BIS Tosses Appeals From Companies Claiming to Be Mistakenly Caught in Russia-Related Denial Order

The Bureau of Industry and Security dismissed appeals from a Turkish airline and a Russian tour company after both said they were wrongly implicated in a temporary denial order the agency renewed against a separate Russian airline in June.

Both Turkey-based Southwind Airlines and Russia-based Pegas Touristik asked BIS to publicly clarify that neither has violated U.S. export controls and neither is subject to a TDO, which places a ban on participating in transactions subject to the Export Administration Regulations. In orders issued Sept. 29 and publicly released this week, BIS dismissed both companies’ requests after an administrative law judge said it didn’t have the authority to rule on the appeals.

The appeals stem from a BIS decision in June to renew its existing denial order for Russia’s Nordwind Airlines, saying the company continued to illegally operate flights to Russia (see 2206240051). BIS at the time also added tour company Pegas Touristik to the scope of the TDO after finding it had ties to Nordwind. The agency later that month removed the tour company from the TDO but didn’t provide a detailed explanation, only saying it wanted “to allow the opportunity for additional administrative process” (see 2306280021).

In July, before it filed its appeal, Pegas Touristik asked BIS to issue another order that “clearly and definitively states” the company was “erroneously added as a related person” to Nordwind’s TDO and that Pegas Touristik has “never been subject to a valid denial order” imposed by BIS. In response, the agency pointed to its removal of Pegas Touristik from the scope of the Nordwind TDO and said “no further action is necessary.”

Pegas Touristik filed its appeal with the ALJ in August, asking for a “public acknowledgement” from BIS that its inclusion in the TDO was “in error.”

The Turkish airline, Southwind, made a similar request in its August appeal, saying that even though the TDO didn't name it, some of its business partners inferred that the airline may have been involved and decided to cut ties with the company.

Southwind said this was because BIS had written in its Nordwind TDO that Pegas Touristik chartered with an unnamed Turkish airline that began flights to Russia “shortly after the imposition of stringent Russia-related export controls.” In its August appeal, Southwind told BIS that its business partner, Pratt & Whitney, inferred Southwind was the Turkish airline referenced in the TDO and stopped providing support to Southwind’s aircraft engines.

Even though BIS in June officially removed Pegas Touristik from the scope of the TDO, a lawyer for Southwind said that didn’t “resolve the misunderstanding” caused by the BIS TDO. The lawyer told BIS that “problems are mounting for the company given the language in the [modified] TDO.”

Southwind eventually asked BIS to provide an email that the airline could forward to Pratt & Whitney to “assuage their concerns that BIS would find a violation if they serviced the engines.” BIS agreed to provide an email that confirmed Southwind wasn’t on the Entity List or the Denied Persons List, but BIS also said in the email that its list of aircraft subject to denial orders is “not exhaustive, and the restrictions also apply in any situation in which a person has knowledge that a violation of the EAR has occurred, is about to occur, or is intended to occur in connection with an aircraft or other item that is subject to the EAR, whether or not such aircraft or other item is included on BIS’s website.”

Southwind said Pratt & Whitney restored some business activities, but the BIS email “did not resolve the misunderstanding regarding its operations.”

In its ruling, the ALJ Tommy Cantrell recommended BIS dismiss both appeals, saying the ALJ can rule only on whether the company named in the TDO is “related” to Nordwind and whether the TDO is “justified in order to prevent evasion.”

The judge noted that BIS didn’t name Southwind in the TDO, so the airline has no “standing” to appeal. “[T]he record shows there is no current TDO naming Southwind as a related person that I could affirm, modify, or vacate as part of this appeal,” the judge said, adding it also can’t “direct” BIS to publicly declare that Southwind didn’t violate export controls.

Cantrell made similar points in its decision on Pegas Touristik, saying, “I cannot rule on these issues because there is no TDO currently in effect” against the company. “While I understand Pegas’s business concerns, the regulations do not grant me authority to issue an order retroactively nullifying the addition of Pegas as a related party.”

In its dismissal order, BIS confirmed that Southwind and Pegas Touristik are not "subject to the license requirements and prohibitions in the Nordwind TDO."