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 RegisterMar 3, 1998

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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: Final rule.

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SUMMARY: The Treasury Department amends the Foreign Assets Control

Regulations and the Cuban Assets 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 made to the Transaction Control

Regulations. The final rule is issued after consideration of public

comments received on the proposed rule published in the February 14,

1997 Federal Register.

EFFECTIVE DATE: This final rule is effective April 2, 1998.

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 Assets Control Regulations, 31 CFR part 515 (jointly, the

``Regulations''), are 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 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 revised to establish the procedures governing

administrative hearings.

This final rule addresses the comments received during the public

comment period and establishes the Office of Foreign Assets Control's

(``OFAC'') civil penalties administrative hearing process.

Response to Public Comments

On February 14, 1997, OFAC requested public comments on proposed

rules (31 CFR Parts 500, 505 and 515). OFAC received two letters

commenting on the proposed hearing procedures. The commenters were

Lonnie Ann Pera, Esq., of Zuckert, Scoutt & Rasenberger, L.L.P., and

D.E. Wilson, Jr., Esq., of Lane & Mittendorf LLP. A number of

procedural and substantive changes have been made to improve clarity

and to reflect concerns raised in the comments submitted.

In response to the suggestion of one commenter, the sections have

been renumbered to create new headings to facilitate use of the

regulations. In the discussion below, the new headings are used with

the previous heading listed in parentheses. The comments below apply

equally to part 500 and 515, but, because the sections are identical,

reference is made only to part 500.

Section 550.701(b)

Criminal Penalty Increase:

One commenter suggested that more information about increased

criminal fines for violations of the Trading with the Enemy Act

pursuant to 18 U.S.C. 3571 be included. Further information is

provided.

Section 500.702

Calendar Days:

Both commenters raised a number of procedural points requesting

clarification of filing and service requirements. Many of their

suggestions have been incorporated into the final rule. Filing

deadlines are now specifically counted in terms of calendar days,

unless otherwise noted.

Notice in the Prepenalty Notice of Waiver of Discovery:

One commenter believed that the prepenalty notice should

specifically inform the respondent that a request for discovery must be

included in the response or the right to discovery is waived. This

additional notice to the respondent is now included in

Sec. 500.702(b)(2)(iii). The second commenter stated that the waiver of

respondent's rights to discovery and hearing where the respondent has

filed in an untimely manner was ``draconian.'' OFAC disagrees.

Prepenalty notices and OFAC regulations clearly set out deadline

requirements which respondents must satisfy.

Service:

One commenter stated that Sec. 500.702(c)(3) should require the

individual serving the prepenalty notice to sign and to indicate on the

certificate the date on which the prepenalty notice was served. The

paragraph has been amended to require that the certificate include both

the server's signature and the date of service.

Section 500.703

Notice of Address Change:

Each respondent is required to provide a name and address for

service. One commenter asked that OFAC define the term ``interested

parties'' found in section 703(b)(1)(iii), which contains the

requirement for accurate address information. The commenter requested

that the possible sanctions for failure to comply with this provision

be specifically set forth in the regulations. OFAC has changed the term

``interested

[[Page 10322]]

parties'' to ``parties'' to clarify who must be notified of address

changes. The imposition of sanctions for failure to comply with this

requirement is committed to the discretion of the Administrative Law

Judge. Consistent with the Administrative Procedure Act, 5 U.S.C. ch. 5

and 7 (the ``APA''), the Administrative Law Judge has the authority to

conduct the hearing including the authority to ``regulate the course of

the hearing and the conduct of the parties and their counsel.''

Sec. 500.706(b)(5).

One commenter believed that if a respondent is represented by

counsel, OFAC need only know the current name, address and telephone

number of respondent's counsel and that notice only need be sent to the

parties' counsel. OFAC agrees it is sufficient for a party represented

by counsel to have the counsel provide the appropriate name, address,

and facsimile machine and telephone numbers. This provision has been

amended accordingly.

Informal Settlement:

One commenter stated it was not clear whether OFAC would or could

toll the 30 calendar day response period during settlement discussions

and requested clarification regarding the required mechanism for

tolling the response period under Sec. 500.703(b)(3). OFAC believes

that the provision is clear. There is no automatic tolling of the 30-

day response period during settlement discussions. A respondent engaged

in settlement discussions for 29 calendar days may not break off

discussions on day 29 and then receive 29 additional calendar days to

file a response to the prepenalty notice. In this example, the

respondent would have only one remaining calendar day left in which to

file a response absent a clear agreement with OFAC to the contrary.

Where OFAC has responded affirmatively in writing that the 30 calendar

day response period has been tolled for ongoing settlement discussions,

the respondent will be informed in writing of the new deadline for

responding.

Section 500.705

Admissibility of Information into the Record:

One commenter expressed concern over the admissibility of evidence

into the record. OFAC has amended the language to emphasize that

information will be admissible into the record to the extent that the

Administrative Law Judge deems it admissible pursuant to Sec. 500.715.

Signature of a Requesting Party:

One commenter objected to OFAC's double signature requirement on a

request for hearing. Under the proposed regulations, Sec. 500.705(c)

required both respondent's signature and respondent's counsel's

signature on the request for hearing. OFAC agrees this is unnecessary

and has amended this requirement to allow signature either by

respondent or, if represented, by respondent's counsel.

Section 500.706

Notice of Appearance:

Both commenters sought clarification concerning the requirement for

notice of appearance and representation before the Administrative Law

Judge. The provision has been amended to reflect OFAC's intent that

parties or their counsel provide written notice to the Administrative

Law Judge that they are either a party or counsel to a party in the

proceeding before the judge. The notice of appearance must be provided

to the Administrative Law Judge. No particular format is required for

the notice of appearance.

Section 500.709 (proposed Sec. 500.706)

Motions, Interlocutory Appeals, Notice of Change of Address:

Both commenters supported the use of facsimile transmissions and

private expedited mail services to facilitate respondents' efforts in

meeting filing deadlines. One commenter questioned how the

Administrative Law Judge would be able to serve the parties with a

decision by certified mail and leave the parties sufficient time to

respond with an interlocutory appeal. Citing delivery problems with

certified mail in particular areas of the country, the commenter stated

that the parties may not learn of the decision until just before, or

possibly even after, the expiration of the 10-day period for appealing

the decision. OFAC has amended these provisions. Parties or the

Administrative Law Judge may serve or file copies of signed and dated

documents by facsimile transmission, courier, or other expedited means,

provided that the original, signed document is also sent concurrently

by registered or certified mail, return receipt requested. The date

stated in the date-stamped registered or certified mail postal receipt

constitutes the filing or service date.

Section 500.707 (proposed Sec. 500.706(g))

Interlocutory Appeal:

One commenter asked for more precise instructions in filing an

interlocutory appeal. The commenter also asked for a model form. The

Administrative Law Judge has the authority to provide particularized

instructions of this nature.

500.706(e)

Ex Parte Communications:

One commenter noted that the terms referring to ``party,''

``party's counsel,'' ``respondent,'' and ``any other individual'' were

used but not interchangeably. OFAC agrees with the commenter and the

paragraph has been amended to achieve more consistent usage of these

terms.

Section 500.710(e) (proposed Sec. 500.706(k)(5))

Exemptions from Discovery:

One commenter suggested that OFAC was treating as undiscoverable

Executive orders dealing with the treatment of national security

information even where the President has decided that certain of such

orders are not classified. This is not OFAC's position. This section

provides for withholding information requested in discovery where a

privilege is asserted. One available privilege applies to classified

information. Unclassified documents would not qualify for this

privilege.

The other commenter felt that a respondent would be compelled to

submit interrogatories before OFAC had time to set a hearing date. The

commenter suggested that the filing deadlines were already strict and

asserted that requiring respondent to serve interrogatories in advance

of scheduling a hearing date would prove ``unduly burdensome'' for the

respondent. OFAC does not agree. A respondent has 30 calendar days in

which to respond to an OFAC prepenalty notice and request a hearing and

discovery. Once the response is served upon OFAC, an Administrative Law

Judge will be assigned the case. The Administrative Law Judge will set

the hearing date, not OFAC. When the procedural schedule is not

prescribed under the regulations, the Administrative Law Judge has the

authority to establish the schedule. The Administrative Law Judge may,

for example, convene a pre-hearing conference to respond to scheduling

burdens being experienced by the parties.

Section 500.711 (proposed Sec. 500.706(l)(5))

Summary Disposition:

One commenter suggested that a respondent might not receive the

Administrative Law Judge's recommended decision for summary dismissal

in sufficient time to file an interlocutory appeal. The commenter also

requested that the regulations clarify whether the appeal is due within

[[Page 10323]]

20 days after the date of the Administrative Law Judge's decision or

after the date respondent receives the recommended decision.

OFAC agrees with the commenter's concerns and the need for greater

clarity on this point. Service by the Administrative Law Judge upon the

parties of recommended decisions and other orders might be delayed by

the use of U.S. certified mail, and this may impose hardships upon the

parties. This and other provisions have been amended to provide for

delivery of the Administrative Law Judge's signed and dated recommended

decisions and other orders by facsimile transmission, courier, or other

expedited means, concurrent with service by U.S. certified mail.

Section 500.711(e)(proposed Sec. 500.706(l)(5)) has been changed to

clarify that an appeal from the Administrative Law Judge's recommended

decision for summary disposition is due within 20 days of the date of

the judge's decision.

Section 500.713 (proposed Sec. 500.706(o))

Public Hearing:

One commenter suggested that the term ``notice'' required

clarification. OFAC has amended the language to include a specific

reference to the ``notice of hearing from the Administrative Law

Judge.'' Sec. 500.713(a). Thus, within 20 calendar days of the

Administrative Law Judge's notice of hearing, any party may file a

motion with the judge requesting a closed hearing.

Section 500.715(g) (proposed Sec. 500.706(q)(7))

Costs of Depositions:

One commenter requested that OFAC specify exactly which costs of a

deposition the requesting party must pay. OFAC believes that the

regulations are clear. All costs of depositions shall be borne by the

party requesting the deposition. Should a party requesting a deposition

object to fees or travel expenses sought by the deponent, the

requesting party may seek a ruling by the Administrative Law Judge.

Pursuant to Sec. 500.706(b)(4) and (12), the Administrative Law Judge

has the authority to cause depositions to be taken and to set fees and

expenses for witnesses, including expert witnesses.

One commenter asked that the term ``unavailable'' be defined for

purposes of Sec. 500.715(g). The commenter suggested that the

respondent must know whether a deposition is appropriate if a person

cannot attend the hearing because of a conflict, or whether the witness

must meet the ``unavailability'' requirements of the Federal Rules of

Evidence before the respondent may take a deposition. While the Federal

Rules of Evidence do not generally apply to this administrative hearing

process, the Administrative Law Judge does have the authority to take

and cause depositions to be taken. In the event a question or

controversy arises as to the ``unavailability'' of a witness, the

parties may seek a ruling by the Administrative Law Judge.

Section 500.716(g) (proposed Sec. 500.706(u))

Final Decision:

Proposed Sec. 500.706(u) provided for the final decision of the

Secretary or the Secretary's designee to be based on a review of the

proposed decision and the entire record of the proceeding. A commenter

questioned whether OFAC intended that the final decision be based upon

the parties' proposed decisions or on the Administrative Law Judge's

recommended decision. OFAC has amended Sec. 500.716(g) to read ``based

on a review of the Administrative Law Judge's recommended decision and

the entire record of the proceeding.''

Regulatory Flexibility Act

It has been determined that this final rule 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 final

rule 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 12, 1997, the cumulative number of hearing

requests pending was 41. Of these, only 5 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 APA.

The collection of information in the final rule arises in the

conduct of administrative actions or investigations by OFAC against

specific individuals or entities and is, pursuant to 44 U.S.C.

3518(c)(1)(B)(ii), not subject to the requirements of the Paperwork

Reduction Act.

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, 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 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: 18 U.S.C. 2332d; 31 U.S.C. 321(b); 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. Subpart G is revised to read as follows:

Subpart G--Penalties

Secs.

500.701 Penalties.

500.702 Prepenalty notice; contents; respondent's rights; service.

500.703 Response to prepenalty notice; requests for hearing and

prehearing discovery; waiver; informal settlement.

[[Page 10324]]

500.704 Penalty imposition or withdrawal absent a hearing request.

500.705 Time and opportunity to request a hearing.

500.706 Hearing.

500.707 Interlocutory appeal.

500.708 Settlement during hearing proceedings.

500.709 Motions.

500.710 Discovery.

500.711 Summary disposition.

500.712 Prehearing conferences and submissions.

500.713 Public hearings.

500.714 Conduct of hearings.

500.715 Evidence.

500.716 Proposed decisions; recommended decision of Administrative

Law Judge; final decision.

500.717 Judicial review.

500.718 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 -- ``TWEA''), 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 TWEA 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 TWEA 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, papers, or other articles or

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

and equipment, concerned in a violation of TWEA 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 TWEA.

(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 TWEA shall, at the discretion of the

Secretary of the Treasury, be forfeited to the United States

Government.

(b) The criminal penalties provided in TWEA are subject to increase

pursuant to 18 U.S.C. 3571 which, when read in conjunction with section

16 of TWEA, provides that persons convicted of violating TWEA may be

fined up to the greater of either $250,000 for individuals and

$1,000,000 for organizations or twice the pecuniary gain or loss from

the violation.

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

representations, 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 5 years, or both.

Sec. 500.702 Prepenalty notice; contents; respondent's rights;

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 or she shall issue to the person

concerned a notice of his or her 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 in writing to the notice within 30 calendar 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. A failure to request a

hearing within 30 calendar days of service of the prepenalty notice

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. A failure to file a request

for discovery within 30 calendar days of service of the prepenalty

notice 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 the mailing date stated in a date-stamped postal receipt

presented 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 personal service by 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 and evidenced by a certificate of service signed and dated

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

(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

[[Page 10325]]

or ineffective for service upon the nonresident respondent.

Sec. 500.703 Response to prepenalty notice; requests for hearing and

prehearing discovery; waiver; informal settlement.

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

days from the date of mailing or other service of the prepenalty notice

pursuant to Sec. 500.702(c) to respond thereto. The response, signed

and dated, may be sent by facsimile transmission to the Office of

Foreign Assets Control, at 202/622-1657, or by courier or other

expedited means at any time during the 30-day response period if an

original copy is sent concurrently via the U.S. Postal Service,

registered or certified mail, return receipt requested. The date shown

on the date-stamped registered or certified mail postal receipt will

constitute the filing date of the response.

(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, together

with current telephone and, if applicable, facsimile machine numbers

and area code. If respondent is represented by counsel, counsel's full

name and address, together with telephone and facsimile numbers and

area code, may be provided in lieu of service information for the

respondent. The respondent or respondent's counsel of record is

responsible for providing timely written notice to the parties of any

subsequent changes in the information provided.

(2) Request for hearing and prehearing discovery; waiver. Any

request for an administrative hearing and prehearing discovery must be

made, if at all, in the written response made pursuant to this section

and within the 30 calendar day period specified in Sec. 500.705(a). A

failure to request a hearing and prehearing discovery in writing within

30 calendar days of service of the prepenalty notice constitutes a

waiver of a hearing and prehearing discovery. A response asserting that

respondent reserves the right to request a hearing or prehearing

discovery beyond the 30 calendar day period is ineffectual.

(3) Informal settlement; response deadline. 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 claim proposed in 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 calendar 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. A failure to request a hearing and

prehearing discovery in writing within 30 calendar days of service of

the prepenalty notice constitutes a waiver of a hearing and prehearing

discovery.

Sec. 500.704 Penalty imposition or withdrawal absent a hearing

request.

(a) No violation. If, in the absence of a timely hearing request,

after considering any 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, in the absence of a timely hearing request,

after considering any 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 with respect to that respondent.

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

payment of the assessed penalty must be made within 30 calendar 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 calendar 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 for inclusion, if found admissible

pursuant to Sec. 500.715(a), 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 or, if represented, by each party's

counsel.

(d) Computation of time--(1) Final date on weekend or holiday.

Whenever the final date for any requirement of this part falls on a

Saturday, Sunday, Federal holiday, or other day on which

[[Page 10326]]

the Office of Foreign Assets Control is not open for the transaction of

business during normal working hours, the time for filing will be

extended to the close of business on the next working day.

(2) Closing time. The time for filing any document expires at 5:00

p.m. local Washington, DC time on the last day when such filing may be

made.

Sec. 500.706 Hearing.

(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 a change in the time

or place of a hearing must be received in the Administrative Law

Judge's chambers and served upon the parties no later than 15 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 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 Secs. 500.711(d) and

500.716(e);

(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 notice to

the Administrative Law Judge in a civil penalty hearing.

(2) Appearance before an Administrative Law Judge by a nonlawyer. A

respondent may appear on his own behalf; a duly authorized member of a

partnership may represent the partnership; a duly authorized officer,

director, or employee of any corporation may represent that corporation

upon written notice to the Administrative Law Judge in a civil penalty

hearing.

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

Foreign Assets Control shall be represented by the Office of General

Counsel of the United States Department of the Treasury.

(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 to learn 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 calendar 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 party to the proceeding, a party's counsel, or

any other individual, 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

[[Page 10327]]

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) 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 enter a finding that the right to a hearing was waived, and

the case shall be determined pursuant to Sec. 500.704.

Sec. 500.707 Interlocutory appeal.

(a) Interlocutory appeals. 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.

(b) Filing deadline. Interlocutory appeals must be filed no later

than 15 calendar days after the matter being appealed has been decided

in writing by the Administrative Law Judge. Parties may request that

the Administrative Law Judge transmit the written decision to the

parties by facsimile transmission, courier, or other expedited means in

addition to service of the decision via the U.S. Postal Service by

registered or certified mail, return receipt requested. Such requests

must be supported by a written statement of need for expedited

delivery. Timely filing of the interlocutory appeal shall be determined

by the date stated on the date-stamped registered or certified mail

postal receipt.

Secretary's designee must be filed by facsimile transmission to 202/

622-1188, courier, or other expedited means, and sent concurrently by

registered or certified mail, return receipt requested, to the

Secretary's Office, U.S. Treasury Department, 1500 Pennsylvania Avenue,

NW, Washington, DC 20220, with the envelope prominently marked

``Attention: OFAC Interlocutory Appeal.'' Expedited service must also

be made upon the Administrative Law Judge and all parties or, if

represented, their counsel, with certified copies sent concurrently by

registered or certified mail, return receipt requested.

Sec. 500.708 Settlement during hearing proceedings.

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

Sec. 500.707(c). 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, nor any subsequent

negotiation or resolution, is admissible as evidence in any hearing

before this tribunal.

Sec. 500.709 Motions.

(a) 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.

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

sought and must be accompanied by a proposed order.

(2) 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.

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

the Administrative Law Judge directs that such motion be made in

writing.

be filed with the Administrative Law Judge and served upon the Office

of the Chief Counsel, 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. Motions by the Office of

Foreign Assets Control must be filed with the Administrative Law Judge

and with each respondent or respondent's counsel. Motions may also be

concurrently sent by facsimile transmission, courier, or other

expedited means.

(2) Interlocutory appeals. Motions related to interlocutory appeals

to the Secretary or the Secretary's designee must be filed by facsimile

transmission to 202/622-1188, by courier, or by other expedited means,

and sent concurrently by registered or certified mail, return receipt

requested, to the Secretary's Office, U.S. Treasury Department, 1500

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

prominently marked ``Attention: OFAC Interlocutory Appeal.'' Expedited

service must also be made upon the Administrative Law Judge and all

parties or, if represented, their counsel, with certified copies sent

concurrently by registered or certified mail, return receipt requested.

(d) Responses. (1) Any party may file a written response to a

motion within 20 calendar days of the date of its mailing, by

registered or certified mail pursuant to this subpart. If directed by

the Administrative Law Judge, the time period in which to respond 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 calendar days of the date the response was filed and served

upon all parties.

(2) 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 any proposed order

accompanying the motion.

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

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

sanctions.

Sec. 500.710 Discovery.

(a) 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

materials, placement of information, documents and/or materials under

seal and/or protective order, and interlocutory appeals to the

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

Administrative Law Judge.

(b) 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

[[Page 10328]]

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 the Office of

the Chief Counsel, Foreign Assets Control 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.

upon the Office of the Chief Counsel, Foreign Assets Control within 20

calendar days of respondent's written request for a hearing. The Office

of Foreign Assets Control's interrogatories must be served within 30

calendar days of the receipt of service of respondent's interrogatories

or within 30 calendar 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 calendar 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.

(d) 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.

(e) 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)).

(f) 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.

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

discovery requests, shall be completed no later than 20 calendar 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 (g).

Sec. 500.711 Summary disposition.

(a) 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:

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

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

matter of law.

(b) Filing of motions and responses. (1) Any party who believes

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

that such party 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 calendar 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.

(2) 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 its

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 such party contends a

genuine dispute exists. The 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.

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

motion for summary disposition.

(d) 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, he or she 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.

(e) 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. The interlocutory appeal must be filed within 20

calendar days immediately following the Administrative Law Judge's

recommended decision.

(f) 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.

Sec. 500.712 Prehearing conferences and submissions.

(a) Prehearing conferences. The Administrative Law Judge may, on

his or her own motion, or at the request of any party for good cause

shown, direct counsel for the parties to meet with him or her (in

person, by telephone, or by teleconference) at a prehearing

[[Page 10329]]

conference to address any or all of the following:

(1) Simplification and clarification of the issues;

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

authenticity and admissibility into evidence of documents;

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

(4) Limitation of the number of witnesses;

(5) Summary disposition of any or all issues;

(6) Resolution of discovery issues or disputes; and

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

proceeding.

(b) 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.

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:

(1) Stipulations of fact, if any;

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

with a copy of each exhibit; and

(3) 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.

(d) Deadline for respondent's and the other parties' submissions.

Unless for good cause shown the Administrative Law Judge permits an

extension of time to file, the respondent and the other parties shall

have 20 calendar days from the date of the submission by the Office of

Foreign Assets Control of the items set forth in paragraph (c) of this

section, and/or of any other party's service of items set forth in this

paragraph (d), to serve upon the Administrative Law Judge and all

parties, the following:

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

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

with a copy of each exhibit; and

(3) 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.

(e) 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 (c) and

(d) of this section, except for good cause shown.

Sec. 500.713 Public hearings.

(a) In general. All hearings shall be open to the public, unless

the Administrative Law Judge, at his or her 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 calendar days of

service of the notice of hearing from the Administrative Law Judge, 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.

(b) Filing document under seal. (1) The Office of Foreign Assets

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

disclosure of the document would be inconsistent 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.

(2) 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 manner,

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

authorities as are provided with respect to ex parte communications

under paragraph (e)(5) of this section.

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

documents under seal or under protective order, any 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 calendar days from the date of the

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

opportunity either to 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.

(4) 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.

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

documents or materials shall be given to the parties registered with

the Administrative Law Judge at least 20 calendar 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 Sec. 500.706(e)(4) and (e)(5) for failure to provide

this information.

Sec. 500.714 Conduct of hearings.

(a) In general--(1) 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.

(2) 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.

(3) 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.

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

electronic

[[Page 10330]]

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.

Sec. 500.715 Evidence.

(a) Admissibility. (1) 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.

(2) 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, or considerations of undue delay, waste of

time, or needless presentation of cumulative evidence.

(3) 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.

(b) Official notice. (1) Official notice may be taken of any

material fact which may be judicially noticed by a United States

district court.

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

shall appear on the record.

(3) If official notice is requested or taken of any material fact,

the parties, upon timely request, shall be afforded an opportunity to

object.

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.

(d) Objections to 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.

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

rejected exhibits, adequately marked for identification, in the event

of an interlocutory appeal.

(f) 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.

(g) 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.

Sec. 500.716 Proposed decisions; recommended decision of

Administrative Law Judge; final decision.

(a) Proposed decisions. Any party may file with the Administrative

Law Judge a proposed decision within 30 calendar days after the parties

have received notice that the transcript has been filed with the

Administrative Law Judge, unless otherwise ordered by the

Administrative Law Judge.

(b) 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.

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.

(d) 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.

(e) Recommended decision and filing of record. Within 45 calendar

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.

(f) 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 calendar 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 calendar 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.

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

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

Law Judge's recommended decision and the entire record of the

proceeding. The final written decision shall be provided to all

parties.

Sec. 500.717 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. 500.718 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 calendar 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

[[Page 10331]]

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: 31 U.S.C. 321(b); 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 penalties, 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: 31 U.S.C. 321(b); 22 U.S.C. 2370(a), 6001-6010, 6021-

6091; 50 U.S.C. App. 1-44; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C.

2461 note); Pub. L. 104-132, 110 Stat. 1214, 1254 (18 U.S.C. 2332d);

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; respondent's rights; service.

515.703 Response to prepenalty notice; requests for hearing and

prehearing discovery; waiver; informal settlement.

515.704 Penalty imposition or withdrawal absent a hearing request.

515.705 Time and opportunity to request a hearing.

515.706 Hearing.

515.707 Interlocutory appeal.

515.708 Settlement during hearing proceedings.

515.709 Motions.

515.710 Discovery.

515.711 Summary disposition.

515.712 Prehearing conferences and submissions.

515.713 Public hearings.

515.714 Conduct of hearings.

515.715 Evidence.

515.716 Proposed decisions; recommended decision of Administrative

Law Judge; final decision.

515.717 Judicial review.

515.718 Referral to United States Department of Justice;

administrative collection measures.

Subpart G--Penalties

Sec. 515.701 Penalties.