging Letter; (3) concluding that Enterysys has committed the
sixteen charged violations; and (4) recommending as an appropriate
sanction for these violations an order denying Respondent's export
privileges for a period of at least ten years.
BIS served Enterysys with the Motion for Default Order and its
exhibits in accordance with 15 CFR 766.5. To date, Enterysys has not
filed a response to the Motion for Default Order. For the reasons
provided below, BIS' Motion for Default Order is Granted, and this
Recommended Decision and Order is issued following Respondent's
default.
A. The Charging Letter
The Charging Letter alleges a total of sixteen violations that
occurred between August 2005 and November 2007. The charges are as
follows:
Charge 1: 15 CFR 764.2(h)--Evasion
As described in greater detail in the attached Schedule of
Violations, which is incorporated herein by reference, in or about
May 2006, Enterysys engaged in a transaction and took other actions
with intent to evade the provisions of the Regulations. Through
false statements to a U.S. manufacturer and freight forwarder,
Enterysys obtained and exported to India twenty square meters of
ceramic cloth, an item subject to the Regulations, classified under
Export Control Classification Number (``ECCN'') 1C010, controlled
for National Security reasons, and valued at $15,460, without
obtaining the required license pursuant to Section 742.4 of the
Regulations. Enterysys purchased the ceramic cloth from a U.S.
manufacturer and arranged for the manufacturer to ship the item to a
freight forwarder identified by Enterysys, knowing that a license
was required for the export of the ceramic cloth to India. On or
about May 1, 2006, when Enterysys asked that the U.S. manufacturer
to ship the ceramic cloth to Enterysys's freight forwarder instead
of directly to Enterysys, Enterysys was informed by the manufacturer
that the material ``is a controlled commodity in terms of export to
India,'' and the manufacturer asked Enterysys for assurance and a
``guarantee'' that the ceramic cloth would not be exported to India.
In response, also on or about May 1, 2006, Enterysys stated, ``This
is not going out of USA.'' In addition, in arranging for the
purchase from the U.S. manufacturer, Enterysys asked the
manufacturer not to put any packing list, invoice or certificate of
conformance in the box with the ceramic cloth, but rather to fax the
documents to Enterysys. Enterysys also arranged for its freight
forwarder to ship the ceramic cloth to Enterysys in India. Once the
manufacturer shipped the ceramic cloth to the freight forwarder
identified by Enterysys, Enterysys provided the freight forwarder
with shipping documentation on or about May 2, 2006, including a
packing list and invoice that falsely identified the ceramic cloth
as twenty square meters of ``used waste material'' with a value of
$200. The ceramic cloth arrived at the freight forwarder on or about
May 3, 2006, and was exported pursuant to Enterysys's instructions
to India on or about May 5, 2006. Enterysys undertook these acts to
facilitate the export of U.S.-origin ceramic cloth to India without
the required Department of Commerce license and to avoid detection
by law enforcement. In so doing, Enterysys committed one violation
of Section 764.2(h) of the Regulations.
Charge 2: 15 CFR 764.2(a)--Engaging in Prohibited Conduct by Exporting
Ceramic Cloth to India Without the Required License
As described in greater detail in the attached Schedule of
Violations, which is incorporated herein by reference, on or about
May 5, 2006, Enterysys engaged in conduct prohibited by the
Regulations by exporting to India twenty square meters of ceramic
cloth, an item subject to the Regulations, classified under ECCN
1C010, controlled for National Security reasons and valued at
$15,460, without the Department of Commerce license required
pursuant to Section 742.4 of the Regulations. In so doing, Enterysys
committed one violation of Section 764.2(a) of the Regulations.
Charges 3-13: 15 CFR 764.2(a)--Engaging in Prohibited Conduct by
Exporting Electronic Components to a Listed Entity Without the Required
Licenses
As described in greater detail in the attached Schedule of
Violations, which is incorporated herein by reference, on eleven
occasions between on or about August 12, 2005 and November 27, 2007,
Enterysys engaged in conduct prohibited by the Regulations by
exporting various electronic components, designated as EAR99 items
\8\ and valued at a total of $38,527, from the United States to
Bharat Dynamics Limited (``BDL'') in Hyderabad, India, without the
Department of Commerce license required by Section 744.1 and
Supplement No. 4 to Part 744 of the Regulations. BDL is an entity
that is designated in the Entity List set forth in Supplement No. 4
to Part 744 of the Regulations, and at all times pertinent hereto
that designation included a requirement that a Department of
Commerce license was required for all exports to BDL. In so doing,
Enterysys committed eleven violations of Section 764.2(a) of the
Regulations.
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\8\ EAR99 is a designation for items subject to the Regulations
but not listed on the Commerce Control List. 15 CFR 734.3(c) (2005-
06).
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Charge 14: 15 CFR 764.2(e)--Acting With Knowledge of a Violation
As described in greater detail in the attached Schedule of
Violations, which is
[[Page 74462]]
incorporated herein by reference, on or about July 11, 2007, in
connection with the transaction described in Charge 11, above,
Enterysys ordered, bought, stored, transferred, transported and
forwarded electronic components, designated as EAR99 items and
valued at $8,644, that were to be exported from the United States to
BDL in Hyderabad, India, with knowledge that a violation of the
Regulations was about to occur or was intended to occur in
connection with the items. Enterysys had knowledge that exports to
BDL required authorization from the Department of Commerce because,
in or around May 2007, Enterysys provided these items to a freight
forwarder and was informed by the freight forwarder that items being
exported to BDL required an export license and that BDL was on the
Entity List. The freight forwarder also directed Enterysys to the
BIS Web site. The freight forwarder then returned the items to
Enterysys. Subsequently, Enterysys provided the items to a second
freight forwarder for export to BDL even though Enterysys knew that
an export license was required and had not been obtained. In so
doing, Enterysys committed one violation of Section 764.2(e) of the
Regulations.
Charges 15-16: 15 CFR 764.2(e)--Acting With Knowledge of a Violation
As described in greater detail in the attached Schedule of
Violations, which is incorporated herein by reference, on two
occasions on or about November 7, 2007 and November 27, 2007, in
connection with the transactions described in Charges 12 and 13,
above, Enterysys ordered, bought, stored, transferred, transported
and forwarded electronic components, designated as EAR99 items and
valued at $11,266.85, that were to be exported from the United
States to BDL in Hyderabad, India, with knowledge that a violation
of the Regulations was about to occur or was intended to occur in
connection with the items. Enterysys had knowledge that exports to
BDL required authorization from the Department of Commerce because,
in or around May 2007, Enterysys was informed by a freight forwarder
that items being exported to BDL required a license and that BDL was
on the Entity List. The freight forwarder also directed Enterysys to
the BIS Web site. Subsequently, Enterysys wrote an email on or about
October 11, 2007, to the Department of Commerce requesting guidance
about license requirements to BDL, and in response was provided with
a copy of the Entity List, advised, among other things, that all
exporting companies need to check transactions against certain
lists, and provided with a link to such lists on the BIS Web site.
Thereafter, on October 24, 2007, Enterysys's President Shekar Babu
wrote an email stating that he was ``working directly with US Govt
on the export license'' and that the license would ``take a month.''
Nevertheless, Enterysys did not apply for or obtain the required
export license. In so doing, Enterysys committed two violations of
Section 764.2(e) of the Regulations.
Gov. Exh. 1.
The Charging Letter advised Respondent that the maximum civil
penalty is up to the greater of $250,000 per violation or twice the
transaction value that forms the basis of the violation; denial of
export privileges; and/or exclusion from practice before BIS. The
Charging Letter also stated that failure to answer the charges
within thirty (30) days after service of the Charging Letter will be
treated as a default, and, although Respondent is entitled to an
agency hearing, a written demand for hearing must be included with
the answer.
The Charging Letter also advised Respondent that the U.S. Coast
Guard was providing Administrative Law Judge services for these
proceedings \9\ and that Respondent's answer had to be filed with
both the U.S. Coast Guard ALJ Docketing Center (address provided)
and the BIS attorney representing the agency in this case. BIS
forwarded the Charging Letter to the U.S. Coast Guard Administrative
Law Judge Docketing Center for adjudication. On July 14, 2011, the
ALJ Docketing Center issued its Notice of Docket Assignment to the
Respondent and BIS.
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\9\ U.S. Coast Guard Administrative Law Judges provide these
services pursuant to a Memoranda of Agreement and Office of
Personnel Management letters issued in accordance with 5 U.S.C. 3344
and 5 CFR 930.230, which authorize the detail of U.S. Coast Guard
Administrative Law Judges to adjudicate BIS cases involving export
control regulations on a reimbursable basis.
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B. Service of the Charging Letter and the Deadline for Filing an
Answer
Section 766.3(b)(1) of the Regulations provides that notice of
the issuance of a charging letter may be served on a respondent by
mailing a copy by registered or certified mail addressed to the
respondent at the respondent's last known address. 15 CFR
766.3(b)(1).
On July 11, 2011, BIS mailed the Charging Letter to Enterysys at
its last known addresses at two locations: One in California, by
certified mail, and one in India, by registered mail. Gov. Exh.
1.\10\ BIS received a signed return receipt showing that Enterysys
received the Charging Letter in California by certified mail on July
26, 2011. Gov. Exh. 2. BIS also received a return receipt for
international mail showing that Enterysys received the Charging
Letter in India by registered mail. Gov. Exh. 3. The date on the
registered mail return receipt is difficult to discern, but appears
to be July 25, 2011.
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\10\ Gov. Exhs. refer to the exhibits BIS filed with its Motion
for Default Order.
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The record establishes that BIS properly provided notice of the
issuance of the Charging Letter in accordance with 15 CFR
766.3(b)(1). With regard to the effective date of this service, 15
CFR 766.3(c) provides that ``[t]he date of service of notice of the
issuance of a charging letter instituting an administrative
enforcement proceeding * * * is the date of its delivery, or of its
attempted delivery if delivery is refused.'' 15 CFR 766.3(c). The
return receipts submitted by BIS establish that delivery occurred
with service effective no later than July 26, 2011.
Under 15 CFR 766.6(a), a respondent must file an answer to a
charging letter ``within 30 days after being served with notice of
the issuance of the charging letter'' initiating the proceeding.
Enterysys thus was obligated to answer the Charging Letter by no
later than August 25, 2011. It has now been over one year and
Enterysys has not filed an answer to the Charging Letter.
C. Enterysys Defaulted Under 15 CFR Part 766
BIS properly served the Charging Letter on Respondent and
Respondent had notice in that Charging Letter of both its
obligations to file an answer and the consequences for failure to do
so.\11\ In addition to the acknowledgements of receipt indicated by
the certified and registered mail receipts, Enterysys defaulted even
though Shekar Babu, the President of Enterysys, sent an email to
BIS's counsel on August 2, 2011, further acknowledging receipt of
the Charging Letter. See Gov. Exh. 4. Furthermore, BIS reminded
Enterysys of the August 25, 2011 deadline for filing an answer, via
an email from BIS's counsel to Mr. Babu on August 15, 2011. See Gov.
Exh. 5. Yet, Enterysys still elected to sit on its rights. Given
Enterysys's failure to answer the Charging Letter, BIS's Motion for
Default Order is granted and Enterysys is found to be in default
with respect to the Charging Letter.
---------------------------------------------------------------------------
\11\ As noted above, the Charging Letter not only set out each
of the sixteen alleged violations, but also provided Enterysys with
actual notice of, inter alia, the requirement to file an answer
within thirty days, as well as the consequences of failing to timely
file an answer, stating:
If Enterysys fails to answer the charges contained in this
letter within 30 days after being served with notice of issuance of
this letter, that failure will be treated as a default. See 15 CFR
766.6 and 766.7 (2010). If Enterysys defaults, the Administrative
Law Judge may find the charges alleged in this letter are true
without a hearing or further notice to Enterysys. The Under
Secretary for Industry and Security may then impose up to the
maximum penalty on the charges in this letter.
Gov, Exh. 1, at 4.
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The Regulations provide that where the respondent has failed to
file a timely answer, such failure ``constitutes a waiver of the
respondent's right to appear and contest the allegations in the
charging letter.'' 15 CFR 766.7(a). That section further provides in
pertinent part that ``[i]n such event, the administrative law judge,
on BIS's motion and without further notice to the respondent, shall
find the facts to be as alleged in the charging letter and render an
initial or recommended decision containing findings of fact and
appropriate conclusions of law and issue or recommend an order
imposing appropriate sanctions.'' Id. (emphasis added). Respondent's
only remedy to cure such a default is to file a petition to the
Under Secretary pursuant to 15 CFR 766.7(b).
Enterysys has thus waived its right to appear and contest the
allegations in the Charging Letter. Because of Enterysys's default,
I also find the facts to be as alleged in the Charging Letter as to
each of the sixteen charged violations and hereby determine that
those facts establish that Enterysys committed one violation of
Section 764.2(h) (2006), three violations of Section 764.2(e)
(2007), and twelve violations of Section 764.2(a) (2005-2007). Under
15 CFR 766.7(a), the judge's duty at this stage is to issue a
Recommended Decision in accordance with 15 CFR 766.17(b)(2).
[[Page 74463]]
D. Time for Decision
The Regulations provide at 15 CFR 766.17(d) that administrative
enforcement proceedings not involving Part 760 of the EAR (including
review by the Under Secretary under 15 CFR 766.22) shall be
concluded within one year from submission of the Charging Letter
unless the Administrative Law Judge extends such period for good
cause shown. Here, the Charging Letter was issued on July 11, 2011,
which exceeds the one year period and I have not extended the period
for concluding the enforcement proceedings.
However, 15 CFR 766.17(d) provides that ``[t]he charging letter
will be deemed to have been submitted to the administrative law
judge on the date the respondent filed an answer or on the date BIS
files a motion for default order pursuant to Sec. 766.7(a) of this
part, whichever occurs first.'' (emphasis added). Respondent has not
filed an answer to the Charging Letter. BIS filed its Motion of
Default Order on September 14, 2012. Therefore, September 14, 2012
is the operative date for calculating the time for decision under
the Regulations.
II. Recommended Findings of Fact
The Recommended Findings of Fact and Conclusions of Law are based
on a thorough and careful analysis of the documentary evidence,
exhibits, and the entire record as a whole. Given Respondent's default,
the facts alleged in the Charging Letter are deemed to be admitted and
Respondent has waived its right to appear and contest the allegations
contained therein.
Charge 1: 15 CFR 764.2(h)--Evasion
1. As described in greater detail in the Schedule of Violations
attached to the Charging Letter, which is incorporated herein by
reference, in or about May 2006, Enterysys obtained and exported to
India twenty square meters of ceramic cloth by making false
statements to a U.S. manufacturer and freight forwarder.
2. The ceramic cloth was an item subject to the Regulations,
classified under Export Control Classification Number (``ECCN'')
1C010, controlled for National Security reasons, and valued at
$15,460.
3. Enterysys did not obtain the required license pursuant to
Section 742.4 of the Regulations
4. Enterysys purchased the ceramic cloth from a U.S.
manufacturer and arranged for the manufacturer to ship the item to a
freight forwarder identified by Enterysys, knowing that a license
was required for the export of the ceramic cloth to India.
5. On or about May 1, 2006, Enterysys asked the U.S.
manufacturer to ship the ceramic cloth to Enterysys's freight
forwarder instead of directly to Enterysys. Enterysys was informed
by the manufacturer that the material ``is a controlled commodity in
terms of export to India,'' and the manufacturer asked Enterysys for
assurance and a ``guarantee'' that the ceramic cloth would not be
exported to India.
6. In response, also on or about May 1, 2006, Enterysys stated,
``This is not going out of USA.''
7. In addition, in arranging for the purchase from the U.S.
manufacturer, Enterysys asked the manufacturer not to put any
packing list, invoice or certificate of conformance in the box with
the ceramic cloth, but rather to fax the documents to Enterysys.
8. Enterysys also arranged for its freight forwarder to ship the
ceramic cloth to Enterysys in India.
9. Once the manufacturer shipped the ceramic cloth to the
freight forwarder identified by Enterysys, Enterysys provided the
freight forwarder with shipping documentation on or about May 2,
2006, including a packing list and invoice that falsely identified
the ceramic cloth as twenty square meters of ``used waste material''
with a value of $200.
10. The ceramic cloth arrived at the freight forwarder on or
about May 3, 2006, and was exported pursuant to Enterysys's
instructions to India on or about May 5, 2006.
11. Enterysys undertook these acts to facilitate the export of
U.S.-origin ceramic cloth to India without the required Department
of Commerce license and to avoid detection by law enforcement.
Charge 2: 15 CFR 764.2(a)--Engaging in Prohibited Conduct by Exporting
Ceramic Cloth to India Without the Required License
12. As described in greater detail in the Schedule of Violations
attached to the Charging Letter, which is incorporated herein by
reference, on or about May 5, 2006, Enterysys engaged in conduct
prohibited by the Regulations by exporting to India twenty square
meters of ceramic cloth.
13. The ceramic cloth was an item subject to the Regulations,
classified under ECCN 1C010, controlled for National Security
reasons and valued at $15,460.
14. Enterysys undertook these acts to facilitate the export of
U.S.-origin ceramic cloth to India without the required Department
of Commerce license.
Charges 3-13: 15 CFR 764.2(a)--Engaging in Prohibited Conduct by
Exporting Electronic Components to a Listed Entity Without the Required
Licenses
15. As described in greater detail in the Schedule of Violations
attached to the Charging Letter, which is incorporated herein by
reference, on eleven occasions between on or about August 12, 2005
and November 27, 2007, Enterysys engaged in conduct prohibited by
the Regulations by exporting various electronic components,
designated as EAR99 items \12\ and valued at a total of $38,527,
from the United States to Bharat Dynamics Limited (``BDL'') in
Hyderabad, India, without the Department of Commerce license
required by Section 744.1 and Supplement No. 4 to Part 744 of the
Regulations.
---------------------------------------------------------------------------
\12\ EAR99 is a designation for items subject to the Regulations
but not listed on the Commerce Control List. 15 CFR 734.3(c) (2005-
06).
---------------------------------------------------------------------------
16. BDL is an entity that is designated in the Entity List set
forth in Supplement No. 4 to Part 744 of the Regulations, and at all
times pertinent hereto that designation included a requirement that
a Department of Commerce license was required for all exports to
BDL.
Charge 14: 15 CFR 764.2(e)--Acting With Knowledge of a Violation
17. As described in greater detail in the Schedule of Violations
attached to the Charging Letter, which is incorporated herein by
reference, on or about July 11, 2007, in connection with the
transaction described in Charge 11, above, Enterysys ordered,
bought, stored, transferred, transported and forwarded electronic
components, designated as EAR99 items and valued at $8,644, that
were to be exported from the United States to BDL in Hyderabad,
India, with knowledge that a violation of the Regulations was about
to occur or was intended to occur in connection with the items.
18. Enterysys had knowledge that exports to BDL required
authorization from the Department of Commerce because, in or around
May 2007, Enterysys provided these items to a freight forwarder and
was informed by the freight forwarder that items being exported to
BDL required an export license and that BDL was on the Entity List.
19. The freight forwarder also directed Enterysys to the BIS Web
site.
20. The freight forwarder then returned the items to Enterysys.
21. Subsequently, Enterysys provided the items to a second
freight forwarder for export to BDL even though Enterysys knew that
an export license was required and had not been obtained.
Charges 15-16: 15 CFR 764.2(e)--Acting With Knowledge of a Violation
22. As described in greater detail in the Schedule of Violations
attached to the Charging Letter, which is incorporated herein by
reference, on two occasions on or about November 7, 2007 and
November 27, 2007, in connection with the transactions described in
Charges 12 and 13, above, Enterysys ordered, bought, stored,
transferred, transported and forwarded electronic components,
designated as EAR99 items and valued at $11,266.85, that were to be
exported from the United States to BDL in Hyderabad, India, with
knowledge that a violation of the Regulations was about to occur or
was intended to occur in connection with the items.
23. Enterysys had knowledge that exports to BDL required
authorization from the Department of Commerce because, in or around
May 2007, Enterysys was informed by a freight forwarder that items
being exported to BDL required a license and that BDL was on the
Entity List.
24. The freight forwarder also directed Enterysys to the BIS Web
site.
25. Subsequently, Enterysys wrote an email on or about October
11, 2007, to the Department of Commerce requesting guidance about
license requirements to BDL, and in response was provided with a
copy of the Entity List that advised, among other things, that all
exporting companies need to check transactions against certain
lists, and was provided with a link to such lists on the BIS Web
site.
[[Page 74464]]
26. Thereafter, on October 24, 2007, Enterysys's President
Shekar Babu wrote an email stating that he was ``working directly
with US Govt on the export license'' and that the license would
``take a month.''
27. Nevertheless, Enterysys did not apply for or obtain the
required export license.
III. Analysis
A. Burden of Proof
The burden in this proceeding lies with BIS to prove the charges
instituted against the Respondents by a preponderance of reliable,
probative, and substantial evidence. Steadman v. SEC., 450 U.S. 91, 102
(1981); In the Matter of Abdulmir Madi, et al., 68 FR 57406 (October 3,
2003). In the simplest terms, the Agency 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).
Given Respondent's default, the facts alleged in the Charging
Letter are deemed admitted and can (and hereby do) serve as the basis
for a finding of the violations alleged proven and the imposition of
sanctions. See 15 CFR 766.7(a).
B. The Regulations' Prohibited Conduct and the Charges
The Regulations generally prohibit a range of conduct under 15 CFR
764.2. Specifically relevant for these proceedings, the Regulations
establish a violation for ``Evasion'' as follows: ``No person may
engage in any transaction or take any other action with intent to evade
the provisions of the EAA, the EAR, or any order, license or
authorization issued thereunder.'' 15 CFR 764.2(h).
Furthermore, the Regulations establish a violation for ``Engaging
in Prohibited Conduct'' as follows: ``No person may engage in any
conduct prohibited by or contrary to, or refrain from engaging in any
conduct required by, the EAA, the EAR, or any order, license or
authorization issued thereunder.'' 15 CFR 764.2(a).
The Regulations also prohibit ``Acting with knowledge of a
violation'' at 15 CFR 764.2(e) as follows:
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 or to be 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 the item.''
The Regulations define ``Knowledge'' at 15 CFR 772.1 under
``Definitions of terms as used in the Export Administration Regulations
(EAR).'' as:
Knowledge of a circumstance (the term may be a variant, such as
``know,'' ``reason to know,'' or ``reason to believe'') includes not
only positive knowledge that the circumstance exists or is
substantially certain to occur, but also an awareness of a high
probability of its existence or future occurrence. Such awareness is
inferred from evidence of the conscious disregard of facts known to
a person and is also inferred from a person's willful avoidance of
facts. This definition does not apply to part 760 of the EAR
(Restrictive Trade Practices or Boycotts).
Charge 1 alleges that Enterysys violated 15 CFR 764.2(h) in May
2006, when, with knowledge that the national-security-controlled
ceramic cloth at issue required a license for export to India,
Enterysys took actions with intent to evade that licensing requirement
and avoid detection by law enforcement. Enterysys's evasive acts
included falsely assuring the U.S. manufacturer in writing that the
item would not be exported from the United States and providing a
packing list and invoice to the freight forwarder that falsely
identified the item not as ceramic cloth, but as ``used waste
material.'' The facts establish that Charge 1 is proved.
Charge 2 alleges, in turn, that Enterysys violated 15 CFR 764(2)(a)
when it exported the ceramic cloth to India without the required
license, thereby engaging in conduct prohibited by the Regulations. The
facts establish that Charge 2 is proved.
Charges 3-13 allege that Enterysys also violated 15 CFR 764(2)(a)
between August 2005 and November 2007, when without the required
licenses, it exported electronic components to Bharat Dynamics Limited
(``BDL''), an Indian entity on BIS's Entity List at all times pertinent
hereto. The facts establish that Charges 3-13 are proved.
In connection with the transactions alleged in Charges 11-13,
respectively, Charges 14-16 allege that Enterysys violated 15 CFR
764.2(e), when, inter alia, after being informed that BDL was on the
Entity List and that exports to BDL required a license, Enterysys
nevertheless ordered, bought, stored, transferred, transported and
forwarded electronic components for export from the United States to
BDL without the required licenses. In so doing, Enterysys acted with
knowledge that a violation of the Regulations was about to occur or was
intended to occur in connection with the items. The facts establish
that Charges 14-16 are proved.
IV. Ultimate Findings of Fact and Conclusions of Law
1. Respondent and the subject matter of these proceedings are
properly within the jurisdiction vested in BIS under the EAA, and the
EAR, as extended by Executive Order and Presidential Notices.
2. As detailed in the Findings of Fact Nos. 1-11, Enterysys
violated 15 CFR 764.2(h) by engaging in the described transaction and
taking other actions with intent to evade the provisions of the
Regulations.
3. As detailed in Findings of Fact Nos. 12-14, Enterysys violated
15 CFR 764(2)(a) when it exported the ceramic cloth to India without
the required license, thereby engaging in conduct prohibited by the
Regulations.
4. As detailed in Findings of Fact Nos. 15-16, Enterysys violated
15 CFR 764.2(a) on 11 occasions by exporting EAR99 electronic
components to a listed entity without the required licenses.
5. As detailed in Findings of Fact Nos. 17-21, Enterysys violated
15 CFR 764.2(e) by ordering, buying, storing, transferring,
transporting and forwarding the EAR99 electronic components for export
from the United States to a known listed entity without the required
licenses.
6. As detailed in Findings of Fact Nos. 22-27, Enterysys violated
15 CFR 764.2(e) on two further occasions by ordering, buying, storing,
transferring, transporting and forwarding the EAR99 electronic
components for export from the United States to a known listed entity
without the required licenses.
V. Recommended Sanction
Section 764.3 of the Regulations sets forth the sanctions BIS may
seek for violations of the Regulations. The applicable sanctions are:
(i) A monetary penalty, (ii) a denial of export privileges under the
Regulations, and/or (iii) suspension from practice before BIS. 15 CFR
764.3. BIS submits in its Motion for Default Order that the nature and
extent of Enterysys's misconduct demonstrates a severe disregard for
U.S. export control laws and calls for the imposition of a significant
sanction. BIS also submits that Enterysys's principal, Shekar Babu,
apparently is located in India and that a monetary penalty may be
difficult to collect and may not serve a sufficient deterrent effect.
BIS thus submits that the Court should recommend the imposition of a
denial of export privileges of at least ten years.
The facts admitted by default demonstrate that Enterysys engaged in
evasive and knowing misconduct and a series of unlawful exports.
Enterysys's
[[Page 74465]]
misconduct included deliberate efforts to evade the Regulations in
connection with the export of ceramic cloth, an item that was
controlled for national security reasons under ECCN 1C010 and that
required a BIS license for export to India pursuant to Section 742.4 of
the Regulations. Enterysys falsely assured the U.S. manufacturer that
the item would not be exported from the United States to India (or
elsewhere); took additional steps so that the manufacturer would not
place any identifying documents in the packaging with the ceramic
cloth; and provided the freight forwarder with a packing list falsely
identifying the ceramic cloth as ``used waste material'' with a minimal
value. Enterysys thus was able to evade the applicable licensing
requirement and export the item to India without seeking and obtaining
an export license from BIS.
Enterysys similarly committed three knowledge violations in
connection with the unlicensed export of electronic components to BDL,
an Indian entity on BIS's Entity List continuously from November 1998
until January 2011. BDL's placement on the Entity List, which
established a license requirement for all exports to BDL of items
subject to the EAR, occurred through a rule that established sanctions
and other measures for certain entities in India and Pakistan that were
``determined to be involved in nuclear or missile activities.'' India
and Pakistan Sanctions and Other Measures, 63 FR 64,322 (Nov. 19,
1998).
The facts demonstrate that after being informed specifically that
BDL was on the Entity List and that a license was required for exports
to BDL, Enterysys nonetheless ordered, bought, stored, transferred,
transported and forwarded electronic components subject to the EAR for
export to BDL. Enterysys thus acted with knowledge that a violation of
the Regulations was about to occur or was intended to occur in
connection with the export of these items.
These evasion and knowledge violations establish Enterysys's
disregard for the Regulations and U.S. export control laws. In
addition, Enterysys made eleven other unlicensed exports of electronic
components to BDL in violation of Section 764.2(a) of the Regulations.
Although Section 764.2(a) is a strict liability provision (unlike
Sections 764.2(e) and (h)), these numerous additional violations
further support BIS's sanction request. In total, Enterysys committed
sixteen violations relating to twelve unlicensed exports, with two of
the violations involving an item controlled for national security
reasons and fourteen involving an Entity List entity sanctioned due to
its involvement in nuclear or missile activities.
BIS's request also is supported by prior BIS case law. See, e.g.,
In the Matter of Technology Options (India) Pvt. Ltd. and Shivram Rao,
69 FR 69,887 (Dec. 1, 2004), as amended on other grounds, 69 FR 71,397
(Dec. 9, 2004) (a ten-year denial of export privileges imposed where
the respondents defaulted after being charged with two counts of
evading the Regulations, a conspiracy charge, and a false statement
charge in connection with exports ultimately intended, as in this case,
for an Indian entity included on BIS's Entity List); In the Matter of
Winter Aircraft Products SA, 72 FR 29,965 (May 30, 2007) (a ten-year
denial of export privileges imposed where the respondent defaulted
after being charged with two counts of evasion in connection with
exports to Iran, including failing to inform the U.S. suppliers of the
true destination for the aircraft parts at issue).
Respondent's misconduct exhibited a severe disregard for the
Regulations and U.S. export controls and a monetary penalty is not
likely to be an effective deterrent in this case. Given the nature and
number of Enterysys's violations, I recommend, pursuant to Section
766.7(a), that the Under Secretary of Commerce for Industry and
Security (``Under Secretary'') impose a ten-year denial of export
privileges against Respondent.
Wherefore:
VII. Order
It is hereby ordered that BIS's Motion for Default Order is granted
and Respondent, Enterysys Corporation, is found to be in default; the
recommended order for which is contained below.
VIII. Recommended Order
[REDACTED SECTION]
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 15 CFR
Sec. 766.22(c). A copy of the Agency regulations for Review by the
Under Secretary can be found as Attachment A.
Done and dated on this 15th day of October, 2012 at Alameda,
California.
Hon. Parlen L. McKenna,
Acting Chief Administrative Law Judge, United Coast Guard.
Attachment A
Notice to the Parties Regarding Review by the Under Secretary
15 CFR 766.22
Section 766.22 Review by Under Secretary.
(a) Recommended decision. For proceedings not involving violations
relating to part 760 of the EAR, the administrative law judge shall
immediately refer the recommended decision and order to the Under
Secretary. Because of the time limits provided under the EAA for review
by the Under Secretary, service of the recommended decision and order
on the parties, all papers filed by the parties in response, and the
final decision of the Under Secretary must be by personal delivery,
facsimile, express mail or other overnight carrier. If the Under
Secretary cannot act on a recommended decision and order for any
reason, the Under Secretary will designate another Department of
Commerce official to receive and act on the recommendation.
(b) Submissions by parties. Parties shall have 12 days from the
date of issuance of the recommended decision and order in which to
submit simultaneous responses. Parties thereafter shall have eight days
from receipt of any response(s) in which to submit replies. Any
response or reply must be received within the time specified by the
Under Secretary.
(c) Final decision. Within 30 days after receipt of the recommended
decision and order, the Under Secretary shall issue a written order
affirming, modifying or vacating the recommended decision and order of
the administrative law judge. If he/she vacates the recommended
decision and order, the Under Secretary may refer the case back to the
administrative law judge for further proceedings. Because of the time
limits, the Under Secretary's review will ordinarily be limited to the
written record for decision, including the transcript of any hearing,
and any submissions by the parties concerning the recommended decision.
(d) Delivery. The final decision and implementing order shall be
served on the parties and will be publicly available in accordance with
Sec. 766.20 of this part.
(e) Appeals. The charged party may appeal the Under Secretary's
written order within 15 days to the United States Court of Appeals for
the District of Columbia pursuant to 50 U.S.C. app. Sec. 2412(c)(3).
Certificate of Service
I hereby certify that I have served the foregoing recommended
decision &
[[Page 74466]]
order (11-BIS-0005) via overnight carrier to the following persons and
offices:
Eric L. Hirschhorn, Esq., Under Secretary for Industry and
Security, U.S. Department of Commerce, Room H-3839, 14th & Constitution
Avenue NW., Washington, DC 20230, Telephone: (202) 482-5301.
John T. Masterson, Esq., Chief Counsel for Industry and Security,
Joseph V. Jest, Esq., Chief of Enforcement and Litigation, Thea D. R.
Kendler, Senior Counsel, Attorneys for Bureau of Industry and Security,
Office of Chief Counsel for Industry and Security, United States
Department of Commerce, Room H-3839, 14th Street & Constitution Avenue
NW., Washington, DC 20230, Telephone: (202) 482-5301.
Enterysys Corporation, Shekar Babu, 1307 Muench Court, San Jose, CA
95131, (FEDEX).
Plot No. 39, Public Sector, Employees Colony, New Bowenpally
500011, Secunderabad, India, (FEDEX International).
Hearing Docket Clerk, USCG, ALJ Docketing Center, 40 S. Gay Street,
Room 412, Baltimore, Maryland 21202-4022, Telephone: (410) 962-5100.
Done and dated on this 17th day of October, 2012, Alameda, California.
Cindy J. Melendres,
Paralegal Specialist to the Hon. Parlen L. McKenna.
[FR Doc. 2012-29789 Filed 12-13-12; 8:45 am]
BILLING CODE P