Court Opinion

ID: 4172114
Source: CourtListenerOpinion
Date Created: 2017-05-26 15:04:31.873703+00
Date Added: 2024-06-11T14:39:22.274389
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 9, 2016                Decided May 26, 2017

                        No. 16-5118

                EPSILON ELECTRONICS, INC.,
                       APPELLANT

                              v.

 UNITED STATES DEPARTMENT OF THE TREASURY, OFFICE OF
           FOREIGN ASSETS CONTROL, ET AL.,
                     APPELLEES

        Appeal from the United States District Court
                for the District of Columbia
                    (No. 1:14-cv-02220)

    Teresa N. Taylor argued the cause and filed the briefs for
appellant.

    Eric S. Volkman was on the brief for amicus curiae JPM
Legal Advisors Worldwide Limited in support of appellant.

    Lewis S. Yelin, Attorney, U.S. Department of Justice,
argued the cause for appellees. With him on the brief were
Benjamin C. Mizer, Principal Deputy Assistant Attorney
General, and Douglas N. Letter and Sharon Swingle,
Attorneys.
                              2

    Before: ROGERS and GRIFFITH, Circuit Judges, and
SILBERMAN, Senior Circuit Judge.

    Opinion for the Court filed by Circuit Judge GRIFFITH.

    Opinion concurring in part and dissenting in part filed by
Senior Circuit Judge SILBERMAN.

     GRIFFITH, Circuit Judge: In 1995, President Clinton
imposed trade sanctions against Iran that are enforced by the
Office of Foreign Assets Control within the Department of the
Treasury. OFAC is authorized to impose civil penalties
against any person who exports goods to a third party who it
has reason to know intends to send them to Iran. The principal
question raised by this appeal is whether OFAC must also
show that the goods actually ended up in Iran. We agree with
the agency that the government need not make that showing
and affirm the district court on that ground. But we also
conclude that OFAC did not adequately explain parts of its
determination that the exporter here had reason to know that
its shipments would be sent on to Iran.

                               I

     When the President identifies an “unusual and
extraordinary threat” to the American economy, national
security, or foreign policy that originates from abroad, see 50
U.S.C. § 1701, the International Emergency Economic
Powers Act authorizes him to declare a national emergency
and address the threat by regulating foreign commerce, see id.
§ 1702. In 1995, President Clinton determined that Iran’s
“support for international terrorism, its efforts to undermine
the Middle East peace process, and its efforts to acquire
weapons of mass destruction” represented a national
                              3

emergency, see Iranian Transactions Regulations, 77 Fed.
Reg. 64,664, 64,664 (Oct. 22, 2012), and, invoking his
authority under the Act, imposed comprehensive trade
sanctions on Iran by executive order, see Exec. Order No.
12,959, 60 Fed. Reg. 24,757, § 1 (May 6, 1995).

     OFAC implemented the President’s executive order in
September 1995 by promulgating the Iranian Transactions
and Sanctions Regulations, see 60 Fed. Reg. 47,061 (Sept. 11,
1995), which are now codified, as amended, at 31 C.F.R. pt.
560. Among other prohibitions, the regulations forbid “the
exportation, reexportation, sale, or supply, directly or
indirectly . . . of any goods, technology, or services to Iran”
by United States individuals and businesses, including
exportation to a third country with “knowledge or reason to
know” that the goods are “intended specifically” for
reexportation to Iran. See 31 C.F.R. § 560.204.

     The agency has invoked that prohibition against appellant
Epsilon Electronics, a California-based wholesaler of sound
systems, video players, and other accessories for cars. The
company’s wares can be found across the globe, from Latin
America to Africa and the Middle East. Asra International
Corporation, a distributor based in Dubai, has been one of
Epsilon’s trading partners. Between 2008 and 2012, Epsilon
sent thirty-nine shipments of consumer goods to Asra, valued
at about $3.4 million.

    OFAC began investigating Epsilon in 2011, when the
agency learned about a 2008 shipment from Epsilon’s
California headquarters to an address in Tehran, Iran. In
response to an administrative subpoena, Epsilon’s president
denied knowledge of the shipment and suggested that a lower-
                              4

level employee had sent the package without the company’s
knowledge.

     Later in 2011, OFAC also learned that Epsilon had
received multiple wire transfers from a Dubai bank, made on
behalf of Asra International. The agency examined Asra’s
website, which touted the company’s success in the Iranian
market, contained a directory of dealers who were all located
in Iran, and displayed photos from trade shows in various
Iranian cities. Some of these photos also appeared on
Epsilon’s website. OFAC suspected that the company’s
shipments to Asra were “destined for Iran,” and opened a
second investigation on Epsilon in December 2011. The
agency issued an administrative subpoena to Epsilon’s bank,
seeking information about the company’s transactions with
Asra.

     In the meantime, OFAC decided to close its investigation
of the 2008 shipment. In January 2012, the agency sent
Epsilon a letter explaining that the shipment appeared to have
violated OFAC regulations, and warning that those
regulations “prohibit virtually all” American trade with Iran.
Appellant’s App. [A.A.] 94. OFAC explained that it would
not penalize Epsilon for the shipment but that the agency
could take this apparent violation into account in any future
case.

     But OFAC did not close its parallel investigation of
Epsilon’s dealings with Asra. In May 2012, the agency sent
Epsilon another administrative subpoena, requesting further
details on the company’s transactions with Asra and with Iran.
Epsilon responded that it had no dealings with Iran and that
none of its shipments to Asra were intended for Iran. The
                               5

company submitted invoices chronicling thirty-four shipments
to Asra.

     Between February and May 2012, while OFAC’s
investigation continued, Epsilon sent Asra five more
shipments. During this period, Epsilon managers
corresponded by email with an Asra manager, Shahriar
Hashemi, who described plans to launch a Dubai retail store
under “Asra’s flag.” A.A. 118. The emails record Hashemi
and Epsilon negotiating several orders, and show Hashemi
mentioning plans for his showroom, complaining about
another Dubai shop selling Epsilon products, worrying about
whether Epsilon products could endure Dubai’s heat, and
anticipating sales to African and Central Asian customers. An
Epsilon manager promised Hashemi that the Dubai retail
market was “all yours.” See A.A. 119.

     In May 2014, OFAC tentatively concluded that all thirty-
nine of Epsilon’s shipments to Asra violated 31 C.F.R.
§ 560.204 because each was made with knowledge, or reason
to know, that Asra intended to reexport the goods to Iran. The
agency sent Epsilon a Prepenalty Notice, declaring its intent
to impose a civil monetary penalty of $4,073,000, subject to
Epsilon’s response. OFAC arrived at that dollar amount by
applying its penalty guidelines, which required the agency to
determine whether any of the violations were voluntarily
disclosed and whether any were “egregious.” See generally 31
C.F.R. pt. 501, App. A. OFAC found that none of Epsilon’s
violations was voluntarily disclosed, and that the last five
shipments, made after Epsilon received OFAC’s January 2012
cautionary letter, were egregious. Though the agency has
authority to depart upward or downward from the guideline
penalty, it decided not to do so after balancing the aggravating
and mitigating factors.
                                  6

     In July 2014, OFAC issued a final Penalty Notice,
formally imposing a $4,073,000 civil penalty. The agency had
not been persuaded by Epsilon’s response to the Prepenalty
Notice, which again denied any knowledge or reason to know
that Asra distributed Epsilon’s products in Iran. The Penalty
Notice explained that “multiple facts tend to show that the
goods exported to Asra were sent to Iran and that Epsilon
knew or had reason to know that the goods were intended
specifically for supply, transshipment, or reexportation,
directly or indirectly, to Iran.” Although the Notice recited
much of the evidence against Epsilon, it never mentioned the
emails between Epsilon management and Hashemi.

     The issuance of the Penalty Notice was final agency
action. See 31 C.F.R. § 560.704. In December 2014, Epsilon
sued OFAC in district court. Epsilon’s complaint sought
declaratory and injunctive relief against enforcement of the
civil penalty. On March 7, 2016, the district court granted
summary judgment in favor of the government. See Epsilon
Elecs., Inc. v. U.S. Dep’t of Treasury, 168 F. Supp. 3d 131,
147 (D.D.C. 2016). 1

    Epsilon timely appealed. We have jurisdiction under 28
U.S.C. § 1291, and review de novo the district court’s entry of
summary judgment in favor of the government. Islamic Am.
Relief Agency v. Gonzales (IARA), 477 F.3d 728, 732 (D.C.

     1
       Epsilon argues that the district court erred by failing to award
it attorney’s fees and costs as the “prevailing party” in an action
against the United States under 28 U.S.C. § 2412(d)(1)(A). The
company, of course, was not the prevailing party below. In light of
our disposition today, Epsilon may move the district court for fees
and costs in the first instance. We take no position on the propriety
of such an award.
                               7

Cir. 2007). As the Administrative Procedure Act requires, our
review is “highly deferential” to the agency, meaning we may
set aside OFAC’s action “only if it is arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law.”
IARA, 477 F.3d at 732 (quoting 5 U.S.C. § 706(2)(A)). Under
that standard, we will uphold agency findings that are
supported by substantial evidence, even if we might have
reached a different conclusion in the first instance. See, e.g.,
United Steel Workers Int’l Union v. Pension Benefit Guar.
Corp., 707 F.3d 319, 325 (D.C. Cir. 2013). That deference has
a caveat: although the APA does not permit us to substitute
our judgment for the agency’s, we must ensure that the
agency has “articulate[d] a satisfactory explanation for its
action including a ‘rational connection between the facts
found and the choice made.’” Motor Vehicle Mfrs. Ass’n of
the U.S. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983) (quoting Burlington Truck Lines, Inc. v. United States,
371 U.S. 156, 168 (1962)).

     Epsilon asks us to set aside these fundamental doctrines
of administrative law by reviewing OFAC’s decision de novo
instead of under the APA’s arbitrary-and-capricious standard.
We have described de novo review in an APA case as
“extraordinary and rare,” so rare, in fact, that we have never
done so. Zevallos v. Obama, 793 F.3d 106, 112 (D.C. Cir.
2015). Although dicta in one of our cases left the door open to
such scrutiny where the agency’s factfinding procedures are
“severely defective,” Nat’l Org. for Women v. Soc. Sec.
Admin., 736 F.2d 727, 745 (D.C. Cir. 1984) (Mikva &
McGowan, JJ., concurring), we need not decide what such an
analysis would entail, because Epsilon failed to preserve any
argument for de novo review before the district court. See
Mem. Supp. Pl.’s Mot. in Opp’n to Defs.’ Mot. Summ. J. 9,
Epsilon, 168 F. Supp. 3d 131 (No. 14-2220 (RBW)), ECF No.
                                   8

19-1 [hereinafter Epsilon Mot. Summ. J.]. 2 Accordingly, we
will adhere to the “arbitrary [and] capricious” standard set out
in 5 U.S.C. § 706(2)(A).

                                  II

     Epsilon offers three challenges to the civil penalty that
OFAC imposed. First, the company contends that none of its
thirty-nine shipments to Asra were in violation of the Iranian
Transactions and Sanctions Regulations. Second, Epsilon
claims that the amount of the penalty assessed is not only
arbitrary and capricious, but also an “excessive fine”
forbidden by the Eighth Amendment. Third, the company
argues that its due process rights were violated because it had
insufficient notice of the evidence that OFAC intended to rely
on.

                                  A

     We first consider whether OFAC properly found Epsilon
liable for thirty-nine violations of section 560.204 of the
Iranian Transactions and Sanctions Regulations. In addressing
that issue, we face a threshold question of regulatory
interpretation. To hold a party liable for a breach of section

     2
        Epsilon faults the district court’s factual findings, on the
ground that OFAC failed to file “the whole Administrative Record”
with the court below. Appellant Br. 24. OFAC in fact complied
with District Court Rule 7(n), which governs presentation of the
record to the court, and with the district court’s March 16, 2015
order to “file the administrative record,” by filing a certified list of
contents of the record, and by attaching to its motion for summary
judgment those portions of the record on which it relied. Epsilon
was given an opportunity to file additional record excerpts with the
court, and did so.
                                 9

560.204, must OFAC prove that goods shipped by that party
actually arrived in Iranian territory? Or can liability rest solely
on a showing that the party shipped goods to a third party,
with reason to know that the recipient specifically intended to
reexport them to Iran?

     Epsilon advances the former position, and contends there
is no substantial evidence that the thirty-nine shipments at
issue ever entered Iran. OFAC responds that the regulation’s
plain text does not require such a showing. See Appellee Br.
29 (“Under the unambiguous terms of the regulation, actual
reexportation to Iran by the person in the third country is not
required for a violation.”). The agency also urges us to defer
to its interpretation if we find the regulation ambiguous. See
Auer v. Robbins, 519 U.S. 452, 461 (1997). However, the
reading of section 560.204 that OFAC has adopted is the
same reading that we would have adopted in the absence of
any agency interpretation. We therefore need not decide
whether Auer deference would be appropriate in this
instance. 3

                                  i

    We begin with the regulation’s text. See In re England,
375 F.3d 1169, 1177 (D.C. Cir. 2004). Section 560.204
provides:

      3
        We take no position on whether OFAC could, in the future,
adopt Epsilon’s reading of section 560.204, and receive deference
on that interpretation. We merely hold that OFAC’s current
interpretation is the most natural and the most consistent with the
plain text. Auer may require a court to defer to a regulatory reading
it would never have independently reached. See Gen. Elec. Co. v.
EPA, 53 F.3d 1324, 1330 (D.C. Cir. 1995).
                               10

    Except as otherwise authorized pursuant to this
    part . . . the exportation, reexportation, sale, or
    supply, directly or indirectly, from the United
    States, or by a United States person, wherever
    located, of any goods, technology, or services to
    Iran or the Government of Iran is prohibited,
    including the exportation, reexportation, sale, or
    supply of any goods, technology, or services to a
    person in a third country undertaken with
    knowledge or reason to know that:

    (a) Such goods, technology, or services are
    intended specifically for supply, transshipment, or
    reexportation, directly or indirectly, to Iran or the
    Government of Iran . . . .

     The analysis at first glance appears straightforward. The
regulation prohibits “the exportation [] of any goods [] to a
person in a third country undertaken with knowledge or
reason to know that [s]uch goods [] are intended specifically
for [] reexportation [] to Iran.” See id. That prohibition, on its
face, has only two elements: (1) the exportation of goods to “a
person in a third country” and (2) “knowledge or reason to
know” that the third-country recipient plans to send the goods
on to Iran. Id. The goods’ actual arrival in Iran is not
mentioned, meaning that proof of this event is not required for
a liability finding under the prohibition on third-country
exports.

     Epsilon, in response, points to the word “including.” The
rule just discussed is “includ[ed]” within a broader prohibition
on “exportation . . . to Iran.” See id. The company argues that
the “word ‘including’ makes clear there is no separate
prohibition on exports to third countries independent from re-
                                  11

exportation to Iran.” Appellant Reply Br. 6. This argument
relies on an unstated premise: that goods have not been
exported “to Iran” until they actually reach Iranian territory.
OFAC, by contrast, assumes that the phrase “to Iran” refers to
the sender’s intent, not the ultimate arrival of the goods. In
other words, on OFAC’s interpretation, goods have been
“export[ed] . . . to Iran” when the exporter puts them in
transit, with Iran as the intended final destination. 4

     We think OFAC’s reading more closely aligns with
ordinary English usage. Suppose you put a birthday card in
the mail, addressed to your brother. While the card is still en
route, your mother asks you, “Did you send a card to your
brother?” In line with OFAC’s usage, you would respond, “I
sent a card to him, but it hasn’t arrived yet,” because you put
the card in transit, intending it to reach him. Following
Epsilon’s usage, though, you would have to say, “I didn’t
send a card to him,” because the card has not yet arrived.
(Stranger still, if you were uncertain whether the card had
reached his mailbox, you might answer, “I don’t know if I

     4
       Contrary to Epsilon’s suggestion, this interpretation does not
render the attempt provision of the Iranian sanctions regulations
superfluous. See 31 C.F.R. § 560.203(a) (prohibiting any
transaction that “attempts to violate any of the prohibitions set forth
in this part”). Though we do not intend to comprehensively define
what would constitute an attempt to violate section 560.204, we
note that attempt liability requires only a “substantial step” toward
commission of the proscribed act (plus the requisite mental state).
Cf., e.g., United States v. Hite, 769 F.3d 1154, 1162 (D.C. Cir.
2014) (discussing the meaning of “attempt” in federal criminal
law). For example, a merchant who signs a sales contract with an
Iranian business, but has not yet put any goods in transit for export,
might be liable for an attempt to violate section 560.204, but not for
an actual violation of that section.
                               12

sent a card to him or not.”) The first statement is more
consistent with the way ordinary English speakers talk. Cf.
Bond v. United States, 134 S. Ct. 2077, 2090 (2014) (rejecting
a linguistic usage that “no speaker in natural parlance” would
employ).

     The agency’s argument draws further support from the
definition of the word “exportation” in export rules that are
closely related to OFAC’s. The regulations in question are the
Department of Commerce’s Export Administration
Regulations (EAR) which control the export of items that
have both civilian and military uses. See 15 C.F.R. § 730.3.
The Iranian transaction regulations do not expressly
incorporate this EAR definition, but they often refer to the
EAR. For example, OFAC’s approval of some export
activities is conditioned on compliance with the EAR. See,
e.g., 31 C.F.R. §§ 560.530, 560.540. The EAR defines
“export” as “an actual shipment or transmission of items out
of the United States.” 15 C.F.R. § 772.1 (2014). In other
words, the occurrence of an “export” is not contingent on the
goods’ arrival at their final destination. See id. What’s more,
“the export or reexport of items subject to the EAR that will
transit through [Country A] or be transshipped in [Country A]
to [Country B] or are intended for reexport to [Country B], are
deemed to be exports to [Country B].” Id. § 734.2(b)(6)
(2014) (emphasis added). 5 Note the use of forward-looking
language: the export of items “that will transit” or “are
intended for reexport.” If an exporter can say, “I have
exported items to Country B that will transit through Country
    5
        A 2016 rule moved both of these definitions to a newly
created 15 C.F.R. § 734.13, but did not alter the substance of the
definitions. See Revisions to Definitions in the Export
Administration Regulations, 81 Fed. Reg. 35,586, 35,591 (June 3,
2016).
                                13

A,” then exportation to B occurs before “transit through” A,
and thus before the goods reach A, let alone B. The EAR
definition of “export” indicates that OFAC’s reading of
section 560.204 reflects the meaning of that word as it is used
in trade regulations.

     The EAR, like OFAC’s interpretation of section 560.204,
embodies the understanding, drawn from broader legal usage,
that exportation is an “act,” specifically, “[t]he act of sending
or carrying goods and merchandise from one country to
another.” Exportation, BLACK’S LAW DICTIONARY (10th ed.
2014). An “act,” in turn, is an actor’s voluntary conduct: for
example, placing goods on a ship bound for Iran. See Act,
BLACK’S LAW DICTIONARY (10th ed. 2014) (“The word
‘act’ . . . denote[s] an external manifestation of the actor’s will
and does not include any of its results, even the most direct,
immediate, and intended.” (quoting RESTATEMENT (SECOND)
OF TORTS § 2 (1965))). If an exporter has taken all the steps
he must personally take to put goods in transit to Iran, and the
goods are out of his control, no further “voluntary conduct” or
“external manifestation of [] will” by the exporter is necessary
for the goods to arrive in Iran. See RESTATEMENT (SECOND)
OF TORTS § 2 cmt. c (“Thus, if the actor, having pointed a
pistol at another, pulls the trigger, the act is the pulling of the
trigger and not the impingement of the bullet upon the other’s
person.”). The arrival of the goods is a “result” of his
“voluntary conduct,” not part of the conduct itself, and thus is
not a component of the “act” of exportation.

     Epsilon’s gloss on section 560.204 would also subvert
the ordinary meaning of the word “including.” That word
typically introduces one or more illustrative examples. See,
e.g., Chickasaw Nation v. United States, 534 U.S. 84, 89
(2001); Dong v. Smithsonian Inst., 125 F.3d 877, 880 (D.C.
                               14

Cir. 1997); see also Antonin Scalia & Bryan A. Garner,
Reading Law 132-33 (2012). Whatever follows the word
“including” is a subset of whatever comes before; any
conduct that comes within the “including” clause comes, by
definition, within the preceding clause as well. For example,
imagine a regulation that reads: “All disruptive activity is
prohibited in the park, including the playing of loud music.”
The word “including” indicates that “playing of loud music”
is part of the broader category of “disruptive activity.” And if
a court (or an agency) adopted a definition of “disruptive
activity” that excluded “playing of loud music” in many
circumstances, that court (or agency) would distort the plain
meaning of the regulation.

     That principle guides us here, and further illustrates why
Epsilon’s interpretation of the phrase “to Iran” cannot be
correct. Section 560.204 is divided into two clauses. First is
the prohibitory clause, which contains the general ban on
“exportation . . . to Iran.” Second is the “including” clause,
which contains the specific prohibition on third-country
shipments that is at issue in this case. If we adopted the
company’s reading of the words “exportation . . . to Iran” in
the prohibitory clause, certain conduct would be covered by
the including clause, but not by the prohibitory clause.
Consider a case where an exporter ships goods to a distributor
in a third country, knowing that the distributor intends to send
those goods on to Iran. In this hypothetical, there is no dispute
that the goods entered the third country, but no showing that
they actually made it to Iran. On Epsilon’s reading, such a
case would satisfy the text of the including clause (because
the goods arrived in the third country, and the exporter had
the necessary mental state), but not the text of the prohibitory
clause (because the goods did not arrive in Iran). That
interpretation turns the word “including” on its head.
                              15

     Of course, there are instances where the plain text of an
including clause is limited in scope by the preceding clause.
See Massachusetts v. EPA, 549 U.S. 497, 556-57 (Scalia, J.,
dissenting). Justice Scalia’s dissent in Massachusetts cites
several examples. But this situation only arises when a
particular word or phrase from the first clause is implicitly
carried forward into the second clause. For instance, a statute
covering “any American automobile, including any truck or
minivan” would be most naturally read to mean “any
American automobile, including any [American] truck or
minivan.” See id. at 557. Similarly, the phrase “a proceeding
in a foreign or international tribunal, including criminal
investigations conducted before formal accusation” would
“not encompass criminal investigations underway in a
domestic tribunal” because the statutory language implicitly
reads “a proceeding in a foreign or international tribunal,
including criminal investigations conducted before formal
accusation [in a foreign or international tribunal].” See id.
(quoting 28 U.S.C. § 1782(a)).

     Here, though, it’s not clear what word or phrase would
carry forward from the prohibitory clause and limit the scope
of the including clause. Perhaps it would be the words “to
Iran” (assuming, as Epsilon does, that “to Iran” refers to
arrival in Iran, not the sender’s intent). That proposition
would be complicated by the fact that the words “to Iran”
already occur in the including clause: the exporter who ships
to a third country must have “knowledge or reason to know”
that the goods are intended for reexportation “to Iran.” 31
C.F.R. § 560.204(a). Bringing the words “to Iran” from the
prohibitory clause into the including clause would also be odd
in that the including clause already refers to shipment “to a
person in a third country.” Should the clause be read to
                              16

include shipments “to a person in a third country to Iran
undertaken with knowledge or reason to know”? That would
be an awkward construction, to say the least. In the end, we
see no reason to depart in this case from the usual rule that
“including” means “for example.”

                               ii

     Epsilon contends, in the face of the text, that OFAC has
recognized a safe harbor in section 560.204: the “inventory
exception.” This exception, according to the company, is
“well understood in the industry as a negative reading of
§ 560.204, creating a safe harbor for re-exports to Iran of non-
sensitive . . . products so long as the U.S. exporter does not
know, or have reason to know, such products are specifically
intended for Iran.” Appellant Br. 14; see also Br. of Amicus
Curiae JPM Legal Advisors 3 (describing the inventory
exception as a “safe harbor that protects U.S. exporters from
running afoul of the regulations where a third party in a non-
sanctioned country reexports their goods to Iran without their
knowledge or consent” (emphasis added)). Thus, Epsilon
explains, if it ships goods to a Dubai company that are taken
up into the Dubai company’s “general inventory,” Epsilon
cannot be held liable if the Dubai company later ships those
same goods to Iran.

     Nobody argues that section 560.204 is a strict-liability
rule. After all, liability for shipment of goods to a third
country explicitly depends on the shipper’s knowledge or
“reason to know” that the third-country recipient specifically
intends to reexport those goods to Iran. See 31 C.F.R.
§ 560.204. Conversely, when an exporter does have reason to
know that its third-country trading partner specifically intends
to reexport the exporter’s goods to Iran, the exporter cannot
                                 17

avoid liability by asserting that the exports passed through the
middleman’s “general inventory.” Appellant Br. 14. The
regulation does not provide support for Epsilon’s proposed
freestanding exception. Nor does the 2002 OFAC guidance
document on which Epsilon and amicus rely. The guidance
document merely restates section 560.204’s prohibition and
“reason to know” standard, and is not framed as an
“exception.” 6 See OFFICE OF FOREIGN ASSETS CONTROL,
020722-IR-01, GUIDANCE ON TRANSSHIPMENTS TO IRAN
(2002) [hereinafter Transshipments Guidance]. Epsilon thus
was properly found liable for violating section 560.204 if it
had reason to know that its shipments to Asra were
specifically intended for reexport to Iran, regardless of
whether Asra treated those shipments as “general inventory.”

     6
        “It is important to note that the prohibited sales to Iran
through a non-U.S. person in a third country are not limited to those
situations where the seller has explicit knowledge that the goods
were specifically intended for Iran, but includes those situations
where the seller had reason to know that the goods were
specifically intended for Iran, including when the third party deals
exclusively or predominately with Iran or the Government of Iran.”
OFFICE OF FOREIGN ASSETS CONTROL, 020722-IR-01, GUIDANCE
ON TRANSSHIPMENTS TO IRAN 2 (2002).

      We do not decide whether “knowledge that a customer deals
predominantly with Iran is, standing alone, a basis for finding” a
violation of section 560.204. See Br. of Amicus Curiae JPM Legal
Advisors 8 (emphasis added). As we discuss below, the record
supports a finding that, when the first thirty-four shipments were
sent, Epsilon had reason to know that Asra dealt exclusively with
Iran.
                              18

                              iii

     Our dissenting colleague argues that OFAC failed in its
duty of reasoned decisionmaking because the agency’s
Penalty Notice was ambiguous. One sentence in that Notice
reads: “Multiple facts tend to show that the goods exported to
Asra were sent to Iran and that Epsilon knew or had reason to
know that the goods were intended specifically for supply,
transshipment, or reexportation, directly or indirectly, to
Iran.” A.A. 198 (emphasis added). In the dissent’s view, the
“goods . . . were sent to Iran” language suggests a finding that
the goods did arrive in Iran, and thus indicates that OFAC was
trying to avoid deciding whether the actual arrival of goods in
Iran is necessary for a section 560.204 violation. But see
discussion supra Section II.A.i (explaining that the phrase “to
Iran” more naturally refers to the sender’s intent, not the
actual arrival of goods in Iran). The dissent contends that this
ambiguity requires remand of all liability findings, but we
disagree.

     Under the APA’s deferential standard of review, we will
uphold an agency decision where “the agency’s path may
reasonably be discerned,” even if the decision is “of less than
ideal clarity.” E.g., Casino Airlines, Inc. v. NTSB, 439 F.3d
715, 717 (D.C. Cir. 2006) (quoting Bowman Transp., Inc. v.
Ark.-Best Freight Sys., Inc., 419 U.S. 281, 285-86 (1974)).
Here, we can see the path without difficulty. The Prepenalty
Notice, the first document that formally laid out OFAC’s
charges against Epsilon and offered the company an
opportunity to respond, set out the basis for the agency’s
proposed violation findings in a distinct paragraph:

        From on or about August 26, 2008, to on or
    about May 22, 2012, Epsilon appears to have
                                19

     violated 31 C.F.R. § 560.204 when it issued 39
     invoices for car audio and video equipment,
     valued at $3,407,491, which was shipped to Asra,
     a company with offices in Tehran, Iran, and
     Dubai, U.A.E., that reexports most, if not all, of
     its products to Iran. Epsilon knew or had reason
     to know that such goods were intended
     specifically for supply, transshipment, or
     reexportation, directly or indirectly, to Iran.

      Prepenalty Notice 1, A.A. 185. Like an indictment, this
paragraph sets out the elements of a section 560.204 violation
as the agency understood them, and makes no mention of the
actual arrival of goods in Iran. The Prepenalty Notice based
its allegation that Epsilon violated section 560.204 on just two
premises: first, Epsilon shipped goods to a company “that
reexports most, if not all, of its products to Iran” and second,
Epsilon “knew or had reason to know” about Asra’s Iranian
exports. See id. Far from “straddling the issue,” see Partial
Dissent at 3, the Prepenalty Notice clearly indicates that in the
agency’s view, no showing that Epsilon’s goods had arrived
in Iran was necessary for a section 560.204 violation finding. 7
And because we can see exactly how the agency reasoned, a
remand for clarification of that reasoning would serve no
purpose. Cf. PDK Labs., Inc. v. DEA, 362 F.3d 786, 799 (D.C.
Cir. 2004) (“If the agency's mistake did not affect the
outcome, if it did not prejudice the petitioner, it would be
senseless to vacate and remand for reconsideration.”).

     7
       If, as our colleague suggests, OFAC was trying to avoid the
need to prove that the goods actually arrived in Iran, it is unclear
why the agency would deliberately cultivate ambiguity on the
matter, instead of straightforwardly maintaining that such proof was
not required.
                               20

      The dissent points out that “we review final agency
actions, not preliminary complaints.” Partial Dissent at 4.
That is true, of course, but not the issue here. Final agency
action is usually a prerequisite to our review, but once an
agency’s action is final and properly before us, we review the
entire administrative record. See 5 U.S.C. § 706(2) (providing
that a court “shall review the whole record” when determining
whether an agency’s action was arbitrary or capricious);
Camp v. Pitts, 411 U.S. 138, 142-43 (1973). An agency action
need not stand or fall on the last document in the record; if the
record as a whole satisfies the APA’s requirements, remand
“would be pointless.” See Olivares v. TSA, 819 F.3d 454, 458-
59 (D.C. Cir. 2016); Tourus Records, Inc. v. DEA, 259 F.3d
731, 738 (D.C. Cir. 2001). The Chenery rule against appellate
courts’ post-hoc justification of agency action operates on the
same principle. See SEC v. Chenery Corp., 318 U.S. 80, 87
(1943) (“The grounds upon which an administrative order
must be judged are those upon which the record discloses that
its action was based.” (emphasis added)); Tourus Records,
259 F.3d at 738. Any ambiguity that might exist in the
Penalty Notice, taken in isolation, disappears on consideration
of the record as a whole, and of the Prepenalty Notice in
particular.

                               B

     We have explained that an exporter may be found liable
under section 560.204 if it ships goods from the United States
to a third country, with reason to know that those goods are
specifically intended for reexport to Iran, even if the goods
never arrive in Iran. OFAC found that Epsilon made thirty-
nine such shipments, in each case with the requisite reason to
know. We now consider whether the agency’s determinations
were arbitrary and capricious. This case turns on OFAC’s
                              21

factual determination that Epsilon’s conduct contravened
section 560.204, and so the central question in the arbitrary-
and-capricious analysis is whether substantial evidence
supported that determination. See Safe Extensions, Inc. v.
FAA, 509 F.3d 593, 604 (D.C. Cir. 2007).

    The APA’s substantial evidence standard “requires more
than a scintilla, but can be satisfied by something less than a
preponderance of the evidence.” Town of Barnstable v. FAA,
740 F.3d 681, 687 (D.C. Cir. 2014) (quoting Fla. Gas
Transmission Co. v. FERC, 604 F.3d 636, 645 (D.C. Cir.
2010)). If that threshold is met, we must uphold the agency’s
judgment regarding the relevant facts, even if we think the
“evidence tends to weigh against the agency’s finding.” See
United Steel Workers, 707 F.3d at 325. However, we cannot
examine the agency’s proffered evidence in isolation; we
must also consider “whatever in the record fairly detracts
from its weight.” Town of Barnstable, 740 F.3d at 687
(quoting Universal Camera Corp. v. NLRB, 340 U.S. 474,
488 (1951)).

     We begin our exploration of the facts on the parties’
common ground: Epsilon sent thirty-nine shipments of car
accessories from the United States to Asra International, and
those accessories arrived in Dubai. The only disputed
question, in light of our textual analysis above, is whether
Epsilon knew, or had reason to know, that Asra International
specifically intended to reexport those shipments to Iran.
OFAC’s guidance explains that “reason to know” can be
established “through a variety of circumstantial evidence,”
including “course of dealing, general knowledge of the
industry or customer preferences, working relationships
between the parties, or other criteria far too numerous to
                                   22

enumerate.” 8 Transshipments Guidance at 2. We consider the
thirty-nine shipments in two groups: the thirty-four shipments
sent between 2008 and 2011, and the five shipments sent in
2012. We conclude that OFAC’s findings regarding the first
group (the 2008-2011 shipments) were adequately justified,
but the agency’s findings regarding the latter group (the 2012
shipments) were not.

                                    i

     Record evidence tends to show that Asra International
distributed exclusively in Iran as late as December 2011.
Specifically, Asra International’s English-language website
presented Asra International (“Dubai Asra”) as an affiliate of
the Asra Electronic Trading Company of Tehran (“Tehran
Asra”). 9 The website’s “Contact Us” page, under the heading
“Asra International Corporation L.L.C.,” listed only two
addresses: one for Asra International Corporation in Dubai,
United Arab Emirates, and one for Asra Electronic Trading
Company in Tehran, Iran. The same website’s “About Us”
page, again under the “Asra International Corporation”
heading, announced that “Asra Trading Company revels in its
10 long years of experience on Iran’s car audio & video
market,” having established “the broadest car audio & video
systems distribution and sales network in Iran, supported by
150 of Iran’s most reputable sales agents in different cities.”
A.A. 85. The marketing copy made several references to

      8
          Epsilon does not challenge this definition. See Appellant Br.
19.
      9
       OFAC captured screenshots of the website as it appeared in
December 2011. These appear in the administrative record. Nothing
in the record suggests that the website’s content differed at any
relevant time.
                                 23

Asra’s success in “the country,” implying that the company
served only a single country, Iran; indeed, no other countries
were mentioned on this page. See id. Finally, the website’s
“Dealers” tab displayed a long list of sales agents, all located
in Iran. OFAC could reasonably infer from this website that
Dubai Asra distributed only in Iran, by reexporting goods to
Tehran Asra, which then transported those goods to dealers
throughout the country.

     Epsilon had reason to know these facts, which were
available on Asra’s public, English-language website. There
is also direct evidence that Epsilon had actual knowledge of
Asra’s website and its contents. Specifically, Epsilon copied
images found there to its own website, displaying them in a
photo gallery labeled “Iran” as recently as 2012. 10 Thus, in
addition to demonstrating Epsilon’s awareness of Asra’s
website, these photos suggest that Epsilon actually knew of
Dubai Asra’s distribution in Iran. Further evidence that
Epsilon knew of Dubai Asra and Tehran Asra’s connection
came in the form of a 2008 freight manifest, recording a

     10
        OFAC retrieved earlier versions of Epsilon’s website from
the Internet Archive, a database of archived webpages. See United
States ex rel. Oliver v. Philip Morris USA, Inc., 101 F. Supp. 3d
111, 121-23 (D.D.C. 2015) (confirming reliability of Internet
Archive evidence, and citing cases), aff’d, 826 F.3d 466 (D.C. Cir.
2016). The Internet Archive recorded the existence of this photo
gallery nineteen times between 2007 and 2012. It could be accessed
from the Epsilon website’s “International Gallery” page (which
displayed an array of national flags, and invited visitors to click on
a flag “to view that Country’s Soundstream Team,” A.A. 161) by
clicking on an Iranian flag labeled “Iran.” Epsilon blames the
Iranian flag’s presence on a third-party web developer, whom
Epsilon had instructed to create the appearance of a “widespread
global presence,” but does not explain the photo gallery. A.A. 194.
                                 24

shipment from Epsilon’s address directly to Tehran Asra’s
address.

     Because nothing in the record suggests that Asra
International made sales anywhere other than Iran before
2012, Epsilon focuses on rebutting the inference that Dubai
Asra and Tehran Asra are affiliates. The company offers a
letter from a Dubai Asra manager, alleging that Tehran Asra
is a separate company that is solely responsible for the
website and pirated Dubai Asra’s trademarks. 11 But the
agency was under no obligation to consider this letter, which
was not submitted to OFAC and was not part of the agency
record. Epsilon offers no reason for not including the letter,
which was dated May 16, 2014, in its response to the
Prepenalty Notice, which the company submitted on June 6,
2014. See, e.g., CTS Corp. v. EPA, 759 F.3d 52, 64 (D.C. Cir.
2014) (refusing to consider extra-record evidence absent a
showing of “gross procedural deficiencies”). We also note
that Epsilon conceded, before the district court, that Dubai
Asra is owned by Iranian nationals. See Epsilon Mot. Summ.
J. 2 n.2.

     The information available to Epsilon indicated that
everything Dubai Asra purchased before 2012 was sent to
Iran. On the record before us, OFAC surely had much “more

     11
        Epsilon also submitted in the district court an affidavit from
a researcher in the Dubai office of the professional-services firm
Ernst & Young. The researcher found that Dubai Asra is indeed
incorporated in Dubai and “not legally a branch office of any other
entity in . . . the U.A.E., or elsewhere.” A.A. 200. This affidavit,
which was prepared in anticipation of litigation at the request of
Epsilon’s current counsel, was not part of the administrative record,
and so we decline to consider it. See CTS Corp. v. EPA, 759 F.3d
52, 64 (D.C. Cir. 2014).
                             25

than a scintilla” of evidence, Town of Barnstable, 740 F.3d at
687, to support its finding that Epsilon’s first thirty-four
shipments to Dubai Asra violated section 560.204.

                              ii

     We cannot say the same, however, for the final five
shipments. Although a court applying the APA’s arbitrary-
and-capricious standard “is not to substitute its judgment for
that of the agency,” State Farm, 463 U.S. at 43, the agency
must “articulate a satisfactory explanation for its action
including a rational connection between the facts found and
the choice made.” IARA, 477 F.3d at 732 (quoting State Farm,
463 U.S. at 43). Certain evidence in the record indicated that
Epsilon did not have reason to know its last five shipments
were intended for reexport to Iran. OFAC failed to explain
adequately why it discounted that evidence. We do not hold
that OFAC could not have imposed liability for the last five
shipments. That is, we do not opine on whether the record
contained substantial evidence supporting a determination of
liability for these shipments. See State Farm, 463 U.S. at 52.
We hold instead that the agency did not explain why its
conclusion about the first thirty-four shipments held for the
last five as well, in light of the countervailing evidence
presented. See Lakeland Bus Lines, Inc. v. NLRB, 347 F.3d
955, 962 (D.C. Cir. 2003). In other words, the agency failed
to “exercise[] its judgment in a reasoned way.” U.S. Sugar
Corp. v. EPA, 830 F.3d 579, 652 (D.C. Cir. 2016) (per
curiam).

    The countervailing evidence in question consists of
several email conversations between Epsilon’s sales team and
Dubai Asra manager Shahriar Hashemi. These emails covered
the period between September 2011 and July 2012, the time
                              26

frame when the last five shipments were sent. Epsilon
explained that these emails “contemplate[d] [Epsilon]
products being sold out of the Asra store in Dubai.” A.A. 132.
The emails’ content seems to bear out Epsilon’s
characterization. The emails tend to show that Hashemi
planned to open a store in Dubai, styled “Actel Trading” but
operating under “Asra’s flag.” A.A. 118. In one conversation,
Hashemi expressed concern about a competing retailer selling
Epsilon products in Dubai. An Epsilon co-owner reassured
him, “We are not selling to anyone in Dubai. It is all yours.”
A.A. 119. In other emails, Hashemi referred to his
“showroom,” A.A. 122, and fretted that he would have
“nothing to display” to prospective customers from Central
Asia, Africa, and Jordan, A.A. 109. The emails appear to
connect the final five shipments to this retail store: each
shipment has a contemporaneous email chain that implies the
shipment was meant for Hashemi’s own business. Several
refer explicitly to market conditions in Dubai. Epsilon,
reading Hashemi’s correspondence, might well have believed
these five shipments were intended for a Dubai retail store,
which suggests that it did not have reason to know those
shipments were specifically intended for reexport to Iran.

     Government counsel explained at oral argument that
OFAC did not consider the emails credible evidence. We can
infer as much from the agency’s liability finding. But we lack
an explanation, from the record, of why they are not credible,
and why they do not counsel against liability for the final five
shipments. The Prepenalty Notice and Penalty Notice do not
mention the emails at all, and instead treat the thirty-nine
violations as a unit, as though the same set of evidence
applied to each one. The agency did include a limited
discussion of the emails in an internal OFAC memorandum,
circulated a month before the Prepenalty Notice issued. But
                              27

even this memo does not set forth a reasoned basis for
rejecting the email evidence.

     The memo occasionally approaches the necessary
explanation, but in each case falls short. First, the memo notes
that every email in the record was sent after Epsilon received
OFAC’s first administrative subpoena. At least two inferences
could be drawn from that fact. Perhaps Epsilon and Asra
concocted the emails to cover up Asra’s continued exports to
Iran (and Epsilon’s knowledge thereof) in the face of OFAC
scrutiny. Or perhaps Epsilon read and understood OFAC’s
January 2012 cautionary letter, and continued exporting to
Asra only because it honestly believed its new shipments
were meant for Dubai retail. Nowhere in the administrative
record does OFAC state any reason for choosing one
inference over the other.

     Second, the memo mentions that Hashemi’s Dubai retail
store opened in April 2012, after all but two of the last five
shipments had already been dispatched. The relevant
question, though, is not whether the goods in the last five
shipments were actually sold in the store, but whether Epsilon
had reason to know that those last five shipments were
intended for Iran. The store’s opening date does not rebut
evidence that Epsilon believed its goods were slated for
eventual sale there. Third, the memo notes that the Dubai
store was named Actel Trading but that the last five
shipments, like the first thirty-four, were addressed to Asra,
not Actel. From these facts, the memo suggests that the last
five shipments could not have been intended for retail sale in
Dubai. But the memo also observes that Actel appears to be
“a subsidiary or affiliate acting on behalf of Asra.” Thus, the
fact that the shipments were addressed to Asra does not
contradict the theory that they were intended for Actel. We
                              28

also note the low value of the last five shipments, two of
which were worth just over one hundred dollars apiece. At the
time those shipments were sent, Epsilon knew its dealings
with Asra were under OFAC investigation. OFAC did not
explain why Epsilon would knowingly risk fines of up to
$250,000 per shipment in return for such a small reward.

     In cases like this one, our doctrine offers two principles
that pull in opposing directions. We must “uphold a decision
of less than ideal clarity if the agency’s path may reasonably
be discerned,” State Farm, 463 U.S. at 43 (quoting Bowman
Transp., 419 U.S. at 286), but we “may not supply a reasoned
basis for the agency’s action that the agency itself has not
given,” id. (quoting Chenery, 332 U.S. at 196). Though the
question is close, we hold that OFAC failed to offer a
sufficient explanation for why it did not credit the email
evidence. Because OFAC failed to justify its conclusion that
Epsilon should be held liable for the last five shipments as
well as the first thirty-four, the final five liability
determinations were arbitrary and capricious.

                               C

     In addition to challenging its liability, Epsilon contends
that the size of the penalty imposed violates both the
Administrative Procedure Act and the Eighth Amendment.
We have held that the imposition of liability for the last five
shipments was arbitrary and capricious, and so we do not
reach Epsilon’s challenge to the monetary penalty for those
five shipments. The question remains whether the penalty for
the first thirty-four shipments is severable from the penalty
for the last five, which would allow us to address the
lawfulness of the former even after invalidating the latter. Cf.
United States v. Lyons, 706 F.2d 321, 335 n.25 (D.C. Cir.
                                29

1983) (explaining, in the criminal context, that when we
“cannot ascertain whether the District Court’s sentence on a
valid conviction was influenced by a conviction on a separate
count that is later overturned on appeal, the proper course is to
remand so that the District Court may reconsider the sentence
imposed”).

      Severability of an agency order “depends on the issuing
agency’s intent. Where there is substantial doubt that the
agency would have adopted the same disposition regarding
the unchallenged portion if the challenged portion were
subtracted, partial affirmance is improper.” North Carolina v.
FERC, 730 F.2d 790, 795-96 (D.C. Cir. 1984). Epsilon has
challenged both portions of the penalty calculation, but we are
still faced with a severability issue: our liability disposition
has removed the basis for one portion of Epsilon’s penalty,
but not the other. 12 Because the two segments of the penalty
calculation are “intertwined,” see Davis Cty. Solid Waste
Mgmt. v. EPA, 108 F.3d 1454, 1459 (D.C. Cir. 1997) (quoting
Tele. & Data Sys., Inc. v. FCC, 19 F.3d 42, 50 (D.C. Cir.
1994)), our decision on liability requires us to remand the
penalty calculation, in its entirety, to OFAC.

     To explain why severance is not an option here, we
briefly review OFAC’s process for calculating civil penalties,
which is set out in Appendix A to 31 C.F.R. pt. 501. The
agency begins by determining the “base penalty” for each

     12
        Neither party’s briefing or argument addressed the question
of severability. However, our disposition of the liability question
requires us to consider the issue, where the alternative is
“usurp[ation] [of] an administrative function,” namely, the
balancing of policy considerations needed for a penalty calculation.
See Fed. Power Comm’n v. Idaho Power Co., 344 U.S. 17, 20
(1952).
                                30

violation, which depends on three variables: the value of the
shipment, whether the violation was “egregious,” and whether
the company voluntarily disclosed the violation. 31 C.F.R. pt.
501, App. A, ¶ V(B)(2)(a). 13 OFAC treated the thirty-four
violations that predated its January 2012 cautionary letter as
non-egregious, and the five violations that postdated the letter
as egregious. Applying the penalty framework to these facts
produced a base penalty of $2,823,000 for the thirty-four non-
egregious violations, and a base penalty of $1,250,000 for the
five egregious violations.

     After setting the base penalty, the agency can depart
upward or downward by applying the aggravating and
mitigating factors listed in the guidelines. Id. ¶¶ V(B)(2)(b),
III. OFAC did not apply aggravating and mitigating factors to
each individual violation, but instead applied the same set of
factors to all thirty-nine alleged violations: seven aggravating
factors, and three mitigating factors. The most important cited
aggravating factor, for our purposes, was that “[f]ive of
Epsilon’s shipments to Asra occurred after Epsilon . . .

     13
        Violations in the non-egregious, not-voluntarily-disclosed
category are penalized by the “applicable schedule amount.” See 31
C.F.R. pt. 501, App. A, ¶ V(B)(2)(a)(ii). The “applicable schedule
amount” is $10,000 for a shipment valued between $1,000 and
$10,000; $25,000 for a shipment valued between $10,000 and
$25,000; and so on in like fashion, up to the statutory maximum.
See id. ¶ I(B). A case will be deemed “egregious” when
consideration of the relevant aggravating factors shows it to be “a
particularly serious violation of the law calling for a strong
enforcement response.” See id. ¶ V(B)(1). For violations that are
egregious and not voluntarily disclosed, OFAC will apply the
statutory maximum penalty: $250,000 or twice the value of the
offending transaction, whichever is greater. See id. ¶ V(B)(a)(iv);
50 U.S.C. § 1705(b).
                                31

received a cautionary letter from OFAC for an attempt to send
goods directly to Iran.” A.A. 187. We have held that the
imposition of liability for those five shipments was arbitrary
and capricious, and so removed, pending remand, the factual
basis for this aggravating factor. This in turn calls into
question the penalty for all thirty-nine shipments, because this
aggravating factor was applied to all of them. 14 OFAC might
respond that it applied this aggravating factor only to the last
five shipments, but that cannot be the case. The agency had
already set the base penalty for those shipments at the
statutory maximum, and thus could not have increased the
penalty by applying any aggravating factors. If OFAC in fact
gave weight to this aggravating factor, it must have done so
with respect to the first thirty-four shipments.

     We thus have “substantial doubt” that OFAC would have
imposed the same penalty for the first thirty-four shipments in
the absence of its liability finding for the last five shipments.
The penalty for the earlier shipments depended in part on two
aggravating factors which themselves depended on the
liability finding for the later shipments. Because the agency
has primary responsibility for calculating penalties, we will
not speculate as to what penalty amount it would set under a
different balance of aggravating and mitigating factors. We
will leave that judgment to OFAC. Cf. Nat’l Ass’n of Mfrs. v.
NLRB, 717 F.3d 947, 963 (D.C. Cir. 2013) (noting that a court
that is too quick to sever and affirm part of an agency’s
decision is “performing a function left to the agency”),
overruled on other grounds by Am. Meat Inst. v. U.S. Dep’t of
     14
        Similarly, OFAC found the fact that “Epsilon exported
goods to Asra valued at $3,407,491” to be an aggravating factor. Id.
Our invalidation of the final five liability findings potentially
reduces this number (albeit by a small amount: $35,629), and calls
this aggravating factor into doubt as well.
                               32

Agric., 760 F.3d 18 (D.C. Cir. 2014) (en banc); see also Fla.
Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985) (“[I]f
the reviewing court simply cannot evaluate the challenged
agency action on the basis of the record before it, the proper
course, except in rare circumstances, is to remand to the
agency for additional investigation or explanation.”). On
remand, whether or not the agency reaffirms the liability
findings for the last five shipments, it should reconsider the
entire penalty calculation.

    Our disposition means that we will not decide whether
OFAC’s calculation of Epsilon’s penalty was arbitrary and
capricious. Nor will we reach Epsilon’s Eighth Amendment
challenge to the penalty amount. Analysis of those questions
must await OFAC’s response to our decision today.

                               D

     One constitutional argument remains to be considered.
“No person shall . . . be deprived of life, liberty, or property,
without due process of law.” U.S. CONST. amend. V. As noted
above, Asra International’s website, and the 2008 DHL
receipt showing a shipment from Epsilon’s address to Tehran,
were two important pieces of evidence underlying OFAC’s
conclusion that Epsilon violated the Iran sanctions
regulations. Epsilon argues that it did not learn that OFAC
would rely on this evidence until it received the Penalty
Notice. The company claims OFAC deprived it of a
meaningful opportunity to rebut the Asra website evidence or
the shipping receipt, in violation of the Fifth Amendment’s
Due Process Clause. See People’s Mojahedin Org. of Iran v.
U.S. Dep’t of State, 613 F.3d 220, 227 (D.C. Cir. 2010).
                              33

     However, Epsilon has not carried its burden to
demonstrate that it was prejudiced by this alleged error. See
Chai v. Dep’t of State, 466 F.3d 125, 132 (D.C. Cir. 2006)
(recognizing that a procedural due process violation, in an
administrative adjudication, may be harmless in light of “the
particular circumstances” of the case); see also Shinseki v.
Sanders, 556 U.S. 396, 409 (2009) (“[T]he burden of showing
that an error is harmful normally falls upon the party attacking
the agency’s determination.”). Epsilon explained that it would
have submitted two additional pieces of evidence to OFAC if
it had known the agency planned to rely on Asra’s website
and on the DHL shipping receipt. First, Epsilon would have
introduced a distribution agreement between Epsilon and
Asra, entered into on February 1, 2012, which authorized
Asra “to sell only to countries which USA can legally
distribute [sic].” A.A. 95. Second, the company would have
provided copies of two letters in which Shahriar Hashemi, the
Dubai Asra manager, denied any affiliation between Dubai
Asra and Tehran Asra.

     Both of these pieces of evidence would have been
relevant and responsive to the Prepenalty Notice, and Epsilon
fails to explain why it did not include them with its response
at that time. The Prepenalty Notice expressly alleged an
affiliation between the two Asra entities, Asra International
(Dubai Asra) and Asra Electronic (Tehran Asra). See A.A.
185 (describing “apparent violations . . . involv[ing] the
exportation of goods to Asra International Corporation
LLC . . . also doing business as Asra Electronic Trading
Co.”). The Notice also asserted that Asra “reexports most, if
not all, of its products to Iran.” A.A. 185. Epsilon was thus on
notice that OFAC would seek to prove a connection between
Dubai Asra and Tehran Asra, and to prove that Asra
reexported to Iran. The two pieces of evidence Epsilon cites
                               34

could have bolstered its defense by rebutting those
allegations. Neither item is probative only as a response to
Asra’s website or to the 2008 DHL shipment. Instead, both
address OFAC’s overarching contention that Dubai Asra did
business in Iran. Epsilon has thus not established any causal
connection between the alleged due-process error (OFAC’s
failure to give notice that it would rely on the Asra website
and the DHL shipment) and the alleged prejudice: Epsilon’s
decision not to submit two pieces of potentially exculpatory
evidence that the company already had in its possession and
knew would be responsive to OFAC’s theory of liability.
Epsilon’s failure to present all of its available evidence to
OFAC may be puzzling but cannot be attributed to a lack of
notice regarding Asra’s website or the DHL receipt.

                               III

      The order of the district court granting the government
defendants’ motion for summary judgment is affirmed in part
and reversed in part. The order is affirmed as to OFAC’s
determination that Epsilon’s thirty-four shipments to Asra
International between August 2008 and March 2011 violated
section 560.204 of the Iranian Transactions and Sanctions
Regulations. The order is reversed as to OFAC’s
determination that Epsilon’s five shipments to Asra
International in 2012 violated the same regulation. The case is
remanded to the district court, with instructions to remand the
matter to OFAC for further consideration of the five alleged
2012 violations, and of the total monetary penalty imposed for
all liability findings, in a manner consistent with this opinion.

                                                    So ordered.
     SILBERMAN, Senior Circuit Judge, concurring in part and
dissenting in part: I agree with my colleagues that it was
arbitrary and capricious for OFAC to impose liability on Epsilon
Electronics for the five shipments that were sent in 2012. Maj.
Op. at 22, 25. But I would go further in ordering a remand.
OFAC has exacted a penalty based on a confusing, indeed
mystifying, decision.

     We are reviewing an informal adjudication of OFAC
(referred to as a penalty notice) that imposed a large fine on
appellant. OFAC sent appellant a pre-penalty notice—in the
nature of a complaint—alleging that appellant violated a
regulation restricting trade with Iran.1 The complaint asserted
that appellant had sent car audio and video equipment to a
company, Asra, in Dubai, which exported “most, if not all, of its
products to Iran. [Therefore] Epsilon knew or had reason to
know that such goods were intended specifically for supply,
transhipment, or reexportation, directly or indirectly, to Iran.”

     Accordingly, the complaint suggested that only appellant’s
intent was relevant to its liability, whether or not the goods ever
actually arrived in Iran. But appellant, apparently reading the
regulation as did most exporters according to amicus, assumed
there was no violation unless there was evidence that the goods
arrived in Iran. Appellant pointed out in a response to the pre-
penalty notice that there was no evidence that any of the audio
and video equipment actually arrived in Iran.

    So the proper interpretation of the regulation was put
squarely in issue before OFAC.

    To review, the regulation states:

    1
      OFAC’s regulations describe a pre-penalty notice as containing
allegations. 31 C.F.R. § 560.703(b).
                                 2

         § 560.204 Prohibited exportation, reexportation, sale,
         or supply of goods, technology, or services to Iran.

         Except as otherwise authorized pursuant to this part,
         and notwithstanding any contract entered into or any
         license or permit granted prior to May 7, 1995, the
         exportation, reexportation, sale, or supply, directly or
         indirectly, from the United States, or by a United States
         person, wherever located, of any goods, technology, or
         services to Iran or the Government of Iran is
         prohibited, including the exportation, reexportation,
         sale, or supply of any goods, technology, or services to
         a person in a third country undertaken with knowledge
         or reason to know that:

         (a) Such goods, technology, or services are intended
         specifically for supply, transshipment, or reexportation,
         directly or indirectly, to Iran or the Government of
         Iran; or

         ...

31 C.F.R. § 560.204 (emphasis added).

     The government’s brief relies on the including clause as
establishing the basis for the violation. Appellant responded that
the including clause should not be read as providing a separate
grounds for violation; it is only an illustration of the broader ban
which still requires a showing that the goods arrived in Iran.

     Paradoxically, the majority does not rely primarily on the
including clause. Actually, its discussion of the clause at page
17 appears to be exactly opposite to the government’s, which, I
suppose, makes obvious that the including clause is ambiguous
as to whether it sets forth a separate ground for violation. In any
                                3

event, including clauses are notoriously ambiguous. See, e.g.,
American Surety Co. of N.Y. v. Marotta, 287 U.S. 513, 517
(1933); Ohio v. EPA, 997 F.2d 1520, 1543 (D.C. Cir. 1993);
Adams v. Dole, 927 F.2d 771, 775 (4th Cir. 1991). That courts
may have settled on a default rule as a means of resolving that
ambiguity when required to do so themselves is irrelevant.

     Instead the majority assumes, along with appellant, that the
key phrase is “export . . . to Iran” (it carries over to the
including clause). Does that phrase mean the goods just have to
be sent by the first sender towards Iran or must there be a
showing that the goods arrived in Iran? Unfortunately OFAC's
decision never discusses the proper interpretation of the
regulation; it conducts no textual exegesis. (Even the
government’s brief does not make a specific textual argument
except to assert that the words after “including” create an
additional overriding prohibition—implying, contrary to the
majority’s view, ironically, that without the including clause, the
words “to Iran” would not be adequate to make out the
government’s case.)

    Moreover—and here is the core of the reason I think we
must remand—in response to appellant’s defense that there is no
evidence the goods arrived in Iran, OFAC’s decision is quite
confusing. It stated “multiple facts tend to show that the goods
exported to Asra were sent to Iran.” (emphasis added). In other
words, the agency fudged the answer to the crucial question.

     It appears that the agency’s draftsman, aware of the
ambiguity in the regulation, was straddling the issue of whether
or not the agency had to prove that the goods arrived in Iran. (It
reminds me of the famous Yogi Berraism, “if you come to a fork
in the road, take it.”) That approach simply is not consistent
with the obligation under the APA to engage in reasoned
                                4

decision-making. See generally Allentown Mack Sales &
Service, Inc. v. NLRB, 522 U.S. 359, 374-75 (1998).

     The majority ignores this ambiguous language in the
agency’s decision; it focuses on the complaint and the
complaint's implicit interpretation of the regulation. But even
were we to assume the complaint’s allegations were crystal
clear, that is quite irrelevant as to the clarity of the agency's
decision. After all, we review final agency actions, not
preliminary complaints. I would have thought that was black
letter administrative law.

      Perhaps recognizing the agency’s failure to explicitly
interpret the regulation as applied to this case, the government
seeks deference to the interpretation it advances in litigation,
which I’ve pointed out is rather skimpy. The majority decides,
however, that deference is not necessary and spends pages and
pages setting forth its “reading” of the phrase “to Iran,” leading
to its conclusion the agency’s decision can be upheld.

     I hardly know where to start. First, the majority never
denies that the regulation is ambiguous—still less the
adjudication—it simply sets forth its interpretation of the
regulation which favors the government’s decision. But the
problem with the majority treating deference as irrelevant is it
improperly appears to freeze the agency’s interpretation of an
ambiguous regulation. Cf. Perez v. Mortgage Bankers Ass’n, —
U.S. —, 135 S. Ct. 1199 (2015). Even if one were to agree with
the majority that its interpretation of the regulation were the
better one, I have little doubt that another OFAC leadership
could interpret the language differently. Suppose, for instance,
an exporter in Omaha sent goods to Iran to be consolidated with
a brother-in-law’s shipment in Chicago. The brother-in-law,
blessed with legal advice, determined not to send the goods.
Would the Omaha shipper be in violation of the regulation?
                                5

According to the majority, yes, but I certainly could imagine
OFAC reasonably coming to another answer.

      Second, the majority’s lengthy interpretation of the
regulation totally ignores another fundamental principle of
administrative law going back to Chenery I. 318 U.S. 80 (1943).
It is not up to a reviewing court to offer explanations for an
agency decision not articulated by the agency. If one
accepts—and I don’t know how it can be denied—that the
agency’s decision is ambiguous as to whether actual evidence
exists of appellant’s goods arriving in Iran and whether such
evidence is necessary, it is hardly open to a reviewing court to
“clarify” the agency’s decision. The majority asserts it can see
the “path” the agency traveled, drawing, in part on the complaint
and on government’s brief, but that just ignores the confusion in
the adjudication which, of course, is the final agency action we
are reviewing. We know what the agency’s preliminary
interpretation of the regulation was, but, after it was contested,
we don’t know the agency’s interpretation in its final decision.

     Finally, perhaps the strangest objections the majority raises
to a remand to clarify the adjudication’s ambiguity are: (1) that
appellant was not prejudiced because whether or not the
adjudication was ambiguous, the complaint was not; and (2) in
any event, appellant never argued that it was separately harmed
by the ambiguity in the adjudication. Maj. Op. at 20. The first
point assumes that the complaint is somehow transformed into
final agency action. It is so contrary to administrative law—
indeed all law—I hardly know what to say. The second point is
equally bizarre. Of course, appellant wouldn’t “specifically”
argue that the agency’s ambiguity required a remand. It wanted
a decision holding the agency adjudication was inconsistent with
the regulation. A remand is what a court does when it is not
sure how the agency read the regulation and applied it to the
facts. No case of ours ever held that a party challenging an
                                    6

agency’s interpretation of a regulation or a statute has to
specifically ask for a remand if we conclude the agency’s
decision is ambiguous.2

     2
        I would have been inclined to reject liability entirely rather than
remand had appellant made the argument that imposing a penalty
pursuant to an ambiguous regulation is inappropriate if you interpret
it for the first time in a penalty proceeding. See Gates & Fox Co., Inc.
v. Occupational Safety and Health Review Comm’n, 790 F.2d 154,
156 (D.C. Cir. 1986). But as the government pointed out at oral
argument, appellant did not take that position.