Notice2024-22549
Final Decision and Order
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 4, 2024
Issuing agencies
Commerce DepartmentIndustry and Security Bureau
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 193 (Friday, October 4, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 193 (Friday, October 4, 2024)]
[Notices]
[Pages 80857-80861]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-22549]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
Bureau of Industry and Security
[Docket Number: 24-TDO-0001]
Final Decision and Order
In the Matter of:
SkyTechnic, Kiyevskoye Shosse 22-Y, Moskovsky Settlement, Moscow,
Russia 108811;
Skywind International Limited, Room 2403A 24/F Lippo CTR Tower One,
89 Queensway, Admiralty, Hong Kong;
Hong Fan International, Shop 102, Level 1, One Exchange Square, Hong
Kong, and
Room A 11/F Henfa Commercial Building, 348-350 Lockhart Road, Hong
Kong, and
Vistra Corporate Services Centre, Wickhams Cay II, Road Town,
Tortola, British Virgin Islands;
Lufeng Limited, Room A 11/F Henfa Commercial Building, 348-350
Lockhart Road, Hong Kong, and
Vistra Corporate Services Centre, Wickhams Cay II, Road Town,
Tortola, British Virgin Islands;
Unical dis Ticaret Ve Lojistik JSC, 34140 Zeytinlik Mh. Halcki Sk,
Iten Han Gue Carsi Blok No 28/58, Bakirkoy, Istanbul, Turkey, and
Room A 11/F Henfa Commercial Building, 348-350 Lockhart Road, Hong
Kong;
Izzi Cup DOO, Koste Cukia 14, Zemun 200915, Serbia, and
Jl.Danau Tondano No. 55, 80228 Sanur--Bali, Indonesia;
Alexey Sumchenko, Hong Kong;
Anna Shumakova, Russia;
Branimir Salevic, Koste Cukia 14, Zemun 200915, Serbia, and
Jl.Danau Tondano No. 55, 80228 Sanur--Bali, Indonesia;
Danijela Salevic, Koste Cukia 14, Zemun 200915, Serbia, and
Jl.Danau Tondano No. 55, 80228 Sanur--Bali, Indonesia
AGENCY: Office of the Undersecretary for Industry and Security, Bureau
of Industry and Security, Commerce.
Before me for my final decision is a Recommended Decision (``RD'')
issued on September 4, 2024, by Administrative Law Judge (``ALJ'')
Tommy Cantrell. The RD recommends that I dismiss the appeal filed by
Alexey Sumchenko (``Sumchenko'') of the Temporary Denial Order
(``TDO'') issued against him on June 12, 2024. As discussed further
below, I accept the findings of fact and conclusions of law in the
ALJ's RD. As a result, Sumchenko's appeal is dismissed and the TDO
issued against him is affirmed.
I. Background
On June 12, 2024, the Assistant Secretary of Commerce for Export
Enforcement (``Assistant Secretary'') of the Bureau of Industry and
Security (``BIS'') issued a TDO against Sumchenko, Hong Fan
International (``Hong Fan''), Lufeng Limited (``Lufeng''), and Skywind
International Limited (``Skywind'')--three companies with which
Sumchenko was affiliated--and several other companies and individuals,
including SkyTechnic, a Russian aircraft parts supplier. 89 FR 51302.
The TDO states that SkyTechnic ``developed and continues to utilize a
network of Hong Kong-based shell companies, including Skywind, Hong
Fan, and Lufeng, to obtain civil aircraft parts from the United States
and obfuscate the ultimate end users of those parts in Russia, contrary
to the requirements of the [Export Administration Regulations (the
``EAR'' or the ``Regulations'')].'' Id.
On July 25, 2024, Sumchenko, through counsel, filed an appeal with
the U.S. Coast Guard ALJ Docketing Center pursuant to 15 CFR
766.24(e)(3) of the EAR. On July 29, 2024, the Chief ALJ assigned the
appeal to ALJ Cantrell. On August 20, 2024, BIS filed a response to the
appeal. ALJ Cantrell issued the RD on September 4, 2024,
[[Page 80858]]
which my office received on September 5, 2024. On September 6, 2024,
the BIS Appeals Coordinator requested views from the parties on
extending the time to issue my Final Decision in this appeal. Both
parties consented to an extension of time, and, on September 11, 2024,
I issued an Order extending the period of time to issue this Final
Decision to September 30, 2024.
II. Standard
Section 766.24 of the EAR authorizes 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)(l), (b)(4). The
Regulations require that the TDO define the imminent violation and
state why the TDO was issued without a hearing. Id. at Sec.
766.24(b)(2). Because all TDOs are public, ``the description of the
imminent violation and the reasons for proceeding on an ex parte basis
. . . shall be stated in a manner that is consistent with national
security, foreign policy, business confidentiality, and investigative
concerns. Id.
A violation may be imminent ``either in time or in degree of
likelihood.'' Id. at 766.24(b)(3). Accordingly, ``BIS may show a
violation is about to occur, or that the general circumstances of the
matter under investigation . . . demonstrate a likelihood of future
violations.'' Id. To establish the likelihood of a future violation,
``BIS may show that the violation under investigation . . . is
significant, deliberate, covert and/or likely to occur again, rather
than technical or negligent.'' Id.
The Regulations provide that a ``respondent may appeal [the
issuance of a TDO] on the grounds that the finding that the order is
necessary in the public interest to prevent an imminent violation is
unsupported.'' Id. at Sec. 766.24(e)(2).
III. Discussion
In his appeal, Sumchenko argues that there is no support for the
finding that the TDO against him is necessary to prevent an imminent
violation of the EAR. Sumchenko Appeal at 5. Specifically, Sumchenko
argues that the alleged misconduct outlined in the TDO occurred after
he relinquished ownership of Hong Fan, Lufeng, and Skywind, and that
there is no evidence that he was aware of or involved in the conduct
that occurred when he did own the companies. Sumchenko Appeal at 5-7.
The ALJ makes fourteen recommended findings of fact in the RD. RD
at 4-5. I accept these recommended findings of fact. Based on these
findings of fact, the ALJ concluded in the RD that BIS successfully
demonstrated the TDO against Sumchenko was necessary to prevent an
imminent violation of the EAR. RD at 8. For reasons discussed below, I
agree with the ALJ's conclusion.
First, the record shows that Sumchenko was the owner and director
of Hong Fan, Lufeng, and Skywind during 2022 and 2023. RD at 6.
Specifically, with respect to Hong Fan and Lufeng, Sumchenko was the
owner of these entities until he transferred his ownership interest in
June 2022. Sumchenko Appeal at 7 and Exs. E and F. He was a director of
Hong Fan and Lufeng until he resigned those positions in November 2022.
Sumchenko Appeal at 6. As noted in BIS's response to Sumchenko's
appeal, even though Sumchenko had transferred his ownership rights in
Hong Fan and Lufeng in June 2022, Sumchenko was identified as the
beneficial owner of bank accounts for Hong Fan and Lufeng until at
least September 2023. BIS Response at 5-6; RD at 4. For Skywind,
Sumchenko was a director and owner until he resigned his position and
transferred his ownership rights in Skywind in November 2023. Sumchenko
Appeal at 6; RD at 4.
Second, the record reflects that between June 2022 and March 2023,
Hong Fan, Lufeng, and Skywind were involved in transactions or
attempted transactions to deliberately obtain U.S.-origin aircraft
parts on behalf of Russian entities, and to conceal the true identities
of the Russian purchasers in those transactions, in violation of the
Regulations. RD at 8.
Third, as discussed above, during the time that Hong Fan, Lufeng
and Skywind were involved in violations of the EAR, Sumchenko was an
owner or director of these companies, or the beneficial owner of bank
accounts connected to these entities. Sumchenko argues in his appeal
that because he was no longer the owner of Hong Fan and Lufeng at the
time of some of the conduct at issue in the TDO, the ``sole
connection'' between the conduct outlined in the TDO as it relates to
those entities and Sumchenko ``has been broken.'' Sumchenko Appeal at
7. I find that the other connections established in the record, such as
Sumchenko's position as director of Hong Fan and Lufeng until November
2022 and his role as beneficial owner of bank accounts for these
companies until at least September 2023, are enough to connect
Sumchenko to the conduct that involved Hong Fan and Lufeng through
September 2023. As a result, I agree with the ALJ's conclusion that
Sumchenko shares responsibility for the conduct of Hong Fan, Lufeng,
and Skywind described in the TDO, which includes transactions
deliberately designed to evade the prohibitions of the EAR. RD at 8.
As discussed above, the Regulations allow BIS to issue a denial
order upon a showing that ``the order is necessary in the public
interest to prevent an imminent violation of [the EAR.]'' 15 CFR
766.24(b)(1). A violation may be considered ``imminent'' either in time
or ``or in degree of likelihood.'' Id. at Sec. 766.24(b)(3). BIS may
consider past participation in deliberate violations of the EAR as a
factor when deciding whether a person is likely to participate in
future violations of the EAR. See 15 CFR 766.24(b)(3). BIS has
established that Hong Fan, Lufeng, and Skywind were involved in
deliberate violations of the EAR, and that Sumchenko is responsible for
that conduct based on his various roles with these companies at the
time the conduct took place. As a result, I agree with the ALJ's
conclusion in the RD that, BIS has established additional violations
are ``imminent'' within the meaning of 15 CFR 766.24(b)(3), and that
the TDO against Sumchenko is necessary to prevent an imminent violation
of the EAR.
Sumchenko argued in his appeal that even if he was the owner and
director of companies that violated the EAR, BIS has not established
that he ``was involved in or even knew about those events.'' Sumchenko
Appeal at 6. The ALJ found this argument unpersuasive, and I find it
unpersuasive as well. As the ALJ notes, Sumchenko made no effort to
refute the allegations against Hong Fan, Lufeng, or Skywind. RD at 9.
Just as important, Sumchenko makes no effort to explain his role in
these companies or how each of these companies could have been involved
in a scheme to violate the EAR without his knowledge given his various
roles, including as owner or director. In addition, Sumchenko concedes
that in February 2023, he directed a third party to pay Lufeng
approximately $450,000. Sumchenko Appeal at 4. Sumchenko argues,
however, that ``it is not clear how directing `a third party to pay
Lufeng' indicates ownership or control over Lufeng.'' Id. Setting aside
the fact that Sumchenko only offers vague assurances ``based on
information and belief'' that the transaction was related to ``the
process of divestment that Mr. Sumchenko was undertaking at the time,''
Sumchenko offers no specific explanation for why he would direct a
third party to make payment to Lufeng if he no longer had an interest
in the
[[Page 80859]]
company. See Sumchenko Appeal at 5. And since Sumchenko was the
beneficial owner of a bank account for Lufeng at the time he instructed
the third party to transfer payment, his potential access to the funds
suggests his financial interest in Lufeng, including the receipt of any
benefits of the scheme to provide U.S.-origin parts to entities in
Russia without authorization, continued after he transferred his
ownership and resigned as director. Indeed, Sumchenko's efforts to
distance himself from Hong Fan and Lufeng via changes to corporate
paperwork, while at the same time maintaining control of related bank
accounts and directing payment to Lufeng, may have been part of an
attempt to evade detection. For these reasons, I agree with the ALJ's
conclusion that Sumchenko may be held responsible for the actions of
Hong Fan, Lufeng, and Skywind described in the TDO. RD at 9. I further
agree with the ALJ's conclusion that ``in the absence of the TDO,
nothing would prevent [Sumchenko] from creating new companies to engage
in the same violative conduct.'' RD at 10.
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, and 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.
Alan F. Estevez,
Under Secretary of Commerce for Industry and Security.
United States of America
Bureau of Industry and Security
Washington, D.C. 20230
In the Matter of:
SkyTechnic, Kiyevskoye Shosse 22-Y, Moskovsky Settlement, Moscow,
Russia 108811
Skywind International Limited, Room 2403A 24/F Lippo CTR Tower One,
89 Queensway, Admiralty, Hong Kong
Hong Fan International, Shop 102, Level 1, One Exchange Square, Hong
Kong, and
Room A 11/F Henfa Commercial Building, 348-350 Lockhart Road, Hong
Kong, and
Vistra Corporate Services Centre, Wickhams Cay II, Road Town,
Tortola, British Virgin Islands
Lufeng Limited, Room A 11/F Henfa Commercial Building, 348-350
Lockhart Road, Hong Kong, and
Vistra Corporate Services Centre, Wickhams Cay II, Road Town,
Tortola, British Virgin Islands
Unical dis Ticaret Ve Lojistik JSC, 34140 Zeytinlik Mh. Halcki Sk,
Iten Han Gue Carsi Blok No 28/58, Bakirkoy, Istanbul, Turkey, and
Room A 11/F Henfa Commercial Building, 348-350 Lockhart Road, Hong
Kong
Izzi Cup DOO, Koste Cukia 14, Zemun 200915, Serbia, and
Jl.Danau Tondano No. 55, 80228 Sanur--Bali, Indonesia
Alexey Sumchenko, Hong Kong
Anna Shumakova, Russia
Branimir Salevic, Koste Cukia 14, Zemun 200915, Serbia, and
Jl.Danau Tondano No. 55, 80228 Sanur--Bali, Indonesia
Danijela Salevic, Koste Cukia 14, Zemun 200915, Serbia, and
Jl.Danau Tondano No. 55, 80228 Sanur--Bali, Indonesia
Respondents
Docket Number: 24-TDO-0001
The Hon. Tommy Cantrell Administrative Law Judge
Recommended Decision and Order
This matter comes before me on Alexey Sumchenko's (Respondent)
appeal of the Order Temporarily Denying Export Privileges (TDO) issued
by the U.S. Department of Commerce Bureau of Industry and Security
(BIS), through its Office of Export Enforcement (OEE) on June 12, 2024.
OEE issued the TDO pursuant to the Export Administration Regulations
(EAR), specifically 15 CFR 766.24.\1\ After considering the evidence
and arguments presented by the parties, and in accordance with the
applicable law and regulations, I find BIS demonstrated the TDO is
necessary in the public interest to prevent an imminent violation of
the EAR, and I recommend the TDO be affirmed.
---------------------------------------------------------------------------
\1\ Title 15 CFR parts 730-774 (EAR), were promulgated under the
Export Administration Act of 1979 (EAA), formerly codified at 50
U.S.C. 4601-4623. Although the EAA expired on August 21, 2001, the
President, through Executive Order 13222 of August 17, 2001, and
through successive Presidential Notices, continued the EAR in full
force and effect under the International Emergency Economic Powers
Act (IEEPA), codified at 50 U.S.C. 1701, et seq. The EAA was
repealed in 2018, with the enactment of the Export Control Reform
Act (ECRA). See 50 U.S.C. Sec. 4826. The ECRA provides BIS with
permanent statutory authority to administer the EAR. The ECRA
specifically states that all administrative or judicial proceedings
commenced prior to its enactment are not disturbed by the new
legislation. See Id.
---------------------------------------------------------------------------
I. Procedural Background
On June 12, 2024, OEE issued a TDO against Respondent, preventing
him from participating in transactions subject to the EAR for 180 days.
On July 25, 2024, Respondent filed an appeal of the TDO. Thereafter,
the Chief Administrative Law Judge assigned this matter to me on July
29, 2024, for adjudication.\2\ On August 5, 2024, the parties filed a
stipulation extending BIS' deadline to submit a reply to the appeal.
BIS filed a reply to the appeal on August 20, 2024.
---------------------------------------------------------------------------
\2\ Pursuant to an interagency agreement, United States Coast
Guard (USCG) Administrative Law Judges are permitted to adjudicate
BIS cases.
---------------------------------------------------------------------------
Respondent's appeal included seven documentary exhibits (Exhibits
A-G), and a copy of the June 12, 2024, TDO (Ex. A). OEE's reply
included two exhibits (Exhibits 1-2).\3\ The record is now closed, and
the appeal is ripe for a recommended decision.
---------------------------------------------------------------------------
\3\ See Attachment A for a listing of exhibits.
---------------------------------------------------------------------------
II. Recommended Findings of Fact
1. Skywind International Limited (Skywind), Hong Fan Global Limited
(Hong Fan), and Lufeng Limited (Lufeng), are companies registered to do
business in Hong Kong. (Exs. B-D, respectively).
2. Respondent was an owner and director of Skywind, Hong Fan, and
Lufeng during 2022-2023. (Exs. A-G; Exs. 1-2).
3. Respondent transferred his ownership interest in and resigned
his position as director of Skywind on November 23, 2023. (Ex. G).
4. Respondent resigned his position as director of Hong Fan on
November 14, 2022, but remained a beneficial owner of Hong Fan until at
least September 6, 2023. (Exs. E, and 1).
5. Respondent resigned his position as director of Lufeng on
November 14, 2022, but remained a beneficial owner of Lufeng until at
least September 6, 2023. (Exs. F and 2).
6. SkyTechnic is an aircraft parts supplier based in Moscow,
Russia. (Ex. A at 3, 7).
7. During May and June 2022, Anna Shumakova, on behalf of
SkyTechnic, discussed with Izzi Cup (a company registered in Serbia)
methods of purchasing aircraft parts from the United States (U.S.) in
contravention of export controls, including by using Skywind as a straw
purchaser of the items. (Ex. A at 7).
8. In May 2022, Shumakova, on behalf of Skywind, informed a freight
forwarder Skywind would complete purchases of aircraft parts on behalf
of Pobeda Airlines, a Russian airline company that itself became the
subject of a TDO on June 24, 2022. (Ex. A at 7).
9. In June 2022, SkyTechnic began using Hong Fan to facilitate the
purchase of aircraft parts from the U.S. (Ex. A at 7).
[[Page 80860]]
10. Also in June 2022, Lufeng engaged in a transaction with Izzi
Cup and served as the straw purchaser on an invoice for aircraft parts
meant for SkyTechnic. (Ex. A at 8).
11. In October 2022, Hong Fan attempted to ship aircraft parts to
the Maldives for Euro Asia. Euro Asia had a sales relationship with
Aeroflot-Russian Airlines (Aeroflot), a company that itself became the
subject of a TDO on April 7, 2022. (Ex. A at 7-8; see PJSC Aeroflot, 1
Arbat St., 119019, Moscow, Russia; Order Temporarily Denying Export
Privileges, 87 FR 21611 (Apr. 12, 2022)).
12. In November 2022, Hong Fan worked with a freight forwarder to
facilitate the purchase of aircraft parts for Pobeda Airlines, and the
associated invoice was issued to SkyTechnic. (Ex. A at 8).
13. In February 2023, Respondent directed a third party to pay
Lufeng approximately $450,000.00 for services rendered to Skywind. (Ex.
A at 5).
14. During February and March 2023, Hong Fan served as a straw
purchaser for SkyTechnic, for the export of aircraft parts from the
U.S., which were ultimately delivered to Aeroflot in Russia. (Ex. A at
8).
III. Opinion and Recommended Conclusions of Law
BIS issues and enforces the EAR ``under laws relating to the
control of certain exports, reexports, and activities.'' 15 CFR 730.1.
The EAR is ``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, BIS may request the EEO issue a TDO on an ex parte basis. 15
CFR 766.24(a). A TDO is valid for a maximum of 180 days and the
Assistant Secretary may renew a TDO in additional 180-day increments as
deemed necessary. 15 CFR 766.24(b)(4), (d)(4).
A violation may be imminent ``either in time or in degree of
likelihood.'' 15 CFR 766.24(b)(3). Accordingly, BIS may attempt to show
``a violation is about to occur, or that the general circumstances of
the matter under investigation . . . demonstrate a likelihood of future
violations.'' Id. With respect to demonstrating the likelihood of
future violations, BIS ``may show that the violation under
investigation . . . is significant, deliberate, covert and/or likely to
occur again, rather than technical or negligent . . .'' Id. Ultimately,
to obtain a TDO against a respondent, BIS must show ``the order is
necessary in the public interest to prevent an imminent violation'' of
the EAR. 15 CFR 766.24(b)(1). Conversely, to prevail on appeal, a
respondent must show ``the finding that the order is necessary in the
public interest to prevent an imminent violation is unsupported.'' 15
CFR 766.24(e)(2).
A. BIS Demonstrated Likelihood of Imminent Violation
The June 12, 2024, TDO set forth facts showing a likelihood
Respondent would imminently violate the EAR unless his export
privileges were revoked. It established that BIS implemented a license
requirement for the export to Russia of any aircraft or aircraft parts
listed in Export Control Classification Number (ECCN) 9A991 on February
24, 2022. (Ex. A at 4). See Implementation of Sanctions Against Russia
Under the Export Administration Regulations (EAR), 87 FR 12226 (Mar. 3,
2022) (to be codified at 15 CFR parts 734, 738, 740, 742, 744, 746, and
772). On March 2, 2022, BIS excluded any aircraft registered in, owned,
or controlled by, or under charter or lease by Russia, or a national of
Russia, from being eligible for license exception Aircraft, Vessels,
and Spacecraft (AVS). (Ex. A at 5). See Imposition of Sanctions Against
Belarus Under the Export Administration Regulations (EAR), 87 FR 13048
(Mar. 8, 2022) (to be codified at 15 CFR parts 734, 738, 740, 742, 744,
and 746). The TDO then established that after those dates, companies
owned and controlled by Respondent acted to subvert these export
controls to obtain prohibited aircraft parts for Russian companies.
Specifically, the record shows Respondent was an owner and director
of Skywind International Limited (Skywind), Hong Fan Global Limited
(Hong Fan), and Lufeng Limited (Lufeng), during 2022-2023. (Exs. A-G;
Exs. 1-2). Skywind, Hong Fan, and Lufeng are, and at all times relevant
were, companies registered to do business in Hong Kong. (Exs. A-D).
During May and June 2022, Anna Shumakova, on behalf of a Russian
aircraft parts company called SkyTechnic, discussed with Izzi Cup, a
company registered in Serbia, methods of purchasing aircraft parts from
the U.S. in contravention of export controls, including using Skywind
as a straw purchaser of the items. (Ex. A at 7). In May 2022,
Shumakova, on behalf of Skywind, informed a freight forwarder that
Skywind would purchase aircraft parts on behalf of Pobeda Airlines, a
Russian airline company that itself became the subject of a TDO on June
24, 2022. (Ex. A at 7). See Pobeda Airlines, 108811, Russian
Federation, Moscow, p. Moskovskiy Kievskoe shosse 22nd km, 4/1. Moscow,
Russia; Order Temporarily Denying Export Privileges, 87 FR 38707 (Jun.
29, 2022). Then in June 2022, SkyTechnic began using Hong Fan to
facilitate the purchase of aircraft parts from the U.S. (Ex. A at 7).
And in June 2022, Lufeng served as the straw purchaser on an invoice
for aircraft parts meant for SkyTechnic. (Ex. A at 8).
In October 2022, Hong Fan attempted to facilitate the purchase of
aircraft parts for Euro Asia, a company with a sales relationship with
Aeroflot-Russian Airlines (Aeroflot), a company that itself became the
subject of a TDO on April 7, 2022. (Ex. A at 7-8). See PJSC Aeroflot, 1
Arbat St., 119019, Moscow, Russia; Order Temporarily Denying Export
Privileges, 87 FR 21611 (Apr. 12, 2022). In November 2022, Hong Fan
worked with a freight forwarder to facilitate the purchase of aircraft
parts for Pobeda Airlines, and the associated invoice was issued by
SkyTechnic. (Ex. A at 8). During February and March 2023, Hong Fan
served as a straw purchaser for SkyTechnic, for the export of aircraft
parts from the U.S. which were ultimately delivered to Aeroflot in
Russia. (Ex. A at 8).
Pursuant to the regulations governing these proceedings, a TDO is
appropriate to prevent an imminent violation of the EAR. 15 CFR
766.24(b)(1). To show a violation is ``imminent,'' BIS may demonstrate
a temporal proximity to a future violation or may show ``that the
general circumstances of the matter . . . demonstrate a likelihood of
future violations.'' 15 CFR 766.24(b)(3). In this regard, ``BIS may
show that the violation under investigation or charges is significant,
deliberate, covert and/or likely to occur again, rather than technical
or negligent . . .'' 15 CFR 766.24(b)(3). Here, the TDO clearly set out
numerous instances of violations of the export controls imposed on
February 24 and March 2, 2022, wherein the violations were not
technical, but deliberate. For example, the TDO set forth in May and
June of 2022, SkyTechnic discussed with Izzi Cup a strategy for
obtaining U.S.-origin aircraft parts by placing Skywind on the invoice
as the purchaser. (Ex. A at 7). The TDO then set forth numerous
instances between June and November 2022 in which Skywind, Hong Fan,
and Lufeng engaged in transactions to deliberately obtain U.S.-origin
aircraft parts and conceal the actual purchasers (Russian companies).
(Ex. A at 7-8).
Respondent led the companies that engaged in these violations, and
thus Respondent shares responsibility for those violations. Having
shown Respondent already violated the EAR in a deliberate manner, BIS
successfully
[[Page 80861]]
demonstrated that further violations were ``imminent'' within the
meaning of 15 CFR 766.24, and an order temporarily denying Respondent's
export privileges would be necessary to prevent them.
B. Respondent's Argument and Evidence Did Not Diminish BIS' Case
As stated above, Respondent must show there is no support for the
finding the TDO is necessary to prevent an imminent violation of the
EAR. 15 CFR 766.24(e)(2). In his appeal, Respondent presented seven
exhibits, one of which was a copy of the June 12, 2024, TDO (Ex. A);
the remaining six exhibits were business records showing Respondent's
transfer of ownership in and resignation as director of Skywind, Hong
Fan, and Lufeng. (Exs. B-G). With these exhibits as support, Respondent
makes two arguments. He first argues a TDO is not necessary to prevent
him from imminently violating the EAR because he is no longer an owner
or director of Skywind, Hong Fan, and Lufeng. Specifically, Respondent
argues the TDO ``addresses alleged violations that occurred after
February 2022,'' and that Respondent ``was divesting his ownership and
resigning'' from the companies during 2022 and 2023. (Appeal at Para.
14). Respondent asserts his ``ownership of the companies is the only
allegation that purportedly ties him to the alleged violations
described in the TDO.'' (Appeal at Para. 14). I am not persuaded.
First, I note Respondent never challenged the truth of the
allegations of the TDO, he merely distances himself from the conduct by
stating he gave up ownership of two of the companies (Hong Fan and
Lufeng) by June 2022. (Appeal at Paras. 15, 16). Respondent
conveniently ignores his own exhibits, which show he was still director
of the companies until November 14, 2022. (Exs. E, F).
Respondent's exhibits also show he remained in control, as owner
and director, of Skywind until November 23, 2023. (Ex. G). Despite
Respondent's claim that he relinquished control of Hong Fan and Lufeng
by November 14, 2022, BIS presented exhibits in its reply showing
Respondent was listed as a beneficial owner of Hong Fan and Lufeng
until at least September 6, 2023. (Exs. E, F; Exs. 1, 2). The TDO set
forth numerous violations of the EAR committed by Skywind, Hong Fan,
and Lufeng that occurred from May through November 2022, while
Respondent was, by both his and BIS' claims, owner and director of the
companies. (Ex. A at 7-8). As the director and owner of these
companies, it is reasonable to conclude an order proscribing
Respondent's export privileges is necessary to prevent future
violations.
Respondent alternatively argues even if he was in control of the
companies while they were engaged in the illicit conduct, the TDO does
not prove he ``was involved in or even knew about those events.''
(Appeal at Para. 14). I find this argument unpersuasive. As owner and
director of the companies, Respondent's role imparts responsibility on
him for the actions of the company. See Faour v. U.S. Dept. of
Agriculture, 985 F.2d 217 (5th Cir. 1993) (petitioner was responsibly
connected to actions of company because he was an officer, director,
and owner of stock during time that company committed repeated
violations of the law). Respondent did not refute any allegations of
violative conduct in the TDO, but instead only demonstrated he has
executed paperwork to divest from the companies. In the absence of the
TDO, nothing would prevent Respondent from creating new companies to
engage in the same violative conduct.
Wherefore,
ORDER
It is hereby recommended the Temporary Denial Order be affirmed.
Done and dated September 4, 2024, at Houston, Texas
[GRAPHIC] [TIFF OMITTED] TN04OC24.001
The Hon. Tommy Cantrell,
Administrative Law Judge, United States Coast Guard.
Attachment A: Exhibit List
Attachment A
Respondent's Exhibits
Exhibit A: Temporary Denial Order issued Jun. 12, 2024
Exhibit B: Company Particulars--Skywind International Limited
Exhibit C: Company Particulars--Hong Fan Global Limited
Exhibit D: Company Particulars--Lufeng Limited
Exhibit E: Resignation and transfer instruments--Hong Fan
Exhibit F: Resignation and transfer instruments--Lufeng
Exhibit G: Resignation and transfer instruments--Skywind
BIS Exhibits
Exhibit 1: Sep. 6, 2023, email re: Hong Fan
Exhibit 2: Sep. 6, 2023, email re: Lufeng
Certificate of Service
I hereby certify that I have transmitted the above document to the
following persons, as indicated below:
ALJ Docketing Center, U.S Custom House, Email:
<a href="/cdn-cgi/l/email-protection#3c5d505658535f5759485f595248594e7c494f5f5b12515550"><span class="__cf_email__" data-cfemail="95f4f9fff1faf6fef0e1f6f0fbe1f0e7d5e0e6f6f2bbf8fcf9">[email protected]</span></a>, Phone: (410) 962-5100, Sent by email
Gregory Michelsen, Esq., Tristan de Vega, Esq., Office of Chief Counsel
for BIS, U.S. Dept. of Commerce, Sent by email
George Benaur, Esq., Benaur Law LLC, Sent by email
Done and dated September 4, 2024, at Houston, Texas
[GRAPHIC] [TIFF OMITTED] TN04OC24.002
Ericka J. Pollard,
Paralegal Specialist to The Hon. Tommy Cantrell Administrative Law
Judge United States Coast Guard
[FR Doc. 2024-22549 Filed 10-3-24; 8:45 am]
BILLING CODE 3510-DT-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on October 4, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.