[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