7 June 2006
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[Federal Register: June 7, 2006 (Volume 71, Number 109)]
[Notices]
[Page 32920-32923]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07jn06-52]
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DEPARTMENT OF COMMERCE
Bureau of Industry and Security
[Docket No. 05-BIS-18]
In the Matter of: Swiss Telecom, 777 Bay the Wicket, P.O. Box
46070, Toronto, ON M5G 2P6, Respondent; Decision and Order
On November 22, 2005, the Bureau of Industry and Security (``BIS''
issued a charging letter alleging that Respondent, Swiss Telecom,
committed nine violations of the Export Administration Regulations
(Regulations).\1\ The Regulations were issued pursuant to the Export
Administration Act of 1979, as amended (50 U.S.C. app. 2401-2420
(2000)) (the Act).\2\
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\1\ The Regulations are currently codified at 15 C.F.R. Parts
730-774 (2006). The charged violations occurred in 2001 and 2002.
The Regulations governing the violations at issue are found in the
2001 and 20002 versions of the Code of Federal Regulations (15 CFR
Parts 730-774 (2001-2002)). The 2006 Regulations establish the
procedures that apply to this matter.
\2\ From August 21, 1994 through November 12, 2000, the Act was
in lapse. During that period, the President, through Executive Order
12924, which had been extended by successive Presidential Notices,
the last of which was August 3, 2000 (3 C.F.R., 2000 Comp. 397
(2001)), continued the Regulation in effect under the International
Emergency Economic Powers Act (50 U.S.C. 1701-1706 (2000))
(``IEEPA''). On November 13, 2000, the Act was reauthorized and it
remained in effect through August 20, 2001. Since August 21, 2001,
the Act has been in lapse and the President, through Executive Order
13222 of August 17, 2001 (3 CFR, 2001 Comp. 783 (2002)), which has
been extended by successive Presidential Notices, the most recent
being that of August 2, 2005 (70 FR 45273 (August 5, 2005)), has
continued the Regulations in effect under IEEPA.
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Specifically, the charging letter alleged that Swiss Telecom
conspired and acted in concert with others, known and unknown, to bring
about an act that constitutes a violation of the Regulations, namely
the export of telecommunications devices to Iran without the required
licenses. BIS alleged that the goal of the conspiracy was to obtain
telecommunications devices, including devices manufactured by a U.S.
company, including an Adit 600 Chassis, FXO Channel Cards, and ABI FXO
Ports (ECCN 5A991),\3\ items subject to both the Regulations and the
Iranian Transactions Regulations \4\ of the Treasury Department's
Office of Foreign Assets Control (OFAC), on behalf of an Iranian end-
user and to export those telecommunications devices to Iran. In doing
so, BIS charged that Swiss Telecom committed a violation of Sec.
764.2(d) of the Regulations.
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\3\ The term ``ECCN'' refers to Export Control Classification
Number. See 15 CFR 772.1 (2006).
\4\ 31 CFR Part 560 (2006).
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The charging letter filed by BIS also alleged that, on or about
December 17, 2001, and on or about March 7, 2002, Swiss Telecom caused,
aided or abetted the doing of an act that was prohibited by the
Regulations. Specifically, BIS alleged that Swiss Telecom ordered the
aforementioned telecommunications devices from a U.S. company for a
project in Iran and told the U.S. company to export the items through
the United Arab Emirates (UAE) to Iran. The U.S. company then exported
the devices through the UAE to Iran. These transactions were subject to
the Iranian Transactions Regulations, and were done without
authorization from OFAC as required by Sec. 746.7 of the Regulations.
BIS charged that Swiss Telecom committed two violations of Sec.
764.2(b) of the Regulations.
In addition, the BIS charging letter alleged that in connection
with the two aforementioned transactions, Swiss Telecom ordered the
telecommunications devices for a project in Iran with knowledge that
they would be exported from the United States to Iran, via the UAE,
without authorization from OFAC. In doing so, BIS charges that two
violations of Sec. 764.2(e) of the Regulations were committed.
Finally, the BIS charging letter alleged that on four occasions
between on or about September 14, 2001, and on or about March 19, 2002,
Swiss Telecom caused the doing of an act prohibited by the Regulations
by causing the export of technical information subject to the
Regulations (ECCN 5E991) from a U.S. company to Iran. Specifically, BIS
alleged that a Swiss Telecom employee caused a U.S. company to provide
Swiss Telecom with technical data and customer support assistance for
equipment in Iran, via telephone, e-mail and telnet. These transactions
were subject to the Iranian Transactions Regulations, and were done
without authorization from OFAC as required by Sec. 746.7 of the
Regulations. This activity was the basis for four charges under Sec.
764.2(b) of the Regulations.
In accordance with Sec. 766.3(b)(1) of the Regulations, on
November 22, 2005, BIS mailed the notice of issuance of the charging
letter by registered mail to
[[Page 32921]]
Swiss Telecom at its last known address. BIS has established that this
charging letter was received by Swiss Telecom on or about December 9,
2005. In addition, BIS mailed notice of issuance of a charging letter
by registered mail to counsel for Swiss Telecom. BIS has also
established that this charging letter was received by counsel for Swiss
Telecom on or about December 8, 2005.
Section 766.6(a) of the Regulations provides, in pertinent part,
that ``[t]he respondent must answer the charging letter within 30 days
after being served with notice of issuance of the charging letter''
initiating the administrative enforcement proceeding. To date, Swiss
Telecom has not filed an answer to the charging letter.
Pursuant to the default procedures set forth in Sec. 766.7 of the
Regulations, BIS filed a Motion for Default Order on April 7, 2006.
Under Sec. 766.7(a) of the Regulations, ``[f]ailure of the respondent
to file an answer within the time provided constitutes a waiver of the
respondent's right to appear,'' and ``on BIS's motion and without
further notice to the respondent, [the ALJ] shall find the facts to be
as alleged in the charging letter.'' Based upon the record before him,
the ALJ held Swiss Telecom in default.
Accordingly, on May 12, 2006, the ALJ issued a Recommended Decision
and Order in which he found the facts to be as alleged in the charging
letter, and determined that those facts established that Swiss Telecom
committed one violation of Sec. 764.2(d), six violations of Sec.
764.2(b) and two violations of Sec. 764.2(e) of the Regulations. The
ALJ recommended a penalty of denial of Swiss Telecom's export
privileges for 10 years.
The ALJ's Recommended Decision and Order, together with the entire
record in this case, has been referred to me for final action under
Sec. 766.22 of the Regulations. I find that the record supports the
ALJ's findings of fact and conclusions of law with respect to each of
the above-referenced charges brought against Swiss Telecom. I also find
that the penalty recommended by the ALJ is appropriate, given the
nature of the violations, the importance of preventing future
unauthorized exports, and the lack of any mitigating factors. Although
the imposition of monetary penalties is an appropriate option, I agree
with the ALJ that in this case such a penalty may not be effective,
given the difficulty of collecting payment against a party outside the
United States.
Based on my review of the entire record, I affirm the findings of
fact and conclusions of law in the ALJ's Recommended Decision and
Order.
Accordingly, it is therefore ordered,
First, that, for a period of ten years from the date this Order is
published in the Federal Register, Swiss Telecom, 777 Bay the Wicket,
P.O. Box 46070, Toronto, ON M5G 2P6, and all of its successors and
assigns, and, when acting for or on behalf of Swiss Telecom, its
officers, representatives, agents, and employees (``Denied Person''),
may not, directly or indirectly, participate in any way in any
transaction involving any commodity, software or technology
(hereinafter collectively referred to as ``item'') exported or to be
exported from the United States that is subject to the Regulations, or
in any other activity subject to the Regulations, including, but not
limited to:
A. Applying for, obtaining, or using any license, License
Exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying,
receiving, using, selling, delivering, 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 any other activity subject to the Regulations.
Second, that no person may, directly or indirectly, do any of the
following:
A. Export or reexport to or on behalf of the Denied Person any item
subject to the Regulations;
B. Take any action that facilitates the acquisition or attempted
acquisition by the Denied Person of the ownership, possession, or
control of any item subject to the Regulations that has been or will be
exported from the United States, including financing or other support
activities related to a transaction whereby the Denied Person acquires
or attempts to acquire such ownership, possession or control;
C. Take any action to acquire from or to facilitate the acquisition
or attempted acquisition from the Denied Person of any item subject to
the Regulations that has been exported from the United States;
D. Obtain from the Denied Person in the United States any item
subject to the Regulations with knowledge or reason to know that the
item will be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the
Regulations that has been or will be exported from the United States
and that is owned, possessed or controlled by the Denied Person, or
service any item, of whatever origin, that is owned, possessed or
controlled by the Denied Person if such service involves the use of any
item subject to the Regulations that has been or will be exported from
the United States. For purposes of this paragraph, servicing means
installation, maintenance, repair, modification or testing.
Third, that, after notice and opportunity for comment as provided
in Sec. 766.23 of the Regulations, any person, firm, corporation, or
business organization related to the Denied Person by affiliation,
ownership, control, or position of responsibility in the conduct of
trade or related services may also be made subject to the provisions of
this Order.
Fourth, that this Order does not prohibit any export, reexport, or
other transaction subject to the Regulations where the only items
involved that are subject to the Regulations are the foreign-produced
direct product of U.S.-origin technology.
Fifth, that this Order shall be served on the Denied Person and on
BIS, and shall be published in the Federal Register.
This Order, which constitutes the final agency action in this
matter, is effective upon publication in the Federal Register.
Dated: June 1, 2006.
David H. McCormick,
Under Secretary of Commerce for Industry and Security.
Recommended Decision and Order
On November 22, 2005, the Bureau of Industry and Security, U.S.
Department of Commerce (``BIS''), issued a charging letter initiating
this administrative enforcement proceeding against Swiss Telecom. The
charging letter alleged that Swiss Telecom committed nine violations of
the Export Administration Regulations (currently codified at 15 CFR
Parts 730-774 (2006)) (the ``Regulations''),\1\ issued under the Export
Administration Act of 1979, as
[[Page 32922]]
amended (50 U.S.C. App 2401-2420 (2000)) (the ``Act'').\2\
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\1\ The charged violations occurred in 2001 and 2002. The
Regulations governing the violations at issue are found in the 2001
and 2002 versions of the Code of Federal Regulations (15 CFR Parts
730-774 (2001-2002)). The 2006 Regulations establish the procedures
that apply to this matter.
\2\ From August 21, 1994 through November 12, 2000, the Act was
in lapse. During that period, the President, through Executive Order
12924, which was extended by successive Presidential Notices, the
last of which was August 3, 2000 (3 CFR, 2000 Comp. 397 (2001)),
continued the Regulations in effect under the International
Emergency Economic Powers Act (50 U.S.C. 1701-06 (2000))
(``IEEPA''). On November 13, 2000, the Act was reauthorized and it
remained in effect through August 20, 2001. Since August 21, 2001,
the Act has been in lapse and the President, through Executive Order
13222 of August 17, 2001 (34 CFR, 2001 Comp. 783 (2002)), as
extended by the Notice of August 2, 2005 (70 FR 45273 (Aug. 5,
2005)), has continued the Regulations in effect under IEEPA.
---------------------------------------------------------------------------
Specifically, the charging letter alleged that Swiss Telecom
conspired and acted in concert with others, known and unknown, to bring
about an act that constitutes a violation of the Regulations, namely
the export of telecommunications devices to Iran without the required
licenses. BIS alleged that the goal of the conspiracy was to obtain
telecommunications devices, including devices manufactured by a U.S.
company, including an Adit 600 Chassis, FXO Channel Cards, and ABI FXO
Ports (ECCN 5A991\3\), items subject to both the Regulations and the
Iranian Transactions Regulations \4\ of the Treasury Department's
Office of Foreign Assets Control (OFAC), on behalf of an Iranian end-
user and to export those telecommunications devices to Iran. (Charge
1).
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\3\ The term ``ECCN'' refers to Export Control Classification
Number. See 15 CFR 772.1 (2006).
\4\ 31 CFR Part 560 (2006).
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The charging letter filed by BIS also alleged that, on or about
December 17, 2001, and on or about March 7, 2002, Swiss Telecom caused,
aided or abetted the doing of an act that was prohibited by the
Regulations. Specifically, BIS alleged that Swiss Telecom ordered the
aforementioned telecommunications devices from a U.S. company for a
project in Iran and told the U.S. company to export the items through
the United Arab Emirates (UAE) to Iran. The U.S. company then exported
the devices through the UAE to Iran. These transactions were subject to
the Iranian Transactions Regulations, and were done without
authorization from OFAC as required by Section 746.7 of the
Regulations. (Charges 2 and 3).
In addition, the BIS charging letter alleged that in connection
with the two aforementioned transactions, Swiss Telecom ordered the
telecommunications devices for a project in Iran with knowledge that
they would be exported from the United States to Iran, via the UAE
without authorization from OFAC. (Charges 4 and 5).
Finally, the BIS charging letter alleged that on four occasions
between on or about September 14, 2001, and or about March 19, 2002,
Swiss Telecom caused the doing of an act prohibited by the Regulations
by causing the export of technical information subject to the
Regulations (ECCN 5E991) from a U.S. company to Iran. Specifically, BIS
alleged that a Swiss Telecom employee caused a U.S. company to provide
Swiss Telecom with technical data and customer support assistance for
equipment in Iran, via telephone, email and telnet. These transactions
were subject to the Iranian Transactions Regulations, and were done
without authorization from OFAC as required by Sec. 746.7 of the
Regulations. (Charges 6, 7, 8, and 9).
Section 766.3(b)(1) of the Regulations provides that notice of the
issuance of a charging letter shall be served on a respondent by
mailing a copy by registered or certified mail addressed to the
respondent at the respondent's last address. In accordance with the
Regulations, on November 22, 2005, BIS mailed the notice of issuance of
a charging letter by registered mail to Swiss Telecom at its last known
address: Swiss Telecom, 777 Bay The Wicket, P.O. Box 46070, Toronto,
Ontario M5G 2P6. In addition, BIS mailed the notice of issuance of a
charging letter by registered mail to counsel for Swiss Telecom, Mr.
Kenneth H. Page, Page Arnold LLP, Suite 2200, 439 University Avenue,
Toronto, Ontario, M5G 1Y8. BIS has submitted evidence that establishes
that this charging letter was received by Swiss Telecom on or about
December 9, 2005. BIS has also submitted evidence that establishes that
this charging letter was received by Mr. Arnold Page on or about
December 8, 2005.
Section 766.6(a) of the Regulations provides, in pertinent part,
that ``[t]he respondent must answer the charging letter within 30 days
after being served with notice of issuance of the charging letter''
initiating the administrative enforcement proceeding. To date, Swiss
Telecom has not filed an answer to the charging letter.
Pursuant to the default procedures set forth in Sec. 766.7 of the
Regulations, I find the facts to be as alleged in the charging letter,
and hereby determine that those facts establish that Swiss Telecom
committed one violation of Sec. 764.2(d), six violations of Sec.
764.2(b), and two violations of Sec. 764.2(e) of the Regulations.
Section 764.3 of the Regulations sets forth the sanctions BIS may
seek for violations of the Regulations. The applicable sanctions are:
(i) A monetary penalty, (ii) suspension from practice before the Bureau
of Industry and Security, and (iii) a denial of export privileges under
the Regulations. See 15 CFR Sec. 764.3 (2001-2002). Because Swiss
Telecom knowingly violated the Regulations by causing the export of
technical information subject to the Regulations and by ordering
telecommunications devices for delivery to Iran, with knowledge that a
violation of the Regulations would occur, BIS requests that I recommend
to the Under Secretary of Commerce for Industry and Security \5\ that
Swiss Telecom's export privileges be denied for ten years.
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\5\ Pursuant to Section 13(c)(1) of the Export Administration
Act and Section 766.17(b)(2) of the Regulations, in export control
enforcement cases, the Administrative Law Judge makes recommended
findings of fact and conclusions of law that the Under Secretary
must affirm, modify or vacate. The Under Secretary's action is the
final decision for the U.S. Commerce Department.
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BIS has suggested these sanctions because Swiss Telecom's knowing
violation in causing the export of controlled technical information and
telecommunications devices for delivery to Iran without prior
authorization evidences a serious disregard for U.S. export control
laws. Furthermore, BIS has noted that Iran is a country that the United
States has designated as a state-sponsor of international terrorism. In
addition, BIS believes that the imposition of a civil penalty in this
case may be ineffective, given the difficulty of collecting payment
against a party outside of the United States. In light of these
circumstances, BIS believes that the denial of Swiss Telecom's export
privileges for ten years is an appropriate sanction.
On this basis, I concur with BIS and recommend that the Under
Secretary of Commerce for Industry and Security enter an Order denying
Swiss Telecom's export privileges for a period of ten years. Such a
denial order is consistent with penalties imposed in past cases under
the Regulations involving shipments to Iran. See In the Matter of
Petrom GmBH International Trade, 70 FR 32743 (June 6, 2005) (affirming
the recommendations of the Administrative Law Judge that a twenty year
denial order and a civil monetary sanction of $143,000 were appropriate
where knowing violations involved a shipment of EAR99 items to Iran);
In the Matter of Arian Transportvermittlungs, GmbH, 69 FR 28120 (May
18, 2004) (affirming the recommendation of the Administrative Law Judge
that a ten year denial order was appropriate where knowing violations
involved a shipment
[[Page 32923]]
of a controlled item to Iran); In the Matter of Jabal Damavand General
Trading Company, 67 FR 32009 (May 13, 2002) (affirming the
recommendation of the Administrative Law Judge that a ten year denial
order was appropriate where knowing violations involved shipments of
EAR99 items to Iran); In the Matter of Adbulamir Mahdi, 68 FR 57406
(Oct. 3, 2003) (affirming the recommendation of the Administrative Law
Judge that a twenty year denial order was appropriate where knowing
violations involved shipments of EAR99 items to Iran as a part of a
conspiracy to ship such items through Canada to Iran). A ten year
denial of Swiss Telecom's export privileges is warranted because Swiss
Telecom's violations, like those of the defendants in the above-cited
case, were deliberate acts done in violation of U.S. export control
laws.
The terms of the denial of export privileges against Swiss Telecom
should be consistent with the standard language used by BIS in such
orders. The language is:
Recommended Order--[Redacted]
This Order, which constitutes the final agency action in this
matter, is effective upon publication in the Federal Register.
Accordingly, I am referring this Recommended Decision and Order
to the Under Secretary of Commerce for Industry and Security for
review and final action for the agency, without further notice to
the respondent, as provided in Sec. 766.7 of the Regulations.
Within 30 days after receipt of this Recommended Decision and
Order, the Under Secretary shall issue a written order affirming,
modifying, and vacating the Recommended Decision and Order. See 15
CFR 766.22(c).
Dated; May 12, 2006.
The Honorable Joseph N. Ingolia,
Chief Administrative Law Judge.
[FR Doc. 06-5142 Filed 6-6-06; 8:45 am]
BILLING CODE 3510-DT-M