Blanford, Thomas D.

Pinkert, Dean A.

English

Brooklyn Law School: BrooklynWorks

Brooklyn Journal of International LawVolume 26 | Issue 3 Article 191-1-2001Judicial Review of Export Control DeterminationsDean A. PinkertThomas D. BlanfordFollow this and additional works at: https://brooklynworks.brooklaw.edu/bjilThis Article is brought to you for free and open access by the Law Journals at BrooklynWorks. It has been accepted for inclusion in Brooklyn Journal ofInternational Law by an authorized editor of BrooklynWorks.Recommended CitationDean A. Pinkert & Thomas D. Blanford, Judicial Review of Export Control Determinations, 26 Brook. J. Int'l L. (2001).Available at: https://brooklynworks.brooklaw.edu/bjil/vol26/iss3/19JUDICIAL REVIEW OFEXPORT CONTROL DETERMINATIONSDean A. PinkertThomas D. Blanford*I. INTRODUCTIONThis commentary includes: (1) a summary of the exportcontrol laws and regulations administered by the Bureau ofExport Administration' and the U.S. Department of Com-merce; (2) an outline of the review procedures available at theagency level; (3) a discussion of the principles that governjudicial review pursuant to the Export Administration Act("EAA") 2 of civil enforcement and administrative export controldeterminations; and (4) an analysis of reform proposals. Be-cause reauthorization and reform of the EAA are perennialsubjects of activity on Capitol Hill, it is timely to considerwhether the scheme of judicial review might be altered to bet-ter complement review procedures available at the agencylevel.II. AN OvERviEw OF THE REGULATORY SCHEMEThe Export Administration Regulations, promulgatedunder the authority of the EAA, generally are focused on thecontrol of exports of "dual-use" commodities (commodities thathave military and commercial applications).3 The Bureau ofExport Administration is charged with administering theseregulations.4* Dean A. Pinkert & Thomas D. Blanford of the law firm of King &Spalding, Washington, D.C. office. The authors would like to thank Ying Z. White,formerly of King & Spalding, Washington, D.C. office (currently on the staff of theWorld Bank) for her assistance. The views and opinions expressed herein are sole-ly those of the authors and do not represent those of King & Spalding or its cli-ents.1. See The Export Administration Act of 1979, as amended, 50 U.S.C. app.§§ 2401-2420 (1988). The EAA expired in 1994. On November 13, 2000, however,the President signed into law H.R. 5239, extending the EAA from August 20, 1994to August 20, 2001.2. Export Administration Act, 50 U.S.C. app. §§ 2401-2420 (1988).3. U.S. DEPARTMENT OF COMMERCE, BUREAU OF EXPORT ADMINISTRATION,EXPORT ADMINISTRATION REGULATIONS §§ 730.1-730.3, 730.6 (2000).4. See Export Administration Act, 50 U.S.C. app. § 2403.BROOK. J. INTL L.The precursor to the EAA was the 1949 Export ControlAct.5 That statute was as much focused on economic securityas national security. Nevertheless, soon after the passage ofthis legislation, the NATO allies established the CoordinatingCommittee ("CoCom").6 CoCom was designed to prevent re-sources intended for the reconstruction of Europe from beingdiverted to the Soviet Bloc.7 In 1994, as a result of the suc-cessful conclusion of the Cold War, CoCom was ended. A great-ly relaxed post-Cold War international export control regime,the Wassenaar Arrangement on Export Controls for Conven-tional Arms and Dual-Use Goods and Technologies, came intoexistence in 1996.8The basic structure of the Export Administration Regula-tions was established under CoCom. Activities subject to theregulations include: (1) exports; (2) re-exports to third coun-tries; (3) the involvement of U.S. persons in supplying foreign -origin items or in otherwise supporting a transaction withknowledge of a proliferation link; and (4) release of technologyor software to a foreign national The regulations do not coverexports under the exclusive jurisdiction of another federalagency or exports of "publicly available" software and technolo-gy.' 0Unless a specific license exception applies, a companydesiring to engage in an activity subject to the regulationsinvolving a controlled commodity-or otherwise requiring alicense-must file a license application with the Bureau of Ex-port Administration." Such applications are reviewed by, at aminimum, the Departments of Commerce, State, Defense, andEnergy, and the Arms Control and Disarmament Agency. 2The Commerce Department also has the option of asking otheragencies to review specific license applications. Similarly, theDefense Department can refer license requests to the National5. See Cecil Hunt, Department of Commerce Export Controls, in COPING WITHU.S. EXPORT CONTROLs 37, 43-46 (Evan R. Berlack & Cecil Hunt eds., PracticingLaw Institute 1998).6. See id. at 43.7. See id. at 43-44.8. See Export Administration Regulations § 743 (2000).9. See id. § 730.5.10. Id. § 730.8.11. See id. § 736.12. See id. § 750.3.844 [Vol. XXVI:32001] EXPORT CONTROL DETERMINATIONSSecurity Agency, the Defense Intelligence Agency, or others inthe intelligence community. 3The regulations also discuss two ways in which companiesmay obtain export control information from the Bureau ofExport Administration. One way is by submitting a "classifica-tion request."'4 On the basis of data submitted regarding theitem to be classified, the Bureau of Export Administration willadvise the exporter (1) whether the item is on the control list,and, if so, (2) the appropriate Export Control ClassificationNumber. 5 Companies also may request an "advisory opinion"based on information about the item to be exported, the pro-posed destination, and the proposed end-use and end-user."The Bureau of Export Administration will respond with non-binding advice on whether a license is required and, if so,whether it is likely to be granted.Violations of the Export Administration Regulations aresubject to severe criminal and civil sanctions. On the civil side,Bureau of Export Administration counsel may file chdrges withan administrative law judge (ALJ) seeking civil fines or admin-istrative sanctions.'7 Administrative sanctions include "denialorders." 8 These orders bar exports by the sanctioned per-son-and related parties-as well as the supply to such personsof items that have been exported from the United States.III. AGENCY LEVEL REVIEW OF CiviL ENFORCEMENT UNDERTHE EAAThe exporter is entitled to notice of the charges againsthim and an opportunity to be heard by the ALJ. The AU mustthen determine whether the evidence supports the charges.The AL's determination is reviewable in the first instance bythe Under Secretary of Commerce for Export Administra-tion.9 The scope of the Under Secretary's review of ALJ de-13. See Export Controls: Issues Related to Commercial Communications Satel-lites: Testimony Before the United States Senate Select Comm. on Intelligence,105th Cong. 3 (1998) (statement of Katherine V. Schinasi, Associate Director, Unit-ed States General Accounting Office).14. 15 C.F.R. § 748.3(b) (2000).15. See id.16. Id. § 748.3(c).17. See Export Administration Regulations § 764 (2000).18. Id.19. See 15 C.F.R. § 766.22 (2000).845BROOK. J. INTL L.terminations has been clarified by two decisions of the D.C.Circuit.Iran Air v. Kugelman ° provides an overview of the agen-cy-level review mechanisms available to parties charged withcivil violations.2' In 1990, the Bureau of Export Administra-tion sought to impose civil penalties on Iran Air for unautho-rized re-exportation to Iran of certain dual-use products. IranAir requested a hearing before an ALJ pursuant to § 2412(c)(1)of the EAA" After receiving evidence and argument from theparties to the dispute, the ALJ ruled that the EAA authorizessanctions only for knowing violations of the Export Adminis-tration Regulations.' As the U.S. Government had not proventhat Iran Air had knowledge of its alleged civil offenses, theALJ dismissed the charges. The Under Secretary reversed theALJ on this point, finding that knowledge is not a requiredelement of a civil enforcement action, and remanded for appro-priate reconsideration. 4 On remand, the ALJ refused to fol-low the agency's reading of the law and dismissed the chargesagain. The Under Secretary vacated the AUJ's second decisionand remanded for redetermination.' The ALJ issued a thirdorder rejecting the agency's construction of the statute.26 TheUnder Secretary once again vacated the ALJ's decision andissued a final order imposing penalties and suspending IranAir's export privileges.Iran Air appealed the decision to the D.C. Circuit, arguingthat the Under Secretary acted beyond her authority by over-turning the determination of the ALJ.28 The D.C. Circuit up-held the Under Secretary's authority to overturn an AUJ'sdetermination on a matter of law, finding this authority to benecessary to facilitate the implementation of uniform agencypolicies with respect to the EAA. The court further found "per-missible" the Under Secretary's view that knowledge is not a20. 996 F.2d 1253 (D.C. Cir. 1993).21. See id. at 1255.22. Export Adminstration Act, 50 U.S.C. app. § 2412(c)(1) (1988).23. See Iran Air, 996 F.2d at 1255.24. See id.25. See id.26. See id. at 1257.27. See id.28. See id. at 1256.[Vol. XXV:38462001] EXPORT CONTROL DETERMINATIONSrequired element of proof in a civil violation case under theEAA. 9The court distinguished Iran Air from an earlier landmarkdetermination that limited the prerogatives of the Under Sec-retary."0 In Dart v. United States," the Court held: (1) sec-tions 13(a) and 13(c) of the EAA do not provide an exemptionfrom judicial review for decisions of the Under Secretary thatfail to "affirm, modify, or vacate" determinations of the ALJ;and (2) the Under Secretary is required to defer to certaindeterminations of the AU.' Iran Air made it clear that suchdeference is required only with respect to the ALU's factualdeterminations.IV. JUDIcAL REVIEW OF BUREAU OF EXPORT ADMINISTRATIONDETERMINATIONSThe general rule under the EAA is that Department ofCommerce export control determinations are not subject tojudicial review.33 The following matters, however, representexceptions to the general rule:1. the imposition of civil penalties and denial of export privi-leges;342. collection of civil penalties;"5 and3. suits by parties to compel the Department of Commerce toact on a license application. 6Cases in the first category are heard in the Court of Appealsfor the D.C. Circuit. EAA § 2412(c)(1), however, provides thatthe review is limited to the determinations necessary to estab-lish liability.37 Cases in the second and third categories areheard, in the first instance, in federal district court.29. Iran Air, 996 F.2d at 1256.30. See id. at 1253.31. 848 F.2d 217, 231 (D.C. Cir. 1993).32. Id. at 231.33. See Export Administration Act, 50 U.S.C. app. § 2401 (1988).34. Id. § 2412(c)(3), (d)(3).35. Id. § 2410(f).36. Id. § 2409(j)(2). Prior to filing suit to compel the Department of Commerceto act on a license application, parties must first petition the Secretary of Com-merce.37. Id. § 2412(c)(1).847BROOK. J. INTL L.The Moller-Butcher case illustrates the interplay betweenlimitations on judicial review of civil enforcement determina-tions and the distinct roles of the AUJ and the Under Secretaryunder the EAA. In 1984, Moller-Butcher and a company hecontrolled were charged with multiple violations of the EAA."8In 1986, the ALJ imposed sanctions, denying Moller-Butcherexport privileges for twenty years.39 The Secretary of Com-merce affirmed the ALJ's decision.41 In 1990, Moller-Butcherfiled a motion with the ALJ seeking to reduce the sanctions.The ALJ granted Moller-Butcher's motion. The Under Secre-tary issued an order denying the motion for modification, find-ing that the ALJ's determination merely was advisory.4'Moller-Butcher appealed the Under Secretary's order to theD.C. Circuit.4 2The court held that the EAA clearly limits the court'sreview authority to "questions concerning the liability whichoccasioned the sanction at issue, not the sanction itself."43 Be-cause Moller-Butcher's challenge did not address liability forthe imposed sanction, the court was without jurisdiction toreview the Under Secretary's order. In addition, the court not-ed that it may review claims that the Under Secretary exceed-ed her authority in disposing of a determination by the ALJ.44In this case, however, the Under Secretary properly "vacated"the action of the ALJ and thus acted within the scope of herauthority.45One of the unusual features of the judicial review schemeis that determinations to impose civil penalties are subject tolitigation on two tracks. First, the determination to impose acivil penalty may be litigated up through the ALJ, the UnderSecretary, and the D.C. Court of Appeals.46 Second, if the pen-alty is imposed but not paid, the Department of Commerce38. See Moller-Butcher v. U.S. Dep't. of Commerce, 12 F.3d 249, 252 (D.C.Cir. 1994).39. See id. at 250.40. See id.41. See id.42. See id.43. Id. at 252.44. See Moiler-Butcher, 12 F.3d at 252.45. Id.46. See Export Administration Act, 50 U.S.C. app. § 2412(c)(1), (c)(3) (1988).848 [Vol. =XV:320011 EXPORT CONTROL DETERMINATIONSmust file an action to collect the unpaid amount and mustprove its case de novo before a federal district court.Two important categories of determinations are not subjectto judicial review under the EAA: classification decisions andlicense denials.48 In both cases, however, administrative re-view procedures are available to aggrieved parties.49 Theseprocedures leave final decision-making authority in the handsof the Under Secretary for Export Administration.V. PROPOSALS FOR REFORMProposals for reauthorization of the EAA frequently areaccompanied by proposals for reform of review procedures.General objectives of reform include increasing agency account-ability and eliminating duplicative procedures.In 1994, the Customs and International Trade Bar Associ-ation ("CITBA") recommended that the Court of InternationalTrade ("CIT") be given jurisdiction in lawsuits seeking judicialreview under the EAA.5" According to CITBA, "it would belogical to give the CIT jurisdiction in these cases because theselawsuits challenge government actions affecting internationaltrade in goods."5' Two additional considerations supportCITBA's proposal. First, under the current scheme, only ahandful of appeals have been taken to the D.C. Circuit. Export-ers might be more inclined to bring appeals to a court of spe-cialized international trade jurisdiction. Second, the CIT hassubstantial relevant experience. The CIT already considersappeals "on the record" from international trade determina-tions, in particular, cases involving allegations of unfair tradepractices by foreign governments and companies.52 Such casesfrequently have a foreign policy aspect and require the protec-tion of sensitive information. Moreover, the CIT reviews classi-fication decisions of the U.S. Customs Service.47. See id. § 2412(f).48. See id. § 2412(e).49. See 15 C.F.R. § 756.2 (2000).50. See Customs and International Trade Bar Association, Recommended Ex-pansions in the Jurisdiction of the U.S. Court of International Trade (1994) (un-published recommendations to the U.S. Court of International Trade) (on file withauthor).51. Id. at 5.52. Id.849BROOK. J. INTL L.If the CITBA proposal is adopted, and more export controlcases are litigated, a concern arises about the resolution of civilenforcement disputes in a timely manner. One way to stream-line procedures would be to take away the responsibility of theUnder Secretary for Export Administration to review legaldeterminations of the ALJ. Another would be to eliminateduplicative litigation of civil penalty determinations. In fact, inthe 106th Congress, the Clinton Administration supportedlegislation that would have reauthorized the EAA and re-formed it along these lines.53 Under the draft legislation, en-forcement proceedings under the EAA would be subject to "one-track" judicial review under the Administrative ProceduresAct.54 In addition, review by the Under Secretary no longerwould be required. Although the exporter would maintain theright to appeal the AI's determinations to the Under Secre-tary, the decision of the AIJ would become the decision of theCommerce Department, if the exporter chooses not to appeal.The 106th Congress did not enact any reforms of the EAA."5Another reform proposal is for judicial review of classifica-tion determinations.56 The claimed benefits of the proposalare improved accuracy and greater public confidence in thesedeterminations. The potential negative consequences includedelay, uncertainty, and the inability to respond flexibly to anever-evolving national security policy environment.A less radical way to address concerns about classificationdeterminations might be to permit an ALJ to review suchdeterminations under an "arbitrary and capricious" standard ofreview. The ALJ's decision would be final and non-appealable.This approach would both introduce a greater degree of ac-countability into classification decision-making and avoid thepitfalls of a cumbersome review process.53. See F. Amanda DeBusk, Role of Judicial Review in Administrative En-forcement Cases, 26 BROOK. J. INT'L L. 853 (2001).54. 5 U.S.C. §§ 701, 706 (1994).55. See supra note 1.56. See Larry Christensen, Address at the Eleventh Annual Judicial Confer-ence of the U.S. Court of International Trade (Dec. 7, 1999) (on file with author).See also DeBusk, supra note 53.850 [Vol. XXV:320011 EXPORT CONTROL DETERMINATIONS 851VI. CONCLUSIONIt can be expected that Congess will continue to deliberateover reauthorization and reform of the EAA. Any reform ofreview mechanisms for classification and/or civil enforcementdeterminations should balance the twin objectives of increasingthe accessibility of judicial review and ensuring that reviewprocedures-both administrative and judicial-do not become socumbersome as to impede significantly the achievement of le-gitimate national security and foreign policy objectives.

Judicial Review of Export Control Determinations

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Judicial Review of Export Control Determinations

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