In the Matter of: Petrom GmbH International Trade, Maria-Theresa Strasse 26, Munich 81675, Germany, Respondent; Decision and Order, 32743-32756 [05-10983]

Agencies

• DEPARTMENT OF COMMERCE
• Bureau of Industry and Security
• Industry and Security Bureau

[Federal Register Volume 70, Number 107 (Monday, June 6, 2005)]
[Notices]
[Pages 32743-32756]
From the Federal Register Online via the Government Printing 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].''
---------------------------------------------------------------------------

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 La