[Federal Register Volume 83, Number 191 (Tuesday, October 2, 2018)]
[Notices]
[Pages 49540-49543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21446]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security


 Order Temporarily Denying Export Privileges

Eastline Technologies OU, Akadeemia tee 21, 12618 Tallinn, Estonia; 
and Peterburi tee 47-210, 11415 Tallinn, Estonia
Adimir OU, Akadeemia tee 21, 12618 Tallinn, Estonia; and Peterburi 
tee 47-210, 11415 Tallinn, Estonia
Valery Kosmachov, a/k/a Valeri Kosmachov, a/k/a Valery Kosmatsov, a/
k/a Valery Kosmatshov, a/k/a Valery Kosmachev, Vaba[otilde]hukooli 
tee 76-A9, 12015 Tallinn, Estonia
Sergey Vetrov, a/k/a Sergei Vetrov, 6-39 Karl Marx Str., Ramenskoye, 
Moscow, Russia 140100
Real Components Ltd., 8-1 Aviamotornaya Str., Moscow, Russia 111024

I. Introduction and Background of the Parties at Issue

    Pursuant to Section 766.24 of the Export Administration Regulations 
(the ``Regulations'' or ``EAR''),\1\ the Bureau of Industry and 
Security (``BIS''), U.S. Department of Commerce, through its Office of 
Export Enforcement (``OEE''), has requested that I issue an order 
temporarily denying, for a period of 180 days, the export privileges of 
Eastline Technologies OU (``Eastline''), Adimir OU (``Adimir''), Valery 
Kosmachov a/k/a Valeri Kosmachov, a/k/a Valery Kosmatsov, a/k/a Valery 
Kosmatshov, a/k/a Valery Kosmachev (``Kosmachov''), and Sergey Vetrov 
a/k/a Sergei Vetrov (``Vetrov'') (collectively, ``Respondents''). OEE 
also has requested, pursuant to Sections 766.23 and 766.24 of the 
Regulations, that this order (``the TDO'') be applied to Real 
Components, Ltd. (``Real Components'') as a related person.
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    \1\ The Regulations are currently codified in the Code of 
Federal Regulations at 15 CFR Parts 730-774 (2018). The Regulations 
originally issued under the Export Administration Act of 1979, as 
amended, 50 U.S.C. 4601-4623 (Supp. III 2015) (``the EAA''), which 
lapsed on August 21, 2001. 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 8, 2018 (83 FR 39871 (Aug. 13, 2018)), 
continued the Regulations in full force and effect under the 
International Emergency Economic Powers Act, 50 U.S.C. 1701, et seq. 
(2012) (``IEEPA''). On August 13, 2018, the President signed into 
law the John S. McCain National Defense Authorization Act for Fiscal 
Year 2019, which includes the Export Control Reform Act of 2018, 
Title XVII, Subtitle B of Public Law 115-232 (``ECRA''). While 
Section 1766 of ECRA repeals the provisions of the EAA (except for 
three sections which are inapplicable here), Section 1768 of ECRA 
provides, in pertinent part, that all rules and regulations that 
were made or issued under the EAA, including as continued in effect 
pursuant to IEEPA, and were in effect as of ECRA's date of enactment 
(August 13, 2018), shall continue in effect according to their terms 
until modified, superseded, set aside, or revoked through action 
undertaken pursuant to the authority provided under ECRA.
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    Eastline is located in Tallinn, Estonia, and describes itself as a 
distributor of electronic parts and components, computer-related 
products, industrial personal computers and embedded systems, equipment 
for industrial automation, and other state-of-the-art solutions. The 
company holds an Estonian business license and has two addresses in 
Tallinn identified in registration documents. Eastline is operated 
primarily for the purpose of procuring electronic components, including 
those of U.S. origin. Kosmachov and Vetrov were listed as co-owners of 
Eastline until late 2016. The company is currently listed as being 
solely owned by Valeria Mihhailova, whom OEE has reason to believe is 
Kosmachov's daughter. Evidence presented by OEE indicates that both 
Kosmachov and Vetrov remain active in the business, as well as that 
Kosmachov also has previously represented that Eastline partners with 
Real Components, which is located in Moscow, Russia, is owned by 
Vetrov, and is Eastline's primary customer in Russia.
    Kosmachov also has previously identified himself as being the sole 
owner of Adimir, an Estonian company. Adimir shares the same business 
addresses as Eastline. Adimir is known to have previously been involved 
in the transshipment and attempted transshipment of U.S.-origin items 
to Russia in apparent violation of the Regulations, as described in a 
TDO issued by BIS on March 19, 2015, as amended on March 23, 2015 (the 
``March 2015 TDO''). See 80 FR 15979 (March 26, 2015); 80 FR 16632 
(March 30, 2015).\2\ During the investigation leading up to the 
issuance of the March 2015 TDO, Adimir admitted to transshipping U.S.-
origin items to Russia, but was not named as a respondent, as Adimir 
was believed to have ceased operating. See id.; see also Section III., 
infra. However, as discussed in Section IV., infra, recently-obtained 
evidence indicates that Adimir appears to have resumed operating, and 
to again be involved in the procurement of U.S.-origin items for 
transshipment to Russian customers, primarily including Real 
Components.
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    \2\ The limited amendment on March 23, 2015, did not relate to 
the discussion of Adimir. See 80 FR 16632, at note 2. The March 2015 
TDO was renewed for an additional 180 days on September 14, 2015. 80 
FR 56439 (Sept. 18, 2015).
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II. Legal Standard

    Pursuant to Section 766.24 of the Regulations, BIS may issue, on an 
ex parte basis, an order temporarily denying a respondent's export 
privileges upon a showing that the order is necessary in the public 
interest to prevent an ``imminent violation'' of the Regulations. 15 
CFR 766.24(a)-(b). ``A violation may be `imminent' either in time or 
degree of likelihood.'' 15 CFR 766.24(b)(3). BIS may show ``either that 
a violation is about to occur, or that the general circumstances of the 
matter under investigation or case under criminal or administrative 
charges demonstrate a likelihood of future violations.'' Id. As to the 
likelihood of future violations, BIS may show that the violation under 
investigation or charge ``is significant, deliberate, covert and/or 
likely to occur again, rather than technical or negligent[.]'' Id. A 
``[l]ack of information establishing the precise time a violation may 
occur does not preclude a finding that a violation is imminent, so long 
as there is sufficient reason to believe the likelihood of a 
violation.'' Id.
    Pursuant to Sections 766.23 and 766.24, a TDO also may be made 
applicable to other persons if BIS has reason to believe that they are 
related to a respondent and that applying the

[[Page 49541]]

order to them is necessary to prevent its evasion. 15 CFR 766.23(a)-(b) 
and 766.24(c). A ``related person'' is a person, either at the time of 
the TDO's issuance or thereafter, who is related to a respondent ``by 
ownership, control, position of responsibility, affiliation, or other 
connection in the conduct of trade or business.'' 15 CFR 766.23(a).

III. The March 2015 TDO and Adimir OU'S Admitted Transshipment 
Activities

    The March 2015 TDO issued against Flider Electronics, LLC d/b/a 
Trident International Corporation (``Trident''), Pavel Semenovich 
Flider (Trident's president and owner), and Gennadiy Semenovich Flider 
(Trident's office manager) for engaging in conduct prohibited by the 
Regulations by exporting items subject to the EAR to Russia via 
transshipment through third countries, including Estonia and Finland. 
Contemporaneous to these events, in or about March 2015, in an 
indictment unsealed in the United States District Court for the 
Northern District of California, Pavel Flider was charged with fifteen 
counts of smuggling goods, one count of conspiracy to commit 
international money laundering, and ten counts of money laundering, and 
Trident was charged with all the same counts, except conspiracy. On 
August 16, 2016, Pavel Flider pled guilty to two counts of felony 
smuggling, and Trident pled guilty to two counts of money laundering 
involving the transshipment of U.S.-origin electronic components 
through Estonia and Finland to Russia. During the investigation, U.S. 
authorities identified other companies and individuals involved in the 
transshipment of U.S.-origin electronic components to Russia.
    Specifically, for example, Trident's president and owner, Pavel 
Flider, identified Adimir in Estonia as the ultimate consignee in a 
shipment of Xilinix field programmable gate array circuits that were 
controlled under Export Control Classification Number 3A001.a.2.c for 
national security reasons and required a license for export to Russia. 
OEE presented evidence that indicated that Adimir was not the end user 
of the items. In addition, Kosmachov, an Adimir corporate officer and 
its owner, admitted that Adimir had transshipped U.S.-origin items to 
Russia for Trident and Pavel Flider. In an interview with OEE, Trident 
office manager Gennadiy Flider stated that Trident had been doing 
business with Adimir for many years and that it was the only customer 
Trident had. Similarly, Pavel Flider stated in an interview that Adimir 
was Trident's one and only customer, and that at times Adimir requested 
that items be shipped to a freight forwarder in Finland, rather than to 
Adimir in Estonia.
    In sum, the March 2015 TDO described a procurement scheme that 
featured exports of U.S.-origin items structured as transshipments to 
camouflage the actual destination, end users and/or end uses of the 
items. As noted above, while Adimir had been involved in transshipping 
the items to Russia, Adimir was not made a party to the March 2015 TDO, 
as it was believed to have already ceased operating. The March 2015 TDO 
and related investigation appears to have for a time deterred Adimir 
and those affiliated or associated with it from engaging in similar 
activities. However, OEE has presented evidence as part of its current 
TDO request indicating that by at least May 2017, Kosmachov and Vetrov 
were using a revised scheme with Eastline identified falsely as the 
ultimate consignee and have expanded their activities to include the 
procurement of U.S.-origin items by both Eastline and Adimir, including 
as recently as August and September 2018.

IV. Subsequent Interviews With Kosmachov About Eastline, the Detention 
of an Attempted Transshipment in May 2017, and More Recent Procurement 
and Transshipment Activities Involving Eastline and Adimir

    OEE's current request for a TDO includes evidence that an ongoing 
procurement scheme involves Eastline and Adimir in Estonia and 
Eastline's customer and partner Real Components Ltd. in Russia, all of 
whom share or have shared a common web of ownership or control 
involving Kosmachov and Vetrov. For example, Adimir and Eastline not 
only share a common address but also have shared a common owner in 
Kosmachov, who, as discussed supra, previously admitted to using Adimir 
to transship U.S.-origin items to Russia. Kosmachov remains active in 
Eastline's procurement operations, though company registration 
documents do not currently list him as a shareholder. Furthermore, 
Eastline and Real Components both have ties to Vetrov, with his 
continuing involvement in Eastline procurement activities and ownership 
of Real Components. As set forth below, OEE has presented evidence of 
these relationships based on interviews with Eastline in 2015-2016, a 
detained shipment in May 2017 and information related to recent export 
activities.
    In July 2015, Kosmachov, who was Eastline's acknowledged co-owner 
at the time (and until late November 2016), told the U.S. Government 
that Eastline started in 2005 as an independent distributor of 
electronic parts and components, among other items. Kosmachov stated 
that 99% of Eastline's business was in electronic components and that 
its primary customers are in Russia. According to Kosmachov, he chose 
to do business in Estonia because ``it was easier to get electronics 
into Estonia than it was into Russia.'' He also stated that U.S. 
companies were ``easier to deal with as a European company, rather than 
as a Russian company.'' Kosmachov indicated that ``all Eastline's 
shipments to Russia go across the Tallinn-Helsinki Ferry to Helsinki 
and then across the Finnish-Russian border'' because it was ``cheaper'' 
and took ``less time'' than shipping directly from Estonia to Russia. 
Also present at this meeting was another individual identified as a 
purchasing manager for both Eastline and Real Components. Kosmachov 
indicated that Eastline partners with Real Components, which is owned 
by Vetrov.
    In a subsequent meeting in March 2016, Kosmachov confirmed that 
nothing had changed in relation to Eastline since the May 2015 meeting 
and that he continued to own Adimir, which shares business addresses 
with Eastline. He noted again that Eastline primarily exports to Real 
Components in Russia. The purchasing manager for both Eastline and Real 
Components was again present at this meeting.
    OEE has presented evidence that Kosmachov and Vetrov remained the 
acknowledged shareholders in Eastline until November 29, 2016, at which 
time Valeria Mihhailova, who is believed to be Kosmachov's daughter, 
became listed as the sole shareholder. Information obtained from a May 
2017 detention by the Department of Homeland Security indicates, 
moreover, that Kosmachov and Vetrov continue to be active in Eastline's 
business operations by having items from the United States procured 
under their names for Eastline and delivered on Eastline's behalf to a 
package forwarder's address in the United States. The package forwarder 
then consolidated multiple Eastline shipments into one export and, 
based on information provided by Eastline, created a commercial invoice 
and made an Electronic Export Information (``EEI'') filing in the 
Automated Export System (``AES'') \3\ listing Estonia as the

[[Page 49542]]

ultimate destination and Eastline as the ultimate consignee, even 
though Eastline has admitted that it is not an end user and that its 
primary customers are in Russia. The related export documents listed 
the ``bill to'' party as ``Eastline Technologies OU, Attn: Valery 
Kosmachov'' in Estonia, and the ``ship to'' as ``Eastline Technologies 
OU, Attn: Sergey Vetrov'' at the package forwarder's address in the 
United States. Furthermore, OEE has presented evidence that Kosmachov 
and Vetrov currently have access to Eastline bank accounts.
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    \3\ The AES system is used by BIS (and U.S. Customs and Border 
Protection) for export control and clearance purposes and used by 
the U.S. Census Bureau to, inter alia, collect export statistics.
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    Based on a review of EEI filings in AES for 2018, Eastline 
continued to order U.S.-origin items and have them delivered to its 
package forwarder in the U.S., for consolidation and export from the 
United States, with Eastline listed as the ultimate consignee at its 
address in Estonia, including as recently as June 2018. Based on the 
transshipment activities described in the March 2015 TDO, the May 2017 
detention, and its ongoing investigation, OEE has reason to believe 
these items were actually intended for Real Components or another 
Russian customer and thus were transshipped to Russia. In addition, 
Eastline represents itself on its website as an independent 
``distributor'' of electronic computers for such locations as Russia, 
lending additional support to OEE's contention that Eastline is not an 
end user of the items it procures. Moreover, OEE is concerned that 
Respondents' strategy of using a package forwarder in the United States 
to consolidate orders placed with multiple U.S. manufacturers or 
suppliers, rather than having the items exported directly by the 
manufacturers or suppliers themselves, may be part of a concerted 
effort to conceal their activities.
    Further, OEE has presented evidence indicating that both Eastline 
and Adimir have received shipments of U.S.-origin items as recently as 
August and September 2018, including shipments directly to Eastline and 
Adimir and shipments to Eastline through its package forwarder in the 
United States. Kosmachov's involvement in both Eastline and Adimir, 
Adimir's prior involvement with transshipment of controlled U.S.-origin 
items to Russia, and Adimir's continued receipt of U.S.-origin items, 
taken together, indicate that Adimir as well as Eastline presents an 
imminent threat of a violation of the Regulations and thus a temporary 
denial order is appropriate.

V. Findings

    I find that the evidence presented by BIS demonstrates that a 
violation of the Regulations is imminent in both time and degree of 
likelihood. Eastline, Adimir, Kosmachov, and Vetrov have engaged in 
knowing violations of the Regulations relating to the procurement of 
U.S.-origin items subject to the Regulations for export to Russia, via 
transshipment through Estonia and Finland, while providing false or 
misleading information regarding the ultimate consignee and final 
destination of the items to U.S. suppliers and/or the U.S. Government. 
The ways in which their export transactions have been structured and 
routed appear designed to conceal or obscure the destinations, end 
users, and/or end uses of the U.S.-origin items they procure, including 
items on the Commerce Control List, thereby attempting to avoid export 
control scrutiny and possible detection by U.S. law enforcement.
    In sum, the facts and circumstances taken together, including the 
transshipment of U.S.-origin items, misrepresentations made in AES 
filings, and concerted actions of the Respondents, provide strong 
indicators that future violations are likely absent the issuance of a 
TDO. As such, a TDO is needed to give notice to persons and companies 
in the United States and abroad that they should cease dealing with 
Eastline, Adimir, Kosmachov, and Vetrov in export transactions 
involving items subject to the EAR. Accordingly, I find that an order 
denying the export privileges of Eastline, Adimir, Kosmachov, and 
Vetrov is necessary, in the public interest, to prevent an imminent 
violation of the EAR.
    Additionally, Section 766.23 of the Regulations provides that in 
order to prevent evasion, TDOs ``may be made applicable not only to the 
respondent, but also to other persons then or thereafter related to the 
respondent by ownership, control, position of responsibility, 
affiliation, or other connection in the conduct of trade or business.'' 
15 CFR 766.23(a). Eastline and Real Components are intertwined in 
ownership and control and in their conduct of business. As noted above, 
Vetrov owns Real Components, Eastline's primary customer in Russia, and 
also remains active in Eastline, including apparently receiving 
shipments on behalf of the company and also holding a bank card in 
Eastline's name. The two companies also share a purchasing manager, 
further suggesting that Eastline serves as a procurement and 
transshipment agent for Real Components. Accordingly, I find that Real 
Components meets the criteria set out in Section 776.23 and should be 
added to the TDO as a related person in order to prevent evasion.
    This Order is being issued on an ex parte basis without a hearing 
based upon BIS's showing of an imminent violation in accordance with 
Section 766.24 of the Regulations.
    It is therefore ordered:
    First, that EASTLINE TECHNOLOGIES OU, with last known addresses at 
Akadeemia tee 21, 12618 Tallinn, Estonia, and Peterburi tee 47-210, 
11415 Tallinn, Estonia, ADIMIR OU, with last known addresses at 
Akadeemia tee 21, 12618 Tallinn, Estonia, and Peterburi tee 47-210, 
11415 Tallinn, Estonia, VALERY KOSMACHOV, a/k/a VALERI KOSMACHOV, a/k/a 
VALERY KOSMATSOV, a/k/a VALERY KOSMATSHOV, a/k/a VALERY KOSMACHEV, with 
a last known address at Vaba[otilde]hukooli tee 76-A9, 12015 Tallinn, 
Estonia, SERGEY VETROV, a/k/a SERGEI VETROV, with a last known address 
at 6-39 Karl Marx Str., Ramenskoye, Moscow, Russia, 140100, and REAL 
COMPONENTS LTD., with a last known address at 8-1 Aviamotornaya Str., 
Moscow, Russia, 111024, and when acting for or on their behalf, any 
successors, assigns, directors, officers, employees, or agents (each a 
``Denied Person'' and collectively the ``Denied Persons'') 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 Export Administration 
Regulations (``EAR''), or in any other activity subject to the EAR 
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 EAR, or engaging in any other 
activity subject to the EAR; or
    C. Benefitting in any way from any transaction involving any item 
exported or to be exported from the United States that is subject to 
the EAR, or from any other activity subject to the EAR.
    Second, 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 EAR;

[[Page 49543]]

    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 EAR 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 EAR that has been exported from the United States;
    D. Obtain from a Denied Person in the United States any item 
subject to the EAR 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 EAR 
that has been or will be exported from the United States and which 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 EAR 
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 EAR, any other person, firm, corporation, or 
business organization or entity related to Eastline Technologies OU, 
Adimir OU, Valery Kosmachov, or Sergey Vetrov by ownership, control, 
position of responsibility, affiliation, or other connection in the 
conduct of trade or business may also be made subject to the provisions 
of this Order.
    In accordance with the provisions of Section 766.24(e) of the EAR, 
Eastline Technologies OU, Adimir OU, Valery Kosmachov, and Sergey 
Vetrov may, at any time, appeal this Order by filing a full written 
statement in support of the appeal with the Office of the 
Administrative Law Judge, U.S. Coast Guard ALJ Docketing Center, 40 
South Gay Street, Baltimore, Maryland 21202-4022.
    In accordance with the provisions of Sections 766.23(c)(2) and 
766.24(e)(3) of the EAR, Real Components Ltd. may, at any time, appeal 
its inclusion as a related person by filing a full written statement in 
support of the appeal with the Office of the Administrative Law Judge, 
U.S. Coast Guard ALJ Docketing Center, 40 South Gay Street, Baltimore, 
Maryland 21202-4022.
    In accordance with the provisions of Section 766.24(d) of the EAR, 
BIS may seek renewal of this Order by filing a written request not 
later than 20 days before the expiration date. Eastline Technologies 
OU, Adimir OU, Valery Kosmachov, and Sergey Vetrov may oppose a request 
to renew this Order by filing a written submission with the Assistant 
Secretary for Export Enforcement, which must be received not later than 
seven days before the expiration date of the Order.
    A copy of this Order shall be sent to Eastline Technologies OU, 
Adimir OU, Valery Kosmachov, Sergey Vetrov, and Real Components Ltd., 
and shall be published in the Federal Register.
    This Order is effective upon issuance and shall remain in effect 
for 180 days.

Douglas Hassebrock,
Director, Office of Export Enforcement, performing the non-exclusive 
functions and duties of the Assistant Secretary of Commerce for Export 
Enforcement.
[FR Doc. 2018-21446 Filed 10-1-18; 8:45 am]
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