[Federal Register Volume 89, Number 193 (Friday, October 4, 2024)]
[Notices]
[Pages 80857-80861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-22549]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

[Docket Number: 24-TDO-0001]


 Final Decision and Order

    In the Matter of:
SkyTechnic, Kiyevskoye Shosse 22-Y, Moskovsky Settlement, Moscow, 
Russia 108811;
Skywind International Limited, Room 2403A 24/F Lippo CTR Tower One, 
89 Queensway, Admiralty, Hong Kong;
Hong Fan International, Shop 102, Level 1, One Exchange Square, Hong 
Kong, and
Room A 11/F Henfa Commercial Building, 348-350 Lockhart Road, Hong 
Kong, and
Vistra Corporate Services Centre, Wickhams Cay II, Road Town, 
Tortola, British Virgin Islands;
Lufeng Limited, Room A 11/F Henfa Commercial Building, 348-350 
Lockhart Road, Hong Kong, and
Vistra Corporate Services Centre, Wickhams Cay II, Road Town, 
Tortola, British Virgin Islands;
Unical dis Ticaret Ve Lojistik JSC, 34140 Zeytinlik Mh. Halcki Sk, 
Iten Han Gue Carsi Blok No 28/58, Bakirkoy, Istanbul, Turkey, and
Room A 11/F Henfa Commercial Building, 348-350 Lockhart Road, Hong 
Kong;
Izzi Cup DOO, Koste Cukia 14, Zemun 200915, Serbia, and
Jl.Danau Tondano No. 55, 80228 Sanur--Bali, Indonesia;
Alexey Sumchenko, Hong Kong;
Anna Shumakova, Russia;
Branimir Salevic, Koste Cukia 14, Zemun 200915, Serbia, and
Jl.Danau Tondano No. 55, 80228 Sanur--Bali, Indonesia;
Danijela Salevic, Koste Cukia 14, Zemun 200915, Serbia, and
Jl.Danau Tondano No. 55, 80228 Sanur--Bali, Indonesia

AGENCY: Office of the Undersecretary for Industry and Security, Bureau 
of Industry and Security, Commerce.
    Before me for my final decision is a Recommended Decision (``RD'') 
issued on September 4, 2024, by Administrative Law Judge (``ALJ'') 
Tommy Cantrell. The RD recommends that I dismiss the appeal filed by 
Alexey Sumchenko (``Sumchenko'') of the Temporary Denial Order 
(``TDO'') issued against him on June 12, 2024. As discussed further 
below, I accept the findings of fact and conclusions of law in the 
ALJ's RD. As a result, Sumchenko's appeal is dismissed and the TDO 
issued against him is affirmed.

I. Background

    On June 12, 2024, the Assistant Secretary of Commerce for Export 
Enforcement (``Assistant Secretary'') of the Bureau of Industry and 
Security (``BIS'') issued a TDO against Sumchenko, Hong Fan 
International (``Hong Fan''), Lufeng Limited (``Lufeng''), and Skywind 
International Limited (``Skywind'')--three companies with which 
Sumchenko was affiliated--and several other companies and individuals, 
including SkyTechnic, a Russian aircraft parts supplier. 89 FR 51302. 
The TDO states that SkyTechnic ``developed and continues to utilize a 
network of Hong Kong-based shell companies, including Skywind, Hong 
Fan, and Lufeng, to obtain civil aircraft parts from the United States 
and obfuscate the ultimate end users of those parts in Russia, contrary 
to the requirements of the [Export Administration Regulations (the 
``EAR'' or the ``Regulations'')].'' Id.
    On July 25, 2024, Sumchenko, through counsel, filed an appeal with 
the U.S. Coast Guard ALJ Docketing Center pursuant to 15 CFR 
766.24(e)(3) of the EAR. On July 29, 2024, the Chief ALJ assigned the 
appeal to ALJ Cantrell. On August 20, 2024, BIS filed a response to the 
appeal. ALJ Cantrell issued the RD on September 4, 2024,

[[Page 80858]]

which my office received on September 5, 2024. On September 6, 2024, 
the BIS Appeals Coordinator requested views from the parties on 
extending the time to issue my Final Decision in this appeal. Both 
parties consented to an extension of time, and, on September 11, 2024, 
I issued an Order extending the period of time to issue this Final 
Decision to September 30, 2024.

II. Standard

    Section 766.24 of the EAR authorizes 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)(l), (b)(4). The 
Regulations require that the TDO define the imminent violation and 
state why the TDO was issued without a hearing. Id. at Sec.  
766.24(b)(2). Because all TDOs are public, ``the description of the 
imminent violation and the reasons for proceeding on an ex parte basis 
. . . shall be stated in a manner that is consistent with national 
security, foreign policy, business confidentiality, and investigative 
concerns. Id.
    A violation may be imminent ``either in time or in degree of 
likelihood.'' Id. at 766.24(b)(3). Accordingly, ``BIS may show a 
violation is about to occur, or that the general circumstances of the 
matter under investigation . . . demonstrate a likelihood of future 
violations.'' Id. To establish the likelihood of a future violation, 
``BIS may show that the violation under investigation . . . is 
significant, deliberate, covert and/or likely to occur again, rather 
than technical or negligent.'' Id.
    The Regulations provide that a ``respondent may appeal [the 
issuance of a TDO] on the grounds that the finding that the order is 
necessary in the public interest to prevent an imminent violation is 
unsupported.'' Id. at Sec.  766.24(e)(2).

III. Discussion

    In his appeal, Sumchenko argues that there is no support for the 
finding that the TDO against him is necessary to prevent an imminent 
violation of the EAR. Sumchenko Appeal at 5. Specifically, Sumchenko 
argues that the alleged misconduct outlined in the TDO occurred after 
he relinquished ownership of Hong Fan, Lufeng, and Skywind, and that 
there is no evidence that he was aware of or involved in the conduct 
that occurred when he did own the companies. Sumchenko Appeal at 5-7.
    The ALJ makes fourteen recommended findings of fact in the RD. RD 
at 4-5. I accept these recommended findings of fact. Based on these 
findings of fact, the ALJ concluded in the RD that BIS successfully 
demonstrated the TDO against Sumchenko was necessary to prevent an 
imminent violation of the EAR. RD at 8. For reasons discussed below, I 
agree with the ALJ's conclusion.
    First, the record shows that Sumchenko was the owner and director 
of Hong Fan, Lufeng, and Skywind during 2022 and 2023. RD at 6. 
Specifically, with respect to Hong Fan and Lufeng, Sumchenko was the 
owner of these entities until he transferred his ownership interest in 
June 2022. Sumchenko Appeal at 7 and Exs. E and F. He was a director of 
Hong Fan and Lufeng until he resigned those positions in November 2022. 
Sumchenko Appeal at 6. As noted in BIS's response to Sumchenko's 
appeal, even though Sumchenko had transferred his ownership rights in 
Hong Fan and Lufeng in June 2022, Sumchenko was identified as the 
beneficial owner of bank accounts for Hong Fan and Lufeng until at 
least September 2023. BIS Response at 5-6; RD at 4. For Skywind, 
Sumchenko was a director and owner until he resigned his position and 
transferred his ownership rights in Skywind in November 2023. Sumchenko 
Appeal at 6; RD at 4.
    Second, the record reflects that between June 2022 and March 2023, 
Hong Fan, Lufeng, and Skywind were involved in transactions or 
attempted transactions to deliberately obtain U.S.-origin aircraft 
parts on behalf of Russian entities, and to conceal the true identities 
of the Russian purchasers in those transactions, in violation of the 
Regulations. RD at 8.
    Third, as discussed above, during the time that Hong Fan, Lufeng 
and Skywind were involved in violations of the EAR, Sumchenko was an 
owner or director of these companies, or the beneficial owner of bank 
accounts connected to these entities. Sumchenko argues in his appeal 
that because he was no longer the owner of Hong Fan and Lufeng at the 
time of some of the conduct at issue in the TDO, the ``sole 
connection'' between the conduct outlined in the TDO as it relates to 
those entities and Sumchenko ``has been broken.'' Sumchenko Appeal at 
7. I find that the other connections established in the record, such as 
Sumchenko's position as director of Hong Fan and Lufeng until November 
2022 and his role as beneficial owner of bank accounts for these 
companies until at least September 2023, are enough to connect 
Sumchenko to the conduct that involved Hong Fan and Lufeng through 
September 2023. As a result, I agree with the ALJ's conclusion that 
Sumchenko shares responsibility for the conduct of Hong Fan, Lufeng, 
and Skywind described in the TDO, which includes transactions 
deliberately designed to evade the prohibitions of the EAR. RD at 8.
    As discussed above, the Regulations allow BIS to issue a denial 
order upon a showing that ``the order is necessary in the public 
interest to prevent an imminent violation of [the EAR.]'' 15 CFR 
766.24(b)(1). A violation may be considered ``imminent'' either in time 
or ``or in degree of likelihood.'' Id. at Sec.  766.24(b)(3). BIS may 
consider past participation in deliberate violations of the EAR as a 
factor when deciding whether a person is likely to participate in 
future violations of the EAR. See 15 CFR 766.24(b)(3). BIS has 
established that Hong Fan, Lufeng, and Skywind were involved in 
deliberate violations of the EAR, and that Sumchenko is responsible for 
that conduct based on his various roles with these companies at the 
time the conduct took place. As a result, I agree with the ALJ's 
conclusion in the RD that, BIS has established additional violations 
are ``imminent'' within the meaning of 15 CFR 766.24(b)(3), and that 
the TDO against Sumchenko is necessary to prevent an imminent violation 
of the EAR.
    Sumchenko argued in his appeal that even if he was the owner and 
director of companies that violated the EAR, BIS has not established 
that he ``was involved in or even knew about those events.'' Sumchenko 
Appeal at 6. The ALJ found this argument unpersuasive, and I find it 
unpersuasive as well. As the ALJ notes, Sumchenko made no effort to 
refute the allegations against Hong Fan, Lufeng, or Skywind. RD at 9. 
Just as important, Sumchenko makes no effort to explain his role in 
these companies or how each of these companies could have been involved 
in a scheme to violate the EAR without his knowledge given his various 
roles, including as owner or director. In addition, Sumchenko concedes 
that in February 2023, he directed a third party to pay Lufeng 
approximately $450,000. Sumchenko Appeal at 4. Sumchenko argues, 
however, that ``it is not clear how directing `a third party to pay 
Lufeng' indicates ownership or control over Lufeng.'' Id. Setting aside 
the fact that Sumchenko only offers vague assurances ``based on 
information and belief'' that the transaction was related to ``the 
process of divestment that Mr. Sumchenko was undertaking at the time,'' 
Sumchenko offers no specific explanation for why he would direct a 
third party to make payment to Lufeng if he no longer had an interest 
in the

[[Page 80859]]

company. See Sumchenko Appeal at 5. And since Sumchenko was the 
beneficial owner of a bank account for Lufeng at the time he instructed 
the third party to transfer payment, his potential access to the funds 
suggests his financial interest in Lufeng, including the receipt of any 
benefits of the scheme to provide U.S.-origin parts to entities in 
Russia without authorization, continued after he transferred his 
ownership and resigned as director. Indeed, Sumchenko's efforts to 
distance himself from Hong Fan and Lufeng via changes to corporate 
paperwork, while at the same time maintaining control of related bank 
accounts and directing payment to Lufeng, may have been part of an 
attempt to evade detection. For these reasons, I agree with the ALJ's 
conclusion that Sumchenko may be held responsible for the actions of 
Hong Fan, Lufeng, and Skywind described in the TDO. RD at 9. I further 
agree with the ALJ's conclusion that ``in the absence of the TDO, 
nothing would prevent [Sumchenko] from creating new companies to engage 
in the same violative conduct.'' RD at 10.

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, and 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.

Alan F. Estevez,
Under Secretary of Commerce for Industry and Security.

United States of America

Bureau of Industry and Security

Washington, D.C. 20230

    In the Matter of:
SkyTechnic, Kiyevskoye Shosse 22-Y, Moskovsky Settlement, Moscow, 
Russia 108811
Skywind International Limited, Room 2403A 24/F Lippo CTR Tower One, 
89 Queensway, Admiralty, Hong Kong
Hong Fan International, Shop 102, Level 1, One Exchange Square, Hong 
Kong, and
Room A 11/F Henfa Commercial Building, 348-350 Lockhart Road, Hong 
Kong, and
Vistra Corporate Services Centre, Wickhams Cay II, Road Town, 
Tortola, British Virgin Islands
Lufeng Limited, Room A 11/F Henfa Commercial Building, 348-350 
Lockhart Road, Hong Kong, and
Vistra Corporate Services Centre, Wickhams Cay II, Road Town, 
Tortola, British Virgin Islands
Unical dis Ticaret Ve Lojistik JSC, 34140 Zeytinlik Mh. Halcki Sk, 
Iten Han Gue Carsi Blok No 28/58, Bakirkoy, Istanbul, Turkey, and
Room A 11/F Henfa Commercial Building, 348-350 Lockhart Road, Hong 
Kong
Izzi Cup DOO, Koste Cukia 14, Zemun 200915, Serbia, and
Jl.Danau Tondano No. 55, 80228 Sanur--Bali, Indonesia
Alexey Sumchenko, Hong Kong
Anna Shumakova, Russia
Branimir Salevic, Koste Cukia 14, Zemun 200915, Serbia, and
Jl.Danau Tondano No. 55, 80228 Sanur--Bali, Indonesia
Danijela Salevic, Koste Cukia 14, Zemun 200915, Serbia, and
Jl.Danau Tondano No. 55, 80228 Sanur--Bali, Indonesia
    Respondents
Docket Number: 24-TDO-0001
The Hon. Tommy Cantrell Administrative Law Judge

Recommended Decision and Order

    This matter comes before me on Alexey Sumchenko's (Respondent) 
appeal of the Order Temporarily Denying Export Privileges (TDO) issued 
by the U.S. Department of Commerce Bureau of Industry and Security 
(BIS), through its Office of Export Enforcement (OEE) on June 12, 2024. 
OEE issued the TDO pursuant to the Export Administration Regulations 
(EAR), specifically 15 CFR 766.24.\1\ After considering the evidence 
and arguments presented by the parties, and in accordance with the 
applicable law and regulations, I find BIS demonstrated the TDO is 
necessary in the public interest to prevent an imminent violation of 
the EAR, and I recommend the TDO be affirmed.
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    \1\ Title 15 CFR parts 730-774 (EAR), were promulgated under the 
Export Administration Act of 1979 (EAA), formerly codified at 50 
U.S.C. 4601-4623. Although the EAA expired on August 21, 2001, the 
President, through Executive Order 13222 of August 17, 2001, and 
through successive Presidential Notices, continued the EAR in full 
force and effect under the International Emergency Economic Powers 
Act (IEEPA), codified at 50 U.S.C. 1701, et seq. The EAA was 
repealed in 2018, with the enactment of the Export Control Reform 
Act (ECRA). See 50 U.S.C. Sec.  4826. The ECRA provides BIS with 
permanent statutory authority to administer the EAR. The ECRA 
specifically states that all administrative or judicial proceedings 
commenced prior to its enactment are not disturbed by the new 
legislation. See Id.
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I. Procedural Background

    On June 12, 2024, OEE issued a TDO against Respondent, preventing 
him from participating in transactions subject to the EAR for 180 days. 
On July 25, 2024, Respondent filed an appeal of the TDO. Thereafter, 
the Chief Administrative Law Judge assigned this matter to me on July 
29, 2024, for adjudication.\2\ On August 5, 2024, the parties filed a 
stipulation extending BIS' deadline to submit a reply to the appeal. 
BIS filed a reply to the appeal on August 20, 2024.
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    \2\ Pursuant to an interagency agreement, United States Coast 
Guard (USCG) Administrative Law Judges are permitted to adjudicate 
BIS cases.
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    Respondent's appeal included seven documentary exhibits (Exhibits 
A-G), and a copy of the June 12, 2024, TDO (Ex. A). OEE's reply 
included two exhibits (Exhibits 1-2).\3\ The record is now closed, and 
the appeal is ripe for a recommended decision.
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    \3\ See Attachment A for a listing of exhibits.
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II. Recommended Findings of Fact

    1. Skywind International Limited (Skywind), Hong Fan Global Limited 
(Hong Fan), and Lufeng Limited (Lufeng), are companies registered to do 
business in Hong Kong. (Exs. B-D, respectively).
    2. Respondent was an owner and director of Skywind, Hong Fan, and 
Lufeng during 2022-2023. (Exs. A-G; Exs. 1-2).
    3. Respondent transferred his ownership interest in and resigned 
his position as director of Skywind on November 23, 2023. (Ex. G).
    4. Respondent resigned his position as director of Hong Fan on 
November 14, 2022, but remained a beneficial owner of Hong Fan until at 
least September 6, 2023. (Exs. E, and 1).
    5. Respondent resigned his position as director of Lufeng on 
November 14, 2022, but remained a beneficial owner of Lufeng until at 
least September 6, 2023. (Exs. F and 2).
    6. SkyTechnic is an aircraft parts supplier based in Moscow, 
Russia. (Ex. A at 3, 7).
    7. During May and June 2022, Anna Shumakova, on behalf of 
SkyTechnic, discussed with Izzi Cup (a company registered in Serbia) 
methods of purchasing aircraft parts from the United States (U.S.) in 
contravention of export controls, including by using Skywind as a straw 
purchaser of the items. (Ex. A at 7).
    8. In May 2022, Shumakova, on behalf of Skywind, informed a freight 
forwarder Skywind would complete purchases of aircraft parts on behalf 
of Pobeda Airlines, a Russian airline company that itself became the 
subject of a TDO on June 24, 2022. (Ex. A at 7).
    9. In June 2022, SkyTechnic began using Hong Fan to facilitate the 
purchase of aircraft parts from the U.S. (Ex. A at 7).

[[Page 80860]]

    10. Also in June 2022, Lufeng engaged in a transaction with Izzi 
Cup and served as the straw purchaser on an invoice for aircraft parts 
meant for SkyTechnic. (Ex. A at 8).
    11. In October 2022, Hong Fan attempted to ship aircraft parts to 
the Maldives for Euro Asia. Euro Asia had a sales relationship with 
Aeroflot-Russian Airlines (Aeroflot), a company that itself became the 
subject of a TDO on April 7, 2022. (Ex. A at 7-8; see PJSC Aeroflot, 1 
Arbat St., 119019, Moscow, Russia; Order Temporarily Denying Export 
Privileges, 87 FR 21611 (Apr. 12, 2022)).
    12. In November 2022, Hong Fan worked with a freight forwarder to 
facilitate the purchase of aircraft parts for Pobeda Airlines, and the 
associated invoice was issued to SkyTechnic. (Ex. A at 8).
    13. In February 2023, Respondent directed a third party to pay 
Lufeng approximately $450,000.00 for services rendered to Skywind. (Ex. 
A at 5).
    14. During February and March 2023, Hong Fan served as a straw 
purchaser for SkyTechnic, for the export of aircraft parts from the 
U.S., which were ultimately delivered to Aeroflot in Russia. (Ex. A at 
8).

III. Opinion and Recommended Conclusions of Law

    BIS issues and enforces the EAR ``under laws relating to the 
control of certain exports, reexports, and activities.'' 15 CFR 730.1. 
The EAR is ``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, BIS may request the EEO issue a TDO on an ex parte basis. 15 
CFR 766.24(a). A TDO is valid for a maximum of 180 days and the 
Assistant Secretary may renew a TDO in additional 180-day increments as 
deemed necessary. 15 CFR 766.24(b)(4), (d)(4).
    A violation may be imminent ``either in time or in degree of 
likelihood.'' 15 CFR 766.24(b)(3). Accordingly, BIS may attempt to show 
``a violation is about to occur, or that the general circumstances of 
the matter under investigation . . . demonstrate a likelihood of future 
violations.'' Id. With respect to demonstrating the likelihood of 
future violations, BIS ``may show that the violation under 
investigation . . . is significant, deliberate, covert and/or likely to 
occur again, rather than technical or negligent . . .'' Id. Ultimately, 
to obtain a TDO against a respondent, BIS must show ``the order is 
necessary in the public interest to prevent an imminent violation'' of 
the EAR. 15 CFR 766.24(b)(1). Conversely, to prevail on appeal, a 
respondent must show ``the finding that the order is necessary in the 
public interest to prevent an imminent violation is unsupported.'' 15 
CFR 766.24(e)(2).

A. BIS Demonstrated Likelihood of Imminent Violation

    The June 12, 2024, TDO set forth facts showing a likelihood 
Respondent would imminently violate the EAR unless his export 
privileges were revoked. It established that BIS implemented a license 
requirement for the export to Russia of any aircraft or aircraft parts 
listed in Export Control Classification Number (ECCN) 9A991 on February 
24, 2022. (Ex. A at 4). See Implementation of Sanctions Against Russia 
Under the Export Administration Regulations (EAR), 87 FR 12226 (Mar. 3, 
2022) (to be codified at 15 CFR parts 734, 738, 740, 742, 744, 746, and 
772). On March 2, 2022, BIS excluded any aircraft registered in, owned, 
or controlled by, or under charter or lease by Russia, or a national of 
Russia, from being eligible for license exception Aircraft, Vessels, 
and Spacecraft (AVS). (Ex. A at 5). See Imposition of Sanctions Against 
Belarus Under the Export Administration Regulations (EAR), 87 FR 13048 
(Mar. 8, 2022) (to be codified at 15 CFR parts 734, 738, 740, 742, 744, 
and 746). The TDO then established that after those dates, companies 
owned and controlled by Respondent acted to subvert these export 
controls to obtain prohibited aircraft parts for Russian companies.
    Specifically, the record shows Respondent was an owner and director 
of Skywind International Limited (Skywind), Hong Fan Global Limited 
(Hong Fan), and Lufeng Limited (Lufeng), during 2022-2023. (Exs. A-G; 
Exs. 1-2). Skywind, Hong Fan, and Lufeng are, and at all times relevant 
were, companies registered to do business in Hong Kong. (Exs. A-D). 
During May and June 2022, Anna Shumakova, on behalf of a Russian 
aircraft parts company called SkyTechnic, discussed with Izzi Cup, a 
company registered in Serbia, methods of purchasing aircraft parts from 
the U.S. in contravention of export controls, including using Skywind 
as a straw purchaser of the items. (Ex. A at 7). In May 2022, 
Shumakova, on behalf of Skywind, informed a freight forwarder that 
Skywind would purchase aircraft parts on behalf of Pobeda Airlines, a 
Russian airline company that itself became the subject of a TDO on June 
24, 2022. (Ex. A at 7). See Pobeda Airlines, 108811, Russian 
Federation, Moscow, p. Moskovskiy Kievskoe shosse 22nd km, 4/1. Moscow, 
Russia; Order Temporarily Denying Export Privileges, 87 FR 38707 (Jun. 
29, 2022). Then in June 2022, SkyTechnic began using Hong Fan to 
facilitate the purchase of aircraft parts from the U.S. (Ex. A at 7). 
And in June 2022, Lufeng served as the straw purchaser on an invoice 
for aircraft parts meant for SkyTechnic. (Ex. A at 8).
    In October 2022, Hong Fan attempted to facilitate the purchase of 
aircraft parts for Euro Asia, a company with a sales relationship with 
Aeroflot-Russian Airlines (Aeroflot), a company that itself became the 
subject of a TDO on April 7, 2022. (Ex. A at 7-8). See PJSC Aeroflot, 1 
Arbat St., 119019, Moscow, Russia; Order Temporarily Denying Export 
Privileges, 87 FR 21611 (Apr. 12, 2022). In November 2022, Hong Fan 
worked with a freight forwarder to facilitate the purchase of aircraft 
parts for Pobeda Airlines, and the associated invoice was issued by 
SkyTechnic. (Ex. A at 8). During February and March 2023, Hong Fan 
served as a straw purchaser for SkyTechnic, for the export of aircraft 
parts from the U.S. which were ultimately delivered to Aeroflot in 
Russia. (Ex. A at 8).
    Pursuant to the regulations governing these proceedings, a TDO is 
appropriate to prevent an imminent violation of the EAR. 15 CFR 
766.24(b)(1). To show a violation is ``imminent,'' BIS may demonstrate 
a temporal proximity to a future violation or may show ``that the 
general circumstances of the matter . . . demonstrate a likelihood of 
future violations.'' 15 CFR 766.24(b)(3). In this regard, ``BIS may 
show that the violation under investigation or charges is significant, 
deliberate, covert and/or likely to occur again, rather than technical 
or negligent . . .'' 15 CFR 766.24(b)(3). Here, the TDO clearly set out 
numerous instances of violations of the export controls imposed on 
February 24 and March 2, 2022, wherein the violations were not 
technical, but deliberate. For example, the TDO set forth in May and 
June of 2022, SkyTechnic discussed with Izzi Cup a strategy for 
obtaining U.S.-origin aircraft parts by placing Skywind on the invoice 
as the purchaser. (Ex. A at 7). The TDO then set forth numerous 
instances between June and November 2022 in which Skywind, Hong Fan, 
and Lufeng engaged in transactions to deliberately obtain U.S.-origin 
aircraft parts and conceal the actual purchasers (Russian companies). 
(Ex. A at 7-8).
    Respondent led the companies that engaged in these violations, and 
thus Respondent shares responsibility for those violations. Having 
shown Respondent already violated the EAR in a deliberate manner, BIS 
successfully

[[Page 80861]]

demonstrated that further violations were ``imminent'' within the 
meaning of 15 CFR 766.24, and an order temporarily denying Respondent's 
export privileges would be necessary to prevent them.

B. Respondent's Argument and Evidence Did Not Diminish BIS' Case

    As stated above, Respondent must show there is no support for the 
finding the TDO is necessary to prevent an imminent violation of the 
EAR. 15 CFR 766.24(e)(2). In his appeal, Respondent presented seven 
exhibits, one of which was a copy of the June 12, 2024, TDO (Ex. A); 
the remaining six exhibits were business records showing Respondent's 
transfer of ownership in and resignation as director of Skywind, Hong 
Fan, and Lufeng. (Exs. B-G). With these exhibits as support, Respondent 
makes two arguments. He first argues a TDO is not necessary to prevent 
him from imminently violating the EAR because he is no longer an owner 
or director of Skywind, Hong Fan, and Lufeng. Specifically, Respondent 
argues the TDO ``addresses alleged violations that occurred after 
February 2022,'' and that Respondent ``was divesting his ownership and 
resigning'' from the companies during 2022 and 2023. (Appeal at Para. 
14). Respondent asserts his ``ownership of the companies is the only 
allegation that purportedly ties him to the alleged violations 
described in the TDO.'' (Appeal at Para. 14). I am not persuaded.
    First, I note Respondent never challenged the truth of the 
allegations of the TDO, he merely distances himself from the conduct by 
stating he gave up ownership of two of the companies (Hong Fan and 
Lufeng) by June 2022. (Appeal at Paras. 15, 16). Respondent 
conveniently ignores his own exhibits, which show he was still director 
of the companies until November 14, 2022. (Exs. E, F).
    Respondent's exhibits also show he remained in control, as owner 
and director, of Skywind until November 23, 2023. (Ex. G). Despite 
Respondent's claim that he relinquished control of Hong Fan and Lufeng 
by November 14, 2022, BIS presented exhibits in its reply showing 
Respondent was listed as a beneficial owner of Hong Fan and Lufeng 
until at least September 6, 2023. (Exs. E, F; Exs. 1, 2). The TDO set 
forth numerous violations of the EAR committed by Skywind, Hong Fan, 
and Lufeng that occurred from May through November 2022, while 
Respondent was, by both his and BIS' claims, owner and director of the 
companies. (Ex. A at 7-8). As the director and owner of these 
companies, it is reasonable to conclude an order proscribing 
Respondent's export privileges is necessary to prevent future 
violations.
    Respondent alternatively argues even if he was in control of the 
companies while they were engaged in the illicit conduct, the TDO does 
not prove he ``was involved in or even knew about those events.'' 
(Appeal at Para. 14). I find this argument unpersuasive. As owner and 
director of the companies, Respondent's role imparts responsibility on 
him for the actions of the company. See Faour v. U.S. Dept. of 
Agriculture, 985 F.2d 217 (5th Cir. 1993) (petitioner was responsibly 
connected to actions of company because he was an officer, director, 
and owner of stock during time that company committed repeated 
violations of the law). Respondent did not refute any allegations of 
violative conduct in the TDO, but instead only demonstrated he has 
executed paperwork to divest from the companies. In the absence of the 
TDO, nothing would prevent Respondent from creating new companies to 
engage in the same violative conduct.
    Wherefore,
ORDER
    It is hereby recommended the Temporary Denial Order be affirmed.

Done and dated September 4, 2024, at Houston, Texas
[GRAPHIC] [TIFF OMITTED] TN04OC24.001

The Hon. Tommy Cantrell,
Administrative Law Judge, United States Coast Guard.
Attachment A: Exhibit List
Attachment A
Respondent's Exhibits
Exhibit A: Temporary Denial Order issued Jun. 12, 2024
Exhibit B: Company Particulars--Skywind International Limited
Exhibit C: Company Particulars--Hong Fan Global Limited
Exhibit D: Company Particulars--Lufeng Limited
Exhibit E: Resignation and transfer instruments--Hong Fan
Exhibit F: Resignation and transfer instruments--Lufeng
Exhibit G: Resignation and transfer instruments--Skywind
BIS Exhibits
Exhibit 1: Sep. 6, 2023, email re: Hong Fan
Exhibit 2: Sep. 6, 2023, email re: Lufeng
Certificate of Service
    I hereby certify that I have transmitted the above document to the 
following persons, as indicated below:
ALJ Docketing Center, U.S Custom House, Email: 
<a href="/cdn-cgi/l/email-protection#3c5d505658535f5759485f595248594e7c494f5f5b12515550"><span class="__cf_email__" data-cfemail="95f4f9fff1faf6fef0e1f6f0fbe1f0e7d5e0e6f6f2bbf8fcf9">[email protected]</span></a>, Phone: (410) 962-5100, Sent by email
Gregory Michelsen, Esq., Tristan de Vega, Esq., Office of Chief Counsel 
for BIS, U.S. Dept. of Commerce, Sent by email
    George Benaur, Esq., Benaur Law LLC, Sent by email

Done and dated September 4, 2024, at Houston, Texas
[GRAPHIC] [TIFF OMITTED] TN04OC24.002

Ericka J. Pollard,
Paralegal Specialist to The Hon. Tommy Cantrell Administrative Law 
Judge United States Coast Guard
[FR Doc. 2024-22549 Filed 10-3-24; 8:45 am]
 BILLING CODE 3510-DT-P


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