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Action Affecting Export Privileges; Aqua-Loop Cooling Towers, Co.

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In the Matter of: 09-BIS-006, Aqua-Loop Cooling Towers, Co., P.O. Box 966, Folsom, CA 95763, and 116 Hopper Lane, Folsom, CA 95630, Respondent.

Order Relating to Aqua-Loop Cooling Towers, Co.

The Bureau of Industry and Security, U.S. Department of Commerce (“BIS”), initiated this administrative proceeding against Aqua-Loop Cooling Towers, Co. (“Aqua-Loop”) pursuant to section 766.3 of the Export Administration Regulations (the “Regulations”),[1] and section 13(c) of the Export Administration Act of 1979, as amended (the “Act”),[2] through the issuance and tiling of a charging letter as to Aqua-Loop that alleges that Aqua-Loop has committed five violations of the Regulations (“Charging Letter”). Specifically, these charges are:

Charge 1: 15 CFR 764.2(d)—Conspiracy to Export Items From the United States to Iran Without the Required Licenses

Beginning at least in or about June 2004, and continuing through at least in or about April 2005, Aqua-Loop conspired or acted in concert with others, known and unknown, to violate the Regulations or to bring about an act that constitutes a violation of the Regulations. The purpose of the conspiracy was to export items subject to the Regulations from the United States to Iran, via the United Arab Emirates (“U.A.E.”), without the required U.S. Government authorization. Pursuant to section 746.7 of the Regulations, no person may engage in the exportation of an item subject to both the Regulations and the Iranian Transactions Regulations (“ITR”),[3] without authorization from the U.S. Department of the Treasury's Office of Foreign Assets Control (“OFAC”). Pursuant to section 560.204 of the ITR, an export to a third country intended for transshipment to Iran is a transaction subject to the ITR.

In furtherance of the conspiracy, the conspirators, including Aqua-Loop, participated in a scheme to have Aqua-Start Printed Page 16733Loop source or obtain the items from a U.S. distributor, and then to have AquaLoop export the items to an Iranian customer and co-conspirator, Parto Abgardan Cooling Towers Co. (“Parto Abgardan”), in Iran through a U.A.E. entity identified by Parto Abgardan. In furtherance of the scheme, Aqua-Loop obtained from Parto Abgardan information regarding items Parto Abgardan sought to have exported from the United States to Iran. Aqua-Loop then obtained such items and facilitated their export to Parto Abgardan in Iran. Pursuant to the conspiracy, various items were exported to Parto Abgardan in Iran, including the items discussed in Charges 2-5, below, for which no OFAC authorization was sought or obtained.

In addition, the co-conspirators sought to bring about the export to Iran of other items subject to the Regulations. On or about December 21, 2004, Parto Abgardan informed Aqua-Loop that it had contacted a U.S. company regarding the purchase of a filament winding machine, Parto Abgardan told Aqua-Loop, “Since they can't sell directly to Iran, they are OK with selling it domestically and then we can transfer it from U.S. to Dubai and then to Iran. With your permission we are going to give Aqua-Loop's information to them so they can send you their offer” based on the technical information provided to the U.S. company by Parto Abgardan. Thereafter, on or about December 23, 2004, Aqua-Loop's president, writing on Aqua-Loop stationery, responded, that he would be “more than happy if I can be of assistance on your purchase of filament winding machines. Please let me know the detail, so I can pursue.” In furtherance of the conspiracy, Parto Abgardan and Aqua-Loop continued to work together to accomplish this transaction; on or about January 31, 2005, Parto Abgardan provided Aqua-Loop with Parto Abgardan's contact at the U.S. filament winding machine company, and asked that Aqua-Loop contact the U.S. company. On or about February 1, 2005, Aqua-Loop's president again wrote to Parto Abgardan, stating that he had had a “long conversation” with the U.S. company's representative and that “I should emphasize that I found this lady a bit reluctant on the subject of export the unit to Iran. But she sound OK to work with us, if we do not mention any thing about Iran.”

In so doing, Aqua-Loop committed one violation of section 764.2(d) of the Regulations.

Charge 2: 15 CFR 764.2(b)—Causing, Aiding or Abetting

Between on or about July 26, 2004, and on or about September 28, 2004, Aqua-Loop caused, aided or abetted the doing of an act prohibited by the Regulations by facilitating or coordinating the export of approximately 174 rolls of hog hair filter media, part number HH6O 130 and valued at approximately $11,687.76, items which are subject to the Regulations and designated as EAR99 items,[4] through the U.A.E. to Iran without the required U.S. Government authorization. Pursuant to section 560.204 of the JTR maintained by OFAC, an export to a third country intended for transshipment to Iran is a transaction that requires OFAC authorization. Pursuant to section 746.7 of the Regulations, no person may engage in the exportation of an item subject to both the Regulations and the hR without authorization from OFAC. No OFAC authorization was sought or obtained for the transaction described herein.

Aqua-Loop took this action after having been asked by Parto Abgardan, an Iranian company, to arrange for the export of the items to Iran “via Dubai.” Parto Abgardan did not have a location in the U.A.E., and the address to which Aqua-Loop arranged for the items to be exported, “do Parto Abgardan,” was in fact added to the BIS Unverified List of entities involved in transactions in which BIS is unable to verify the existence or authenticity of the end-user or other party to the transaction, published in the Federal Register on October 19, 2006. 71 FR 61,706 (Oct. 19, 2006).

In so doing, Aqua-Loop committed one violation of section 764.2(b) of the Regulations.

Charge 3: 15 CFR 764.2(e)—Acting With Knowledge of a Violation

Between on or about July 26, 2004, and on or about September 28, 2004, Aqua-Loop ordered or financed items to be exported from the United States with knowledge that a violation of the Regulations was occurring, was about to occur or was intended to occur in connection with the items. Specifically, between on or about July 26, 2004, and on or about September 28, 2004, Aqua-Loop ordered or financed approximately 174 rolls of hog hair filter media, part number HH60130 and valued at approximately $11,687.76, items which are subject to the Regulations and designated as EAR99, which Aqua-Loop knew would be exported to Iran via the U.A.E. without the required U.S. Government authorization. Pursuant to section 560.204 of the ITR, an export to a third country intended for transshipment to Iran is a transaction that requires OFAC authorization. Pursuant to section 746.7 of the Regulations, no person may engage in the exportation of an item subject to both the Regulations and the ITR without authorization from OFAC. Aqua-Loop knew that no OFAC authorization was sought or obtained for the transaction described herein.

Aqua-Loop had knowledge that a violation was occurring, was about to occur or was intended to occur in connection with the items because Aqua-Loop was aware of the U.S. embargo of Iran and had knowledge that exporting items through the U.A.E. to Iran was a violation of U.S. law.

Aqua-Loop's president stated to a BIS Office of Export Enforcement special agent in an interview on or about October 14, 2005, that approximately three years earlier he had become aware of sanctions barring the shipment of items to Iran and that he understood that knowingly shipping items to Iran through a third country was illegal. Aqua-Loop's president referred to this type of activity as “diverting” items to Iran. Moreover, on or about September 23, 1997, AquaLoop had issued a letter to Parto Abgardan stating, “I am trying to find a way to send the components that I promised to you. Unfortunately after many unsuccessful attempts, I came to a conclusion that the only way to open this channel is what you were thinking, and if I understood correctly, you are going to have some kind of agent or office in one of the Gulf countries. I tell you this that I would have no problem getting a container to my place and loading to a steam ship toward Dubai.* * * Many shipping companies express that you shouldn't have any major problem getting the goods to Tehran from Dubai.”

In so doing, Aqua-Loop committed one violation of section 764.2(e) of the Regulations.

Charge 4: 15 CFR 764.2(b)—Causing, Aiding or Abetting

Between on or about February 9, 2005, and on or about April 19, 2005, Aqua-Loop caused, aided or abetted the doing of an act prohibited by the Regulations by facilitating or coordinating the export of approximately 185 rolls of hog hair filter media, part number HHB6O 130 and valued at approximately $9,838.30, items which are subject to the Start Printed Page 16734Regulations and designated as EAR99 items, through the U.A.E. to Iran without the required U.S. Government authorization. Pursuant to section 560.204 of the ITR maintained by OFAC, an export to a third country intended for transshipment to Iran is a transaction that requires OFAC authorization. Pursuant to section 746.7 of the Regulations, no person may engage in the exportation of an item subject to both the Regulations and the ITR without authorization from OFAC. No OFAC authorization was sought or obtained for the transaction described herein.

Specifically, after exporting certain hog hair filter media to Parto Abgardan in Iran, as described in Charges 2-3, Aqua-Loop was informed by Parto Abgardan that the items were not exactly the same as a sample Aqua-Loop's president had brought to Parto Abgardan before the transaction described in Charges 2-3 occurred. Aqua-Loop received from Parto Abgardan a piece of the original sample as well as a piece of the items described in Charges 2-3. Aqua-Loop then provided both pieces to the U.S. distributor, and placed a new order for 185 rolls of hog hair filter media, part number HHB6O 130, with the U.S. distributor. Aqua-Loop arranged for the U.S. distributor to supply the items, which were destined for Iran, to a freight forwarder for initial shipment to the U.A.E., “c/o Parto Abgardan.” Parto Abgardan did not have a location in the U.A.E., and the address to which Aqua-Loop arranged for the items to be exported, “do Parto Abgardan,” was in fact added to the BIS Unverified List of entities involved in transactions in which BIS is unable to verify the existence or authenticity of the end-user or other party to the transaction, published in the Federal Register on October 19, 2006. 71 FR 61,706 (Oct. 19, 2006).

In so doing, Aqua-Loop committed one violation of section 764.2(b) of the Regulations.

Charge 5: 15 CFR 764.2(e)—Acting With Knowledge of a Violation

Between on or about February 9, 2005, and on or about April 19, 2005, Aqua-Loop ordered items to be exported from the United States with knowledge that a violation of the Regulations was occurring, was about to occur or was intended to occur in connection with the items. Specifically, between on or about February 9, 2005, and on or about April 19, 2005, Aqua-Loop ordered approximately 185 rolls of hog hair filter media, part number HHB6O 130 and valued at approximately $9,838.30, items which are subject to the Regulations and designated as EAR99, which Aqua-Loop knew would be exported to Iran via the U.A.E. without the required U.S. Government authorization. Pursuant to section 560.204 of the ITR, an export to a third country intended for transshipment to Iran is a transaction that requires OFAC authorization. Pursuant to section 746.7 of the Regulations, no person may engage in the exportation of an item subject to both the Regulations and the ITR without authorization from OFAC. Aqua-Loop knew that no OFAC authorization was sought or obtained for the transaction described herein.

Aqua-Loop had knowledge that a violation was occurring, was about to occur or was intended to occur in connection with the items because Aqua-Loop was aware of the U.S. embargo of Iran and had knowledge that exporting items through the U.A.E. to Iran was a violation of U.S. law. Aqua-Loop's president stated to a BIS Office of Export Enforcement special agent in an interview on or about October 14, 2005, that approximately three years earlier he had become aware of sanctions barring the shipment of items to Iran and that he understood that knowingly shipping items to Iran through a third country was illegal. Aqua-Loop's president referred to this type of activity as “diverting” items to Iran. Moreover, on or about September 23, 1997, AquaLoop's president had issued a letter to Parto Abgardan, on Aqua-Loop stationery, stating, “I am trying to find a way to send the components that I promised to you. Unfortunately after many unsuccessful attempts, I came to a conclusion that the only way to open this channel is what you were thinking, and if I understood correctly, you are going to have some kind of agent or office in one of the Gulf countries. I tell you this that I would have no problem getting a container to my place and loading to a steam ship toward Dubai. * * * Many shipping companies express that you shouldn't have any major problem getting the goods to Tehran from Dubai.”

In so doing, Aqua-Loop committed one violation of section 764.2(e) of the Regulations.

Whereas, BIS and Aqua-Loop have entered into a Settlement Agreement pursuant to section 766.18(b) of the Regulations, whereby they agreed to settle this matter in accordance with the terms and conditions set forth therein; and

Whereas, I have approved of the terms of such Settlement Agreement; it is therefore ordered:

First, Aqua-Loop shall be assessed a civil penalty in the amount of $100,000, the payment of which shall be suspended for a period often (10) years from the date of this Order, and thereafter shall be waived, provided that during the period of suspension, Aqua-Loop has committed no violation of the Act, or any regulation, order, or license issued thereunder.

Second, that for a period often (10) years from the date of this Order, Aqua-Loop, his representatives, assigns or agents (“Denied Person”) may not participate, directly or indirectly, 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. Benefitting 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.

Third, 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 Start Printed Page 16735intended 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 which 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.

Fourth, 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 Aqua-Loop 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.

Fifth, that the Charging Letter, the Settlement Agreement, and this Order shall be made available to the public.

Sixth, 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 immediately.

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Issued this 25th day of March, 2010.

David W. Mills,

Assistant Secretary of Commerce for Export Enforcement.

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Footnotes

1.  The Regulations are currently codified in the Code of Federal Regulations at 15 CFR parts 730-774 (2009). The violations occurred in 2004 and 2005. The Regulations governing the violation at issue are found in the 2004 and 2005 versions of the Code of Federal Regulations (15 CFR parts 730-774 (2004-2005)). The 2009 Regulations establish the procedures that apply to this matter.

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2.  50 U.S.C. app. § 240 1-2420 (2000). 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. p. 783 (2002)), which has been extended by successive Presidential Notices, the most recent being that of August 13, 2009 (74 FR 41.325 (Aug. 14, 2009)), has continued the Regulations in effect under the International Emergency Economic Powers Act (50 U.S.C. 1701, et seq.) (IEEPA”).

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4.  EAR99 is a designation for items subject to the Regulations but not listed on the Commerce Control List. 15 CFR 734.3(c).

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[FR Doc. 2010-7439 Filed 4-1-10; 8:45 am]

BILLING CODE 3510-DT-P