On August 25, 2020, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) published a final decision by the Undersecretary, affirming an Administrative Law Judge’s (“ALJ”) imposition of a US $ 31.4 million civil monetary penalty on Nordic Maritime Pte. Ltd., a Singapore-based marine seismic company, and its chairman (together, the “Respondents”), for knowingly exporting highly controlled equipment to Iran. This final decision follows the Undersecretary’s previous decision vacating and remanding the initial penalty as disproportionate to that imposed in similar cases (“Remand Order”). Our previous blog post discussing this unusual action is available here.
By way of background, the ALJ, in his initial recommended decision and order (“RDO”) dated February 7, 2020, found the Respondents liable for violating the Export Administration Regulations (“EAR”), and recommended a civil monetary penalty of US $ 31.4 million. The Respondents then appealed the ALJ’s decision to the Undersecretary, whose first decision, including the Remand Order, was published in March 2020. In that decision, the Undersecretary affirmed the ALJ’s findings on liability, but vacated the penalty and remanded it back to the ALJ for reexamination because the “analysis of damages in the RDO [was] incomplete.” The Undersecretary also listed a number of cases settled with proportionally lower penalties to guide the ALJ on remand. The ALJ then ordered additional briefing focused on the penalty amount, and reinstated the original penalty with a fuller justification in a subsequent RDO dated July 15, 2020. The Undersecretary affirmed the US $ 31.4 million civil monetary penalty in its entirety.
The development of this case provides a helpful insight into the administrative enforcement process in US federal agencies. US federal agencies that have enforcement capabilities, like BIS, appoint ALJs to conduct hearings in administrative enforcement proceedings. In this regard, a respondent is generally prevented from appealing an agency decision to a federal court for judicial review until it has exhausted its administrative remedies. Thus, Nordic Maritime had to appeal the ALJ’s decision to the Undersecretary before appealing to the courts.
In the present case, it is likely that the Undersecretary had made the Remand Order in order to ensure that the unusually high civil monetary penalty would survive scrutiny in a federal court. Indeed, although the Undersecretary, in his Remand Order, stated that “there appears to be little precedent for a civil monetary penalty like the one given here,” in his final decision on August 25, he analyzed a string of settled and litigated cases before deciding that “cases of this nature – involving shipments to an embargoed country of sensitive National Security-controlled items, with knowledge and involvement of company leadership, and then lying to law enforcement about it – warrant high penalties, including the imposition of up to the maximum penalty.”
Of note, the Undersecretary distinguished the present case from previous cases with proportionally lower penalties which also involved intentional violations, by highlighting that the presence of “the combined degree of aggravating factors” in this case – reexport of seismic survey equipment to an embargoed destination (Iran), knowledge of the reexport, and false and misleading statements to BIS in the course of the investigation – made the Respondents’ conduct “far more harmful to the national security interests of the United States.”