BIS Revokes Export Privileges for EAR Violations, Orders Review of Penalty

The head of the Commerce Department Bureau of Industry and Security revoked a shipping company’s export privileges for 15 years for export violations but ordered a review of the assessed fine, saying it was too high, according to a March 11 order. The company and its chairman -- Singapore-based Nordic Maritime Pte. Ltd and Morten Innhaug, respectively -- were originally fined more than $30 million by an administrative law judge, who also revoked the company’s export privileges until the fine was paid, according to the order. But Cordell Hull, BIS’s acting undersecretary, said the fine was too high, ordering the judge to review its decision to impose the penalty.

“Respondents’ conduct in this case was unquestionably serious, and it warrants a significant sanction,” Hull said in the order. But “the record does not, at this point, support the civil monetary penalty amount recommended in this case.”

The order stems from Nordic’s violations of the Export Administration Regulations. The company illegally re-exported controlled “seismic survey equipment” to Iran, including “compass birds” and “streamer sections,” and made false statements to BIS during its investigation, the agency said. BIS also said Nordic knew the exports were illegal, and its chairman was warned in 2012 in a letter from the U.S. that the use of its goods in Iran would violate U.S. law.

After receiving a charging letter, the company told BIS that it would “not participate in the upcoming trial.” Because the case led to litigation, Hull acknowledged that penalties in litigated cases “should be higher” than “settlement cases based on similar conduct.” But Hull said the fine was still too high, pointing to precedent. “Even accounting for the fact that this case was litigated, the penalty here is disproportionate to similar cases charged by BIS,” the order said. “There are a number other cases in this vein where the Under Secretary imposed no civil penalty at all.” The order added: “There appears to be little precedent for a civil monetary penalty like the one given here.”

Hull called the EAR violations “serious” and said the company “should be punished.” He also said the judge was correct in issuing a penalty that “dissuades future violations of this sort.” But the penalty -- twice the amount of the company’s contract with Mapna International FZE, a United Arab Emirates Company that helped facilitate the exports -- may have been too steep, the order said. “Viewed through this lens, it may well be that the civil monetary penalty in case will be substantial. Perhaps it will remain unchanged,” Hull said. “But the record would benefit from further development on the issue of proportionality.”

BIS also disagreed with the denial order issued by the judge, which would have been in effect until the penalty was paid. “I conclude that a denial order unbounded in time does not serve the ends of justice,” the order said. “Accordingly, I conclude a denial order of 15 years will adequately vindicate BIS’s interests in this case.”