Notice2023-22434
In the Matter of: Southwind Airlines, Appellant; Final Decision and Order
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Published
October 11, 2023
Issuing agencies
Commerce DepartmentIndustry and Security Bureau
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<title>Federal Register, Volume 88 Issue 195 (Wednesday, October 11, 2023)</title>
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[Federal Register Volume 88, Number 195 (Wednesday, October 11, 2023)]
[Notices]
[Pages 70414-70417]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-22434]
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Notices
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Federal Register / Vol. 88, No. 195 / Wednesday, October 11, 2023 /
Notices
[[Page 70414]]
DEPARTMENT OF COMMERCE
Bureau of Industry and Security
[Docket Number: 23-BIS-TDO2]
In the Matter of: Southwind Airlines, Appellant; Final Decision
and Order
Before me for my final decision is a Recommended Decision (RD)
issued by Administrative Law Judge (ALJ) Tommy Cantrell on August 24,
2023, and received by my office on August 25, 2023. The RD recommends
that this appeal filed by Cortex Havacilik ve Turizm Ticaret Anonim
Sirketi d/b/a Southwind Airlines (Southwind) be dismissed. As further
discussed below, I accept the findings of fact and conclusions of law
made by the ALJ in his RD.
I. Background
Southwind appeals a Temporary Denial Order (TDO) temporarily
denying the export privileges of Nordwind Airlines (Nordwind), first
issued by the Assistant Secretary of Commerce for Export Enforcement
(Assistant Secretary) of the Bureau of Industry and Security (BIS or
the Agency) on June 24, 2022, 87 FR 38704. The Export Administration
Regulations (EAR or Regulations) at 15 CFR 766.24 authorize the
Assistant Secretary to issue a TDO for a period of up to 180 days to
prevent an ``imminent violation'' of the Regulations. 15 CFR
766.24(b)(1), (b)(4). Moreover, a TDO may be made applicable to
``related persons'' in accordance with Sec. 766.23 of the Regulations.
The Agency subsequently renewed the TDO against Nordwind twice, on
December 20, 2022, 87 FR 79725, and June 15, 2023, 88 FR 40202. Upon
the second renewal, the Agency added OOO Pegas Touristik (Pegas) as a
related person to the TDO, then modified the TDO on June 27, 2023, to
remove Pegas as a related person, 88 FR 42290.
On August 8, 2023, Southwind, through counsel, filed an appeal with
the U.S. Coast Guard ALJ Docketing Center (Docketing Center) pursuant
to 15 CFR 766.23(c) of the EAR. After assignment of the matter to an
ALJ by the Docketing Center on August 14, 2023, BIS filed a response to
the appeal on August 21, 2023. On August 24, 2023, ALJ Cantrell issued
the RD, which my office received on August 25, 2023. On August 31,
2023, the BIS Appeals Coordinator requested views from the parties on
an extension of time to issue my Final Decision in this appeal. Both
parties consented, and on August 31, 2023, I issued an Order extending
the period of time to issue this Final Decision to September 29, 2023.
II. Standard
As described above, Sec. 766.24(b) of the Regulations addresses
the Assistant Secretary's authority to issue TDOs. To issue a TDO, BIS
must make a showing that the order is necessary in the public interest
to prevent an ``imminent violation'' of the Regulations. 15 CFR
766.24(b)(1). The Regulations authorize the issuance of a TDO on an ex
parte basis but require that the order define the imminent violation
and state why it was issued without a hearing. Id. at Sec.
766.24(b)(2). BIS also has the authority to renew the TDO for
additional periods. Id. at Sec. 766.24(d)(1).
To prevent evasion of the TDO, the Assistant Secretary may apply
the terms of the TDO to ``related persons,'' that is, ``other persons
then or thereafter related to the respondent by ownership, control,
position of responsibility, affiliation, or other connection in the
conduct of trade or business.'' Id. at Sec. 766.23(a). When seeking to
add a related person to a denial order, ``BIS shall, except in an ex
parte proceeding under Sec. 766.24(a) of this part,'' give that person
notice and an opportunity to oppose such an action. Id. at Sec.
766.23(b).
``Related persons'' may not oppose the issuance or renewal of a
TDO, but may file an appeal with an ALJ, who issues an RD for the
review of the Under Secretary in accordance with Sec. 766.24(e) of the
Regulations. See id. at Sec. Sec. 766.23(c)(2)(ii), 766.24(d)(3)(ii).
For appeals by related persons, the Regulations provide that the ``sole
issues to be raised and ruled on in any such appeal are whether the
person so named is related to the respondent and whether the order is
justified in order to prevent evasion.'' Id. at Sec. 766.23(c).
III. Discussion
Southwind's appeal specifically requests that an Order be issued
``that the [Nordwind] TDO Renewal be withdrawn and that BIS issue an
order affirmatively reinstating the status quo as it existed prior to
June 15, 2023, and making it clear that companies may continue to
transact with Southwind Airlines.'' Southwind Appeal at 18. The limited
scope of the appeal under Sec. 766.23 (c) of the Regulations prevents
me from doing as Southwind requests.
The ALJ makes twelve recommended findings of fact in the RD. RD at
3-4. I accept these recommended findings of fact.
Regarding the first conclusion of law in the RD, I agree that
Southwind is not a ``related person'' with standing to bring an appeal
pursuant to 15 CFR 766.23. Southwind alleges that it suffered harm as a
result of the June 15, 2023, TDO, which stated, in relevant part, that
BIS's Office of Export Enforcement ``has reason to believe that Pegas
has made additional efforts to evade export controls on Russia in part
by entering into charter agreements with a Turkish airline that started
shortly after the imposition of stringent Russia-related export
controls [. . .] for international flights into Russia on U.S. origin
aircraft without the required BIS authorization.'' BIS Ex. 1 at 7. This
language was removed in the June 27, 2023, modified TDO issued against
Nordwind only.
Southwind concedes that BIS did not name Southwind Airlines as a
related person subject to the terms of the TDO but alleges that the
language in the TDO was sufficiently detailed to identify Southwind as
the ``Turkish airline'' that ``entered into charter agreements'' with
Pegas in support of its efforts to evade U.S. export controls on
Russia. Southwind Appeal at 12. According to Southwind, this language
has had the same effect on Southwind as if it had actually been named
as a related person. Southwind states that the interpretation of this
language by a key business partner, Pratt & Whitney, led Pratt &
Whitney to cease support of engines aboard aircraft leased by
Southwind, jeopardizing its business operations. Id. at 2.
Nevertheless, BIS has never named Southwind as a related person subject
to the Nordwind TDO. Nor, as observed in
[[Page 70415]]
the RD, does a mere inference by a business partner that Southwind is
the unnamed ``Turkish airline'' described in the TDO render Southwind a
related person with standing to appeal the Nordwind TDO. RD at 5. As
such, Southwind does not have appeal rights under Sec. 766.23(c),
which provides only ``persons named by BIS in an order as related to
the respondent'' an avenue for appeal.
Regarding the second conclusion of law in the RD, I agree that
Southwind seeks relief outside the scope of 15 CFR 766.23. The
Regulations limit the scope of the appeal to two issues: whether the
related person is indeed related to the respondent subject to the TDO--
Nordwind in this case--and whether the TDO is justified to prevent
evasion. 15 CFR 766.23(c). Southwind's request that BIS withdraw the
June 15, 2023, TDO and issue an order removing the reference to the
``Turkish airline'' and clarifying that Southwind did not engage in any
EAR violations does not fall within the scope of appeal as outlined in
Sec. 766.23(c). The ALJ has concluded that he cannot direct BIS to
provide this requested relief to Southwind; I agree.
IV. Conclusion and Order
Based on my review of the record, I accept the findings of fact and
conclusions of law made by the ALJ in his RD. I also confirm that
Southwind has never been a party to the Nordwind TDO, and therefore has
never been subject to the license requirements and prohibitions in the
Nordwind TDO. Moreover, I confirm that as of the date of issuance of
this Final Decision and Order, Southwind is not listed on the BIS
Denied Persons List. Accordingly, it is therefore ordered:
First, that this appeal is dismissed.
Second, that this Final Decision and Order shall be served on
Appellants and on BIS and shall be published in the Federal Register.
In addition, the ALJ's Recommended Decision shall also be published in
the Federal Register.
This Order, which constitutes the Department's final decision with
regard to this appeal, is effective immediately.
Dated: September 29, 2023.
Alan F. Estevez,
Under Secretary of Commerce for Industry and Security.
UNITED STATES DEPARTMENT OF COMMERCE
BUREAU OF INDUSTRY AND SECURITY
WASHINGTON, DC 20230
In the Matter of: Southwind Airlines, Southwind Airlines,
Appellant.
Docket No.: 23-TDO-0002
RECOMMENDED DECISION
Issued by: Honorable Tommy Cantrell, Administrative Law Judge
Issued: August 24, 2023
On August 8, 2023, Cortex Havacilik ve Turizm Ticaret Anonim
Sirketi d/b/a Southwind Airlines (Southwind) filed an appeal pursuant
to 15 CFR 766.23(c) of the Export Administration Regulations (EAR).\1\
Specifically, Southwind asks that I issue an order directing BIS to
withdraw a June 15, 2023, Temporary Denial Order (TDO) issued to
Nordwind Airlines. Southwind also asks that I issue an order ``removing
the reference to the Turkish airline and clarifying it has no reason to
believe this Company is engaged in any violations of the EAR.'' (Appeal
at 3). For the reasons set forth herein, I recommend this appeal be
dismissed.
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\1\ I note Southwind also submitted an appeal to the
Undersecretary of Commerce for Industry and Security pursuant to 15
CFR 756.2 on August 7, 2023. (Appeal at 8).
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Background
On June 15, 2023, the Assistant Secretary of Commerce for Export
Enforcement (Assistant Secretary) renewed a TDO to Russian airline
Nordwind Airlines pursuant to 15 CFR 766.24. (BIS Ex. 1).\2\ The
renewed TDO added the corporation Pegas Touristik a/k/a Pegas Touristik
OOO (Pegas) as a related person in accordance with 15 CFR 766.23. Id.
Furthermore, the TDO stated the Office of Export Enforcement (OEE)
``has reason to believe that Pegas has made additional efforts to evade
export controls on Russia in part by entering into charter agreements
with a Turkish airline that started shortly after the imposition of
stringent Russia-related export controls.'' Id. (emphasis added).
However, nothing in the TDO named the Turkish airline.
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\2\ ``BIS Ex.'' references the exhibits attached to BIS's
response dated August 21, 2023.
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Thereafter, on June 27, 2023, the Assistant Secretary removed Pegas
from the Nordwind TDO. (BIS Ex. 2). On July 28, 2023, Southwind
contacted BIS and informed BIS, Pratt & Whitney, a business partner,
inferred that Southwind was the ``Turkish airline'' described in the
TDO. (Ex. 1).\3\ In response to this exchange, BIS provided Southwind
with an email confirming it was not ``on the BIS Entity List or Denied
Persons List.'' (Exs. 15, 16, 17). However, according to Southwind,
this did not resolve the misunderstanding regarding its operations.
(Ex. 14 at 3).
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\3\ ``Ex.'' refers to the exhibits attached to Southwind's
appeal dated August 8, 2023.
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On August 8, 2023, Southwind filed this appeal with the United
States Coast Guard Administrative Law Judge Docketing Center (Docketing
Center).\4\ The appeal letter includes 25 exhibits. On August 14, 2023,
the Docketing Center assigned this case to me for adjudication. BIS
submitted its response to the appeal on August 21, 2023, and included 3
exhibits. The record is now closed and the appeal is ripe for decision.
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\4\ Pursuant to an interagency agreement, United States Coast
Guard Administrative Law Judges are permitted to adjudicate BIS
cases.
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Recommended Findings of Fact
1. On June 15, 2023, the Assistant Secretary renewed a Temporary
Denial Order (TDO) issued to Russian airline Nordwind Airlines. (BIS
Ex. 1). BIS renewed the Nordwind TDO pursuant to 15 CFR 766.24 to
prevent an ``imminent violation'' of the Export Administration
Regulations (EAR). Id.
2. The renewed TDO added Pegas as a related person and stated the
OEE ``has reason to believe that Pegas has made additional efforts to
evade export controls on Russia in part by entering into charter
agreements with a Turkish airline that started shortly after the
imposition of stringent Russia-related export controls . . . for
international flights into Russia on U.S.-origin aircraft without the
required BIS authorization.'' (BIS Ex. 1).
3. Southwind's business partner Pratt & Whitney inferred Southwind
was the ``Turkish airline'' referenced in the TDO and stopped providing
support to Southwind's aircraft engines. (Ex. 1).
4. On June 27, 2023, following discussions between Pegas and BIS,
the Assistant Secretary issued a modified TDO removing Pegas as a
related person. (BIS Ex. 2).
5. The modified TDO states ``Pegas Touristik should be removed from
the TDO to allow the opportunity for additional administrative process
under Part 766 of the Regulations.'' (BIS Ex. 2).
6. On June 28, 2023, counsel for Southwind informed BIS ``problems
are mounting for the company given the language in the [modified]
TDO.'' (Ex. 14, p. 3). Counsel noted Pegas' removal from the TDO did
not ``resolve the misunderstanding'' regarding Southwind's operations.
(Ex. 14, p. 3).
7. Southwind reiterated its issues to BIS on multiple occasions in
late July 2023. (Ex. 16). It requested BIS provide an email Southwind
could forward to Pratt & Whitney to ``assuage their concerns that BIS
would find a violation if they serviced the engines.'' (Ex. 16).
[[Page 70416]]
8. On July 24, 2023, Southwind responded to a number of questions
from BIS regarding the ownership and operation of the company. (Ex.
15).
9. On July 28, 2023, the Office of Chief Counsel for Industry and
Security sent Southwind an email confirming ``neither Southwind nor
Cortex Havacilik VE TUR TIC. A.C. are on the BIS Entity List or Denied
Persons List.'' (Ex. 17).
10. The email further states: ``[N]o Southwind aircraft are
currently on the list of aircraft identified on BIS's website as having
operated in apparent violation of U.S. export controls on Russia.
However, this list of aircraft is not exhaustive, and the restrictions
also apply in any situation in which a person has knowledge that a
violation of the EAR has occurred, is about to occur, or is intended to
occur in connection with an aircraft or other item that is subject to
the EAR, whether or not such aircraft or other item is included on
BIS's website.'' (Ex. 17).
11. Southwind forwarded the BIS email to Pratt & Whitney on July
28, 2023. (Ex. 18).
12. On August 2, 2023, Pratt & Whitney restored access to the ``P&W
Engine Wise Connect Portal and the applications accessed through the
portal'' but noted ``the Engine Health Monitoring/ADEM application will
again be functional, however, no engine data is being transmitted.''
(Ex. 18).
Opinion and Recommended Conclusions of Law
BIS regulations related to export administration are issued ``under
laws relating to the control of certain exports, reexports, and
activities.'' 15 CFR 730.1.\5\ These export control provisions ``are
intended to serve the national security, foreign policy,
nonproliferation of weapons of mass destruction, and other interests of
the United States.'' 15 CFR 730.6. To prevent an imminent violation of
the EAR, the Assistant Secretary may issue a TDO on an ex parte basis.
15 CFR 766.24(a). The TDO ``will deny export privileges to any person
named in the order as provided for in Sec. 764.3(a)(2) of the EAR.''
15 CFR 766.24(a). The order is valid for 180 days, but the Assistant
Secretary may renew it, more than once, in additional 180-day
increments. 15 CFR 766.24(b)(4), 766.24(d)(4). The Assistant Secretary
may also modify or amend a TDO. 15 CFR 766.24(d), 766.23(b).
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\5\ The EAR primarily relate to the implementation of the Export
Administration Act of 1979. 15 CFR 730.2.
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To prevent evasion of the TDO, the Assistant Secretary may apply
the order ``not only to the respondent, but also to other persons then
or thereafter related to the respondent by ownership, control, position
of responsibility, affiliation, or other connection in the conduct of
trade or business.'' 15 CFR 766.23(a), 766.24(c). When adding a related
person to an order affecting export privileges, ``BIS shall, except in
an ex parte proceeding under Sec. 766.24(a)'' give that person notice
and an opportunity to oppose the action. 15 CFR 766.23(b).
Where the Assistant Secretary issues or renews a TDO on an ex parte
basis pursuant to 15 CFR 766.24, persons ``designated as a related
person may not oppose the issuance or renewal of the temporary denial
order, but may file an appeal in accordance with Sec. 766.23(c).'' 15
CFR 766.24(d)(3)(ii). In such an appeal, the ``sole issues to be raised
and ruled on . . . are whether the person so named is related to the
respondent and whether the order is justified in order to prevent
evasion.'' 15 CFR 766.23(c). An administrative law judge then submits a
recommended decision to the Under Secretary for Industry and Security
``recommending whether the issuance or the renewal of the temporary
denial order should be affirmed, modified, or vacated.'' 15 CFR
766.24(e)(4).
Having outlined the relevant regulations governing this appeal, I
now turn to the facts of the case and conclude Southwind has no
standing to bring this appeal pursuant to 15 CFR 766.23(c) as it was
not named by BIS as a related person. I also conclude the relief
Southwind seeks is outside the scope of an appeal as set forth in 15
CFR 766.23(c).
1. Southwind Is Not a ``Related Person'' With Standing To Bring an
Appeal Pursuant to 15 CFR 766.23
As a preliminary matter, BIS did not name Southwind as a related
person when it renewed the Nordwind TDO on June 15, 2023. It simply did
not apply the Nordwind TDO to Southwind. Pratt & Whitney inferred
Southwind was the ``Turkish airline'' associated with Pegas, a
corporation designated by BIS as related to Nordwind. But this
inference does not render Southwind a related person with standing to
appeal the Nordwind TDO. See 15 CFR 766.23(c) (``Any person named by
BIS in an order as related to the respondent may appeal that action'')
(emphasis added).\6\
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\6\ It also follows that because Southwind was not named as a
related person, the regulations did not require BIS to give it
notice and an opportunity to oppose the renewal of the TDO. 15 CFR
766.23(b). This is especially true in the present case, where BIS
issued and renewed the TDO on an ex parte basis pursuant to 15 CFR
766.24. See 15 CFR 766.24(d)(3)(ii) (where TDO is issued or renewed
on ex parte basis, related persons ``may not oppose the issuance or
renewal of the TDO but may file an appeal in accordance with Sec.
766.23(c)''); 15 CFR 766.23(b).
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2. Southwind Seeks Relief Outside the Scope of 15 CFR 766.23
Even if BIS had named Southwind as a related person with standing
to bring this appeal, Southwind seeks relief outside the scope of such
an appeal. 15 CFR 766.23(c). The regulations specifically limit the
appeal to two issues: whether Southwind is related to Nordwind and
whether the TDO is justified in order to prevent evasion. 15 CFR
766.23(c). Southwind does not ask me to rule on either issue, and even
so, the record shows there is no current TDO naming Southwind as a
related person that I could affirm, modify, or vacate as part of this
appeal.\7\
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\7\ As noted above, the June 28, 2023, modification removed
Pegas as a related person. (BIS Ex. 2). I cannot rule on whether the
June 15, 2023, TDO, which is no longer in effect and which did not
name Southwind as a related party, was justified to prevent evasion
of the Nordwind TDO.
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Southwind instead asks that I direct BIS to (1) withdraw the June
15, 2023, TDO, and (2) issue an order removing the reference to the
``Turkish airline'' and clarifying Southwind did not engage in any
violations of the EAR. Southwind seeks to reinstate ``the status quo
prior to June 15, 2023, making it clear that companies may continue to
transact with Southwind Airlines.'' (Appeal, p. 12). I cannot direct
BIS to provide this relief to Southwind.
I note, however, BIS emailed Southwind on July 28, 2023,
definitively stating the company is not on the BIS Entity List or
Denied Persons List, and none of Southwind's aircraft are ``on the list
of aircraft identified on BIS's website as having operated in apparent
violation of U.S. export controls on Russia.'' (Ex. 17). Furthermore,
the current version of the Nordwind TDO, published on the Federal
Registry on July 30, 2023, does not prohibit any company from
transacting with Southwind. (BIS Ex. 2).
In light of the above, I recommend Southwind's appeal be dismissed.
Done and dated this 24th day of August 2023, at Galveston,
Texas.
[[Page 70417]]
[GRAPHIC] [TIFF OMITTED] TN11OC23.002
Certificate of Service
I hereby certify that I have served by electronic mail the
foregoing Recommended Decision to Dismiss Appeal upon the following:
Gregory Michelsen, Esq., Andrea Duvall, Esq., Attorneys for Bureau of
Industry and Security, Office of Chief Counsel for Industry and
Security, U.S. Department of Commerce (Sent via electronic mail)
Wendy Wysong, Esq., Ali Burney, Esq., Steptoe & Johnson HK LLP,
Attorneys for Respondent (Sent via electronic mail)
U.S. Coast Guard, ALJ Docketing Center, Attn: Hearing Docket Clerk
(Sent via electronic mail)
I hereby certify that I have forwarded by Express Courier the
foregoing Recommended Decision to Dismiss Appeal and the case file upon
the following:
Alan F. Estevez, Under Secretary for Industry and Security, Bureau of
Industry and Security, U.S. Department of Commerce (Sent via Fed Ex)
Done and dated August 24, 2023, at Galveston, Texas.
[GRAPHIC] [TIFF OMITTED] TN11OC23.003
[FR Doc. 2023-22434 Filed 10-10-23; 8:45 am]
BILLING CODE 3510-DT-P
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