In the Matter of: Southwind Airlines, Appellant; Final Decision and Order, 70414-70417 [2023-22434]

Agencies

• DEPARTMENT OF COMMERCE
• Bureau of Industry and Security

[Federal Register Volume 88, Number 195 (Wednesday, October 11, 2023)]
[Notices]
[Pages 70414-70417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-22434]


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Federal Register / Vol. 88, No. 195 / Wednesday, October 11, 2023 / 
Notices

[[Page 70414]]



DEPARTMENT OF COMMERCE

Bureau of Industry and Security

[Docket Number: 23-BIS-TDO2]


In the Matter of: Southwind Airlines, Appellant; Final Decision 
and Order

    Before me for my final decision is a Recommended Decision (RD) 
issued by Administrative Law Judge (ALJ) Tommy Cantrell on August 24, 
2023, and received by my office on August 25, 2023. The RD recommends 
that this appeal filed by Cortex Havacilik ve Turizm Ticaret Anonim 
Sirketi d/b/a Southwind Airlines (Southwind) be dismissed. As further 
discussed below, I accept the findings of fact and conclusions of law 
made by the ALJ in his RD.

I. Background

    Southwind appeals a Temporary Denial Order (TDO) temporarily 
denying the export privileges of Nordwind Airlines (Nordwind), first 
issued by the Assistant Secretary of Commerce for Export Enforcement 
(Assistant Secretary) of the Bureau of Industry and Security (BIS or 
the Agency) on June 24, 2022, 87 FR 38704. The Export Administration 
Regulations (EAR or Regulations) at 15 CFR 766.24 authorize the 
Assistant Secretary to issue a TDO for a period of up to 180 days to 
prevent an ``imminent violation'' of the Regulations. 15 CFR 
766.24(b)(1), (b)(4). Moreover, a TDO may be made applicable to 
``related persons'' in accordance with Sec.  766.23 of the Regulations.
    The Agency subsequently renewed the TDO against Nordwind twice, on 
December 20, 2022, 87 FR 79725, and June 15, 2023, 88 FR 40202. Upon 
the second renewal, the Agency added OOO Pegas Touristik (Pegas) as a 
related person to the TDO, then modified the TDO on June 27, 2023, to 
remove Pegas as a related person, 88 FR 42290.
    On August 8, 2023, Southwind, through counsel, filed an appeal with 
the U.S. Coast Guard ALJ Docketing Center (Docketing Center) pursuant 
to 15 CFR 766.23(c) of the EAR. After assignment of the matter to an 
ALJ by the Docketing Center on August 14, 2023, BIS filed a response to 
the appeal on August 21, 2023. On August 24, 2023, ALJ Cantrell issued 
the RD, which my office received on August 25, 2023. On August 31, 
2023, the BIS Appeals Coordinator requested views from the parties on 
an extension of time to issue my Final Decision in this appeal. Both 
parties consented, and on August 31, 2023, I issued an Order extending 
the period of time to issue this Final Decision to September 29, 2023.

II. Standard

    As described above, Sec.  766.24(b) of the Regulations addresses 
the Assistant Secretary's authority to issue TDOs. To issue a TDO, BIS 
must make a showing that the order is necessary in the public interest 
to prevent an ``imminent violation'' of the Regulations. 15 CFR 
766.24(b)(1). The Regulations authorize the issuance of a TDO on an ex 
parte basis but require that the order define the imminent violation 
and state why it was issued without a hearing. Id. at Sec.  
766.24(b)(2). BIS also has the authority to renew the TDO for 
additional periods. Id. at Sec.  766.24(d)(1).
    To prevent evasion of the TDO, the Assistant Secretary may apply 
the terms of the TDO to ``related persons,'' that is, ``other persons 
then or thereafter related to the respondent by ownership, control, 
position of responsibility, affiliation, or other connection in the 
conduct of trade or business.'' Id. at Sec.  766.23(a). When seeking to 
add a related person to a denial order, ``BIS shall, except in an ex 
parte proceeding under Sec.  766.24(a) of this part,'' give that person 
notice and an opportunity to oppose such an action. Id. at Sec.  
766.23(b).
    ``Related persons'' may not oppose the issuance or renewal of a 
TDO, but may file an appeal with an ALJ, who issues an RD for the 
review of the Under Secretary in accordance with Sec.  766.24(e) of the 
Regulations. See id. at Sec. Sec.  766.23(c)(2)(ii), 766.24(d)(3)(ii). 
For appeals by related persons, the Regulations provide that the ``sole 
issues to be raised and ruled on in any such appeal are whether the 
person so named is related to the respondent and whether the order is 
justified in order to prevent evasion.'' Id. at Sec.  766.23(c).

III. Discussion

    Southwind's appeal specifically requests that an Order be issued 
``that the [Nordwind] TDO Renewal be withdrawn and that BIS issue an 
order affirmatively reinstating the status quo as it existed prior to 
June 15, 2023, and making it clear that companies may continue to 
transact with Southwind Airlines.'' Southwind Appeal at 18. The limited 
scope of the appeal under Sec.  766.23 (c) of the Regulations prevents 
me from doing as Southwind requests.
    The ALJ makes twelve recommended findings of fact in the RD. RD at 
3-4. I accept these recommended findings of fact.
    Regarding the first conclusion of law in the RD, I agree that 
Southwind is not a ``related person'' with standing to bring an appeal 
pursuant to 15 CFR 766.23. Southwind alleges that it suffered harm as a 
result of the June 15, 2023, TDO, which stated, in relevant part, that 
BIS's Office of Export Enforcement ``has reason to believe that Pegas 
has made additional efforts to evade export controls on Russia in part 
by entering into charter agreements with a Turkish airline that started 
shortly after the imposition of stringent Russia-related export 
controls [. . .] for international flights into Russia on U.S. origin 
aircraft without the required BIS authorization.'' BIS Ex. 1 at 7. This 
language was removed in the June 27, 2023, modified TDO issued against 
Nordwind only.
    Southwind concedes that BIS did not name Southwind Airlines as a 
related person subject to the terms of the TDO but alleges that the 
language in the TDO was sufficiently detailed to identify Southwind as 
the ``Turkish airline'' that ``entered into charter agreements'' with 
Pegas in support of its efforts to evade U.S. export controls on 
Russia. Southwind Appeal at 12. According to Southwind, this language 
has had the same effect on Southwind as if it had actually been named 
as a related person. Southwind states that the interpretation of this 
language by a key business partner, Pratt & Whitney, led Pratt & 
Whitney to cease support of engines aboard aircraft leased by 
Southwind, jeopardizing its business operations. Id. at 2. 
Nevertheless, BIS has never named Southwind as a related person subject 
to the Nordwind TDO. Nor, as observed in

[[Page 70415]]

the RD, does a mere inference by a business partner that Southwind is 
the unnamed ``Turkish airline'' described in the TDO render Southwind a 
related person with standing to appeal the Nordwind TDO. RD at 5. As 
such, Southwind does not have appeal rights under Sec.  766.23(c), 
which provides only ``persons named by BIS in an order as related to 
the respondent'' an avenue for appeal.
    Regarding the second conclusion of law in the RD, I agree that 
Southwind seeks relief outside the scope of 15 CFR 766.23. The 
Regulations limit the scope of the appeal to two issues: whether the 
related person is indeed related to the respondent subject to the TDO--
Nordwind in this case--and whether the TDO is justified to prevent 
evasion. 15 CFR 766.23(c). Southwind's request that BIS withdraw the 
June 15, 2023, TDO and issue an order removing the reference to the 
``Turkish airline'' and clarifying that Southwind did not engage in any 
EAR violations does not fall within the scope of appeal as outlined in 
Sec.  766.23(c). The ALJ has concluded that he cannot direct BIS to 
provide this requested relief to Southwind; I agree.

IV. Conclusion and Order

    Based on my review of the record, I accept the findings of fact and 
conclusions of law made by the ALJ in his RD. I also confirm that 
Southwind has never been a party to the Nordwind TDO, and therefore has 
never been subject to the license requirements and prohibitions in the 
Nordwind TDO. Moreover, I confirm that as of the date of issuance of 
this Final Decision and Order, Southwind is not listed on the BIS 
Denied Persons List. Accordingly, it is therefore ordered:
    First, that this appeal is dismissed.
    Second, that this Final Decision and Order shall be served on 
Appellants and on BIS and shall be published in the Federal Register. 
In addition, the ALJ's Recommended Decision shall also be published in 
the Federal Register.
    This Order, which constitutes the Department's final decision with 
regard to this appeal, is effective immediately.

    Dated: September 29, 2023.
Alan F. Estevez,
Under Secretary of Commerce for Industry and Security.

UNITED STATES DEPARTMENT OF COMMERCE

BUREAU OF INDUSTRY AND SECURITY

WASHINGTON, DC 20230

    In the Matter of: Southwind Airlines, Southwind Airlines, 
Appellant.

Docket No.: 23-TDO-0002

RECOMMENDED DECISION

Issued by: Honorable Tommy Cantrell, Administrative Law Judge

Issued: August 24, 2023
    On August 8, 2023, Cortex Havacilik ve Turizm Ticaret Anonim 
Sirketi d/b/a Southwind Airlines (Southwind) filed an appeal pursuant 
to 15 CFR 766.23(c) of the Export Administration Regulations (EAR).\1\ 
Specifically, Southwind asks that I issue an order directing BIS to 
withdraw a June 15, 2023, Temporary Denial Order (TDO) issued to 
Nordwind Airlines. Southwind also asks that I issue an order ``removing 
the reference to the Turkish airline and clarifying it has no reason to 
believe this Company is engaged in any violations of the EAR.'' (Appeal 
at 3). For the reasons set forth herein, I recommend this appeal be 
dismissed.
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    \1\ I note Southwind also submitted an appeal to the 
Undersecretary of Commerce for Industry and Security pursuant to 15 
CFR 756.2 on August 7, 2023. (Appeal at 8).
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Background

    On June 15, 2023, the Assistant Secretary of Commerce for Export 
Enforcement (Assistant Secretary) renewed a TDO to Russian airline 
Nordwind Airlines pursuant to 15 CFR 766.24. (BIS Ex. 1).\2\ The 
renewed TDO added the corporation Pegas Touristik a/k/a Pegas Touristik 
OOO (Pegas) as a related person in accordance with 15 CFR 766.23. Id. 
Furthermore, the TDO stated the Office of Export Enforcement (OEE) 
``has reason to believe that Pegas has made additional efforts to evade 
export controls on Russia in part by entering into charter agreements 
with a Turkish airline that started shortly after the imposition of 
stringent Russia-related export controls.'' Id. (emphasis added). 
However, nothing in the TDO named the Turkish airline.
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    \2\ ``BIS Ex.'' references the exhibits attached to BIS's 
response dated August 21, 2023.
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    Thereafter, on June 27, 2023, the Assistant Secretary removed Pegas 
from the Nordwind TDO. (BIS Ex. 2). On July 28, 2023, Southwind 
contacted BIS and informed BIS, Pratt & Whitney, a business partner, 
inferred that Southwind was the ``Turkish airline'' described in the 
TDO. (Ex. 1).\3\ In response to this exchange, BIS provided Southwind 
with an email confirming it was not ``on the BIS Entity List or Denied 
Persons List.'' (Exs. 15, 16, 17). However, according to Southwind, 
this did not resolve the misunderstanding regarding its operations. 
(Ex. 14 at 3).
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    \3\ ``Ex.'' refers to the exhibits attached to Southwind's 
appeal dated August 8, 2023.
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    On August 8, 2023, Southwind filed this appeal with the United 
States Coast Guard Administrative Law Judge Docketing Center (Docketing 
Center).\4\ The appeal letter includes 25 exhibits. On August 14, 2023, 
the Docketing Center assigned this case to me for adjudication. BIS 
submitted its response to the appeal on August 21, 2023, and included 3 
exhibits. The record is now closed and the appeal is ripe for decision.
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    \4\ Pursuant to an interagency agreement, United States Coast 
Guard Administrative Law Judges are permitted to adjudicate BIS 
cases.
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Recommended Findings of Fact

    1. On June 15, 2023, the Assistant Secretary renewed a Temporary 
Denial Order (TDO) issued to Russian airline Nordwind Airlines. (BIS 
Ex. 1). BIS renewed the Nordwind TDO pursuant to 15 CFR 766.24 to 
prevent an ``imminent violation'' of the Export Administration 
Regulations (EAR). Id.
    2. The renewed TDO added Pegas as a related person and stated the 
OEE ``has reason to believe that Pegas has made additional efforts to 
evade export controls on Russia in part by entering into charter 
agreements with a Turkish airline that started shortly after the 
imposition of stringent Russia-related export controls . . . for 
international flights into Russia on U.S.-origin aircraft without the 
required BIS authorization.'' (BIS Ex. 1).
    3. Southwind's business partner Pratt & Whitney inferred Southwind 
was the ``Turkish airline'' referenced in the TDO and stopped providing 
support to Southwind's aircraft engines. (Ex. 1).
    4. On June 27, 2023, following discussions between Pegas and BIS, 
the Assistant Secretary issued a modified TDO removing Pegas as a 
related person. (BIS Ex. 2).
    5. The modified TDO states ``Pegas Touristik should be removed from 
the TDO to allow the opportunity for additional administrative process 
under Part 766 of the Regulations.'' (BIS Ex. 2).
    6. On June 28, 2023, counsel for Southwind informed BIS ``problems 
are mounting for the company given the language in the [modified] 
TDO.'' (Ex. 14, p. 3). Counsel noted Pegas' removal from the TDO did 
not ``resolve the misunderstanding'' regarding Southwind's operations. 
(Ex. 14, p. 3).
    7. Southwind reiterated its issues to BIS on multiple occasions in 
late July 2023. (Ex. 16). It requested BIS provide an email Southwind 
could forward to Pratt & Whitney to ``assuage their concerns that BIS 
would find a violation if they serviced the engines.'' (Ex. 16).

[[Page 70416]]

    8. On July 24, 2023, Southwind responded to a number of questions 
from BIS regarding the ownership and operation of the company. (Ex. 
15).
    9. On July 28, 2023, the Office of Chief Counsel for Industry and 
Security sent Southwind an email confirming ``neither Southwind nor 
Cortex Havacilik VE TUR TIC. A.C. are on the BIS Entity List or Denied 
Persons List.'' (Ex. 17).
    10. The email further states: ``[N]o Southwind aircraft are 
currently on the list of aircraft identified on BIS's website as having 
operated in apparent violation of U.S. export controls on Russia. 
However, this list of aircraft is not exhaustive, and the restrictions 
also apply in any situation in which a person has knowledge that a 
violation of the EAR has occurred, is about to occur, or is intended to 
occur in connection with an aircraft or other item that is subject to 
the EAR, whether or not such aircraft or other item is included on 
BIS's website.'' (Ex. 17).
    11. Southwind forwarded the BIS email to Pratt & Whitney on July 
28, 2023. (Ex. 18).
    12. On August 2, 2023, Pratt & Whitney restored access to the ``P&W 
Engine Wise Connect Portal and the applications accessed through the 
portal'' but noted ``the Engine Health Monitoring/ADEM application will 
again be functional, however, no engine data is being transmitted.'' 
(Ex. 18).

Opinion and Recommended Conclusions of Law

    BIS regulations related to export administration are issued ``under 
laws relating to the control of certain exports, reexports, and 
activities.'' 15 CFR 730.1.\5\ These export control provisions ``are 
intended to serve the national security, foreign policy, 
nonproliferation of weapons of mass destruction, and other interests of 
the United States.'' 15 CFR 730.6. To prevent an imminent violation of 
the EAR, the Assistant Secretary may issue a TDO on an ex parte basis. 
15 CFR 766.24(a). The TDO ``will deny export privileges to any person 
named in the order as provided for in Sec.  764.3(a)(2) of the EAR.'' 
15 CFR 766.24(a). The order is valid for 180 days, but the Assistant 
Secretary may renew it, more than once, in additional 180-day 
increments. 15 CFR 766.24(b)(4), 766.24(d)(4). The Assistant Secretary 
may also modify or amend a TDO. 15 CFR 766.24(d), 766.23(b).
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    \5\ The EAR primarily relate to the implementation of the Export 
Administration Act of 1979. 15 CFR 730.2.
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    To prevent evasion of the TDO, the Assistant Secretary may apply 
the order ``not only to the respondent, but also to other persons then 
or thereafter related to the respondent by ownership, control, position 
of responsibility, affiliation, or other connection in the conduct of 
trade or business.'' 15 CFR 766.23(a), 766.24(c). When adding a related 
person to an order affecting export privileges, ``BIS shall, except in 
an ex parte proceeding under Sec.  766.24(a)'' give that person notice 
and an opportunity to oppose the action. 15 CFR 766.23(b).
    Where the Assistant Secretary issues or renews a TDO on an ex parte 
basis pursuant to 15 CFR 766.24, persons ``designated as a related 
person may not oppose the issuance or renewal of the temporary denial 
order, but may file an appeal in accordance with Sec.  766.23(c).'' 15 
CFR 766.24(d)(3)(ii). In such an appeal, the ``sole issues to be raised 
and ruled on . . . are whether the person so named is related to the 
respondent and whether the order is justified in order to prevent 
evasion.'' 15 CFR 766.23(c). An administrative law judge then submits a 
recommended decision to the Under Secretary for Industry and Security 
``recommending whether the issuance or the renewal of the temporary 
denial order should be affirmed, modified, or vacated.'' 15 CFR 
766.24(e)(4).
    Having outlined the relevant regulations governing this appeal, I 
now turn to the facts of the case and conclude Southwind has no 
standing to bring this appeal pursuant to 15 CFR 766.23(c) as it was 
not named by BIS as a related person. I also conclude the relief 
Southwind seeks is outside the scope of an appeal as set forth in 15 
CFR 766.23(c).

1. Southwind Is Not a ``Related Person'' With Standing To Bring an 
Appeal Pursuant to 15 CFR 766.23

    As a preliminary matter, BIS did not name Southwind as a related 
person when it renewed the Nordwind TDO on June 15, 2023. It simply did 
not apply the Nordwind TDO to Southwind. Pratt & Whitney inferred 
Southwind was the ``Turkish airline'' associated with Pegas, a 
corporation designated by BIS as related to Nordwind. But this 
inference does not render Southwind a related person with standing to 
appeal the Nordwind TDO. See 15 CFR 766.23(c) (``Any person named by 
BIS in an order as related to the respondent may appeal that action'') 
(emphasis added).\6\
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    \6\ It also follows that because Southwind was not named as a 
related person, the regulations did not require BIS to give it 
notice and an opportunity to oppose the renewal of the TDO. 15 CFR 
766.23(b). This is especially true in the present case, where BIS 
issued and renewed the TDO on an ex parte basis pursuant to 15 CFR 
766.24. See 15 CFR 766.24(d)(3)(ii) (where TDO is issued or renewed 
on ex parte basis, related persons ``may not oppose the issuance or 
renewal of the TDO but may file an appeal in accordance with Sec.  
766.23(c)''); 15 CFR 766.23(b).
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2. Southwind Seeks Relief Outside the Scope of 15 CFR 766.23

    Even if BIS had named Southwind as a related person with standing 
to bring this appeal, Southwind seeks relief outside the scope of such 
an appeal. 15 CFR 766.23(c). The regulations specifically limit the 
appeal to two issues: whether Southwind is related to Nordwind and 
whether the TDO is justified in order to prevent evasion. 15 CFR 
766.23(c). Southwind does not ask me to rule on either issue, and even 
so, the record shows there is no current TDO naming Southwind as a 
related person that I could affirm, modify, or vacate as part of this 
appeal.\7\
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    \7\ As noted above, the June 28, 2023, modification removed 
Pegas as a related person. (BIS Ex. 2). I cannot rule on whether the 
June 15, 2023, TDO, which is no longer in effect and which did not 
name Southwind as a related party, was justified to prevent evasion 
of the Nordwind TDO.
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    Southwind instead asks that I direct BIS to (1) withdraw the June 
15, 2023, TDO, and (2) issue an order removing the reference to the 
``Turkish airline'' and clarifying Southwind did not engage in any 
violations of the EAR. Southwind seeks to reinstate ``the status quo 
prior to June 15, 2023, making it clear that companies may continue to 
transact with Southwind Airlines.'' (Appeal, p. 12). I cannot direct 
BIS to provide this relief to Southwind.
    I note, however, BIS emailed Southwind on July 28, 2023, 
definitively stating the company is not on the BIS Entity List or 
Denied Persons List, and none of Southwind's aircraft are ``on the list 
of aircraft identified on BIS's website as having operated in apparent 
violation of U.S. export controls on Russia.'' (Ex. 17). Furthermore, 
the current version of the Nordwind TDO, published on the Federal 
Registry on July 30, 2023, does not prohibit any company from 
transacting with Southwind. (BIS Ex. 2).
    In light of the above, I recommend Southwind's appeal be dismissed.

    Done and dated this 24th day of August 2023, at Galveston, 
Texas.

[[Page 70417]]

[GRAPHIC] [TIFF OMITTED] TN11OC23.002

Certificate of Service

    I hereby certify that I have served by electronic mail the 
foregoing Recommended Decision to Dismiss Appeal upon the following:

Gregory Michelsen, Esq., Andrea Duvall, Esq., Attorneys for Bureau of 
Industry and Security, Office of Chief Counsel for Industry and 
Security, U.S. Department of Commerce (Sent via electronic mail)

Wendy Wysong, Esq., Ali Burney, Esq., Steptoe & Johnson HK LLP, 
Attorneys for Respondent (Sent via electronic mail)

U.S. Coast Guard, ALJ Docketing Center, Attn: Hearing Docket Clerk 
(Sent via electronic mail)

    I hereby certify that I have forwarded by Express Courier the 
foregoing Recommended Decision to Dismiss Appeal and the case file upon 
the following:

Alan F. Estevez, Under Secretary for Industry and Security, Bureau of 
Industry and Security, U.S. Department of Commerce (Sent via Fed Ex)


    Done and dated August 24, 2023, at Galveston, Texas.
    [GRAPHIC] [TIFF OMITTED] TN11OC23.003
    
[FR Doc. 2023-22434 Filed 10-10-23; 8:45 am]
BILLING CODE 3510-DT-P