Foreign Assets Control Regulations; Regulations Prohibiting Transactions Involving the Shipment of Certain Merchandise Between Foreign Countries; Cuban Assets Control Regulations: Civil Penalty Administrative Hearings

Federal RegisterFeb 14, 1997

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DEPARTMENT OF THE TREASURY

Office of Foreign Assets Control

31 CFR Parts 500, 505 and 515

Foreign Assets Control Regulations; Regulations Prohibiting

Transactions Involving the Shipment of Certain Merchandise Between

Foreign Countries; Cuban Assets Control Regulations: Civil Penalty

Administrative Hearings

AGENCY: Office of Foreign Assets Control, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Treasury Department proposes to amend the Foreign Assets

Control Regulations and the Cuban Asset Control Regulations to add

procedures for the conduct of administrative hearings in civil penalty

cases and for settlement of civil penalty cases in lieu of

administrative hearings. A conforming amendment is proposed to be made

to the Transaction Control Regulations.

DATES: Written comments must be received by March 17, 1997.

ADDRESSES: Comments may be mailed to the Director, Office of Foreign

Assets Control, U.S. Treasury Department, 1500 Pennsylvania Avenue,

NW--Annex, Washington, DC 20220.

FOR FURTHER INFORMATION CONTACT: Mrs. B.S. Scott, Chief, Civil

Penalties Program (tel.: 202/622-6140), or William B. Hoffman, Chief

Counsel (tel.: 202/622-2410), Office of Foreign Assets Control, U.S.

Treasury Department, Washington, DC 20220.

SUPPLEMENTARY INFORMATION:

Electronic and Facsimile Availability

This document is available as an electronic file on The Federal

Bulletin Board the day of publication in the Federal Register. By

modem, dial 202/512-1387 and type ``/GO FAC,'' or call 202/512-1530 for

disk or paper copies. This file is available for downloading without

charge in WordPerfect 5.1, ASCII, and Adobe AcrobatTM readable

(*.PDF) formats. For Internet access, the address for use with the

World Wide Web (Home Page), Telnet, or FTP protocol is:

fedbbs.access.gpo.gov. The document is also accessible for downloading

in ASCII format without charge from Treasury's Electronic Library

(``TEL'') in the ``Business, Trade and Labor Mall'' of the FedWorld

bulletin board. By modem, dial 703/321-3339, and select the appropriate

self-expanding file in TEL. For Internet access, use one of the

following protocols: Telnet = fedworld.gov (192.239.93.3); World Wide

Web (Home Page) = http://www.fedworld.gov; FTP = ftp.fedworld.gov

(192.239.92.205). Additional information concerning the programs of the

Office of Foreign Assets Control is available for downloading from the

Office's Internet Home Page: http://www.ustreas.gov/treasury/services/

fac/fac.html, or in fax form through the Office's 24-hour fax-on-demand

service: call 202/622-0077 using a fax machine, fax modem, or (within

the United States) a touch-tone telephone.

Background

The Foreign Assets Control Regulations, 31 CFR part 500, and the

Cuban Asset Control Regulations, 31 CFR part 515 (jointly, the

``Regulations''), are proposed to be amended to provide for detailed

procedures governing administrative hearings, as provided in section

1710(c) of the Cuban Democracy Act of 1992 (22 U.S.C. 6001-6010 -- the

``CDA''). A conforming amendment is proposed to be made to Sec. 505.50

of the Regulations Prohibiting Transactions Involving the Shipment of

Certain Merchandise Between Foreign Countries, 31 CFR part 505, which

incorporates by reference the penalty provisions of part 500. Because

the CDA amends section 16 of the Trading with the Enemy Act (50 U.S.C.

App. 16) to permit the imposition of civil monetary penalties and civil

forfeiture with opportunity for hearing and discovery, subpart G of the

Regulations is proposed to be revised to establish the procedures

governing administrative hearings.

Before this proposed rule is adopted as a final rule, consideration

will be given to written comments (a signed original and 2 copies) that

are timely submitted to the OFAC. All comments will be available for

public inspection and copying.

Regulatory Flexibility Act

It has been determined that this notice of proposed rulemaking is

not a ``significant regulatory action'' as defined in Executive Order

12866. Therefore, a regulatory assessment is not required. It is hereby

certified, pursuant to the Regulatory Flexibility Act (5 U.S.C.

605(b)), that the proposed rule, if promulgated, will not have a

significant economic impact on a substantial number of small entities,

so that no regulatory flexibility analysis is required. The factual

basis for this certification is as follows: Since civil penalty

procedures under the Regulations were adopted (June 29, 1993, for part

515; April 8, 1994, for part 500), all recipients of a prepenalty

notice under the Regulations have been provided the opportunity to

request an administrative hearing, with prehearing discovery, prior to

imposition of a penalty. Secs. 500.702(b) & 515.702(b). As of December

20, 1996, the cumulative number of hearing requests pending was 27. Of

these, only 10 involved respondents that are small business entities

with fewer than 500 employees. A respondent's decision to use the

administrative hearing process is strictly voluntary, and any final

agency action imposing a civil penalty, with or without an

administrative hearing, remains appealable pursuant to section 702 of

the Administrative Procedure Act (5 U.S.C. 553-596 -- the ``APA'').

The collection of information in the proposed rules arises in the

conduct of administrative actions or investigations by OFAC against

specific individuals or entities and is, therefore, not subject to the

requirements of the Paperwork Reduction Act pursuant to 44 U.S.C.

3518(c)(1)(B)(ii).

List of Subjects

31 CFR Part 500

Administrative practice and procedure, Banks, banking, Blocking of

assets, Cambodia, Currency, Estates, Exports, Finance, Foreign claims,

Foreign investment in the United States, Foreign trade, Imports,

Information and informational materials, International organizations,

North Korea, Penalties, Reporting and recordkeeping requirements,

Securities, Services, Specially designated nationals, Terrorism, Travel

restrictions, Trusts and trustees, Vessels, Vietnam.

31 CFR Part 505

Administrative practice and procedure, Arms and munitions, Banks,

banking, Communist countries, Exports, Finance, Foreign trade, Nuclear

materials, Penalties, Reporting and recordkeeping requirements.

31 CFR Part 515

Administrative practice and procedure, Air carriers, Banks,

banking, Blocking of assets, Cuba, Currency,

[[Page 6897]]

Estates, Exports, Finance, Foreign investment in the United States,

Foreign trade, Imports, Information and informational materials,

Penalties, Reporting and recordkeeping requirements, Securities,

Shipping, Specially designated nationals, Terrorism, Travel

restrictions, Trusts and trustees, Vessels.

For the reasons set forth in the preamble, 31 CFR parts 500, 505

and 515 are proposed to be amended as set forth below:

PART 500--FOREIGN ASSETS CONTROL REGULATIONS

1. The authority citation for part 500 is revised to read as

follows:

Authority: 50 U.S.C. App. 1-44; Pub. L. 104-132, 110 Stat. 1214,

1254 (18 U.S.C. 2332d); Pub. L. 101-410, 104 Stat. 890 (28 U.S.C.

2461 note); E.O. 9193, 7 FR 5205, 3 CFR, 1938-1943 Comp., p. 1174;

E.O. 9989, 13 FR 4891, 3 CFR, 1943-1948 Comp., p. 748.

2. Subpart G is revised to read as follows:

Subpart G--Penalties

Secs.

500.701 Penalties.

500.702 Prepenalty notice; contents; service.

500.703 Response to prepenalty notice; right to hearing and

prehearing discovery; informal settlement.

500.704 Penalty imposition or withdrawal absent a hearing request.

500.705 Time and opportunity to request a hearing.

500.706 Hearing, discovery, and decision on the record.

500.707 Judicial review.

500.708 Referral to United States Department of Justice;

administrative collection measures.

Subpart G--Penalties

Sec. 500.701 Penalties.

(a) Attention is directed to section 16 of the Trading with the

Enemy Act (50 U.S.C. App. 16), as adjusted pursuant to the Federal

Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410, as

amended, 28 U.S.C. 2461 note), which provides that:

(1) Persons who willfully violate any provision of that act or any

license, rule, or regulation issued thereunder, and persons who

willfully violate, neglect, or refuse to comply with any order of the

President issued in compliance with the provisions of that act shall,

upon conviction, be fined not more than $1,000,000 or, if an

individual, be fined not more than $100,000 or imprisoned for not more

than 10 years, or both; and an officer, director, or agent of any

corporation who knowingly participates in such violation shall, upon

conviction, be fined not more than $100,000 or imprisoned for not more

than 10 years, or both.

(2) Any property, funds, securities, paper, or other articles or

documents, or any vessel, together with its tackle, apparel, furniture,

and equipment, concerned in a violation of the act may upon conviction

be forfeited to the United States.

(3) The Secretary of the Treasury may impose a civil penalty of not

more than $55,000 per violation on any person who violates any license,

order, or regulation issued under that act.

(4) Any property, funds, securities, papers, or other articles or

documents, or any vessel, together with its tackle, apparel, furniture,

and equipment, that is the subject of a violation subject to a civil

penalty issued pursuant to the act shall, at the discretion of the

Secretary of the Treasury, be forfeited to the United States

Government.

(b) The criminal penalties provided in the Trading with the Enemy

Act are subject to increase pursuant to 18 U.S.C. 3571.

whoever, in any matter within the jurisdiction of any department or

agency of the United States, knowingly and willfully falsifies,

conceals or covers up by any trick, scheme, or device a material fact,

or makes any false, fictitious or fraudulent statements or

representation or makes or uses any false writing or document knowing

the same to contain any false, fictitious or fraudulent statement or

entry, shall be fined under title 18, United States Code, or imprisoned

not more than five years, or both.

Sec. 500.702 Prepenalty notice; contents; service.

(a) When required. If the Director of the Office of Foreign Assets

Control has reasonable cause to believe that there has occurred a

violation of any provision of this part or a violation of the

provisions of any license, ruling, regulation, order, direction or

instruction issued by or pursuant to the direction or authorization of

the Secretary of the Treasury pursuant to this part or otherwise under

the Trading with the Enemy Act, and the Director determines that

further proceedings are warranted, he shall issue to the person

concerned a notice of his intent to impose a monetary penalty and/or

forfeiture. The prepenalty notice may be issued whether or not another

agency has taken any action with respect to this matter.

(b) Contents--(1) Facts of violation. The prepenalty notice shall

describe the violation, specify the laws and regulations allegedly

violated, and state the amount of the proposed monetary penalty and/or

forfeiture.

(2) Respondent's rights--(i) Right to respond. The prepenalty

notice shall also inform the respondent of respondent's right to

respond to the notice within 30 days of the mailing or other service of

the notice pursuant to paragraph (c) of this section, as to why a

monetary penalty and/or forfeiture should not be imposed, or, if

imposed, why it should be in a lesser amount than proposed.

(ii) Right to request a hearing. The prepenalty notice shall also

inform the respondent that, in the response provided for in paragraph

(b)(2)(i) of this section, the respondent may also request a hearing

conducted pursuant to 5 U.S.C. 554-557 to present the respondent's

defenses to the imposition of a penalty and/or forfeiture and to offer

any other information that the respondent believes should be included

in the agency record prior to a final determination concerning the

imposition of a penalty and/or forfeiture. Untimely response

constitutes a waiver of a hearing.

(iii) Right to request discovery prior to hearing. The prepenalty

notice shall also inform the respondent of the right to discovery prior

to a requested hearing. Discovery must be requested in writing in the

response provided for in paragraph (b)(2)(i) of this section, jointly

with respondent's request for a hearing. Untimely response constitutes

a waiver of prehearing discovery.

thereto, shall be served upon the respondent. Service shall be presumed

completed:

(1) Upon mailing a copy by registered or certified mail, return

receipt requested, addressed to the respondent at the respondent's last

known address; or

(2) Upon presentment of a date-stamped postal receipt by the Office

of Foreign Assets Control with respect to any respondent who has

refused, avoided, or in any way attempted to decline delivery, tender,

or acceptance of the registered or certified letter or has refused to

recover a registered or certified letter served; or

(3) Upon leaving a copy with the respondent or an officer, a

managing or general agent, or any other agent authorized by appointment

or by law to accept or receive service for the respondent, evidenced by

a certificate of service signed by the individual making such service,

stating the method of service and the identity of the individual with

whom the prepenalty notice was left; or

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(4) Upon proof of service on a respondent who is not resident in

the United States by any method of service permitted by the law of the

jurisdiction in which the respondent resides or is located, provided

the requirements of such foreign law satisfy due process requirements

under United States law with respect to notice of administrative

proceedings, and where applicable laws or intergovernmental agreements

or understandings make the methods of service set forth in paragraphs

(c)(1) through (3) of this section inappropriate or ineffective for

service upon the nonresident respondent.

Sec. 500.703 Response to prepenalty notice; right to hearing and

prehearing discovery; informal settlement.

(a) Deadline for response. The respondent shall have 30 days from

the date of mailing or other service of the prepenalty notice pursuant

to Sec. 500.702(c) to respond thereto.

(b) Form and contents of response--(1) In general. The written

response need not be in any particular form, but shall contain

information sufficient to indicate that it is in response to the

prepenalty notice. It should be responsive to the allegations contained

therein and set forth the nature of the respondent's defenses.

(i) The response must admit or deny specifically each separate

allegation of violation made in the prepenalty notice. If the

respondent is without knowledge as to an allegation, the response shall

so state, and such statement shall operate as a denial. Failure to

deny, controvert, or object to any allegation will be deemed an

admission of that allegation.

(ii) The response must also set forth any additional or new matter

or arguments the respondent seeks, or shall seek, to use in support of

all defenses or claims for mitigation. Any defense or partial defense

not specifically set forth in the response shall be deemed waived, and

evidence thereon may be refused, except for good cause shown.

(iii) The response must also accurately state, for each respondent,

the respondent's full name and address for future service, including

current telephone number and area code. Respondents are responsible for

providing timely written notice to all interested parties of any

subsequent changes in the information provided.

(2) Request for hearing. Any request for an administrative hearing

and prehearing discovery shall be made in the written response made

pursuant to this section and within the 30-day time period specified in

Sec. 500.705(a).

(3) Informal settlement. In addition or as an alternative to a

written response to a prepenalty notice pursuant to this section, the

respondent or respondent's representative may contact the Office of

Foreign Assets Control as advised in the prepenalty notice to propose

the settlement of allegations contained in the prepenalty notice and

related matters. In the event of settlement at the prepenalty stage,

the prepenalty notice will be withdrawn, the respondent is not required

to take a written position on allegations contained in the prepenalty

notice, and the Office of Foreign Assets Control will make no final

determination as to whether a violation occurred. The amount accepted

in settlement of allegations in a prepenalty notice may vary from the

civil penalty that might finally be imposed in the event of a formal

determination of violation. In the event no settlement is reached, the

30-day period specified in paragraph (a) of this section for written

response to the prepenalty notice remains in effect unless additional

time is granted by the Office of Foreign Assets Control. Untimely

response constitutes a waiver of a hearing and prehearing discovery.

Sec. 500.704 Penalty imposition or withdrawal absent a hearing

request.

(a) No violation. If, after considering any presentations made in

response to the prepenalty notice and any relevant facts, the Director

determines that there was no violation by the respondent named in the

prepenalty notice, the Director promptly shall notify the respondent in

writing of that determination and that no civil monetary penalty or

civil forfeiture pursuant to this subpart will be imposed.

(b) Violation. If, after considering any presentations made in

response to the prepenalty notice and any relevant facts, the Director

determines that there was a violation by the respondent named in the

prepenalty notice, the Director promptly shall issue a written notice

of the imposition by the Office of Foreign Assets Control of the civil

monetary penalty and/or civil forfeiture and/or other available

disposition on that respondent.

(1) The penalty/forfeiture notice shall inform the respondent that

payment of the assessed penalty must be made within 30 days of the

mailing of the penalty notice.

(2) The penalty/forfeiture notice shall inform the respondent of

the requirement to furnish respondent's taxpayer identification number

pursuant to 31 U.S.C. 7701 and that the Department intends to use such

number for the purposes of collecting and reporting on any delinquent

penalty amount in the event of a failure to pay the penalty imposed.

Sec. 500.705 Time and opportunity to request a hearing.

(a) Deadline for hearing request. Within 30 days of the date of

mailing or other service of the prepenalty notice pursuant to

Sec. 500.702(c), the respondent may file a written request for an

agency hearing conducted pursuant to this section, to present the

respondent's defenses to the imposition of a penalty and/or forfeiture,

and to offer any other information found to be admissible into the

agency record prior to a final determination concerning the imposition

of a penalty and/or forfeiture.

(b) Content of written response. If an agency hearing is requested

by the respondent or by the respondent's counsel, the written hearing

request must be accompanied by a written response to the prepenalty

notice containing the information required by Sec. 500.703(b)(1)(i)

through (iii). An untimely hearing request or written response to the

prepenalty notice constitutes a waiver of a hearing.

interrogatories, requests for deposition transcripts, requests for

protective orders, and all other filings relating to requests for and

responses to discovery or pertaining to the hearing process, must be

signed by each requesting party and, if represented, by each party's

counsel.

Sec. 500.706 Hearing, discovery, and decision on the record.

(a) Notice of hearing. (1) Any respondent requesting a hearing

shall receive notice of the time and place of the hearing at the

service address provided pursuant to Sec. 500.703(b)(1)(iii). Requests

to change the time and place of a hearing may be submitted to the

Administrative Law Judge, who may modify the original notice or

subsequently set hearing dates. All requests for any change in time and

place of a hearing must be received in the Administrative Law Judge's

chambers and served upon all interested parties no later than 10

working days before the scheduled hearing date.

(2) The hearing shall be conducted in a manner consistent with 5

U.S.C. 554-557, pursuant to section 1710(c) of the Cuban Democracy Act

of 1992 (22 U.S.C. 6001-6010), and section 16 of the Trading with the

Enemy Act (50 U.S.C. App. 16).

(b) Powers. The Administrative Law Judge shall have all powers

necessary to conduct the hearing, consistent with 5

[[Page 6899]]

U.S.C. 554-557, including the following powers:

(1) To administer oaths and affirmations;

(2) To require production of records or any information relative to

any act or transaction subject to this part, including the imposition

of sanctions available under Federal Rule of Civil Procedure 37(b)(2)

(Fed. R. Civ. P. 37(b)(2), 28 U.S.C.) for a party's failure to comply

with discovery requests;

(3) To receive relevant and material evidence and to rule upon the

admission of evidence and offers of proof;

(4) To take or cause depositions to be taken as authorized by this

part;

(5) To regulate the course of the hearing and the conduct of the

parties and their counsel;

(6) To hold scheduling or prehearing conferences as deemed

necessary;

(7) To consider and rule upon all procedural and other motions

appropriate in an adjudicatory proceeding, provided that only the

Secretary or the Secretary's designee shall have the power to grant any

motion to dismiss the proceeding or to decide any other motion that

results in a final determination of the merits of the proceeding;

(8) To prepare and present to the Secretary or to the Secretary's

designee a recommended decision as provided in paragraph (s) of this

section;

(9) To recuse himself on motion made by a party or on the

Administrative Law Judge's own motion;

(10) To establish time, place and manner limitations on the

attendance of the public and the media for any public hearing;

(11) To perform all necessary or appropriate measures to discharge

the duties of an Administrative Law Judge; and

(12) To set fees and expenses for witnesses, including expert

witnesses.

Appearance before an Administrative Law Judge by counsel. Any member in

good standing of the bar of the highest court of any state,

commonwealth, possession, or territory of the United States, or the

District of Columbia may represent respondents upon written request in

a civil penalty hearing. A copy of the document appointing the counsel

shall be presented to the Administrative Law Judge upon the first

appearance of counsel.

(2) Appearance before an Administrative Law Judge by a non-lawyer.

A respondent may appear on his own behalf; a member of a partnership

may represent the partnership; a duly authorized officer, director, or

employee of any corporation may represent that corporation in a civil

penalty hearing.

(3) Office of Foreign Assets Control representation. The Office of

Foreign Assets Control shall be represented by the Chief Counsel of the

Office of Foreign Assets Control or by the Chief Counsel's designee.

(d) Conflicts of interest--(1) Conflict of interest in

representation. No individual shall appear as counsel for a party in a

proceeding conducted pursuant to this subpart if it reasonably appears

that such representation may be materially limited by that counsel's

responsibilities to a third person, or by counsel's own interests.

(2) Corrective Measures. The Administrative Law Judge may take

corrective measures at any stage of a proceeding to cure a conflict of

interest in representation, including the issuance of an order limiting

the scope of representation or disqualifying an individual from

appearing in a representative capacity for the duration of the

proceeding.

(e) Ex parte communications--(1) Definition. The term ex parte

communication means any material oral or written communication not on

the public record concerning the merits of an adjudicatory proceeding

with respect to which reasonable prior notice to all parties is not

given, on any material matter or proceeding covered by these

regulations that takes place between:

(i) A party to the proceeding, a party's counsel, or any other

individual; and

(ii) The Administrative Law Judge handling that proceeding, or the

Secretary, or the Secretary's designee.

(2) Exceptions. (i) A request for the status of the proceeding does

not constitute an ex parte communication; and

(ii) Settlement inquiries and discussions do not constitute ex

parte communications.

(3) Prohibition on ex parte communications. From the time a

respondent requests a hearing until the date that the Secretary or the

Secretary's designee issues a final decision, no party, interested

person, or counsel therefor shall knowingly make or cause to be made an

ex parte communication. The Administrative Law Judge, the Secretary,

and the Secretary's designee shall not knowingly make or cause to be

made to a party, or to any interested person or counsel therefor, any

ex parte communication.

(4) Procedure upon occurrence of ex parte communication. If an ex

parte communication is received by the Administrative Law Judge, the

Administrative Law Judge shall cause all such written communication

(or, if the communication is oral, a memorandum stating the substance

of the communication) to be placed on the record of the proceeding and

served on all parties. All parties to the proceeding shall have an

opportunity, within 10 days of the receipt of service of the notice or

of receipt of a memorandum of the ex parte communication, to file

responses thereto and to recommend any sanctions, in accordance with

paragraph (e)(5) of this section, appropriate under the circumstances,

or may file an interlocutory appeal with the Secretary or the

Secretary's designee.

(5) Sanctions. Any respondent, respondent's counsel, or other party

who makes a prohibited ex parte communication, or who encourages or

solicits another to make any such communication, may be subject to any

appropriate sanction or sanctions imposed by the Administrative Law

Judge for good cause shown, or that may be imposed upon interlocutory

appeal taken to the Secretary or the Secretary's designee, including,

but not limited to, exclusion from the hearing and an adverse ruling on

the issue which is the subject of the prohibited communication.

(f) Time limits. Except as provided elsewhere in this subpart, the

Administrative Law Judge shall establish all time limits for filings

with regard to hearings conducted pursuant to this subpart, except for

decisions on interlocutory appeals filed with the Secretary or the

Secretary's designee.

(g) Interlocutory Appeal. When exceptions, requests for extensions,

or motions, including motions for summary disposition, are denied by

the Administrative Law Judge, interlocutory appeals may be taken to the

Secretary or to the Secretary's designee for a decision.

(1) Interlocutory appeals must be filed no later than 10 working

days after the matter being appealed has been decided in writing by the

Administrative Law Judge.

(2) Interlocutory appeals must be filed with the Secretary's

Office, U.S. Treasury Department, 1500 Pennsylvania Avenue, NW,

Washington, DC 20220, with certified copies served upon the

Administrative Law Judge and the Office of Chief Counsel for the Office

of Foreign Assets Control.

(h) Opportunity for settlement. Any party may, at any time during

the hearing, unilaterally submit written offers or proposals for

settlement of a proceeding to the Secretary or the Secretary's

designee, at the address listed in paragraph (g)(2) of this section.

[[Page 6900]]

Submission of a written settlement offer does not provide a basis for

adjourning or otherwise delaying all or any portion of a hearing. No

settlement offer or proposal, or any subsequent negotiation or

resolution, is admissible as evidence in any hearing before this

tribunal.

(i) Failure to appear. The unexcused failure of a respondent to

appear in person at a hearing or to have duly authorized counsel appear

in respondent's place, constitutes a waiver of the respondent's right

to a hearing and is deemed an admission of the violation alleged.

Without further proceedings or notice to the respondent, the

Administrative Law Judge shall file with the Secretary or the

Secretary's designee a recommended decision finding a violation and the

amount of penalty as indicated in the prepenalty notice.

(j) Motions--(1) Written motions. Except as otherwise specifically

provided herein, an application or request for an order or ruling must

be made by written motion, in typed format.

(i) All written motions must state with particularity the relief

sought and must be accompanied by a proposed order.

(ii) No oral argument may be held on written motions unless

directed by the Administrative Law Judge. Written memoranda, briefs,

affidavits, and other relevant material and documents may be filed in

support of or in opposition to a motion.

(2) Oral motions. A motion may be made orally on the record unless

the Administrative Law Judge directs that such motion be made in

writing.

(3) Filing of motions--(i) In general. Motions must be filed with

the Administrative Law Judge, and with the Office of Chief Counsel,

Office of Foreign Assets Control, U.S. Treasury Department, 1500

Pennsylvania Avenue, NW, Washington, DC 20220, with the envelope

prominently marked, ``Urgent: Annex--Room 3133,'' unless otherwise

directed by the Administrative Law Judge, or agreed to by Chief

Counsel.

(ii) Interlocutory appeals. Motions related to interlocutory

appeals to the Secretary or the Secretary's designee must be sent by

fax (fax number: 202/622-1188) and filed with the Secretary, U.S.

Treasury Department, 1500 Pennsylvania Avenue, NW, Washington, DC

20220, marked ``Attention: OFAC Interlocutory Appeal.''

(4) Responses. (i) Any interested party may file a written response

to a motion within 20 days of the date of mailing, by registered or

certified letter service and pursuant to these regulations. If directed

by the Administrative Law Judge response time may be shortened or

extended. The Administrative Law Judge may allow each party to file a

response before finally ruling upon any oral or written motion. The

Administrative Law Judge may allow a rejoinder to responses for good

cause shown. If a rejoinder is permitted, it must be filed within 15

days of the date the response was filed and served upon all parties.

(ii) The failure of a party to oppose a written motion or an oral

motion made on the record is deemed to be consent by that party to the

entry of an order substantially in the form of the order accompanying

the motion.

(5) Dilatory motions. Frivolous, dilatory, or repetitive motions

are prohibited. The filing of such motions may form the basis for

sanctions.

(k) Discovery--(1) In general. The availability of information and

documents through discovery is subject to the agency's assertion of

privileges available to OFAC and/or to the Treasury and to the

application of all exemptions afforded the agency pursuant to the

Freedom of Information Act (5 U.S.C. 552(b)(1) through (9)) and the

Privacy Act (5 U.S.C. 552a) to all facets of discovery, including

interrogatories, depositions that seek the release of trade secrets,

proprietary materials, third party confidential and/or commercially

sensitive material, placement of information, documents and/or

materials under seal and/or protective order, and interlocutory appeal

to the Secretary or the Secretary's designee from any decision of the

Administrative Law Judge.

(2) Types of discovery. Parties may obtain discovery by one or more

of the following methods: depositions upon oral examination or written

questions; written interrogatories; production of documents or other

evidence for inspection; and requests for admission. All depositions of

federal employees must take place in Washington, DC, at the U.S.

Treasury Department or at the location where the federal employee to be

deposed performs his duties, whichever the federal employee's

supervisor or Chief Counsel shall deem appropriate. All depositions of

federal employees shall be held at a mutually agreed upon date and

time, and for a mutually agreed upon length of time.

(3) Interrogatories. Respondent's interrogatories must be served

upon the Chief Counsel within 20 days of respondent's written request

for a hearing. Chief Counsel must serve Chief Counsel's interrogatories

within 30 days of the receipt of service of respondent's

interrogatories or within 30 days of the receipt of respondent's

written request for a hearing if no interrogatories are filed by

respondent by that time. Parties have 30 days to respond to

interrogatories from the date interrogatories are received.

Interrogatories shall be limited to 20 questions only. Each subpart,

section, or other designation of a part of a question shall be counted

as one complete question in computing the permitted 20 question total.

Where more than 20 questions are served upon a party, the receiving

party may determine which of the 20 questions the receiving party shall

answer.

(4) Scope. Parties may obtain discovery regarding any matter not

privileged, which has material relevance to the merits of the pending

action. It is not a ground for objection that the information sought

will be inadmissible at the hearing if the information sought appears

reasonably calculated to lead to discovery of admissible evidence. The

Administrative Law Judge may make any order which justice requires to

ensure that requests are not unreasonable, oppressive, excessive in

scope or unduly burdensome, including the issuance of an order to show

cause why a particular discovery request is justified upon the motion

of the objecting party.

(5) Privileged matter. Privileged documents are not discoverable.

Privileges include, inter alia, the attorney-client privilege, attorney

work-product privilege, any government's or government agency's

deliberative-process or classified information privilege, including

materials classified pursuant to Executive Order 12958 (3 CFR, 1995

Comp., p. 333) and any future Executive orders that may be issued

relating to the treatment of national security information, and all

materials and information exempted from release to the public pursuant

to the Privacy Act (5 U.S.C. 552a) and the Freedom of Information Act

(5 U.S.C. 552(b)(1) through (9)).

(6) Updating discovery. Whenever a party receives new or additional

information or documentation, all information produced, and all

information required to be provided pursuant to the discovery and

hearing process, must automatically be updated. The Administrative Law

Judge may impose sanctions for failure to update, including prohibiting

opposition to claims or defenses raised, striking pleadings or staying

proceedings, dismissing the action or any part thereof, rendering a

judgment by default, and holding a party in contempt.

[[Page 6901]]

(7) Time limits. All discovery, including all responses to

discovery requests, shall be completed no later than 20 days prior to

the date scheduled for the commencement of the hearing. No exceptions

to this time limit shall be permitted, unless the Administrative Law

Judge finds on the record that good cause exists for waiving the

requirements of this paragraph (k)(7).

(l) Summary disposition--(1) In general. The Administrative Law

Judge shall recommend that the Secretary or the Secretary's designee

issue a final order granting a motion for summary disposition if the

facts of the record show that:

(i) There is no genuine issue as to any material fact; and

(ii) The moving party is entitled to a decision in its favor as a

matter of law.

(2) Filing of motions and responses. (i) Any party who believes

that there is no genuine issue of material fact to be determined and

that he or she is entitled to a decision as a matter of law may move at

any time for summary disposition in its favor of all or any part of the

proceeding. Any party, within 20 days after service of such a motion,

or within such time period as allowed by the Administrative Law Judge,

may file a response to such motion.

(ii) A motion for summary disposition must be accompanied by a

statement of the material facts as to which the moving party contends

there is no genuine issue. Such motion must be supported by documentary

evidence, which may take the form of admissions in pleadings,

stipulations, depositions, transcripts, affidavits, and any other

evidentiary materials that the moving party contends support his

position. The motion must also be accompanied by a brief containing the

points and authorities in support of the moving party's arguments. Any

party opposing a motion for summary disposition must file a statement

setting forth those material facts as to which he or she contends a

genuine dispute exists. Such opposition must be supported by evidence

of the same type as that submitted with the motion for summary

disposition and a brief containing the points and authorities in

support of the contention that summary disposition would be

inappropriate.

(3) Hearing on motion. At the request of any party or on his own

motion, the Administrative Law Judge may hear oral argument on the

motion for summary disposition.

(4) Decision on motion. Following receipt of a motion for summary

disposition and all responses thereto, the Administrative Law Judge

shall determine whether the moving party is entitled to summary

disposition. If the Administrative Law Judge determines that summary

disposition is warranted, the Administrative Law Judge shall submit a

recommended decision to that effect to the Secretary. If the

Administrative Law Judge finds that no party is entitled to summary

disposition, he or she shall make a ruling denying the motion.

(5) Interlocutory appeal. Following receipt of the Administrative

Law Judge's recommended decision relating to summary disposition, each

party has the right to an interlocutory appeal to the Secretary or the

Secretary's designee, within 20 days immediately following the

Administrative Law Judge's decision.

(m) Partial summary disposition. If the Administrative Law Judge

determines that a party is entitled to summary disposition as to

certain claims only, the Administrative Law Judge shall defer

submission of a recommended decision as to those claims. A hearing on

the remaining issues must be ordered and those claims for which the

Administrative Law Judge has determined that summary disposition is

warranted will be addressed in the recommended decision filed at the

conclusion of the hearing.

(n) Prehearing conferences and submissions--(1) Prehearing

conferences. The Administrative Law Judge may, on his own motion, or at

the request of any party for good cause shown, direct counsel for the

parties to meet with him (in person, by telephone, or by

teleconference) at a prehearing conference to address any or all of the

following:

(i) Simplification and clarification of the issues;

(ii) Stipulations, admissions of fact, and the contents,

authenticity and admissibility into evidence of documents;

(iii) Matters of which official notice may be taken;

(iv) Limitation of the number of witnesses;

(v) Summary disposition of any or all issues;

(vi) Resolution of discovery issues or disputes; and

(vii) Such other matters as may aid in the orderly disposition of

the proceeding.

(2) Prehearing orders. At, or within a reasonable time following

the conclusion of, any prehearing conference, the Administrative Law

Judge shall serve on each party an order setting forth any agreements

reached and any procedural determinations made.

(3) Prehearing submissions. Within 40 days of the receipt of

respondent's request for a hearing or at a time set by the

Administrative Law Judge, the Office of Foreign Assets Control shall

serve on the respondent and upon the Administrative Law Judge, the

following:

(i) Stipulations of fact, if any;

(ii) A list of the exhibits to be introduced at the hearing along

with a copy of each exhibit; and

(iii) A list of witnesses to be called to testify at the hearing,

including name and address of each witness and a short summary of the

expected testimony of each witness.

(4) Deadline for respondent's and other interested parties'

submissions. Unless for good cause shown the Administrative Law Judge

permits an extension of time to file, the respondent and other

interested parties shall have 20 days from the date of the submission

by the Office of Foreign Assets Control of the items set forth in

paragraph (n)(3) of this section, and/or of another interested party's

service of items set forth in this paragraph (n)(4), to serve upon the

Administrative Law Judge and all parties, the following:

(i) Its response to stipulations of fact, if any;

(ii) A list of the exhibits to be introduced at the hearing along

with a copy of each exhibit; and

(iii) A list of witnesses to be called to testify at the hearing,

including the name and address of each witness and a short summary of

the expected testimony of each witness.

(5) Effect of failure to comply. No witness may testify and no

exhibits may be introduced at the hearing if such witness or exhibit is

not listed in the prehearing submissions pursuant to paragraphs (n)(3)

and (n)(4) of this section, except for good cause shown.

(o) Public hearings--(1) In general. All hearings shall be open to

the public, unless the Administrative Law Judge, at his discretion,

determines at any time prior to or during the hearing, that holding an

open hearing would be contrary to the public interest. Within 20 days

of service of the notice, any party may file with the Administrative

Law Judge a request for a closed hearing, and any party may file a

pleading in reply to such a request. Failure to file a request or a

reply is deemed a waiver of any objections regarding whether the

hearing will be public or closed.

(2) Filing document under seal. (i) The Office of Foreign Assets

Control may file any documents or any part of a document under seal if

disclosure of the document would be inconsistent

[[Page 6902]]

with the protection of the public interest or if justice requires

protection of any person, including a source or a party, from

annoyance, threat, oppression, or undue burden or expense, or the

disclosure of the information would be, or might reasonably lead to a

disclosure, contrary to Executive Order 12958 or other Executive orders

concerning disclosure of information, U.S. Treasury Department

regulations, the Privacy Act, or the Freedom of Information Act.

(ii) The Administrative Law Judge shall also safeguard the security

and integrity of any documents under seal and shall take all

appropriate steps to preserve the confidentiality of such documents or

any parts thereof, including closing portions of the hearing to the

public. Release of any information under seal, in any form, or in any

manner, is subject to the same sanctions and the exercise of the same

authorities provided with respect to ex parte communications under

paragraph (e)(5) of this section.

(iii) Should the Administrative Law Judge deny placement of any

documents under seal or under protective order, any interested party,

and any person whose documents or materials are at issue, may file an

interlocutory appeal to the Secretary or the Secretary's designee. In

such cases the Administrative Law Judge must not release or expose any

of the records or documents in question to the public or to any other

parties for a period of 20 days from the date of the Administrative Law

Judge's ruling, in order to permit a petitioner the opportunity to

either withdraw the records and documents or to file an interlocutory

appeal with the Secretary or the Secretary's designee requesting an

order that the records be placed under seal.

(iv) Upon settlement, final decision, or motion to the

Administrative Law Judge for good cause shown, all materials (including

all copies) under seal or protective order shall be returned to the

respective parties, except when it may be necessary to retain a record

until the judicial process is completed.

(v) Written notice of all requests for release of protected

documents or materials shall be given to all interested parties

registered with the Administrative Law Judge at least 20 days prior to

any permitted release and prior to any access not specifically

authorized under the protective order. A copy of all requests for

information, including the name, address, and telephone number of the

requester, shall be provided to the petitioner. Each request for access

to protected material must also provide the names, addresses, and

telephone numbers of all persons represented by the requester,

including those on whose behalf the requester seeks access to protected

information. The Administrative Law Judge shall impose sanctions

provided under paragraphs (e)(4) and (5) of this section for failure to

provide this information.

(p) Conduct of hearings--(1) In general--(i) Overview. Hearings

shall be conducted to provide a fair and expeditious presentation of

the relevant disputed issues and facts. Each party has the right to

present its case or defense by oral and documentary evidence and to

conduct such cross examination as may be required for full disclosure

of the relevant facts.

(ii) Order of hearing. The Office of Foreign Assets Control shall

present its case-in-chief first, unless otherwise ordered in advance by

the Administrative Law Judge or otherwise expressly specified by law or

regulation. The Office of Foreign Assets Control shall be the first

party to present an opening statement and a closing statement and may

make a rebuttal statement after the respondent's closing statement.

(iii) Stipulations. Unless the Administrative Law Judge directs

otherwise, all stipulations of fact and law previously agreed upon by

the parties, and all documents, the admissibility of which has been

previously stipulated, will be admitted into evidence upon commencement

of the hearing.

(2) Transcript. A record of the hearing shall be made by manual or

electronic means, including through the use of audio recorded diskettes

or audio-visual cassettes, and transcribed unless the Administrative

Law Judge rules otherwise. The transcript shall be made available to

any party upon payment of the cost thereof. The Administrative Law

Judge shall have authority to order the record corrected, either upon a

motion to correct, upon a motion to stipulate by the parties for good

cause shown, or following notice to the parties upon the Administrative

Law Judge's own motion. The Administrative Law Judge shall serve notice

upon all parties, at the addresses provided by the parties pursuant to

Sec. 500.703(b)(1)(iii), that the certified transcript, together with

all hearing exhibits and exhibits introduced but not admitted into

evidence at the hearing, has been filed with the Administrative Law

Judge.

(q) Evidence--(1) Admissibility. (i) Except as is otherwise set

forth in this section, evidence that is relevant and material is

admissible to the fullest extent authorized by the Administrative

Procedure Act and other applicable law.

(ii) Evidence may be excluded if it is misleading or its probative

value is substantially outweighed by the danger of unfair prejudice or

confusion of the issues, considerations of undue delay or waste of

time, or of needless presentation of cumulative evidence.

(iii) Evidence that would be inadmissible under the Federal Rules

of Evidence need not be deemed or ruled to be inadmissible in a

proceeding conducted pursuant to this subpart if such evidence is

relevant and material, and not unduly repetitive.

(2) Official notice. (i) Official notice may be taken of any

material fact which may be judicially noticed by a United States

district court.

(ii) All matters officially noticed by the Administrative Law Judge

shall appear on the record.

(iii) If official notice is requested or taken of any material

fact, the parties, upon timely request, shall be afforded an

opportunity to object.

(3) Duplicate copies. A duplicate copy of a document is admissible

to the same extent as the original, unless a genuine issue is raised as

to whether the copy is in some material respect not a true and legible

copy of the original.

(4) Admissibility of evidence. Objections to the admissibility of

evidence must be timely made and rulings on all objections must appear

on the record. Failure to object to admission of evidence or to any

ruling constitutes a waiver of the objection.

(5) Rejected exhibits. The Administrative Law Judge shall retain

rejected exhibits, adequately marked for identification, in the event

of an interlocutory appeal.

(6) Stipulations. The parties may stipulate as to any relevant

matters of fact or to the authenticity of any relevant documents. Such

stipulations may be received into evidence at a hearing and are binding

on the parties with respect to the matters therein stipulated.

(7) Depositions of unavailable witnesses. If a witness is

unavailable to testify at a hearing, and that witness has testified in

a deposition within the United States to which all parties to the

proceeding have received timely notice and an opportunity to

participate, a party may offer as evidence all or any part of the

transcript of the deposition, including deposition exhibits. All costs

of depositions shall be borne by the party requesting the deposition.

(r) Proposed decision and supporting briefs--(1) Proposed

decisions. Any party may file with the Administrative Law Judge a

proposed decision within 30 days after the parties have received notice

that the transcript has been filed

[[Page 6903]]

with the Administrative Law Judge, unless otherwise ordered by the

Administrative Law Judge.

(2) Reliance on relevant authorities. The proposed decision must be

supported by citation to relevant authorities and by transcript page

references to any relevant portions of the record. At the same time the

proposed decision is filed, a post-hearing brief may be filed in

support. The post-hearing brief shall be filed either as part of the

same document or in a separate document.

(3) Reply briefs. Reply briefs may be filed within 15 days after

the date on which the parties' proposed decision is due. Reply briefs

must be strictly limited to responding to new matters, issues, or

arguments raised in another party's papers. A party who has not filed a

proposed decision or a post-hearing brief may not file a reply brief.

(4) Simultaneous filing required. Absent a showing of good cause

for the use of another procedure, the Administrative Law Judge shall

not order the filing by any party of any brief or reply brief in

advance of the other party's filing of its brief.

(s) Recommended decision and filing of record. Within 45 days after

expiration of the time allowed for filing reply briefs, the

Administrative Law Judge shall file with and certify to the Secretary

or the Secretary's designee the record of the proceeding and the

decision. The record must include the Administrative Law Judge's

recommended decision, including a determination either that there was

no violation by the person named in the prepenalty notice, or that

there was a violation by the person named in the prepenalty notice, and

the recommended monetary penalty and/or civil forfeiture and/or other

disposition available to the Office of Foreign Assets Control. In

addition to the proposed decision, the record must include all

prehearing and hearing transcripts, exhibits, and rulings, and the

motions, briefs, memoranda, and other supporting papers filed in

connection with the hearing. The Administrative Law Judge shall have

the recommended decision served upon each party.

(t) Exceptions to the recommended decision. When the Administrative

Law Judge has issued his recommended decision, the Administrative Law

Judge or his representative shall contact each party by telephone at

the telephone number provided by each party pursuant to

Sec. 500.703(b)(1)(iii). Within 3 days of telephoning the parties, the

recommended decision shall be mailed by the Administrative Law Judge to

the parties. A party may file written exceptions to the recommended

decision with the Secretary or the Secretary's designee within 30 days

of the date the telephone call is placed by the Administrative Law

Judge or his representative. A supporting brief may be filed at the

time the exceptions are filed.

(u) Final decision. The final decision of the Secretary or the

Secretary's designee shall be based on a review of the proposed

decision and the entire record of the proceeding. The final written

decision shall be provided to all parties.

Sec. 500.707 Judicial review.

Any person may seek judicial review as provided under 5 U.S.C. 702

for a penalty and/or forfeiture imposed pursuant to this part.

Sec. 500.708 Referral to United States Department of Justice;

administrative collection measures.

In the event that the respondent does not pay the penalty imposed

pursuant to this part within 30 days of the mailing of the written

notice of the imposition of the penalty, the matter may be referred for

administrative collection measures or to the United States Department

of Justice for appropriate action to recover the penalty in a civil

suit in a Federal district court.

PART 505--REGULATIONS PROHIBITING TRANSACTIONS INVOLVING THE

SHIPMENT OF CERTAIN MERCHANDISE BETWEEN FOREIGN COUNTRIES

1. The authority citation for part 505 is revised to read as

follows:

Authority: 50 U.S.C. App. 1-44; Pub. L. 101-410, 104 Stat. 890

(28 U.S.C. 2461 note); E.O. 9193, 7 FR 5205, 3 CFR, 1938-1943 Comp.,

p. 1174; E.O. 9989, 13 FR 4891, 3 CFR, 1943-1948 Comp., p. 748.

2. Section 505.50 is revised to read as follows:

Sec. 505.50 Penalties.

For provisions relating to civil penalties and civil forfeiture,

see subpart G of part 500 of this chapter.

PART 515--CUBAN ASSETS CONTROL REGULATIONS

1. The authority citation for part 515 is revised to read as

follows:

Authority: 50 U.S.C. App. 1-44; 22 U.S.C. 6001-6010; 22 U.S.C.

6021-6091; 22 U.S.C. 2370(a); Pub. L. 104-132, 110 Stat. 1214, 1254

(18 U.S.C. 2332d); Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461

note); E.O. 9193, 7 FR 5205, 3 CFR, 1938-1943 Comp., p. 1174; E.O.

9989, 13 FR 4891, 3 CFR, 1943-1948 Comp., p. 748; Proc. 3447, 27 FR

1085, 3 CFR, 1959-1963 Comp., p. 157; E.O. 12854, 58 FR 36587, 3

CFR, 1993 Comp., p. 614.

2. Subpart G is revised to read as follows:

Subpart G--Penalties

Secs.

515.701 Penalties.

515.702 Prepenalty notice; contents; service.

515.703 Response to prepenalty notice; right to hearing and

prehearing discovery; informal settlement.

515.704 Penalty imposition or withdrawal absent a hearing request.

515.705 Time and opportunity to request a hearing.

515.706 Hearing, discovery, and decision on the record.

515.707 Judicial review.

515.708 Referral to United States Department of Justice;

administrative collection measures.

Subpart G--Penalties

Sec. 515.701 Penalties.