Iran Air v. Robert F. Kugelman, Acting Under Secretary for Bureau of Export Administration, U.S. Department of Commerce

996 F.2d 1253, 302 U.S. App. D.C. 174
CourtCourt of Appeals for the D.C. Circuit
DecidedJuly 2, 1993
Docket91-1596, 92-1304 and 92-1389
StatusPublished
Cited by13 cases

This text of 996 F.2d 1253 (Iran Air v. Robert F. Kugelman, Acting Under Secretary for Bureau of Export Administration, U.S. Department of Commerce) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Iran Air v. Robert F. Kugelman, Acting Under Secretary for Bureau of Export Administration, U.S. Department of Commerce, 996 F.2d 1253, 302 U.S. App. D.C. 174 (D.C. Cir. 1993).

Opinions

Opinion for the Court filed by Circuit Judge RUTH BADER GINSBURG.

Concurring opinion filed by Circuit Judge SILBERMAN.

GINSBURG, RUTH BADER, Circuit Jüdge.

I. Introduction

In 1985, Iran Air unwittingly violated the Export ■ Administration Act of 1979, 50 U.S.CApp. §§ 2401-2420, in connection with the shipment of three U.S.-made “signal generators” 1 from Germany to Iran. In 1990, the Commerce- Department’s Office of Export Enforcement sought to impose civil sanctions against Iran Air, but the Administrative Law Judge (ALJ) assigned to hear the case ruled that the Export Act authorized sanctions only for knowing violations. Because the Office of Export Enforcement had neither alleged nor proved that Iran Air 'knowingly violated the law, the ALJ .dismissed the charge. On final agency review, the Acting'Under Secretary of Commerce for Export Administration emphasized that the ALJ’s interpretation of the Act clashed with the. Department’s firm position that “knowledge” is not a requirement in a civil penalty ease. The Under Secretary imposed a $100,-000 civil penalty (the statutory maximum) and a suspension of export privileges for twenty-four months, twenty-one of them to be waived if Iran Air paid the penalty in full within thirty days of the Under Secretary’s order.

On petition for review to this court, Iran Air asserts that, as the ALJ ruled, only knowing violations of export administration regulations are sanetionable. In any event, Iran Air insists, this court’s decision in Dart v. United States, 848 F.2d 217 (D.C.Cir.1988), precludes a ruling by the Under Secretary overturning that of the ALJ. We hold that both sides have misperceived our ruling in Dart. That decision does not permit the agency head to reject the ALJ’s fact findings, but neither does it allow the ALJ to supplant the head of the agency in construing the applicable law and regulations. Accordingly, we affirm the Under Secretary’s construction of the governing statute and regulation; we remand, however, for a reasoned determination of the appropriate penalty.

II. BACKGROUND

In August 1985, Iran Air placed an order for three top-of-the-line signal generators with a German-based company, Fluke Germany, for export -to Iran. The purchase order stated: “Please ship to Iran Air Frankfurt Airport for reforwarding to Tehran Iran.” Fluke Germany did not have the generators in stock, and therefore referred the order to its affiliate, Fluke Holland. Fluke Holland, which was also out of the signal generators, obtained them from the United States manufacturer, Fluke USA. The invoices associated with the transactions between Fluke USA and Fluke Holland and between Fluke Holland and Fluke Germany bore the destination control statement: “These commodities were licensed for ultimate destination Fed.Rep. Germany. Diversion contrary to United States law is prohibited.”

On October 17,1985, Fluke Germany delivered the Fluke USA generators to Iran Air [1256]*1256in Frankfurt, Germany. In contrast to the previous invoices, the invoice for this transaction contained no destination control statement. A few days later, Iran Air shipped the generators to Iran.

Regulations pursuant to the Export Administration Act of 1979 (Export Act), 50 U.S.C.App. §§ 2401-2420; instruct that “reexport” of certain U.S.-made equipment, such as the signal generators in this case, from Germany to Iran requires a Commerce Department license:

Unless the reexport of a commodity previously exported from the United States has been specifically authorized in writing by the Office of Export Licensing prior to its reexport ..., no person in a foreign country (including Canada) or in the United States may:
(a) Reexport such commodity ... from the authorized country(ies) of ultimate destination; or ••
(b) Export such commodity from the United States with the knowledge that it is to be reexported ... from the authorized country(ies) of ultimate destination.

15 C.F.R. § 774.1 (footnote omitted). Despite this regulation, Iran Air did not obtain a reexport license for the transfer of the U.S.-made signal generators from Germany to Iran. Nor does it appear that any Fluke company did so.

Five years later, in October 1990, the Commerce Department’s Office of Export Enforcement (OEE) instituted administrative proceedings against Iran Air — though apparently not against any of the Fluke companies2 — for the imposition of civil sanctions. OEE charged Iran Air, pursuant to 15 C.F.R. § 787.2,3 with pausing the reexport of “U.S.-origin Fluke signal generators ’... from ... Germany to Iran without obtaining ... the reexport authorization required by [15 C.F.R. § ] 774.1.”

After-an evidentiary hearing, the ALJ dismissed the charge. The ALJ ruled, centrally, that the governing statutory prescription, 50 U.S.C.App. § 2410(c), authorized the, imposition of civil sanctions only for knowing violations of the Export Act or regulations thereunder. The OEE, according to the ALJ, neither alleged nor proved that Iran Air had knowingly violated the law.4

The Acting Under Secretary of Commerce . for Export Administration (Under Secretary) disagreed with the ALJ’s reading of the Export Act. In accord with OEE’s position, the Under Secretary ruled that the exporter’s knowledge need not be shown as a prerequisite to the imposition of civil penalties. Declaring that the ALJ had incorrectly construed the civil sanction prescriptions to include a state of mind requirement, the Under Secretary remanded the case for -reconsideration consistent with the agency’s view of the controlling law.

On remand, the ALJ refused to follow the Under Secretary’s reading of the law and, again, dismissed the charge. The ALJ emphasized that the Export Act allowed the Under Secretary only to “affirm, modify, or vacate” an ALJ decision, 50 U.S.CApp. § 2412(c)(1); that language, as construed in Bart v. United States, 848 F.2d 217 (D.C.Cir.1988), the ALJ said, precluded reversal of his determination “summarily,” • i.e., without “meaningful explanation.” Even under the agency’s construction of the law, the ALJ concluded, the errors in ordering and -shipping the Fluke USA-made generators “would have warranted no more than a warning” -to the American manufacturer, its subsidiaries, and Iran Air.

[1257]*1257Once more the Under Secretary asserted the agency head’s prerogative to interpret the governing law: “ ‘Knowledge,’ ” the Under Secretary repeated, “is not -an essential element of proof for the imposition of civil penalties_” (Emphasis in original.) That construction of the Export Act and the regulations thereunder, the Under Secretary said, “became the law of this case,” i.e., law “binding on the ALJ and the parties.” For a second time, the Under Secretary vacated the ALJ’s decision and remanded for a determination of the charge against Iran Air consistent with the rule that Export Act civil penalties entail no scienter requirement.

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Bluebook (online)
996 F.2d 1253, 302 U.S. App. D.C. 174, Counsel Stack Legal Research, https://law.counselstack.com/opinion/iran-air-v-robert-f-kugelman-acting-under-secretary-for-bureau-of-export-cadc-1993.