5 July 2006
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[Federal Register: July 5, 2006 (Volume 71, Number 128)]
[Notices]
[Page 38133-38136]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05jy06-34]
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DEPARTMENT OF COMMERCE
Bureau of Industry and Security
[Docket No. 05-BIS-20]
In the Matter of MUTCO International Kelenbergweg 37 1101 EX
Amsterdam, Netherlands; Respondent
Decision and Order
In a charging letter dated November 22, 2005, the Bureau of
Industry and Security (``BIS'') alleged that Respondent, MUTCO
International (``MUTCO''), committed two violations of the Export
Administration Regulations (``Regulations''), \1\ issued under the
Export Administration Act of 1979, as amended (50 U.S.C. app. 2401-2420
(2000)) (the ``Act'').\2\ BIS alleged that MUTCO conspired to obtain
toxins, including Aflatoxin (M1, P1, Q1) and Staphyloccocal Enterotoxin
(A and B), items subject to the Regulations and
[[Page 38134]]
classified under export control classification number (``ECCN'') 1C351,
on behalf of a North Korean end-user and to export those toxins to
North Korea. The charging letter also alleged that MUTCO solicited a
violation of the Regulations by ordering the aforementioned toxins from
a United States company and by agreeing to complete the shipment of the
toxins through the Netherlands to North Korea.
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\1\ The Regulations are currently codified at 15 CFR Parts 730-
774 (2006). The charged violations occurred in 2000 through 2002.
The Regulations governing the violations at issue are found in the
2000 through 2002 versions of the Code of Federal Regulations (15
CFR Parts 730-774 (2000-2002)). The 2006 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 Part 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 and it
remained in effect through August 20, 2001. Since August 21, 2001,
the Act has been in lapse and the President, through Executive Order
13222 of August 17, 2001 (3 CFR Part 2001 Comp. 783 (2002)), which
has been extended by successive Presidential Notices, the most
recent being that of August 2, 2005 (70 FR 45,273 (August 5, 2005)),
has continued the Regulations in effect under IEEPA.
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In accordance with Sec. 766.3(b)(1) of the Regulations, on
November 22, 2005, BIS mailed the notice of issuance of the charging
letter by registered mail to MUTCO at its last known address. BIS has
established that this charging letter by registered mail to MUTCO at
its last known address. BIS has established that this charging letter
was served in accordance with Sec. 766.3 of the Regulations and that
BIS received the signed mail return receipt on January 9, 2006. MUTCO
did not file an answer to the charging letter with the ALJ, as required
by Sec. 766.6(a) of the Regulations.
In accordance with Sec. 766.7 of the Regulations, BIS filed a
Motion for Default Order on April 17, 2006. This Motion for Default
Order recommended that MUTCO be denied export privileges under the
Regulations for a period of six years. Under Sec. 766.7(a) of the
Regulations, ``[f]ailure of the respondent to file an answer within the
time provided constitutes a waiver of the respondent's right to
appear,'' and ``on BIS's motion and without further notice to the
respondent, [the ALJ] shall find the facts to be as alleged in the
charging letter.''
On June 8, 2006, based on the record before him, the ALJ found the
Respondent to be in default, and issued a Recommended Decision and
Order in which he found that MUTCO committed one violation of Sec.
764.2(d) and one violation of Sec. 764.2(c) of the Regulations. The
ALJ recommended the penalty of denial of MUTCO's export privileges for
a period of six years.
The ALJ's Recommended Decision and Order, together with the entire
record in this case, has been referred to me for final action under
Sec. 766.22 of the Regulations.
I find that the record supports the ALJ's findings of fact and
conclusions of law. I also find that the penalty recommended by the ALJ
is appropriate, given the nature of the violations, the lack of
mitigating circumstances, and the importance of preventing future
unauthorized exports.
Based on my review of the entire record, I affirm the findings of
fact and conclusions of law in the ALJ's Recommended Decision and
Order.
Accordingly, it is therefore ordered, first, that, for a period of
six years from the date this Order is published in the Federal
Register, MUTCO International, Kelenbergweg 37 1101, EX Amsterdam,
Netherlands, and all of its successors and assigns, and when acting for
on behalf of MUTCO, 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, sorting, disposing of,
forwarding, transporting, financing, or otherwise servicing in any way,
any transaction involving any exported or to be exported from the
United States that is subject to the Regulations, or in any other
activity subject to the Regulations; or
C. Benefiting in any way from any transaction involving any item
exported or to be exported from the United States that is subject to
the Regulations, or in any other activity subject to the Regulations.
Second, that no person may, directly or indirectly, do any of the
following:
A. Export or reexport to or on behalf of the Denied Person any
item subject to the Regulations;
B. Take any action that facilitates the acquisition or attempted
acquisition by the Denied Person of the ownership, possession, or
control of any item subject to the Regulations that has been or will be
exported from the United States, including financing or other support
activities related to a transaction whereby the Denied Person acquires
or attempts to acquire such ownership, possession or control;
Take any action to acquire from or to facilitate the acquisition or
attempted acquisition from the Denied Person of any item subject to the
Regulations that has been exported from the United States;
D. Obtain from the Denied Person in the United States any item
subject to the Regulations with knowledge or reason to know that the
item will be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the
Regulations that has been or will be exported from the United States
and that is owned, possessed or controlled by the Denied Person, or
service any item, of whatever origin, that is owned, possessed or
controlled by the Denied Person if such service involves the use of any
item subject to the Regulations that has been or will be exported from
the United States. For purposes of this paragraph, servicing means
installation, maintenance, repair, modification or testing.
Third, that, after notice and opportunity for comment as provided
in Sec. 766.23 of the Regulation, any person, firm, corporation, or
business organization related to the Denied Person by affiliation,
ownership, control, or position of responsibility in the conduct of
trade or related services may also be made subject to the provisions of
this Order.
Fourth, that this Order does not prohibit any export, reexport, or
other transaction subject to the Regulations where the only items
involved that are subject to the Regulations are the foreign-produced
direct product of U.S.-origin technology.
Fifth, that this Order shall be served on the Denied Person and on
BIS, and shall be published in the Federal Register. In addition, the
ALJ's Recommended Decision and Order, except for the section related to
the Recommended Order, shall be published in the Federal Register.
This Order which constitutes the final agency action in this
matter, is effective upon publication in the Federal Register.
Dated: June 27, 2006.
David H. McCormick,
Under Secretary of Commerce for Industry and Security.
Recommended Decision and Order
On November 22, 2005, the Bureau of Industry and Security, U.S.
Department of Commerce (``BIS''), issued a charging letter initiating
this administrative enforcement proceeding against MUTCO International
(``MUTCO''). The charging letter alleged that MUTCO committed two
violations of the Export Administration Regulations (currently codified
at CFR Parts 730-774 (2006)) (the ``Regulations''),\1\ issued under the
Export Administration Act of 1979, as
[[Page 38135]]
amended (50 U.S.C. App. 2401-2420 (2000)) (the ``Act'').\2\
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\1\ The charged violations occurred in 2000 through 2002. The
Regulations governing the violations at issue are found in the 2000
through 2002 versions of the Code of Federal Regulations (15 CFR
Parts 730-774 (2000-2002)). The 2006 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 was extended by successive Presidential Notices, the
last of which was August 3, 2000 (3 CFR part 2000 Comp. 397 (2001)),
continued the Regulations in effect under the International
Emergency Economic Powers Act (50 U.S.C. 1701-06 (2000))
(``IEEPA''). On November 13, 2000, the Act was reauthorized and it
remained in effect through August 20, 2001. Since August 21, 2001,
The Act has been in lapse and the President, through Executive Order
13222 of August 17, 2001 (3 CFR part 2001 Comp. 783 (2002)), as
extended by the Notice of August 2, 2005 (70 FR 45,273 (Aug. 5,
2005)), has continued the Regulations in effect under IEEPA.
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Specifically, the charging letter alleged that MUTCO conspired and
acted in concert with others, known and unknown, to export toxins from
the United States to North Korea without the required Department of
Commerce license. BIS alleged that the goal of the conspiracy was to
obtain toxins, including Aflatoxin (M1, P1, Q1) and Staphyloccocal
Enterotoxin (A and B), items subject to the Regulations and classified
under export control classification number (``ECCN'') 1C351, on behalf
of a North Korean end-user and to export those toxins to North Korea.
BIS alleged that, in furtherance of the conspiracy, MUTCO ordered the
toxins from a co-conspirator in the United States and agreed to
complete the export to North Korea once the toxins were delivered to
the Netherlands from the United. States. BIS alleged that, contrary to
Sec. 742.2 of the Regulations, no Department of Commerce license was
obtained for the export from the Untied States to North Korea. (Charge
1).
The charging letter filed by BIS also alleged that, in or about
July 2002, MUTCO solicited a violation of the Regulations by ordering
toxins, including Aflatoxin (M1, P1, Q1) and Staphyloccocal Enterotoxin
(A and B), items subject to the Regulations and classified under export
control classification number (``ECCN'') 1C351, from a co-conspirator
in the United States and agreeing to complete the export of the toxins
to North Korea. BIS also alleged that, contrary Sec. 742.2 of the
Regulations, no Department of Commerce license was obtained for the
export from the United States to North Korea. (Charge 2).
Section 766.3(b)(1) of the Regulations provides that notice of the
issuance of a charging letter shall be served on a respondent by
mailing a copy by registered or certified mail addressed to the
respondent at the respondent's last known address. In accordance with
the Regulations, on November 22, 2005, BIS mailed the notice of
issuance of a charging letter by registered mail to MUTCO at its last
known address: MUTCO International, Kelenberweg 37 1101, EX Amsterdam,
Netherlands. BIS has submitted evidence that establishes that this
charging letter was served in accordance with Sec. 766.3 of the
Regulations and that BIS received the signed return receipt on January
9, 2006.
Section 766.6(a) of the Regulations provides, in pertinent part,
that ``[t]he respondent must answer the charging letter within 30 days
after being served with notice of issuance of the charging letter''
initiating the administrative enforcement proceeding. To date, MUTCO
has not filed an answer to the charging letter.
Pursuant to the default procedures set forth in Sec. 766.7 of the
Regulations, the undersigned finds the facts to be as alleged in the
charging letter, and hereby determines that those facts establish that
MUTCO committed one violation of Sec. 764.2(d), and one violation of
Sec. 764.2(c) of the Regulations.
Section 764.3 of the Regulations sets forth the sanctions BIS may
seek for violations of the Regulations. The applicable sanctions are:
(i) A monetary penalty, (ii) suspension from practice before the Bureau
of Industry and Security, and (iii) a denial of export privileges under
the Regulations. See 15 CFR 764.3 (2000-2002). Because MUTCO solicited
the export of toxins, items controlled by BIS for Anti-Terrorism
reasons for export to North Korea, BIS requests that the undersigned
recommends to the Under Secretary of Commerce for Industry and Security
\3\ that MUTCO's export privileges be denied for six years.
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\3\ Pursuant to Section 13(c)(1) of the Export Administration
Act and Sec. 766.17(b)(2) of the Regulations, in export control
enforcement cases, the Administrative Law Judge makes recommended
findings of fact and conclusions of law that the Under Secretary
must affirm, modify or vacate. The Under Secretary's action is the
final decision for the U.S. Commerce Department.
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BIS has suggested these sanctions because MUTCO's role in
conspiring to export toxins to North Korea, as well as its role in
ordering toxins for export to North Korea, represents a significant
potential harm to the essential national interests protected by U.S.
export controls.\4\ BIS has noted that the items involved in the
attempted export in this case involved Aflatoxins (M1, P1, Q1) and
Staphyloccocal Enterotoxins (A and B). These items are controlled by
BIS for Anti-Terrorism reasons. Furthermore, BIS has noted that MUTCO's
role in conspiring and soliciting the export of these items for
delivery to North Korea--a country that the United States Government
has designated a state sponsor of international terrorism--represents
significant harm to the national interests protected by U.S. export
controls.\5\ Furthermore, BIS believes that the imposition of a six-
year denial order is particularly appropriate in this case since BIS
may face difficulties in collecting a monetary penalty, as MUTCO is not
located in the United States. Finally, BIS believes that the
recommended denial order is particularly appropriate in this case,
since MUTCO has failed to respond to the charging letter filed by BIS.
In light of these circumstances, BIS believes that the denial of
MUTCO's export privileges for six years is an appropriate sanction.
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\4\ See 15 CFR Part 766, Supp. No. 1, III, A. (Stating that a
denial order may be considered even in matters involving simple
negligence or carelessness, if the violation(s) involves ``harm to
the national security or other essential interests protected by the
export control system,'' if the violations are of such a nature and
extent that a monetary fine alone represents an insufficient
penalty. * * *) (emphasis added).
\5\ See id. (``Destination Involved: BIS is more likely to seek
a greater monetary penalty and/or denial or export privileges * * *
in cases involving: (1) exports or reexports to countries subject to
anti-terrorism controls. * * *'') (emphasis in original).
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On this basis, the undersigned concurs with BIS and recommends that
the Under Secretary enter an Order denying MUTCO's export privileges
for a period of six years. Such a denial order is consistent with
penalties imposed in past cases under the Regulations involving
shipments to countries designated as ``Terrorist Supporting
Countries.'' \6\ See In the Matter of Petrom GmbH International Trade,
70 FR 32,743 (June 6, 2005) (affirming the recommendations of the
Administrative Law Judge that a twenty-year denial order and a civil
monetary sanction of $143,000 were appropriate where knowing violations
involved a shipment of EAR99 items to Iran); In the Matters of Yaudat
Mustafa Talyi a.k.a. Yaudat Mustafa a.k.a. Joseph Talyi, 69 FR 77,177
(Dec. 27, 2004) (affirming the ALJ's recommendations that a twenty-year
denial order and the maximum civil penalty of $11,000 per violation
were appropriate where an individual exported oil field parts to Libya
without authorization, in violation of a BIS order temporarily denying
his export privileges and with knowledge that a violation would occur;
and solicited a violation of the Regulations by ordering oil field
parts from a U.S. manufacturer without authorization and with knowledge
that a violation would occur); In the Matter of Arian
[[Page 38136]]
Transportvermittlungs, GmbH, 69 FR 28,120 (May 18, 2004) (affirming the
recommendation of the Administrative Law Judge that a ten-year denial
order was appropriate where knowing violations involved a shipment of a
controlled item to Iran); In the Matter of Jabal Damavand General
Trading Company, 67 FR 32,009 (May 13, 2002) (affirming the
recommendation of the Administrative Law Judge that a ten-year denial
order was appropriate where knowing violations involved shipments of
EAR99 items to Iran); In the Matter of Adbulamir Mahdi, 68 FR 57,406
(Oct. 3, 2003) (affirming the recommendation of the Administrative Law
Judge that a twenty-year denial order was appropriate where knowing
violations involved shipments of EAR99 items to Iran as part of a
conspiracy to ship such items through Canada to Iran). A six-year
denial of MUTCO's export privileges is warranted because MUTCO's
violations, like those of the respondents in the above-cited case,
involved exports made to Terrorist Supporting Countries in violation of
U.S. export control laws.
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\6\ BIS's list of Terrorist Supporting Countries is set forth in
15 CFR Part 740, Supp. No. 1, Country Group E:1.
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The terms of the denial of export privileges against MUTCO should
be consistent with the standard language used by BIS in such orders.
The language is:
[REDACTED SECTION]
This Order, which constitutes the final agency action in this
matter, is effective upon publication in the Federal Register.
Accordingly, the undersigned refers this Recommended Decision and
Order to the Under Secretary of Commerce for Industry and Security for
review and final action for the agency, without further notice to the
respondent, as provided in Sec. 766.7 of the Regulations.
Within 30 days after receipt of this Recommended Decision and
Order, the Under Secretary shall issue a written order affirming,
modifying, or vacating the Recommended Decision and Order. See 15 CFR
766.22(c).
Dated: June 8, 2006.
The Honorable Joseph N. Ingolia,
Chief Administrative Law Judge.
CERTIFICATE OF SERVICE
I hereby certify that I have served the foregoing RECOMMENDED
DECISION & ORDER by DHL Express to the following person:
James C. Pelletier, Esq., Office of Chief Counsel for Industry and
Security, U.S. Department of Commerce, Room H-3839, 14th Street &
Constitution Avenue, NW., Washington, D.C. 20230.
I hereby certify that I have served the foregoing RECOMMENDED
DECISION & ORDER by U.S. First Class Mail to the following person:
MUTCO International, Kelenberweg 37 1101, EX Amsterdam, Netherlands
Attn: Kailash Muttreja, President
Done and dated June 8, 2006 at Baltimore, Maryland.
Debra Gundy,
Paralegal Specialist.
[FR Doc. 06-5986 Filed 7-3-06; 8:45 am]
BILLING CODE 3510-DT-M