[Federal Register: March 25, 1996 (Volume 61, Number 58)]
[Rules and Regulations]
[Page 12713-12763]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[[Page 12713]]
_______________________________________________________________________
Part II
Department of Commerce
_______________________________________________________________________
Bureau of Export Administration
_______________________________________________________________________
15 CFR Part 730, et al.
Export Administration Regulation; Simplification of Export
Administration Regulations; Final Rule
[[Page 12714]]
DEPARTMENT OF COMMERCE
Bureau of Export Administration
15 CFR Parts 730, 732, 734, 736, 738, 740, 742, 744, 746, 748, 750,
752, 754, 756, 758, 760, 762, 764, 766, 768, 770, 772, and 774,
768A, 769A, 770A, 771A, 772A, 773A, 774A, 775A, 776A, 777A, 778A,
779A, 785A, 786A, 787A, 788A, 789A, 790A, 791A, 799A
[Docket No. 950407094-6022-02]
RIN 0694-AA67
Export Administration Regulation; Simplification of Export
Administration Regulations
AGENCY: Bureau of Export Administration, Commerce.
ACTION: Interim rule.
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SUMMARY: This interim rule restructures and reorganizes the Export
Administration Regulations (EAR), the regulatory regime through which
the Bureau of Export Administration imposes export and reexport
controls on those items and activities within its jurisdiction. This
interim rule clarifies the language of the EAR, simplifies their
application, and generally makes the export control regulatory regime
more user-friendly.
DATES: Effective Dates: This interim rule is effective April 24, 1996,
except part 752, which shall be effective March 25, 1996. Removal of
newly designated Sec. 771A.25(d) shall be effective March 25, 1996.
Removal of newly designated parts 768A through 779A, 785A through 791A,
and 799A will be effective November 1, 1996.
COMMENTS: Comments on this rule must be received on or before May 24,
1996.
USE OF FORMS: On June 15, 1996 BXA will begin requiring applicants to
submit certain new forms to implement this interim rule. The new Form
BXA-748P, Multipurpose Application will be effective June 15, 1996.
Before June 15, 1996 BXA will not accept Form BXA-748P. After June 15,
1996 BXA will not accept existing Forms BXA-622P or BXA-699P. See
SUPPLEMENTARY INFORMATION for guidance on which forms to use before
June 15, 1996, and which forms to use after that date.
ADDRESSES: Written comments should be sent to Cecil Hunt, Deputy Chief
Counsel for Export Administration, United States Department of
Commerce, Bureau of Export Administration, Fourteenth Street and
Constitution Avenue, N.W., Room 3839, Washington, D.C. 20230.
FOR FURTHER INFORMATION CONTACT: Larry E. Christensen, Director,
Regulatory Policy Division, Bureau of Export Administration, (202) 482-
2440.
SUPPLEMENTARY INFORMATION:
Background
On September 30, 1993, the Secretary of Commerce submitted to the
Congress a report of the Trade Promotion Coordinating Committee (TPCC),
entitled Toward a National Export Strategy. The report included the
following among its goals:
Undertake a comprehensive review of the Export Administration
Regulations to simplify, clarify, and make the regulations more
user-friendly.
In November 1993, BXA organized a Task Group, drawn from several of
its offices, to carry out the TPCC recommendation. The Task Group
launched its review project by publishing an advance notice of proposed
rulemaking (ANPRM) in the Federal Register on February 10, 1994 (59 FR
6528). This notice was designed to solicit comments from industry and
the interested public. The ANPRM asked for suggestions concerning
improvements BXA could make to the EAR and described several specific
issues on which BXA was particularly interested in receiving public
input.
Over seven months during the development of a proposed rule with
request for comments that was published in the Federal Register on May
11, 1995, titled ``Export Administration Regulations; Simplification of
Export Administration Regulations'' (60 FR 25268) (hereafter referred
to as proposed rule), BXA shared four discussion packages with and
sought comments from the Regulations & Procedures Technical Advisory
Committee (RPTAC), an advisory committee consisting of industry
representatives intimately familiar with the private sector's role in
using the EAR. The packages were also made available to other
interested members of the public, with the last two being made
available electronically on FedWorld. The four discussion packages were
dated August 2, 1994, September 29, 1994, January 12, 1995, and
February 28, 1995.
The May 11 proposed rule reflected several new features based upon
the comments received from the public pursuant to the ANPRM, and the
RPTAC, and BXA's own assessment of how the EAR could be improved. Such
features include:
<bullet> No license or other authorization would be required for
any transaction under BXA jurisdiction unless the regulations
affirmatively state the requirement. (Existing regulations state that
all exports are prohibited unless an applicable general license has
been established or a validated license or other authorization has been
granted by BXA.)
<bullet> The terms ``general'' license and ``validated'' license
would be dropped. The term ``license'' would be used to refer only to
authorization issued by BXA upon application. The proposed regulations
would convert the many existing general licenses into a smaller number
of ``exceptions'' to require the obligation to seek a license when the
Commerce Control list indicates that the particular item going to the
stated country generally requires a license.
<bullet> The parts of the EAR would be arranged to give the reader
a logical path to follow.
<bullet> The affirmative statements of the need to obtain a
license, scattered throughout various parts of the existing EAR, would
be consolidated into ten general prohibitions and described in a
separate part. One part would contain the license review policy for all
list-based license requirements; another part would provide for the
requirements and review policies of licenses based on the end-use or
end-user involved in a proposed export or reexport; and the list-based
license requirements would be contained in the Commerce Control List
(CCL) indicating the reason for control and the Country Chart
indicating the country scope of each reason for control.
<bullet> The Country Groups used in the existing regulations would
be revised in favor of Groups which better reflect post-Cold War
circumstances.
<bullet> The CCL would be redesigned to state the reasons for
control more specifically within each Export Control Classification
Number (ECCN).
<bullet> The redesigned CCL would be used in tandem with a new
Country Chart that would indicate whether a license is required for any
ECCN to any country in the world and the reason or reasons for control.
Over 80 commenters responded to the proposed rule. Many commenters
recommended that BXA take sufficient time to draft an interim rule to
ensure ample opportunity to review and discuss with industry their
comments on the May 11 proposed rule, and incorporate them into an
interim rule. BXA has taken the time necessary to thoroughly review,
analyze, and discuss industry comments on the proposed rule. In
addition, BXA conducted 18 town-hall style fora (hereafter referred to
as town-hall fora) that reached over 1,000 industry representatives,
and met with the RPTAC and other interested
[[Page 12715]]
public to discuss their comments and concerns in more detail.
Following is a detailed part-by-part description of this interim
rule, and a review of comments received pursuant to the May 11 proposed
rule:
Implementation
This interim rule will become effective April 24, 1996; however,
final compliance with this interim rule is not compelled until November
1, 1996. During the period between the effective date and the final
compliance date of this interim rule, you must comply with the
provisions of either the existing Export Administration Regulations
(EAR) (redesignated 15 CFR 768A through 799A by this interim rule)
including any amendments thereto that are published in the Federal
Register or the provisions of this interim rule including any
amendments thereto that are published in the Federal Register.
Notwithstanding the general effective date of this interim rule,
the repeal of the importer statement requirement for General License
GCT is effective immediately, and the Special Comprehensive License
provisions in part 752 are effective immediately. For up to March 25,
1997, holders of issued and outstanding special licenses may continue
to use those special licenses according to their terms and conditions
and according to the special license provisions of the existing EAR.
The majority of the commenters requested a 90 day delayed effective
date plus an additional six to twelve months during which one must
comply with either the existing Export Administration Regulations or
this interim rule. The cost of changes to internal information systems
and the time to train personnel on the new system were the main reasons
cited for requesting a delayed effective date and a transition period.
Several large companies said that their computer systems will require
substantial reprogramming for the new License Exception group symbols,
the new Destination Control Statement (DCS), and the renumbering of
entries on the Commerce Control List in part 774 to conform to the
European Union numbering system.
Some firms indicated that implementation costs would be reduced if
they were allowed a span of time in which to implement the changes made
by this interim rule. Costs would be higher if a single implementation
date were required because their information systems departments would
not have flexibility regarding scheduling and might be required to hire
additional temporary employees or pay overtime. Many large firms cannot
implement the computer changes on one given day. After receiving the
above comments in writing and during the town-hall fora, BXA made
additional contacts with several firms. All acknowledge that they can
efficiently implement the changes required by this interim rule within
six months. Since those discussions, BXA has determined to modify the
Destination Control Statement (DCS) as noted below to closely following
the existing DCS widely used by many firms. BXA is hopeful that this
decision will further reduce the costs of implementation of this
interim rule.
BXA is sensitive to the costs of implementation, and that is the
reason this interim rule provides for a rather long implementation
period. Through this mechanism, BXA hopes to reduce the marginal costs
of implementation by reducing necessary overtime, contracting, and
training beyond that regularly scheduled. BXA will also assist the
business community in training for this interim rule. BXA has already
announced a substantial program to conduct training sessions around the
United States to make it convenient for firms to train their personnel.
The new Multipurpose Application Form, BXA-748P, will replace the
Application for Export License (BXA-622P) and the Request for Reexport
Authorization (BXA-699P). It will also serve as an application for the
Special Comprehensive License. Additionally, the BXA-748P will
accommodate Commerce Classification Requests, thus allowing item
classifications to be handled electronically.
BXA will not accept the new forms listed in this paragraph for
applications and requests received before June 15. BXA will not accept
existing forms listed in this paragraph for applications and requests
received on or after June 15. The existing Form BXA-622P Application
for Export License, existing Form BXA-685P, Request for Amendment
Action, and existing Form BXA-699P, Request for Reexport Authorization
will all be replaced by new Form BXA 748P, Multipurpose Application.
The existing Form BXA-622P-A, Commodity Description Supplement will be
replaced by new Form BXA-748P-A, Item Appendix. Existing Form 622P-B,
End-user Supplement will be replaced by new Form 748P-B, End-user
Appendix. Form BXA-6052P, Statement by Foreign Consignee in Support of
Special License Application will be replaced by Form BXA-752P,
Statement by Consignee in Support of Special Comprehensive License.
Existing Form BXA-629P, Statement by Ultimate Consignee and
Purchaser will be replaced by new Form BXA-711, Statement by Ultimate
Consignee and Purchaser. However, Form BXA-629P may be used until
November 1, 1996.
Use of Existing Form BXA 686-P, Statement by Foreign Importer of
Aircraft or Vessel Repair Parts and Form BXA 6026-P, Service Supply
(SL) Statement by U.S. Exporter will be discontinued on March 25, 1996,
because the Aircraft and Vessel Repair Station Procedure at Sec. 773A.8
and the Service Supply (SL) Procedure at Sec. 773A.7 of the existing
EAR will be replaced by the Special Comprehensive License in part 752
of this interim rule.
BXA will stop issuing BXA Form-648P, Notification of Delivery
Verification Requirement on June 15, 1996. For licenses issued on or
after that date, the delivery verification requirement will be printed
on the license itself.
The Knowledge Standard
One step is being taken in this interim rule that changes language
in many parts of the EAR, but without changing the intended meaning.
Several commenters noted that the proposed rule continued use in the
EAR of differing expressions as to knowledge, such as ``know'' or
``know or have reason to know''. Three commenters called for the
removal of the term ``reason to know'' and one commenter requested a
uniform adoption of ``know or have reason to know''. BXA has decided to
adopt the term ``knowledge'' (together with variants, such as ``know''
or ``knowing'') as the standard usage and defines this term in the EAR.
This definition is added to part 772--Definitions. Variants, such as
``reason to believe'' are being retained in the EAR where they are used
to follow statutory wording. This definition confirms the intention of
BXA that ``know'' and terms such as ``know or have reason to know'' be
given the same meaning and that this meaning include more than positive
knowledge. This definition is not being applied to part 760--
Restrictive Practices and Boycotts, leaving the interpretation of such
terms in this distinct part of the EAR to be independent of export
control usage.
Part-by-Part Analysis
Part 730--General Information
Part 730 provides a general introduction to the EAR. It is intended
for the first-time reader and is not regulatory.
Seven of the public comments referred to part 730. There was broad
[[Page 12716]]
support for the listing of other control agencies, together with
telephone and fax numbers for obtaining information. Four commenters
noted that similar information was provided in a supplement to the
scope part of the proposed rule, with duplication and some
inconsistency. BXA has eliminated that supplement and includes the
agency information in this part 730. Three commenters requested that
the listing be broadened, and noted the absence of reference to certain
controls of other agencies listed in the existing EAR. This listing has
been updated and extended. BXA is not, however, acting on requests to
add more detailed information on controls administered by other
agencies, nor on areas of possible overlap, as this would unduly
complicate this brief introduction to the EAR.
Three commenters called for combining part 730 with the Steps part
in some way. BXA concluded that a merger of the two parts is not
advisable, as the amount of detail needed in steps would obscure the
more general introductory information offered in part 730. Many
comments on the two parts called for flow charts and wiring diagrams.
BXA has recently received authorization from the Office of the Federal
Register to include such additional aids, and BXA will develop those
materials for inclusion in the EAR at a later date.
Two commenters questioned the basic, non-regulatory, approach taken
in part 730, citing such elements as the Sec. 730.6 reference to the
benefits from multilateral controls and the Sec. 730.8 explanation of
why the EAR are lengthy and detailed. BXA continues to believe that
this kind of introduction to the EAR will be helpful to persons new to
the field.
Part 732--Steps
By cross-references to the relevant provisions, part 732 describes
the suggested steps for you to determine applicability of (1) the scope
of the EAR described in part 734, (2) each of the general prohibitions
in part 736, (3) the License Exceptions in part 740, and (4) other
requirements such as clearing the U.S. Customs Service, keeping
records, and completing license applications. This part 732 describes
the organization of the EAR, informs you of the relationship among the
parts and provisions, and describes the appropriate order in which to
consider the various provisions of the EAR by cross-referencing those
provisions. Supplement No. 1 to this part 732, contains the ``Know Your
Customer'' Guidance, which has been moved from part 744--Control
Policy--End-user and End-use Based Control. In this interim rule, BXA
has also added examples of Red Flags referred to in the ``Know Your
Customer'' Guidance.
Over thirty commenters referred to the part on steps in the
proposed rule, and all but one supported the inclusion of steps to
guide the reader. Of these commenters, more than half stated that the
steps part should be relocated so that it could serve as a type of
road-map in the use of the entire EAR. The proposed rule provided for
steps at part 736 after the parts on scope and general prohibitions.
BXA agrees that the steps part is more useful if relocated closer to
the beginning of the EAR. Therefore, in this interim rule, the steps
part is renumbered as part 732; and it precedes the part on scope that
is renumbered as part 734 and the part on prohibitions that is
renumbered as part 736.
About one quarter of the commenters on this part urged some type of
restructuring or reordering of the steps within the part; however, the
comments were varied. Based upon these written comments and a
substantial number of oral comments made during the town-hall fora, BXA
believes that it is useful to organize the steps in categories
regarding the scope of the EAR, the ten general prohibitions, the
License Exceptions, and additional requirements such as keeping
records, documentation for clearing the U.S. Customs Service, and
completing license applications. In addition, one commenter urged that
the steps regarding prohibitions at part 736 make clear the distinction
between the first three prohibitions that are shaped by product
parameters on the Commerce Control List versus the last seven
prohibitions that address certain types of activities without regard to
the product parameters on the Commerce Control List. Another common
suggestion was to give greater prominence and clarity to the
determination of the proper ECCN for items, a process referred to as
classification. This interim rule adopts those recommendations.
One commenter suggested that the steps part in the proposed rule
included too many cross-references to the other parts and required the
reader to flip too many pages. Several other commenters recommended
additional cross-references in the EAR. BXA believes that the part on
steps should continue to contain cross-references for fundamental
reasons. The part on steps is not a substitute for the language of
other parts of the EAR and the part on steps would be much too long if
it contained a complete explanation or repetition of every other
provision of the EAR. Rather, it is a type of road-map, guide, or
written decision tree that helps the reader understand the order in
which to read the various provisions and to determine which provisions
are relevant to a given transaction or activity. By this means, the
part on steps serves the purpose of describing the relationship among
the provisions of the EAR, something that was not done in the EAR
before the proposed rule. When these steps are followed in the proper
order, the reader will consider those provisions of the EAR necessary
to determine his or her rights and duties.
It would be impossible to develop a useful series of steps without
use of cross-references to the various provisions of the EAR; however,
BXA is sensitive to a reader's understandable desire for steps that may
be read with an easy flow and with no more cross-referencing than
necessary to specify the language that creates regulatory rights and
obligations. To this end, where possible, we have inserted brief
explanatory references that give the reader an indication of the
substance of the referenced provision. One comment made often by the
public is that the steps part must contain guidance and not create
additional regulatory duties. BXA agrees that part 732 is not
controlling for purposes of describing the requirements of the EAR; the
parts of the EAR referenced in the steps are controlling. For this
reason, part 732 must reference the regulatory provisions in the other
parts of the EAR.
An organization of trade associations, supported by several other
commenters, suggested several additional drafting changes to improve
the part on steps. Nearly all of those recommendations are included in
this interim rule.
Part 734--Scope
This part establishes the rules for determining whether
commodities, software, technology, software and activities of U.S. and
foreign persons are subject to the EAR. ``Subject to the EAR'' is a
term used to identify the items and activities that BXA regulates under
the EAR. Those items and activities not so identified are not regulated
under the EAR.
The term ``subject to the EAR'' does not imply that a license is
required for any particular item or activity. Licensing requirements
are spelled out in other parts of the EAR. The term does define the
bounds of the authority that BXA has exercised under the EAR. The term
is particularly useful to define the limits of the recordkeeping
requirements, certain denial orders, and the end use and end user
obligations related to proliferation controls.
[[Page 12717]]
This part also provides certain key terms and principles used
throughout this interim rule. These include definitions for the terms
``export'' and ``reexport.'' A comprehensive listing of definitions is
included in part 772.
In addition to a change in designation from part 732 in the
proposed rule to part 734 in this interim rule, this interim rule makes
substantial changes in part 734 as a result of comments received on the
proposed rule. BXA received 31 comments on this part. BXA has adopted
many of the recommendations contained in the public comments and they
are reflected in the interim rule.
Section 734.1 has been substantially revised. The proposed rule
included a list of all the contents to part 734 with specificity. One
commenter urged that this listing amounted to a table of contents and
recommended deletion. This interim rule follows this recommendation
and, and includes an introduction that explains the contents of this
part and how it fits into the overall structure of the EAR.
Certain commenters recommended that definitions be included in part
772, Definitions, rather than in this part. This interim rule removes
the definitions for the terms ``item'' and ``you'', and moves them to
part 772. Because the terms ``export'' and ``reexport'' are so key to
the EAR, these terms have been retained in this section, with certain
modifications. Section 732.2(d) of the proposed rule defined exports
and reexports of technology and software, but did not include a
definition of exports and reexports of commodities. This interim rule
amends the definition of ``export'' and ``reexport'' to apply to
commodities, technology, and software.
A number of commenters also noted that, as written in the proposed
rule, the reexport in a foreign country of technology by release by one
foreign national to another foreign national could be read to include
release of foreign-origin technology, with no United States nexus. This
interim rule limits this provision to ``items subject to the EAR'' and
thereby limits the provision to U.S.-origin technology.
This interim rule adds three additional provisions to part 734.
Section 734.2(d)(5) reflects the principle that exports that will
transit a country on their way to a third country or are intended to be
reexported to a third country are deemed under the EAR to be exports to
the third country. This principle was not included in the proposed
rule, except as it relates to Canada (Sec. 732.12 of the proposed
rule). Section 734.2(d)(6) reflects the principle that appeared in
Sec. 732.15 of the proposed rule that an export to a territory,
possession, or department of a country is deemed under the EAR to be an
export to that country. Finally Sec. 734.2(d)(7) clarifies that
shipments among the states of the United States and its territories,
dependencies, and possessions do not constitute exports or reexports.
A significant number of commenters indicated that the provision
regarding Canada in Sec. 732.15 of the proposed rule was misleading and
tended to confuse the distinction between the scope of the EAR and
licensing requirements with respect to Canada. BXA agrees, and this
interim rule omits this provision. The minimal number of instances
where licenses are required for Canada is reflected on the CCL and does
not need to be recited in this part. As noted above, the in-transit and
intended reexport principles contained in the Canada provision are
retained in this interim rule and are made applicable to all
destinations. Finally, any License Exceptions that apply to Canada are
reflected in part 740, License Exceptions.
In the proposed rule, BXA invited comments on the implementation of
a de minimis rule for software and technology. In particular, BXA said
that we were considering a requirement for a one-time report on
calculations under the de minimis rule. Throughout the comment period,
BXA made clear at the town-hall fora that there are three criteria of
concern in carrying out the proposal without a reporting requirement.
First, for transfers between related parties, the export price of the
software or technology exported from the United States must reflect an
arms-length price or fair market value. Second, estimates of future
sales of foreign-made software must be reasonable. Third, selection of
the scope of foreign technology for measuring U.S.-content must be
reasonable.
BXA sought comments and suggestions on a one-time report. This was
to determine how to avoid the potential misuse of the above criteria
without requiring a one-time report. BXA also sought comments on
whether the calculations should be made only under United States-based
generally accepted accounting principles. From the outset, BXA
concluded that strict accounting standards would be useful to prevent
misuse of the rule through unreasonably low transfer prices for U.S.
software or technology transferred to related parties. BXA also
believed there is no need to create a new U.S. accounting standard for
implementation of this rule.
No commenter offered a solution to avoid misuses in the choice
amortization assumptions for software and the selection of an
appropriate universe to measure U.S.-content in foreign commingled
technology. All comments on the report opposed its requirement.
Commenters supported the rule with the hope that the de minimis
exclusion might be granted by BXA without requiring a report. However,
many of these same firms acknowledge that they and foreign parents,
subsidiaries and customers will invariably make de minimis calculations
on valuation assumptions most likely to result in a finding that U.S.
content is below the relevant de minimis level. The tenor of the
comments also suggests that most commenters did not fully appreciate
that the de minimis relief could not likely be granted without either a
one-time report or some other means to avoid the potential misuses of
the criteria.
Some commenters called the report a burden almost as heavy as the
license requirement. Some of those commenters stated expresses a belief
that the existing rule is simply not enforced and likely is not
enforceable. They also concluded that compliance with the existing
commingled rule is weak. However, some commenters acknowledged that
without a report requirement in this interim rule, they would
nonetheless submit advisory requests before relying on the de minimis
exclusions. Such advisory requests would require the same information
as the report required by this interim rule. Therefore for such
companies, the report requirement of this interim rule does not add
costs for use of the relief granted by this interim rule.
Almost all foreign commenters on the de minimis rule opposed a
requirement for U.S. accounting standards. They argued that they should
be permitted to use their home-country accounting standards and that
use of U.S. accounting standards would be too costly.
BXA has determined to require a one-time report and to permit
various accounting standards so long as the export price is not
depreciated or otherwise reduced by accounting conventions. With the
requirement of a one-time report, there is far less need for a single,
strict accounting standard.
The report will require a description of the nature and export
price of the item exported from the United States, the estimate of
future software sales in units and value along with the basis for those
estimates within the relevant market category, and a description of the
technology and its value for
[[Page 12718]]
purposes of determining the U.S.-content of technology. The report will
not require information regarding destinations and end-users for
reexport.
BXA has concluded after interagency consultations and review of all
the comments that the so-called amortization problem exists for
software and does not exist for commodities. Several commenters have
asked why.
Unlike parts incorporated into end products, the cost of U.S.
software code will be attributed or allocated to the future sales of
foreign-made software incorporating the U.S. code. In making this
calculation for foreign software, you must make an estimate of future
software sales of that software if it is commingled with or
incorporated with the U.S. code. Unless there is a one-time report
revealing the assumptions of such calculations, foreign firms may
misuse the de minimis rule and make unrealistic assumptions of large
future sales. Such a misuse can result in U.S.-content that is unfairly
estimated to be below the de minimis level.
BXA has concluded after interagency consultations and review of all
the comments that the so-call universe problem exists for technology
and not for commodities. Several commenters have asked why.
There is the risk that foreign firms will select excessively large
categories of foreign technology for division into the U.S.-origin
technology content. There is no regulatory criteria or standard that is
sufficient to describe the scope of foreign technology that must be
divided into the U.S. technology to determine the percentage of U.S.-
content. The possible choices of a universe by the reexporter are many
and varied.
Some commenters wanted BXA to select one U.S. transfer pricing
standard such as the standard of the Internal Revenue Service found in
section 482 of the Internal Revenue Code. One software producer
indicated that it will have very difficult decisions to make in the
calculation of U.S.-content for purposes of foreign-made software and
asked BXA how it would be done. In this interim rule, we indicate that
accepted accounting standards such as section 482, its implementing
rules, and related ruling provide one option the exporter or reexport
may follow. The Organization for Economic Cooperation and Development
(OECD) is considering uniform transfer pricing rules, and such
international standards would present an attractive option in the
future. However, it will likely be at least a year before they put such
OECD standards in place. Other commenters said that their firms do not
maintain adequate records to perform calculations of U.S.-content. Of
course, for such firms, any value-based de minimis rule will not
relieve existing burdens regardless of the report requirement.
For decades, all reexport controls under the EAR extended to
foreign software and technology incorporating any level of U.S.-
content. BXA refers to this as the commingled rule. In 1988, BXA
proposed giving some relief from the commingled rule with a type of
shifting of presumptions regarding country of origin after a period of
time. With one exception, commenters opposed that proposed rule and
urged a value-based de minimis exclusion. BXA addressed the issue in
its February 1994 proposed renewal of the Export Administration Act.
That proposal would have compelled a de minimis exclusion from the
commingled rule and reserved the authority of the Executive Branch to
require a one-time report.
BXA believes that it is appropriate to put reasonable limits on the
reach of U.S. reexport controls for foreign-made software and
technology. This is to recognize the sensitivities of other nations and
to put some outer limits on the obligations of foreign firms doing
business with U.S. firms. However, it is not the purpose of this
exercise to eliminate reexport controls on software and technology.
Reexport controls remain tools of the EAR to prevent diversion contrary
to vital national security, nonproliferation, and foreign policy
interests of the United States.
BXA understands that some foreign firms will benefit from the
relief offered in this interim rule and will use this relief by filing
the necessary report. For such firms, the de minimis rule and related
report is not a new licensing requirement. Rather, it is a means for
BXA to assure that the above described three criteria are not misused
in a given set of calculations and assumptions. The report is required
under a ``report and wait'' procedure. If the reporting firm does not
hear from BXA within thirty days, then the reporting firm may
thereafter rely upon its reported calculations, and its foreign
technology or software described in the filed report is not subject to
the EAR.
For those reexporters without the desire or ability to take
advantage of the de minimis rule, their position under the EAR remains
unchanged in any respect by this interim rule. The commingled rule
continues to apply as it has for decades. One commenter said that the
report requirement would make enforcement easier for BXA than under the
existing rule. BXA does not believe that to be true. The existing rule
is clear.
Reexporters should also be mindful that many authorities for
permissive reexports remain available to overcome reexport
prohibitions. The de minimis exclusion from the commingle rule
determines whether foreign technology or software is subject to the
EAR. If certain commingled foreign technology or software is subject to
the EAR, then the general prohibitions and License Exceptions define
the obligations of the holder of that technology and software.
This interim rule also makes several changes to Sec. 734.3, Items
Subject to the EAR. In the proposed rule, foreign made products subject
to the EAR were separately in Sec. 732.4. These provisions dealing with
foreign made products are now included in Sec. 734.3, together with
other items subject to the EAR. This interim rule consolidates all
related principles in one section.
A number of commenters questioned whether BXA intended to limit the
coverage of items subject to the EAR only to ``U.S.-origin'' items as
reflected in Sec. 732.2(a) of the proposed rule. This interim rule
clarifies the intent of the proposed rule and the BXA practice related
to this issue. Specifically, this interim rule has asserted
jurisdiction over all items subject to the EAR exported from the United
States, whether of U.S. or foreign origin, but in practice has limited
other controls, such as reexport controls, over EAR-controlled items to
those of U.S. origin. Section 734.3(a) of this interim rule reflects
these provisions. Section 734.3 also applies to all covered items in
the United States, and to all such items that are of U.S.-origin,
wherever located.
This interim rule also specifically states that foreign origin
items in-transit through the United States and in U.S. foreign trade
zones are subject to the EAR. For any special licensing treatment that
may be accorded such shipments on their export from the United States,
exporters should look at the License Exceptions in part 740.
This interim rule makes five changes to the proposed rule that are
reflected in the provisions of Sec. 734.3(b), which lists the
exclusions from items subject to the EAR.
1. In proposed Sec. 732.3(a)(1), BXA excluded items exclusively
controlled for export or reexport by other agencies which maintain
controls for national security or foreign policy purposes. The agencies
were identified in Supplement No. 2 to proposed part 732. To reduce
cross-referencing, the agencies are now listed in part 734, and the
Supplement has been removed.
2. This interim rule also adds a new provision that excludes from
the definition of ``items subject to the EAR''
[[Page 12719]]
items included in ECCN 0A98 in the existing EAR, such as films,
records, books, and periodicals. This provision was not included in the
proposed rule. Under the existing EAR, items included in that ECCN do
not require authorization to any destination. This interim rule has the
same result.
3. Section 732.2(a)(3) of the proposed rule excluded security-
classified technology and software from the coverage of items ``subject
to the EAR.'' This provision was based on the theory that classified
items are controlled by the Nuclear Regulatory Commission and the
Department of State's Office of Defense Trade Controls. One commenter
observed that because these agencies control the export of classified
items as part of their ``exclusive'' jurisdiction, no specific
provision needs to appear for classified items. To avoid confusion,
this interim rule omits the reference to classified items. The
provision is already implicitly included in part 734 because items
controlled exclusively for export by another agency are not subject to
the EAR (Sec. 734.3(b)(1)).
4. This interim rule also adopts the term ``publicly available
information'' to refer to all information included in General License
GTDA of the existing EAR. Such information is listed in
Sec. 734.3(b)(3). In the proposed rule, the term ``publicly available''
applied solely to information that was ``generally accessible to the
interested public in any form''. This interim rule adopts the term
``published information'' to represent such generally accessible
information.
5. A number of commenters objected to the use of the term ``Not on
List'' or ``NOL'' to designate and clear for export those items which
are subject to the EAR but which do not appear on the CCL. This interim
rule drops this term, which will be discussed in greater detail under
part 758, General Export Clearance Requirements. However, in response
to written comments and audience comments at the town-hall fora, BXA
will designate such items under ``EAR99.'' This designation, discussed
in Sec. 734.3(c) of this interim rule, will be used for classification
and reference purposes only, and will not be required for clearing
exports.
One commenter recommended that items subject to the EAR be
specifically limited to exports and reexports because BXA's statutory
authority relates to controlling exports and reexports. This interim
rule does not adopt this recommendation because the term ``subject to
the EAR'' defines the scope of EAR jurisdiction. The prohibition on
exports and reexports of such items based on BXA's statutory authority
is reflected in part 736, Prohibitions.
Finally, this interim rule expands Supplement No. 2 to include a
requirement for the submission of a report to be submitted to BXA if an
exporter uses the de minimis for technology or software.
Part 736--General Prohibitions
Part 736 includes ten general prohibitions. These are the
prohibitions that may apply to items subject to the scope of the EAR as
described in part 734, Scope. General Prohibitions One, Two, and Three
are product controls. The Commerce Control List in Supplement No. 1 to
part 774 and the Country Chart in Supplement No. 1 to part 738 are used
together to define the product scope and destinations for the license
requirements of General Prohibitions One, Two, and Three. General
Prohibitions Four through Ten describe certain activities that are not
permitted without authorization from BXA.
Several commenters recommended liberalization of the existing
reexport controls. For example, one commenter suggested a license free
zone for all members of the former Coordinating Committee on Export
Controls (COCOM), the Missile Technology Control Regime (MTCR), the
Nuclear Suppliers Group (NSG), and the Australia Group (AG). BXA notes
that a provision in the Export Administration Act of 1979 compels
individual validated licenses for items controlled cooperatively by
members of the MTCR. BXA is aware of the interest of the exporting
community in the further expansion of license free zones. However, this
interim rule is not intended to address such fundamental policy
decisions and is not an appropriate vehicle to make such changes.
Some commenters urged BXA to create a separate part for reexport
controls or a separate guideline for reexports. Others supported this
view and indicated that it was convenient for them to photocopy newly
designated part 774A and send this to firms abroad. BXA believes that
part 774A of the EAR does not describe all the duties of reexporters;
and reliance upon a reading of only that portion of the regulations
could well lead to violations of other portions of the EAR. In response
to these comments, BXA has taken care in this interim rule to indicate
which requirements of the EAR apply to reexporters and which
requirements do not. Part 732, Steps contains explicit indications of
applicability of various provisions to reexporters. As suggested by
several commenters, part 732, Steps has been substantially expanded to
present a road map for the use of these provisions by reexporters.
The foreign-produced direct product control described in General
Prohibition Three reflects a policy prompted by the Cold War. The
Regulations and Procedures Technical Advisory Committee (RPTAC)
recommended that BXA not revise this policy during the drafting period
that led to the proposed rule. After publication of this interim rule,
BXA will initiate a policy review of the foreign-produced direct
product rule.
All ten general prohibitions in this part 736 apply to firms abroad
under some circumstances. Part 734, Scope defines the scope of the
regulations for foreign as well as domestic firms. The key factors that
make all ten general prohibitions applicable to foreign firms are the
scope of the parts and components rule, the foreign-produced direct
product rule, and the general prohibition regarding reexports of U.S.-
origin items. These are described in detail in part 732, Steps; part
734, Scope; and part 736, General Prohibitions with specific references
to reexporters.
One commenter asked if we would add a provision regarding the
applicability of License Exceptions to General Prohibition Eight
concerning the unlading of goods in certain countries. The structure of
this prohibition is that it applies only to exports and reexports that
require a license. By definition, if you properly use a License
Exception authorized by the EAR, General Prohibition Eight does not
apply. Rather, it is a prohibition against unlading items that are
shipped under a license. Exporters and carriers should note that BXA
plans to conduct a policy review of the country scope of General
Prohibition Eight following the publication of this interim rule.
Several commenters stated that the proposed rule continued to
present a complex set of requirements, and many commenters suggested
fundamental decontrols and elimination of longstanding regulatory
requirements. Such recommendations would necessary entail changes to
the general prohibitions. However, the Regulation Reform exercise was
not intended to address such fundamental policy decisions, and this
interim rule is not an appropriate vehicle to make such changes.
Supplement No. 1 to part 736 on General Prohibitions provides for
certain General Orders. At this time, Supplement No. 1 is reserved.
Supplement No. 2 to part 736 provides
[[Page 12720]]
for three Administrative Orders. These Administrative Orders continue
polices of the existing regulations regarding the technical advisory
committees, business conduct before BXA, and certain confidentiality
provisions.
Part 738--Commerce Control List Overview and Country Chart
Part 738 provides an overview of the Commerce Control List (CCL)
and the Country Chart. The complete CCL is contained in Supplement No.
1 to part 774, while the Country Chart is contained in this part.
A significant change to the proposed rule as it relates to the CCL
is the modification of the numbering system used to identify Export
Control Classification Numbers (ECCNs) to conform with the European
Union (EU) numbering system as described in the supplementary
information regarding the CCL. This part provides an overview of the
new CCL structure and ECCN numbering system along with a thorough
discussion of the components that make up an ECCN.
This interim rule eliminates the use of the term ``License
Alternative'' and the ``Special Comprehensive License'' reference as
described in the proposed rule. In addition, this interim rule adopts
the revised reasons for control as identified in the proposed rule
(i.e., use of the broad term ``FP'' has been discontinued). New
``Related Definition'' and ``Related Controls'' sections contained in
the proposed rule have also been adopted in this interim rule.
Several commenters described use of the Country Chart column
identifier in the ``License Requirement'' section of each ECCN as a
rational model and fundamental to simplifying the task of determining
licensing requirements. This interim rule retains this very valuable
tool with few modifications.
The Country Chart, as described in the proposed rule, has been
modified to incorporate columns for destinations eligible for General
License GCT and GNSG under the existing EAR. General License GCT
eligibility is now determined by NS Column 2, while NP Column 1 now
reflects General License GNSG eligibility. NP Column 2 is retained in
its original format as reflected in the proposed rule. Accordingly,
references to License Exceptions CSR and NSG in the ``License
Exceptions'' section within each entry on the Commerce Control List do
not appear in this interim rule.
A few commenters noted that the proposed title to part 738,
Commerce Control List and Country Chart implies that the entire CCL is
contained in part 738. The title to this part has been modified to
state this part contains an overview of the CCL structure and its
relationship to the Country Chart, rather than the actual CCL.
Two commenters noted that the cross-reference to part 742, Control
Policy--CCL Based Controls should be clarified. This interim rule
contains a more descriptive cross-reference to part 742 and is placed
in a more appropriate location.
A few commenters expressed confusion over the use of UN Column 1.
This interim rule removes UN Column 1, because of its limited scope of
control and for added clarity. In addition, this interim rule revises
the two instances in which the Country Chart is not consulted to
determine license requirements. This interim rule expands the proposed
list of ECCNs in which the Country Chart cannot be used from 5A80D
(5A980) to include 1A988, 2A994, 2D994, 2E994, 2B985, 0A983, 0A986, and
0A988.
This interim rule does not adopt the request made by a few
commenters that the Country Chart be expanded to incorporate the
Country Group identification as described in part 740, License
Exceptions. These two lists were developed for separate purposes and
allow for systematic licensing determinations (e.g., Country Groups are
not reviewed unless a license is required by the Country Chart). In
addition, incorporation increases the possibility that readers will
make incorrect license determinations.
This interim rule expands the example for using the CCL and Country
Chart to illustrate more complex fact patterns, as requested by a
commenter.
Part 740--License Exceptions
Part 740 provides for exceptions from license requirements similar
to the General Licenses contained in the existing regulations. In
addition to License Exceptions for commodities, this part contains
License Exceptions for software and technology and permissive
reexports. Previously, both technical data and reexports had separate
parts. License Exceptions for short supply commodities appear in part
754.
Eligibility for License Exceptions may be based on the item to be
exported or reexported, the country of ultimate destination, the end-
use of the item, or the end-user. If a License Exception is available
for a particular transaction, the exporter or reexporter may proceed
with the export or reexport without a license. However, the exporter or
reexporter is required to meet all the terms of the License Exception;
in using a License Exception, the exporter or reexporter will be
certifying that all terms, conditions, and provisions for the use of
that License Exception have been met.
The most significant departure in this interim rule from the
proposed rule is the changed relationship between the determination of
the applicability of a License Exception to a particular transaction
and the documenting of that transaction for export clearance purposes.
Previously, each License Exception bore a three-character symbol that
transferred directly to shipping documents to certify that the
transaction did not require a license and that it met the terms and
condition of the stated License Exception. In this interim rule, each
three-character symbol that will be used on shipping documents
represents a group of License Exceptions rather than a single License
Exception. This change means that a few symbols will cover a large
percentage of shipments from the United States. Each symbol bears an
intuitive relationship to its group of License Exceptions; for example,
those based on the Commerce Control List bear the symbol ``LST.'' Some
commenters wished to retain the old General License symbols, but a
preponderance of exporters preferred intuitive symbols and expressed
that preference at the numerous town-hall fora held around the country.
Many commenters on the proposed rule protested that certain
existing General Licenses--specifically GLR and GTDU--had been
needlessly fragmented. In this interim rule, these License Exceptions
have been consolidated into Servicing and Replacement (RPL) and
Technology and Software--Unrestricted (TSU), respectively. General
Licenses GCT and GNSG in the existing EAR, which appeared as License
Exceptions CSR and NSG in the proposed rule, have in this interim rule
been incorporated into the Country Chart in part 738.
Changes made in General Licenses in the intervening period between
publication of the proposed rule and this interim rule, including G-
BETA for beta test software, G-CTP for computers, and a modification of
GCG (shipments to cooperating governments), are reflected in part 740.
The former Humanitarian License Procedure, which was included in the
Embargo part of the proposed rule, has become a License Exception for
humanitarian donations.
Part 742--Control Policy--CCL-Based Controls
If you have determined that a license application must be filed
after reviewing the Country Chart in part 738 and the Commerce Control
List (CCL) in part 774, this part 742 provides the licensing
[[Page 12721]]
policy that BXA will apply in reviewing your application. This part
contains licensing review policies for all items listed on the CCL
except items controlled for ``short supply'' reasons or to implement
``U.N. Sanctions.'' It consolidates most of newly designated part 785A,
Special Country Policies, portions of newly designated part 776A,
Special Commodity Policies and all the CCL-based controls described in
newly designated part 778A, Proliferation Controls. It also includes
control policies for items included on the CCL but not reflected in the
Country Chart. Specifically, these items are high performance
computers, implements of torture, and communications intercepting
devices.
Part 742 does not include controls and licensing polices that apply
to exports and reexports to embargoed destinations (currently, Cuba,
Libya, North Korea, Iraq, Iran, and the Bosnian-Serb controlled areas
of Bosnia-Herzegovina), except a description of anti-terrorism controls
applicable to Iran (Sec. 742.8) and other terrorist-designated
countries (Supplement No. 2 to part 742). Part 746, Embargoes and Other
Special Controls, covers the licensing policies for embargoed
destinations.
This part is structured to assist exporters to easily retrieve
licensing information related to the reason for control for each item
listed on the CCL. Each ``Reason for Control'' column on the Country
Chart in part 738 has a counterpart section in part 742. The sections
in this part appear consecutively in the same order as the columns on
the chart, reading from left to right. In addition, each section is
similarly structured:
--Paragraph (a) lists the licensing requirements as stated on the CCL;
--Paragraph (b) provides the licensing policy for specific controls on
the CCL;
--Paragraph (c) describes any contract sanctity dates that apply to
particular controls; and
--paragraph (d) provides information concerning any multilateral
cooperation that may apply to a particular control.
BXA believes that the structure and organization of this part is a
significant improvement over the existing EAR. It enables an exporter
to retrieve specific licensing information relevant to each ECCN on the
CCL without having to review extraneous material.
Changes were made in Sec. 742.1, Introduction, to accurately
describe the structure of this interim rule. Paragraph (c) was added to
make clear that controls on embargoed destinations, other than anti-
terrorism controls, are covered in part 746, Embargoes and Other
Special Controls and do not appear in this part 742. Paragraph (d)
generally describes anti-terrorism controls maintained by BXA.
Paragraph (e) reminds the reader that items not listed on the CCL are
nonetheless subject to the end-use and end-user provisions described in
part 744, Control Policy--End-user/End-use Based.
In addition, this interim rule contains changes that implement
regulations which were issued by BXA but were not reflected in the
proposed rule. The interim rule also reflects changes made in response
to public comments on the proposed rule.
On May 6, 1995, the President issued Executive Order 12959,
imposing a virtual embargo on exports of any goods, technology or
devices to Iran and on certain reexports of U.S.-origin goods or
technology. (The Treasury Department, Office of Foreign Assets Control
(OFAC), has principal responsibility for implementing E.O. 12959.)
Because of the virtual embargo on exports to Iran, provisions dealing
with Iran, except anti-terrorism controls, have been shifted to part
746, Embargoes and Other Special Controls. In this interim rule,
Sec. 742.8 describes anti-terrorism controls on exports and reexports
to Iran that BXA continues to maintain while the comprehensive embargo
administered by OFAC is in effect.
This interim rule also includes new anti-terrorism controls on
Sudan, described in Sec. 742.10 and in Supplement No. 2 to part 742.
The Department will also publish these controls in the format of newly
designated part 785A and related parts. The items controlled for anti-
terrorism reasons to Sudan include explosive device detectors, which
have been moved into a new ECCN. The anti-terrorism control on
explosive device detectors also applies to Syria and Iran.
Since the publication of the proposed rule, the Department has
issued a new regulation on exports of specially designed implements of
torture (60 FR 58512). This regulation moved specially designed
implements of torture from Export Commerce Control Number (ECCN) 0A82C
to a new ECCN, 0A83D, and required a license to all destinations,
including Canada. The changes made by that regulation are reflected in
the interim rule. Proposed Sec. 742.7 (Crime Control) is revised to
eliminate references to implements of torture, and a new Sec. 742.11
(Specially Designed Implements of Torture) is added to this interim
rule.
The President announced a revision of U.S. export controls on
computers on October 6, 1995 that affects the supercomputer controls
contained in part 742 (Sec. 742.12) of the proposed rule. The
Department published the revised regulations on January 25, 1996 (61 FR
2099). Section 742.12 has been retitled ``High performance computers''
in this interim rule and describes the license requirements and
licensing policies applicable to four ``tiers'' of countries.
Supplement No. 3 to part 742 describes licensing safeguard conditions
that may be imposed on exports of high performance computers to certain
destinations.
Twelve commenters included comments on part 742 in their
submissions. A number of commenters pointed out technical mistakes and
omissions in part 742. These are corrected in this interim rule.
Following is a discussion of other comments submitted.
Two commenters questioned the appropriateness of continuing
controls on exports to members of a given multilateral control regime
of items controlled by that regime. No License Exceptions are available
for items controlled for missile technology reasons because a provision
in the Export Administration Act requires individual validated licenses
to all destinations. Section 742.2(a)(2) of this interim rule states
that licenses are not required for exports of the listed chemicals to
Australia Group member countries. This interim rule revises
Sec. 742.3(a)(1) to inform the exporter that no license is required for
exports of certain nuclear proliferation controlled items to Nuclear
Suppliers Group (NSG) member countries. Finally, this interim rule
describes, in Sec. 742.4(a), a new national security control level,
denoted by ``NS Column 2'' in the Country Chart, which indicates that
no license is required for exports to Country Group A:1 and cooperating
countries.
One commenter noted that proposed Supplement No. 2, listing
countries that are party to the Treaty on the Nonproliferation of
Nuclear Weapons and to the Treaty for the Prohibition of Nuclear
Weapons in Latin America, required updating. Because the list of
countries party to these treaties is constantly changing, BXA decided
to remove this Supplement rather than risk publishing an inaccurate or
outdated list. BXA will maintain and make available to interested
persons a current list of the countries party to these treaties.
One commenter suggested that part 738, Commerce Control List
Overview; part 742, Control Policy--CCL Based
[[Page 12722]]
Controls; and part 774, The Commerce Control List be combined, since
they all concern the Commerce Control List. BXA did not adopt this
recommendation. Each of the three parts provides a view of controls
from a different vantage point: Part 738 by country; part 742 by type
of control; and part 774 by type of item. BXA believes that
consolidating the three parts into one would make the interim rule more
unwieldy and difficult to use.
Two commenters recommended that contract sanctity provisions be
established for nuclear nonproliferation, national security, regional
stability, crime control or computer controls. BXA did not establish
contract sanctity in this interim rule. Decisions on contract sanctity
dates are made when new controls are imposed. This interim rule does
not impose any new controls. Accordingly, no changes have been made in
contract sanctity provisions.
Two commenters stated that Sec. 742.2(d) (chemical and biological
weapons), Sec. 742.4(d) (national security) and Sec. 742.5(d) (missile
technology) incorrectly state that U.S. controls are consistent with
multilateral agreements. BXA does not agree with this comment. The only
change that BXA is making in this interim rule is to reserve
Sec. 742.4(d). On December 19, 1995, the United States and twenty-seven
other countries, including its NATO allies and Russia, agreed to
establish a new multilateral export control arrangement. The Wassenaar
Arrangement for Export Controls for Conventional Arms and Dual-use
Goods and Technologies (``Wassenaar Arrangement'') is expected to be
operational later in 1996. Any EAR changes that may be needed to carry
out the Wassenaar Arrangement will be made at the appropriate time.
A commenter suggested that License Exception NSG be extended to
South Korea, Taiwan and Mexico. License Exception NSG has been removed
in this interim rule. Instead, items on the CCL with ``NP Column 1'' in
the Country Chart column of the ``License Requirements'' section of an
ECCN do not require a license to NSG member countries. The commenter's
suggestion has not been adopted by BXA for Taiwan and Mexico because
the regulations simplification initiative was not intended to make
substantive changes in license requirements. However, recent regulatory
changes have extended such treatment to South Korea, and that change is
incorporated into this interim rule.
One commenter questioned why ECCN 5A80 (communications intercepting
devices) of the proposed rule is not included in Sec. 742.7 (Crime
Control). These items are regulated under separate statutory authority
and licensing criteria. Items controlled under Sec. 742.7 are those
agreed to pursuant to section 6(n) of the Export Administration Act.
Controls on communications intercepting devices are maintained in
accordance with the Omnibus Crime Controls and Safe Streets Act of
1968, and are therefore separately controlled under Sec. 742.13.
Part 744--Control Policy--End-User/End-Use Based
This part contains prohibitions against exports, reexports, and
activities related to certain end-uses and end-users. Specifically,
Sec. 744.2 prohibits exports and reexports of items subject to the EAR,
without a license, if at the time of the export or reexport you know
that the item will be used in nuclear explosive, or other safeguarded
or unsafeguarded nuclear activities. Section 744.3 prohibits the export
or reexport, without a license, of certain items to be used for missile
end-uses. Similarly, Sec. 744.4 prohibits the export or reexport of
items with certain chemical and biological weapon end-uses. Next,
Sec. 744.5 prohibits the export or reexport of items to be used for
specified nuclear maritime end-uses.
Section 744.6 places restrictions on certain proliferation-related
activities of U.S. persons. For purposes of this prohibition the term
``U.S. person'' means citizens, permanent resident aliens, or protected
individuals as defined in the immigration laws; any juridical person
organized under the laws of the United States or any U.S. jurisdiction;
and any person physically in the United States. This part also contains
prohibitions against exports, reexports, and certain transfers to
specified end-users. Section 744.7 imposes restrictions on certain
exports to and for the use of certain foreign vessels or aircraft, and
Sec. 744.8 places restrictions on certain exports to all countries for
Libyan aircraft.
Commenters urged BXA to publish a positive list of items and limit
the applicability of the nonproliferation related end-use restrictions
to items on such a positive list. In addition, commenters asked BXA to
publish certain names of end-users as to which individual exporters
have been ``informed'' that a license is required by reason of
Sec. 744.2(b), Sec. 744.3(b), Sec. 744.4(b), and Sec. 744.6(b). BXA is
working within the Administration toward these objectives; however,
these are major policy initiatives, they are not part of this interim
rule, and they are not necessary to achieve the goals of the
Regulations Reform exercise.
Commenters suggested that under Sec. 744.2(b) the discretion of BXA
to inform an exporter of the trustworthiness of certain end users
should be a duty of BXA rather than an option of BXA. The U.S.
Government will retain this discretion because of the overriding
interests in protecting sources and methods of intelligence gathering
and the interests in law enforcement objectives that on occasion
require flexibility on the part of the government.
One commenter urged BXA to make clearer the treatment of technology
that historically was authorized for export under General License GTDA.
In the proposed rule, BXA excluded such information from the scope of
the EAR. That approach is retained in this interim rule and clarified
in the steps that have been added to part 732, Steps to suggest methods
for using part 734, Scope of the EAR. Items not subject to the scope of
the EAR are not subject to any prohibition of the EAR.
Section 744.2(b) contains provisions designed to standardize the
procedure for informing exporters that a particular party may present
an unacceptable risk of diversion contrary to nuclear policies. Some
commenters applauded this addition, and one opposed it. BXA will
maintain this provision because the procedural discipline it provides
should prove useful for both BXA and exporters. This provision does not
change BXA's substantive authorities under the EAR.
One commenter suggested additional cross-references to the license
review policies for items subject to, for example, missile technology
controls identified on the CCL based upon product parameters rather
than a prohibited end-use. In the proposed rule and in this interim
rule, the license review standard for applications required by reason
of the product parameters designated on the CCL are listed in part 742,
Control Policy--CCL Based Controls. The license review standards for
license requirements defined by end-uses described in part 744 are
contained in part 744. Because of the criticism of some commenters that
the proposed rule contained too many cross-references, BXA has
concluded in this instance that additional cross-references are not
advisable.
This interim rule continues existing policy regarding the country
scope of the nuclear end-use prohibition. A new Supplement No. 3 is
added to the part and referenced at Sec. 744.2(a) to exempt designated
countries from this prohibition, and those are the same countries that
are exempt under the
[[Page 12723]]
existing EAR. This is a change from the proposed rule.
One commenter suggested that BXA remove from Sec. 744.6 words that
indicate defined activities are prohibited in the United States. This
interim rule accepts this recommendation. One commenter complained that
Sec. 744.6 applies to less than all countries in Country Group D:1. The
exclusion of Romania and China is consistent with current policy, and
is maintained in this interim rule. BXA recognizes that such policy
decisions make the use of the Country Groups and the EAR itself more
complex. BXA hopes reviewing of provisions of the EAR in the order
recommended by the steps in part 732 will minimize this problem. BXA
intends to further address such issues in the future. However, policy
making in export controls will always present trade offs for exporters
when petitioning the government for fairness and precision of export
control policy on the one hand versus simplicity and ease of
administration for the public on the other.
The proposed Sec. 744.6(a)(2) prohibited certain U.S. person
activities related to nuclear explosives devices. It was removed from
this interim rule because such activity is prohibited under the
International Traffic in Arms Regulations (22 CFR 120-130), which
regulate defense services for all destinations.
Part 746--Embargoes and Other Special Controls
Part 746 of the proposed rule contained controls for Cuba, Libya,
Iraq, North Korea, and the Federal Republic of Yugoslavia (Serbia and
Montenegro), indicating where jurisdiction was divided between BXA and
the Department of the Treasury's Office of Foreign Assets Control. It
also contained controls implementing U.N. sanctions resulting in
additional EAR controls on Rwanda.
Controls on Iran, embargoed because of Executive Order 12959 of May
6, 1995, have been added to part 746 in this interim rule. With the
suspension of the embargo on the Federal Republic of Yugoslavia (Serbia
and Montenegro), controls on that country, as well as on certain areas
of Croatia and Bosnia-Herzgovina, have been shifted to a Supplement to
part 746. Commenters pointed out that ECCN 0A95, which released food
and medical supplies to Libya from reexport control, was unaccounted
for in the proposed rule; that oversight has been corrected. The former
Humanitarian License Procedure, which was included in the Embargo part
of the proposed rule, has become a License Exception for humanitarian
donations and is in part 740 of this interim rule.
Finally, this part includes Supplements containing general
information on embargoes and sanctions administered by other federal
agencies.
Part 748--Applications (Classification, Advisory, and License) and
Documentation
Part 748 describes the procedures for submitting license
applications, classification requests and advisory opinions. This
interim rule places information from throughout the existing EAR into
one part. It is intended to provide the reader with all information
necessary to submit an application to BXA.
This interim rule adopts use of the new Form BXA-748P for the
submission of license applications and classification requests, but not
advisory opinions. Most commenters favored the use of one form for both
exports and reexports. This interim rule clarifies the definition of
advisory opinions and states they must be submitted in writing via
letter. Commenters were evenly split regarding the proposal to require
use of Form BXA-748P for advisory opinions. One commenter proposed
adopting the form for use when submitting end-user requests. This
suggestion along with one recommending the elimination of unit and
total price boxes are not adopted in this interim rule. A number of
commenters also queried whether BXA intends to republish the Forms
Supplement contained in the existing loose leaf EAR subscription. BXA
will republish the Forms Supplement in the subscription to the EAR
offered by the National Technical Information Service (NTIS). The Forms
Supplement is not published in the Code of Federal Regulations.
Sections in part 748 have been redesignated to better describe each
section's contents. The addresses in Sec. 748.2 and Sec. 748.14 have
been placed in one section. Procedures for submitting applications
electronically have been placed in a separate section for easier
access. For continuity, the unique license requirements for specific
items or transactions have been placed in a separate Supplement No. 2
to this part. This change will allow readers to determine quickly
whether the unique requirements apply to their transaction, and if not,
to continue quickly with sections relating to support documents.
Instructions for completing Form BXA-748P contained in Supplement No. 1
to part 748 have been clarified in response to comments posed by both
the public and BXA employees.
On the suggestion of one commenter, a reminder that information
submitted under the Export Administration Act will be treated in
accordance with provisions stated in section 12(c) of the act has been
added in this interim rule in Sec. 748.1(c).
The section on license application support documents has been
revised to eliminate one step in the decision tree. The questions
contained in Sec. 748.10(a)(3) in the proposed rule have been combined
into one question in this interim rule. Some commenters noted that
exceptions for obtaining support documents have decreased in certain
circumstances. The changes announced in the proposed rule were due
largely to the changing export control environment and proliferation
credentials of various countries. Accordingly, this interim rule adopts
the requirements contained in the proposed rule with a few
modifications. This interim rule also adopts the two year validity
period for the Statement by Ultimate Consignee and Purchaser.
A few commenters noted that though the development of decision
trees will assist in determining support document requirements, BXA
should consider the development of a matrix or chart similar to that
contained in part 775 of the existing rule. Though a chart has not been
included in this interim rule, BXA will explore development of a new
matrix/chart based on the support document decision tress in this part.
This interim rule also eliminates the last letter in the Export Control
Classification Number contained in the existing rule. This letter had
been used previously to designate support document requirements, but is
no longer necessary.
A few commenters requested additional guidance on what constitutes
an emergency and clarification of validity periods as they relate to
licenses approved under emergency processing. This interim rule
clarifies the validity period by cross-referencing the appropriate
section in part 750, but does not provide additional language to be
used by applicants when submitting emergency requests. In order to
retain the emergency nature of these requests, this interim rule does
not adopt the suggestion by one commenter to increase the validity
period from 30 to 60 days for applications involving reexports.
Commenters were evenly split regarding the elimination of Form BXA-
685P for amendments with a few stating the elimination of this form is
long overdue. This interim rule adopts the intent to eliminate Form
BXA-685P along with Form BXA-648. Changes not
[[Page 12724]]
listed in Sec. 750.7(c) will require the submission of a Replacement
application. One commenter stated the time period for the return of
Delivery Verifications to BXA was reduced with elimination of Form BXA-
648. The existing rule states the time frame as ``a reasonable time
after the last shipment'' while the instructions contained in the
existing Form BXA-648 stated the time frame as ``90 days after the last
shipment''. This interim rule eliminates this inconsistency by
establishing a 90 day time frame.
Form BXA-711 along with its written counterpart is adopted in this
interim rule. Commenters stated the ability to use a form or letter was
a good idea.
Part 750--Application Processing, Issuance and Denial
Part 750 describes the processing procedures and time frames for
classification requests, advisory opinion requests and license
applications. Once an applicant has prepared documents in accordance
with part 748, this part describes how the application will be handled
by BXA. The time frames detailed in this interim rule are drawn from
Executive Order No. 12981 of December 6, 1995 and the draft 1994 Export
Administration Act bill written by the Clinton Administration.
This interim rule provides a detailed description of the
relationship between all agencies and departments involved in the
license review process as well as a description of the interagency
dispute resolution process. This part also addresses actual issuance,
validity periods, denial, revocations, suspensions, transfers,
duplicates, and shipping tolerances.
This interim rule also eliminates the proposed exceptions to the
license processing time frames and limits all license applications to a
90 day processing time frame. A number of commenters made
recommendations for revising the time frames for the processing of
license applications as well as the types of applications subject to
Congressional notification. This interim rule incorporates the
processing time frames provided in Executive Order No. 12981.
Accordingly, recommendations to establish different time frames have
not been adopted. In addition, congressional notification requirements
for crude oil and refined petroleum products have not been adopted
since they no longer apply to the types of licenses reviewed by the
Department.
Most commenters supported the clarification of the license
processing system and time frames. These commenters agreed that BXA has
met the goal of making the process more transparent for the exporter.
A number of commenters requested that applicants be given the
opportunity to express their views during the license escalation
process. These commenters also requested clarification of the term
``registration'' to include language that would require prompt action
by BXA upon receipt of a license application. Both of these
recommendations have been adopted in this interim rule.
One commenter suggested that part 756, Appeals, be combined with
this part 750 since most appeals involve license applications. This
recommendation was not adopted because the appeals process is open to
all administrative actions, not only those relating to license
applications.
One commenter recommended simplification in the provisions for
shipping tolerances. While this recommendation has merit and may be
considered at a later date, it was not adopted in this interim rule.
Part 752--Special Comprehensive License
Part 752 describes the provisions of the Special Comprehensive
License (SCL). The SCL consolidates the activities authorized under the
Project, Distribution, Service Supply, Service Facilities, Aircraft and
Vessel Repair Station Procedure, and Special Chemical Licenses, and
provides for additional flexibility to BXA in shaping appropriate SCLs
and internal control programs (ICPs). For example, the Project License
and Service Supply Procedure authorize exports and reexports to
countries of the former Soviet Union, Eastern Europe, and the People's
Republic of China, but the Distribution License, which includes an
extensive mandatory ICP that is not required for the Project License or
the Service Supply Procedure, does not allow exports and reexports for
distribution in these countries. This interim rule conforms item and
country eligibility under the SCL. All items subject to the EAR are
also eligible for export and reexport under the SCL, except a few
specified items. Form BXA-686P, Statement by Foreign Importer of
Aircraft or Vessel Repair Parts, which was used for certain exports
under the Aircraft and Vessel Repair Station Procedure, and Form BXA-
6026P, Service Supply License Statement by U.S. Exporter, are not used
under the SCL.
BXA received fourteen comments on part 752. Overall, several
commenters stated that the SCL is a significant improvement over the
existing special license eligibility because it provides broader
authority to allow exports of items such as software and technology.
Five commenters suggested that existing special license holders
retain the right to use existing special licenses until they expire,
but apply for amendments to take advantage of the increased item and
country scope of the SCL.
This interim rule makes the SCL effective March 25, 1996. All
existing special licenses will expire on March 25, 1997, unless the
special license expires before that time by its own terms. BXA will not
grant extensions to existing special licenses. Existing special license
holders who want to take advantage of the SCL benefits, must apply for
an SCL according to part 752. BXA will not accept amendments to
outstanding special licenses.
Eight commenters provided comments on item scope for the SCL. Most
commenters stated that the proposed rule would not authorize exports
under the SCL of items eligible for a License Exception. The proposed
rule allowed exports under the SCL of all items subject to the EAR,
including items eligible for a License Exception. However, to prevent
confusion, the interim rule specifically states in Sec. 752.1 that you
may apply for an SCL, when appropriate, in lieu of a license described
in part 748 or a License Exception described in part 740.
Two commenters stated that the SCL should not exclude any items
because it defeats the purpose of the SCL, which is designed to allow
greater flexibility in return for increased monitoring of each shipment
by the SCL holder and consignees. One commenter added that other
agencies have the right to review the applications for an SCL, and
restrictions may be placed on a license on a case-by-case basis.
However, two commenters stated that there should be no ad-hoc
restrictions, adding that the only item restrictions should be those
published in the Federal Register, which would be applicable to all
companies.
This interim rule retains the list of items not eligible for the
SCL in Sec. 752.3 to ensure that potential applicants are aware of the
few item restrictions before they consider applying for an SCL. If BXA
determines that an item must be added to the list to protect national
security, nonproliferation, or foreign policy interests, or determines
that an item need no longer be prohibited under the SCL, BXA will
publish a change in the Federal Register, at which time the change will
become effective and apply to all SCL and potential SCL holders.
Another commenter was concerned about the general policy of denial
for
[[Page 12725]]
exports to destinations in Country Group D:2 of items controlled for
nuclear nonproliferation reasons, and suggested that the SCL
specifically state that items controlled for nuclear nonproliferation
reasons be authorized on a case-by-case basis provided that the
exporter has appropriate controls in place to screen for proscribed
end-uses or end-users. The Internal Control Procedures (ICPs) required
for most activities authorized under the SCL include screening elements
for proliferation end-uses. This interim rule revises the policy of
denial language found in Sec. 752.3(b) of the proposed rule to a policy
of case-by-case review. In addition, this rule retains the discretion
to deny or limit the export or reexport of all items, including those
controlled for nonproliferation reasons.
Most commenters applauded the expansion of country scope to include
the newly independent states and Russia. However, several commenters
requested clarification that the SCL is eligible for countries such as
Slovenia, Rwanda, Bosnia, and Croatia, which are eligible under
existing special licenses . One commenter stated that when BXA declares
a country ineligible to receive items under the SCL, BXA should
simultaneously list the country in the EAR, and remove it from all
SCLs.
It is not BXA's intent to roll-back special license country
eligibility. This interim rule therefore clarifies that all countries
are eligible to receive items under the SCL except Cuba, Iran, Iraq,
Libya, North Korea, Syria, and Sudan. If BXA determines that additional
countries should become ineligible to receive items under the SCL, it
will publish the change in the Federal Register, and notify all SCL
holders.
Four commenters suggested consolidating Sec. 752.2 into one generic
paragraph that describes the representative activities. Another
commenter stated that the SCL should not prohibit the export of service
parts or upgrades as long as it does not exceed the limits of the SCL
parameters. Section 752.2 is intended to provide illustrative examples
of the types of activities that may be approved under the SCL. It is
not intended to be an inclusive list, and other activities may be
approved on a case-by-case basis. This interim rule revises Sec. 752.2
to provide a general description of the types of activities that BXA
may approve the under the SCL. These activities fall under the general
categories of ``service'', ``end-user'', ``distribution'', and
``other'' activities.
Four commenters provided comments on the requirement for a letter
of assurance for exports under the SCL of certain technology. One
commenter stated that the SCL expands the scope of the existing letter
of assurance required for exports under General License GTDR because it
would require the letter of assurance from each new recipient overseas.
One commenter specifically requested that the letter of assurance be
required from only one party overseas. The proposed rule did not expand
current policy. Under the existing EAR, any transfers of technical data
covered by a letter of assurance would require such assurances from any
new recipient of the technology. Two commenters indicated that
assurances are not required for exports of technology under a validated
license. But, if an assurance must be required, the assurance should be
included in the SCL certifications.
This interim rule removes the letter of assurance requirement from
Sec. 752.5. BXA intends to review requests to export controlled
software and technology under the SCL on a case-by-case basis, and
impose conditions or restrictions as appropriate. Depending upon the
level of software or technology requested for export under the SCL,
this may include restrictions on reexport of software or technology, or
exports of direct products of the technology.
Comments on Sec. 752.5, steps you must follow to apply for an SCL,
focused on the comprehensive narrative statement. Many commenters
stated that much of the information required in the comprehensive
narrative statement is already required on Form BXA-748P, Multipurpose
Application, or Form BXA-752, Statement by Consignee in Support of
Special Comprehensive License. Five commenters specifically requested
that the requirement to state the ratio and dollar volumes of
controlled items to those not subject to the EAR be removed, because it
is impractical to calculate and fundamentally unreliable. BXA agrees
that SCL applicants should not be required to repeat information in a
comprehensive narrative statement that is also required on Form BXA-
748P or Form BXA-752. Therefore, this interim rule includes major
revisions to the comprehensive narrative statement requirements,
limiting that statement to the information that is not required
elsewhere. This interim rule also removes the requirement to list the
items eligible for a License Exception that will be exported under the
SCL because the ICP requirements assure that appropriate controls are
in place to prevent diversion.
One commenter stated that the application stage was too early to
provide BXA a copy of the proposed ICP, and to do so conflicts with the
certification requirements that an ICP must be in place upon approval
of the SCL. This interim rule retains, under Sec. 752.5(c)(3), the
requirement that applicants and consignees submit ICPs at the time of
application. This information is necessary for BXA to determine whether
to approve the items, activities, or countries requested on the SCL
application, or to modify your proposed ICP depending upon the nature
of the request.
One commenter stated that BXA should not require an SCL holder to
inform all consignees of license conditions. Certain conditions may
only have relevance to one or two consignees. BXA agrees, and has
clarified in Sec. 752.9(a)(4) to state that the SCL holder must inform
all relevant consignees of all license conditions prior to making any
shipments under the SCL. Four commenters objected to the language that
refers to prior reporting of exports of certain items, which is was
included in Sec. 752.9(a)(4). This interim rule retains this language.
Exporters should note that the list of the special conditions that may
be placed on your SCL included in this section only provides examples,
and such conditions may not be included on your SCL.
Section 752.11 describes the elements of the Internal Control
Programs (ICPs) that the SCL holder and consignee must implement upon
approval of the SCL to assure that exports and reexports are not made
contrary to the EAR. Two commenters stated that the ICP requirements
included in the proposed rule should be clear and defined, not
generalized. Three commenters suggested that EPCI screening be limited
to certain countries. Two commenters requested that BXA clarify when
the parties to the application must submit the ICP to BXA. One
commenter also requested that upon publication of the SCL, BXA publish
guidelines that further define ICP requirements.
This interim rule also restructures Sec. 752.11 to consolidate the
elements of all three ICPs into one list, and to remove the different
levels of ICPs. This simplifies the text, and makes it more user-
friendly. This interim rule does not place country limits on screens
against customers who are known to have, or suspected of having,
unauthorized dealings with specially designated regions and countries
for which nonproliferation controls apply. Any such limits must be
approved by BXA, and are dependent upon the specific nature of your SCL
request. This interim rule also includes information in
Sec. 752.11(a)(2) on where you may obtain
[[Page 12726]]
guidelines to assist you in developing an adequate ICP.
This interim rule also makes several other editorial changes to
part 752 to consolidate provisions and simplify the text. Section
752.10, Changes to the SCL, has been revised to clearly define the
requirements for changing an SCL. Detailed instructions on how to
complete Forms BXA-748P, Multipurpose Application, and Form BXA-752,
Statement by Consignee in Support of Special Comprehensive License, and
other forms related to applying for an SCL are included in supplements
to part 752. The servicing provision in Sec. 752.4(b) has been revised
to conform with the standard used throughout the EAR. This provision
prohibits you from servicing, under the SCL, any item when you know
that the item is owned or controlled by, or under the lease or charter
of, entities in countries not eligible for the SCL, or any nationals of
such countries. Finally, the recordkeeping provisions of Sec. 752.12
have been clarified by providing the appropriate cross-references to
part 762, which applies to all transactions subject to the EAR.
Part 754--Short Supply
This part implements section 7 of the EAA and similar provisions in
other laws that authorize or require restrictions on exports for
reasons dealing with adequacy of supply of commodities in the United
States, as opposed to reasons based on foreign policy, national
security, or nonproliferation considerations. Specifically, this part
implements controls on exports of crude oil restricted under the EAA
and a number of other laws; on exports of petroleum products produced
or derived from the Naval Petroleum Reserves; on exports of western red
cedar as required by provisions in the EAA; and on exports of horses by
sea for the purpose of slaughter. It also provides information relating
to two provisions contained in EAA section 7: The registration of
agricultural commodities for exemption from short supply controls, and
the filing of petitions for the imposition of controls on recyclable
metallic materials.
Consistent with the revised structure of the proposed and interim
rules, this part contains all of the requirements that apply uniquely
to commodities controlled for short supply reasons. It sets forth all
of the licensing requirements, licensing policy, License Exceptions,
and other unique requirements that apply to commodities controlled for
short supply reasons on the CCL. Short supply controlled commodities
are identified with ``SS'' under ``Reason for Control'' in each
relevant ECCN on the CCL. Other requirements of the EAR that are not
unique to short supply controls, such as recordkeeping in part 762,
also apply to items covered by this part.
Six commenters provided comments on this part. A number of
revisions have been made to implement the recommendations contained in
the comments. Additional revisions were made to incorporate the heavy
California crude oil rule published in the Federal Register but not
included in the proposed rule.
Commenters recommended that the definition of ``crude oil'' in
Sec. 754.2 be moved to the front of this section from paragraph (g).
The definition of ``crude oil'' is now included in paragraph (a).
Section 754.2(b) deals with licensing policy for crude oil. It has
been revised significantly to distinguish BXA's licensing policy for
shipments of crude oil which have already been found to be in the
national interest, by Presidential decision or otherwise, e.g., crude
oil from Cook Inlet or California heavy crude, and those which will be
approved if BXA makes the necessary findings on a case-by-case review
of applications. In the proposed rule all crude oil applications would
be reviewed by BXA and approved if the crude oil was not subject to
certain statutory restrictions and BXA made a finding that the export
was in the national interest and consistent with the purposes of the
Energy Policy and Conservation Act. In this interim rule, paragraph
(b)(1) of Sec. 754.2 lists the exports that have already been found to
be in the national interest and paragraph (b)(2) lists the exports for
which BXA must make the necessary findings.
Section 754.2(b)(2) also reflects a revision relating to the kinds
of transactions that BXA will find to be in the national interest. The
proposed rule had cited examples of crude-for-crude and crude-for-
product exchanges that would be found to be in the national interest.
The language of the proposed rule, however, could have been interpreted
as limiting the national interest to these examples. The interim rule
makes clear that the cited exchanges are only examples.
This interim rule also adds a new paragraph (g) to Sec. 754.2,
reflecting regulations that were published in the Federal Register (60
FR 15669, March 27, 1995).
Finally, this interim rule creates two new License Exceptions which
apply to the exports of crude oil. Section 754.2(h) implements a new
License Exception SS-SPR, intended to permit the export of foreign
origin oil stored for emergency use by a foreign government in the
Strategic Petroleum Reserves (SPR). License Exception SS-SPR permits
the export even if the foreign origin oil is commingled with other SPR
oil, provided that the Department of Energy certifies that the crude
oil being exported is of the same quantity and of comparable quality as
the foreign origin oil imported by the foreign government for storage
in the SPR.
Section 754.2(i) of this interim rule creates a new License
Exception, SS-SAMPLE, to permit limited quantities of crude oil for
analytical or testing purposes. This revision implements
recommendations included in the public comments. Under this License
Exception you may ship up to ten barrels of crude oil to any one end-
user annually, up to a cumulative limit of 100 barrels per exporter
annually. This License Exception codifies a BXA licensing policy for
sample shipments that has been in effect for several years. This
licensing policy has been included in BXA's annual report to the
Congress, but has not been reflected in the EAR. Such de minimis sample
shipments have no measurable effect on U.S. oil supplies.
Section 754.3 of this interim rule reflects a significant change in
the way that the Naval Petroleum Reserves Production Act (NPRPA)
restriction on non-crude oil products are implemented. The NPRPA
prohibits the export of petroleum origination or derived from the Naval
Petroleum Reserve (NPR), unless the President approves the export.
Under existing EAR, licenses are required for all petroleum products,
and General License G-NNR authorizes shipments of all such product of
non-NPR origin or derivation. The proposed rule continued this approach
and provided License Exception SS-NPR.
Commenters noted that if all NPR crude oil produced in fiscal year
1994 were refined, it would amount to less than one percent of all the
crude oil refined in the United States. The commenters recommended that
the existing approach be changed to require a license only for
petroleum products which were NPR produced or derived. BXA adopted this
recommendation and this provision reflects the change.
The relevant ECCNs on the CCL have been revised to apply only to
petroleum products that were produced or derived from the NPR or became
available for export as a result of an exchange of any NPR produced or
derived commodities. With this change, General License SS-NNR is no
longer necessary and is removed.
[[Page 12727]]
Section 754.4, unprocessed western red cedar, has been reorganized
consistent with a recommendation included in the comments. In the
proposed rule, Sec. 754.4(a)(2) contained instructions for filing a
license application, and preceded provisions on license policy and
exceptions. A commenter noted that an exporter will first look for
licensing policy and license exceptions before looking for information
on how to fill out a license application. The commenter observed that
there is no point in instructing the exporter how to complete a license
application if subsequent text informs the exporter either that a
license will not be approved or is not necessary. This interim rule
adopts this comment and has restructured Sec. 754.4 accordingly.
Part 756--Appeals
This part describes the procedures applicable to appeals from
administrative actions taken by BXA. An administrative action is any
action (not including an administrative enforcement proceeding) taken
under the EAA or EAR with respect to a particular person, including
denial of a license application, return of a license application for
other than procedural deficiencies or additional information, or
classification of an appellant's item. Essentially, any person directly
and adversely affected by an administrative action would be allowed to
appeal to the Under Secretary for Export Administration for
reconsideration of that administrative action.
No substantial comments were received on this part 756. One
commenter suggested the possibility of combining this part with part
748, Applications. This interim rule does not adopt the suggestion.
With the exception of minor editorial revisions and clarifications,
the provisions of part 756 remain unchanged from the proposed rule.
Part 758--General Export Clearance Requirements
This part deals with requirements imposed on exporters and others
regarding the movement of items subject of the Export Administration
Regulations (EAR) out of the United States. The purpose of this part is
to assure that the movement of items subject to these EAR conforms to
the requirements of the export license or other authorization for their
export.
This part imposes specific responsibilities on the different
persons involved in export transactions to ensure compliance with other
provisions of the EAR and of the Foreign Trade Statistics Regulations
(FTSR) (15 CFR Part 30), including exporters, freight forwarders,
exporters' agents, carriers and all other persons. It prohibits any
person from engaging in certain proscribed conduct. This part governs
some of the same conduct that is governed by the FTSR.
This part imposes specific responsibilities for assuring that
Shipper's Export Declarations (SEDs), bills of lading and air waybills
are accurately filled out and are consistent with the export license or
other authorization for the export to which they correspond. It
restricts the conduct of exporters, forwarders, carriers and others to
assure that the delivery abroad of items subject to the EAR is in
accordance with the terms of the export license, exception to the
licensing requirement or other authorization. In some cases, it imposes
duties on parties to the transaction to return the items to the United
States or take steps to prevent them from entering the commerce of a
foreign country.
The proposed rule made several changes to this part. Approximately
25 commenters made comments on the proposed part 758.
A majority of those who commented on part 758 recommended that we
eliminate the requirement to place the symbol ``NOL'' on Shippers
Export Declarations (SEDs) for transactions involving items not on the
CCL. Most of those commenters suggested that we adopt a single symbol
``NLR'' for all transactions where the export does not require a
license either because it is on the CCL but does not require a license
to the destination in question or because it is not on the CCL. Several
commenters went further and recommended that we authorize the use of
the symbol ``NLR'' for transactions that are authorized by a License
Exception instead of requiring that the License Exception symbol be
listed on the SED. We adopted the suggestion to eliminate the symbol
``NOL''. However, this interim rule includes a designator (EAR99) for
items that in the proposed rule were subject to the EAR but not on the
CCL, that will be used by BXA in responding to classification requests
and by exporters for their management systems. The designator will not
be used on SEDs. We have also reduced the number of License Exception
symbols from which parties filling out SEDs must choose. As noted above
in the discussion of License Exceptions, we have created a small number
of symbols for various groups of License Exceptions, and it is these
symbols for groups of License Exceptions that must appear on the SED.
Several commenters suggested that the choice of Destination Control
Statements (DCSs) in the proposed rule was unduly complex. In addition,
some commenters suggested that the proposed rule on DCSs did not make
it clear that the most restrictive DCS could be used for any
transaction. This interim rule adopts a single simplified DCS.
A number of commenters raised the issue of what information should
be shown on SEDs for items which in the proposed rule were not subject
to the EAR, but which in the existing EAR are eligible for general
license GTDA. In response to these comments this interim rule creates
an optional designator TSPA which exporters may use on SEDs for
software or technology that the proposed rule and this interim rule
define as outside the scope of the EAR.
The proposed rule eliminated some information about authority and
status of forwarding agents and procedures for correcting SEDs on the
grounds that those points are covered in the FTSR (15 CFR part 30) and
including them in the EAR was redundant of the FTSR. Some trade
associations recommended that we retain these procedures. We did not
adopt this suggestion because the FTSR applies to all exports from the
United States including those subject to the EAR and those that are
not. These procedures need to be in the FTSR because exporters who have
no transactions subject to the EAR must follow them. Retaining
duplicate language in a regulation that applies to only a portion of
the exports from the United States would be redundant and creates the
burden of keeping two different sets of regulations identical whenever
amendments are adopted.
Two commenters suggested that proposed Sec. 758.1 was too long and
portions were redundant. They suggested breaking it up into several
sections. We did not adopt this suggestion in this interim rule. The
section has been shortened because of the elimination of the NOL
provisions.
Several commenters suggested that the use of the word ``you'' in
the proposed rule under Sec. 758.1(a)(1) shifted responsibility from
exporters to forwarders. This interim rule does not change that
language. The proposed rule, by its terms makes those who obtain
licenses from BXA or rely on License Exceptions in their export
transactions responsible for the proper use of that license or License
Exception. This is a reasonable policy and is retained in this interim
rule.
Two commenters proposed that forwarding agents not be required to
keep a record of the delegation of authority to them unless the
[[Page 12728]]
responsibility to do so was delegated by the exporter. This interim
rule does not adopt this suggestion. The proposed rule and this interim
rule conform with the existing EAR and with the FTSR on this issue.
Two commenters stated that the use of the phrase ``exporter and the
person submitting the document'' in the proposed Secs. 758.3(e) and
758.3(l)(1) expands the scope of the persons making representations to
the U.S. Government to include forwarders in instances where the
existing EAR does not impose responsibility on forwarders. We accepted
this recommendation. This interim rule adopts language from the
existing EAR. However, other sections of this interim rule, like the
existing EAR, impose liability on forwarders who make
misrepresentations to the government.
Two commenters recommended that the HTSUS numbers be permitted on
SEDs in lieu of Schedule B numbers. We did not adopt this
recommendation in this interim rule. The FTSR (15 CFR part 30) which
govern all exports from the United States require Schedule B numbers.
To the extent that there are differences between the HTSUS and the
Schedule B numbers, errors in compiling foreign trade statistics would
occur if either classification numbering system were permitted for
exports subject to the EAR.
One commenter recommended that this rule eliminate the
responsibility of exporters and forwarders who file summary monthly
reports in lieu of SEDs to ensure that carriers place the destination
control statement on bills of lading and air waybills. We did not adopt
this suggestion. The proposed rule and this interim rule follow the
existing EAR which was designed to assure that exports made under the
privileged monthly procedure were totally in compliance with the EAR.
Two commenters recommended that the regulations impose a limit on
the time that the Government may hold up export shipments for
inspection. We did not adopt that suggestion because it was beyond the
scope of the regulations reform exercise. Input from a number of other
government agencies would be necessary to develop a rational time
limit.
One commenter recommended that when the government orders a carrier
to return or unload a shipment that the government be required to
notify the exporter. We did not adopt this suggestion. In some cases
the exporter may be the target of an investigation and a notification
requirement could jeopardize legitimate law enforcement activities.
More than one agency has authority to order return or unloading and
developing a rule would require the coordinated input of several
agencies. That coordination would be beyond the scope of the
regulations reform exercise.
One commenter recommended that we require that exporters show the
Export Control Classification Number (ECCN) on the SED for all exports.
We did not adopt this suggestion. Although exporters need to determine
the proper ECCN in order to determine whether they need an export
license, requiring them to show that number on SED's for all exports
would unduly increase the paperwork burden.
To assist in defining parties to an export transaction, one
association recommended we adopt as a guide a Power of Attorney
utilized by Customs. We did not adopt this recommendation. The EAR
defines parties to a transaction in an adequate manner. Parties to
transactions additionally are free to adopt any Power of Attorney
arrangement that addresses pertinent roles and is not inconsistent with
the EAR or other applicable regulations.
One commenter questioned the proposed requirement to place the
various EAR authorizations for each item being exported under its
corresponding line item description. This commenter pointed out that
the FTSR requires that same information to be placed in blocks 21 and
22 on the SED form or continuation sheet. This interim rule adopts the
FTSR procedure and eliminates the requirement to repeat the
authorization under the line item description.
This same commenter also recommended that the ``Conformity''
provisions in Sec. 758.4(c)(2)(iii) be changed to allow a name of a
party other that the licensee/shipper on the SED to be shown on the
bill of lading as shipper. We did not adopt this recommendation. These
provisions are designed to assure that new parties are not introduced
in transactions contrary to the EAR and that exports are completed in
an orderly and legal manner. Additionally, the situation described may
be appropriately addressed in the application for license process, by
showing the foreign subsidiary as exporter/licensee and the United
States affiliated/related company as agent for the exporter.
Two commenters recommended eliminating the proposed rule
requirements concerning commodity descriptions on the SED
(Sec. 758.3(g)(2)(ii)) and the requirement that a copy of the
commercial invoice with a DCS be sent to the ultimate consignee
(Sec. 758.6(c)(4)). They claimed that these were new requirements. We
did not adopt the recommendations in this interim rule because the
proposed rule merely retained the requirements of the existing EAR.
Part 760--Restrictive Trade Practices or Boycotts
This part revises the existing part 769. The recordkeeping
requirement found in Sec. 760.5(b)(8) of this interim rule requires the
recipient of records relating to a reportable boycott request to keep
those records for five years after receipt of the request. The existing
EAR Sec. 769.6(b)(8) requires the recipient of records relating to a
reportable boycott request to keep those records for three years after
receipt of the request.
Two sections that were reserved in the existing EAR (769.5 and
769.7) have been removed. As a result of this change, Sec. 769.6 in the
existing EAR has been renumbered as Sec. 760.5 in this interim rule. In
addition two grace period provisions in the existing EAR have been
removed. They are; Sec. 760.2(f)(11) (along with its accompanying
example xi) in which certain actions to implement letters of credit
prior to the expirations of grace periods and Sec. 769.8 which
established a grace period for agreements entered into on or before May
16, 1977 could be complied with. The last such grace period expired on
December 31, 1978. Supplement No. 14 which relates to U.S. sanctions
against South Africa that have been repealed has also been removed and
subsequent supplements renumbered.
A new Supplement No. 16 interpreting antiboycott policy in light of
recent developments in Jordan has been added by this interim rule.
None of the changes made to this part by this interim rule were
published in the proposed rule.
Part 762--Recordkeeping
In this interim rule, this part has been reorganized and revised to
eliminate the requirement that regulated persons obtain BXA approval
prior to destroying original documents and replacing them with
electronic, magnetic, photographic or other images. This interim rule
also makes it clear that persons required to keep records may always
keep the records in the form in which that person receives or creates
it. It extends the recordkeeping period to five years to coincide with
the applicable statute of limitations and sets standards of legibility
and retrievability for reproductions that are kept in lieu of
originals.
Several commenters objected to the extension of the recordkeeping
requirement to five years in the
[[Page 12729]]
proposed rule. This interim rule adopts the five year record retention
period. A record retention period that coincides with the applicable
statute of limitations is needed to promote effective enforcement. In
addition, such a retention period benefits firms that comply with the
regulations because the EAR require that those who export under a
License Exception justify the use of that exception. Such persons will
need the records of the transaction to do so.
Three commenters suggested that recordkeeping requirements be
eliminated for certain categories of exports that do not require a
license from BXA. We did not adopt this suggestion. Many transactions
that are subject to the EAR do not require a license from BXA.
Comprehensive records are necessary for effective enforcement and
administration of the EAA and EAR.
One commenter objected to a requirement in the proposed rule that
records which are the subject of a request for production of records by
the government may not be destroyed even if the record retention period
has otherwise expired. This provision is a requirement under the
existing EAR and is retained in this interim rule. Enforcement and
compliance efforts would be undermined if parties were allowed to
destroy records after they have been notified that those records are
wanted in connection with an audit or investigation.
Several commenters recommended that we eliminate the specific
requirements for legibility and retrievability of reproduced records
that are kept in lieu of originals that appeared in the proposed rule.
We did not adopt this suggestion. This interim rule does not impose any
requirements of legibility on original records. However, standards of
legibility and retrievability are necessary when the originals are
destroyed and copies are retained in lieu thereof. BXA will continue to
review this issue to ascertain if the standards might be simplified
without compromising record integrity.
Two commenters recommended that the EAR specifically state that
records of certain activities of U.S. persons in connection with the
proliferation controls described in Secs. 734.2(b)(7) and 744.6 are
subject to the recordkeeping requirement. Although the proposed rule
stated that all transactions that are subject to the EAR are subject to
these recordkeeping requirements, we adopted this suggestion to make
more explicit the fact that activities subject to the proliferation
controls are covered.
Part 764--Enforcement
Eleven of the commenters dealt with part 764. This interim rule
makes numerous changes to the proposed rule based upon these comments.
This interim rule accepts the suggestion of one commenter and
revises Sec. 764.2(e) expressly to limit the offense of acting with
knowledge of a violation to actions that are connected with an item
that is the object of the violation of the EAA or EAR.
Section 764.2(j) is revised to remove from the list of violations a
number of actions characterized as ``trafficking and advertising export
control documents''. BXA accepted the suggestion that some of the
restrictions on the creation of an interest in a licensed transaction
are inconsistent with normal trade practice in financing and insuring
exports. BXA is eliminating other parts of this section as unnecessary
because limitations on license transfer and use are effectively covered
by other EAR provisions, such as Sec. 750.10, and concerns regarding
disclosure of a person's relationship to a transaction are covered by
provisions such as Sec. 764.2(g). This interim rule limits
Sec. 764.2(j) to the offense of license, other export control documents
or other alteration.
Some commenters called for distinguishing between ``substantive''
and ``minor'' violations. BXA did not adopt this suggestion. BXA
concludes that such distinctions are not feasible or appropriate with
respect to the type of activity covered by the EAR.
Some commenters urged BXA to list factors that would mitigate
sanctions for violations. BXA did not adopt this suggestion. BXA notes
that its practice shows that it is open to the consideration of a wide
range of mitigating factors, and it does not believe that a listing of
such factors is needed to enhance compliance or to ensure that
sanctions will be appropriate.
Some commenters called for BXA to include in the EAR a
comprehensive denial list that would include the names not only of
persons denied export privileges by BXA, but of persons covered by
denial orders or designations by other agencies. This interim rule does
not contain such a list. BXA cannot make its regulations an official
repository of legal action by other agencies. BXA will work with other
agencies to try to improve coordination of and access to the lists.
This interim rule describes certain measures such as license
suspensions and temporary denial orders and places them in a new
Sec. 764.6, entitled ``protective administrative measures''. These
measures are not punitive, but are intended to protect against activity
contrary to the purposes of the EAR. Although these measures were
included in the existing EAR and in the proposed rule, they were not
all in a single section. Placing these measures in a single section
distinguishes them from the sanctions which are covered elsewhere in
part 764.
Part 766--Administration Enforcement Proceedings
Five commenters specifically addressed part 766. Three of these
commenters addressed substantially the same points.
Three commenters called for changes to protect the interests of
persons BXA seeks to add to a denial order on the basis of relationship
to the respondent. This interim rule makes three such changes. It
revises Sec. 766.23 to clarify that prevention of evasion is the basis
for making an order applicable to a related person, to provide more
specifically and uniformly for notice to persons that BXA seeks to have
named as related, and provides that such persons may oppose or appeal
not only the issue of relationship, but also whether the order is
justified to prevent evasion. These commenters suggested, further, that
related persons be allowed to challenge the order on the merits, that
is, as to whether or not there has been a violation or a temporary
denial order is necessary in the public interest in order to prevent an
imminent violation. BXA did not adopt this suggestion. BXA believes
that it is proper to limit contests on the merits to respondents, as it
is the alleged conduct of respondents that is the basis for the order.
One commenter expressed concern that having the Under Secretary
decide appeals from Administrative Law Judge (ALJ) decisions in
enforcement proceedings raises doubts about impartiality, due process
and fairness. This commenter called for direct appeal from the ALJ to
the U.S. Court of Appeals. No such change has been made, as it would be
contrary to specific EAA provisions and to general administrative law
practice that makes final agency action subject to judicial review. An
ALJ decision cannot be final agency action under 50 U.S.C. app. 2412(c)
or (d). Moreover, BXA believes that its conduct of administrative
proceedings has been marked by fairness and the careful observance of
due process.
Three commenters called for stating that ``clear and convincing
evidence'' is required to sustain an administrative enforcement case.
BXA did not adopt this suggestion. The EAA (50 U.S.C.
[[Page 12730]]
app. 2412(c)) makes the Administrative Procedure Act (5 U.S.C. 556)
evidence standard (``reliable, probative, and substantial'')
applicable. BXA does not believe that any different EAR standard is
needed.
Three commenters called for detailed provisions on how much
evidence is needed to support a summary decision under Sec. 766.8.
BXA did not adopt this suggestion. BXA concludes that the use of
the standard ``there is no genuine issue as to any material fact'' is
proper and sufficient.
Another commenter stated that Sec. 766.24(b) should be revised to
define the ``imminent violation'' criterion for issuance of a temporary
denial order as requiring a showing of imminence both in nearness of
time and in likelihood of occurrence. BXA did not adopt this
suggestion. BXA retains its longstanding definition from the existing
EAR, consistent with the legislative history of the 1985 amendments to
the EAA, that either time or probability imminence will support the
issuance or renewal of a temporary denial order.
This interim rule adopts many improvements in drafting clarity and
precision that were suggested in the comments, along with numerous
others that BXA developed. This interim rule revises Sec. 766.7 to make
default procedures available in antiboycott proceedings. There were no
public comments suggesting this change, but it makes the procedures for
imposing administrative sanctions and other measures in antiboycott
cases more consistent with other proceedings under the EAR. Finally,
BXA decided to remove from this interim rule one provision that
appeared in the proposed rule even though no comments on it were
received. This interim rule eliminates a provision from Sec. 766.18 of
the proposed rule that would have barred reference in a settlement
order to a finding of a violation, as the content of such an order is
consensual. This deletion makes this interim rule consistent with the
existing EAR.
Part 768--Foreign Availability
Part 768 reflects the provisions described in part 791A of the
existing EAR. It implements section 5(h) of the Export Administration
Act (EAA) and contains procedures and criteria relating to
determinations of foreign availability for national security controlled
items. It is substantively unchanged from the existing part 791A. This
revised version contains several technical changes, such as use of the
term ``claimant'' instead of ``applicant,'' intended to make part 768
easier to read and understand.
Only three commenters mentioned this part in their submissions,
possibly because the Federal Register notice soliciting comments had
stated that BXA did not intend to make any significant changes in this
part.
One commenter questioned why Cuba is included in the definition of
``controlled countries'' for foreign availability purposes under
Sec. 768.1(d) and not for general purposes by inclusion in Country
Group D:1, as described in Supplement No. 1 to part 740. Cuba is a
``controlled country'' pursuant to determination made by BXA under
section 5(b) of the EAA. (See Export Administration Annual Report 1994,
at II-8.) Country Group D:1 does not include countries subject to broad
based embargoes, such as Cuba and North Korea, even though they are
controlled countries. This interim rule adds a clarifying notation
stating that since virtually all exports to Cuba and North Korea
currently are subject to an embargo, the foreign availability
procedures do not apply to these two controlled countries. A similar
notation is included in Supplement No. 1 to part 740.
Another commenter suggested that Sec. 768.7(d) be revised to
clearly reflect the provision of section 5(f)(3) of the EAA that ``the
Secretary shall accept the representations of applicants * * *
supported by reasonable evidence, unless contradicted by reliable
evidence * * *''. BXA did not make any revisions because Sec. 768.7
paragraphs (c), (d)(1), (d)(2), and (d)(3) of this interim Rule already
implement this provision.
One comment suggested that the provision in Sec. 768.7(f)((1)(i)(C)
for submitting foreign availability determinations to COCOM or a
successor regime was unnecessary and should be deleted. When COCOM
ceased functioning on March 31, 1994, the United States and other
member countries agreed to maintain the control lists that were in
place at that time until a successor regime was in place. A change has
been made in this interim rule to reflect BXA's intention to conduct
any necessary consultations with former member countries.
Another commenter questioned why foreign availability procedures do
not apply to foreign policy controlled items. Foreign availability is
always taken into account whenever foreign policy controls are imposed,
expanded, or extended. Because the purposes of foreign policy controls
vary, strict procedures for conducting assessments have not been deemed
to be warranted. Finally, one commenter suggested that part 768 be
revised to reflect the expanded role of the Strategic Industries and
Economic Security Office's Economic Analysis Division in considering
unfair impact, effectiveness of controls, and foreign availability, and
to discuss how exporters may contribute to this work and analysis. BXA
will consider such an addition to the EAR in future revisions.
Part 770--Interpretations
Part 770 contains certain interpretations concerning commodities,
software, technology, and de minimis exceptions for chemical mixtures.
These are designed to clarify the scope of the controls. BXA intends to
add interpretations to this part over time to aid you in interpreting
the EAR. Since the publication of the proposed rule, BXA has issued
certain interpretations on the application of the de minimis exclusion
for certain mixtures of chemicals. Those interpretations are added to
part 770 in this interim rule.
Some commenters suggested that the part numbers of this chapter and
others will overlap with the part numbers of different chapters in
earlier versions of the EAR and therefore BXA should use both odd and
even numbers for the parts of this interim rule. BXA does not believe
that using only even numbers for the parts of this interim rule will
cause confusion. BXA further believes that is it useful to retain only
even numbers in this interim rule so as to leave room for future parts
that cannot now be anticipated.
Certain commenters urged BXA to add interpretations of certain
issues; and BXA will review those recommendations for inclusion in the
future.
Commenters also asked BXA to include an interpretation of the
phrase ``specially designed.'' BXA is not responding to this
recommendation due to pending criminal enforcement action and for other
reasons.
This part contains certain interpretations regarding the de minimis
content of certain chemical mixtures. These reflect amendments to the
EAR adopted after the publication of the proposed rule.
Part 772--Definitions
This part defines terms as used in the EAR.
In response to comments, this interim rule combines the definitions
part from the proposed rule with the multilaterally-agreed definitions
found on the Commerce Control List that are found in Supplement No. 3
to Sec. 799A.1 of the existing EAR. These definitions may be
distinguished from other definitions by the fact that they appear in
quotation marks.
[[Page 12731]]
Part 774--The Commerce Control List
On May 11, 1995, BXA published an advance notice of public
rulemaking in the Federal Register, (60 FR 25480), soliciting comments
from industry and interested public on whether and how to conform the
numbering system used to identify items controlled by the Export
Administration Regulations, or Export Control Classification Numbers
(ECCNs), with the numbering system used by the European Union (EU) to
identify such items.
BXA received a total of eighteen responses to the May 11 notice.
Ten commenters responded directly to this notice, while the remaining
commenters included comments on the May 11 notice with their comments
on the proposed rule. Additional verbal comments were also provided at
the town-hall fora conducted throughout the United States by BXA.
Overall, industry supports harmonizing the U.S. ECCN system with
the EU numbering system. The following is an analysis of the responses
to the five questions posed by BXA in the Federal Register notice,
followed by other general comments.
1. Should the U.S. Harmonize the ECCNs With the EC Numbers and
Encourage Other Countries To Adopt a Uniform Numbering System?
Most commenters stated that they were very supportive of adopting
the EU numbering system. Four stated that if such a change were to be
made, there should be a grace period during which either the ECCN or EU
number could be used. One of these commenters stated that the grace
period should be six months, and another stated that a minimum of nine
months should be allowed for a smooth transition to the new system. One
company stated that it would be less costly to plan for such a change
now rather than sometime in the ``years ahead''. Another commenter
stated that although the initial computerization of the new numbers
could be costly, they will be able to use the information to process
export declarations electronically, which will make processing the
information much more timely.
One foreign-based company stated that they do not support
converting the ECCNs to the EU numbering system because the U.S.-based
ECCN automatically shows that the item is U.S.-origin, and that there
are just too many discrepancies between the items controlled by ECCNs
and the corresponding EU numbers. Another commenter who does not
support conversion to the EU numbering system stated that the use of a
common ECCN has little benefit in the export documentation and should
not be considered an advantage to exporters. This commenter further
stated that it was only recently that they incurred costs of
administering the changes BXA made to the ECCNs to implement the
Coordinating Committee on Multilateral Export Control's (COCOM) ``Core
List'' in 1991 (56 FR 42824, August 29, 1991), and would not want to do
it again. Another commenter stated that the ECCN system is a good
system that works and that they see no advantage of a world-wide system
in this area.
One commenter, that supported the conversion of ECCNs to the EU
system, stated that BXA should not require conversion to the EU system
until the differences between the existing ECCNs and the numbering
system used by the EU are resolved, and also until the COCOM successor
regime and control lists are finalized and all export destinations
agree to adopt the system. Another commenter echoed this opinion, and
added that the new U.S. ECCNs should only be developed for U.S.-
controlled items now controlled by the EU. One commenter stated that
unless the U.S. and EU numbers are identical, there will still be a
need for exporters to classify U.S. and EU separately.
BXA agrees that complete harmonization between the new ECCN system
and the EU system is desirable. Without such harmonization, any
resulting list may be confusing for industry and difficult to
implement. For multilaterally controlled items, the new ECCNs described
in this interim rule are renumbered according to the comparable entry
on the EU list. The scope of such controls are generally the same on
both lists, however the style of the text may be different.
It is important to note that the EU list provides guidance to
member states on the control parameters for items controlled by on the
Industrial List, the International Atomic Energy List, Missile
Technology Control Regime Annex, the Nuclear Supplier's Group, and the
list of items controlled by the Australia Group. Each EU member
publishes its own national list to implement such controls and any
other unilateral controls. Many national lists are therefore different
from the EU list, except for the scope of multilateral controls. The
U.S. also uses discretion in developing its national list, the CCL, for
dual-use items. Certain entries on the CCL have been created for those
items that are not controlled multilaterally on the EU list. Such items
are identified an unilateral controls. In those few instances where the
multilateral entries differ, the U.S. will ask its trading partners to
adopt the CCL.
2. What are the Specific Implications If We Change the ECCNs To Conform
With the EC Numbering System? For Example, if You Currently Have
Computer Programs That Aid in Facilitating Exports and Reexports, What
Will be the Programming Implications for Your Firm if We Make This
Change?
Most of the commenters stated that the reprogramming of computer
systems would be a significant undertaking to convert to a EU numbering
system. One commenter stated that they estimate it would take
approximately 2 person years of effort and $300,000 to change the data
base and ancillary associated systems worldwide. The time for
performing this effort would be approximately three to four months. Two
commenters stated that consideration would need to be given to the
diversion of human resources from current tasks to the review of entire
product lines against the proposed new classification numbers. This
would involve the review of several thousand product part numbers and
the time required to enter each new EU-based number into the computer
system. Three commenters remarked on the export control personnel
retraining requirements requisite to use of the new numbering system.
Another commenter stated that changes to their current system would be
minimal, but they are now in the process of upgrading relevant programs
and processes, and would like to see a change in numbering system now.
One commenter stated that they currently give dual classifications
(ECCN and EU number) to items on their product matrices, and that the
matrices are computerized. Changes to the matrices will be required for
the implementation of the EAR simplification project, so it would be
beneficial if the ECCN harmonization could be carried out at the same
time.
BXA is sympathetic to the time and cost involved in implementing a
new numbering system. However, as many companies have stated, the
benefits of a global numbering system far outweigh the costs of
implementing such a system. The new ECCNs identified in this interim
rule implement the first steps toward a global control list.
[[Page 12732]]
3. What Problems Have You Had in the Past in Tracking Two or More
Numbering Systems for Identical Items Controlled by Two or More
Countries?
One commenter stated that a uniform numbering system would
eliminate a potential area for misunderstanding or confusion in
references to a specific item while another stated that the current
need to track multiple numbering systems adds cost and unnecessary
complexity to their compliance programs. This latter commenter also
stated that there is added confusion caused by changes on different
dates by different countries to the various lists. Another commenter
stated that the lack of correlation between the various lists has made
it all but impossible to develop a computerized correlation between the
various numbers that may apply to one unique product. This commenter
also stated there is no correlation in the EU numbering system for
ECCNs designated for unilateral controls.
4. What Are the Specific Ways in Which a Uniform Numbering System Would
Help Your Company?
Five commenters responded to this question. One commenter stated
that it would simplify their product matrices, while another two stated
that it would streamline their training procedures. One of these
commenters also stated that it would also increase their ability to
maintain high levels of export control compliance. Another commenter
agreed that standardization would allow the company to avoid building
and maintaining cross-reference tables as they communicate order
requirements and status on U.S. export orders with importing foreign
entities.
Another commenter also cited simplification as the major benefit of
a uniform system, and highlighted the specific benefit of consistency
in classification of items. Only one commenter stated that a uniform
numbering system would not benefit their company, but provided no
further explanation as to why it would not be beneficial.
5. Are There Numbering Systems of Other Countries That You Prefer to
the EC System? If So, State Which Ones and Exactly How You Would
Reconcile Any Differences in Scope?
Two of the ten commenters supported maintaining the current ECCN
system. Of the seven commenters that specifically supported a unified
numbering system, none identified a system other than the EU as
preferable.
Four commenters provided additional comments other than those
supporting the four specific questions posed in the May 11 Federal
Register notice. One commenter, who did not support a conversion to the
EU numbering system, stated that the fourth and fifth digits of the EU
number do not provide any real benefit or added clarity. This commenter
further stated that the alpha-character used at the end of the current
ECCNs has been useful in internal control procedures. For example, an
``A'' at the end of a ECCN easily indicates a highly sensitive item,
while a ``G'' indicates greater range of exportability.
Two commenters, who were supportive of the EU numbering system,
also supported the elimination of basket categories. One of these
commenters stated that the continued use of such categories would
conflict with the objective of harmonizing the ECCNs with the EU list.
Another commenter stated that elimination of the ``G'' level basket
categories was not favorable.
One commenter also stated that there should be no interim or
intermediate changes to the ECCN numbering system, and future changes
to the control list should be effective on the same date in all
countries that are a party to the control regimes using the list. The
EU provides guidance to member states for drafting national control
lists. Each state is responsible for implementing changes to
multilateral control lists based upon agreements reached by the
Wassenaar Arrangement, the Missile Technology Control Regime, the
Nuclear Suppliers Group, and the Australia Group. BXA will continue to
implement agreements reached by each of the regimes through prompt
publication in the Federal Register.
Another commenter suggested that if the United States were to adopt
the EU numbering system, BXA should clarify whether new control numbers
(not included on the EU control list) represent new controls, and if
so, what items are being suggested for control and the policy basis for
such controls. A comprehensive cross-reference will be included in
Supplement No. 3 to this part. The Supplement will provide cross-
references for both new format to old format and old to new, so that
readers will be able to locate new numbers based on their current
ECCNs. In this manner, readers will be able to determine the origin of
all numbers that do not currently appear on the EU list. Further, the
revised CCL implements recent multilateral agreements that have not yet
been incorporated in the EU list, such as the NSG revisions published
February 1, 1996 (61 FR 3555).
Under the new numbering system adopted by this interim rule, it
will be easy to identify whether an item is controlled multilaterally
(e.g., for national security, missile technology, nuclear
nonproliferation, or chemical and biological reasons) or unilaterally,
based upon the third digit of the number. ECCNs having a ``9'' as their
third digit (i.e., 5A980, surreptitious listening devices) are controls
unique to the United States, just as other countries may have their own
unique controls. Further, Category 10 has been renumbered, and will
appear as Category 0 in conformance with the EU list. Titles of the
various categories have also been revised in conformance with the EU.
This interim rule retains one ``basket'' entry (EAR99), referenced
at the end of each category in the Commerce Control List, which
contains all the items that used to be classified under those ECCNs
ending with ``96G'' and were thus eligible for General License G-DEST
to most destinations. Items classified as EAR99 are those items not
specified on the CCL, but still subject to the EAR. Therefore,
exporters first must determine that their items are not, in fact, on
the CCL; only then may they classify their items as EAR99.
As in the existing EAR, terms enclosed in quotation marks (i.e.,
``aircraft'' or ``production'') are those with multilaterally agreed
definitions that appear throughout the CCL. These definitions, found in
Supplement No. 3 to part 799A of the existing EAR, are in this interim
rule integrated into part 772 (Definitions). By contrast, definitions
or parameters not enclosed in quotation marks and identified by the
Related Definitions header in individual ECCNs are unique to particular
entries, and therefore appear only in those entries.
Administrative Exception Notes, denoting ``favorable
consideration'' of licenses for certain items to certain destinations
in the existing Supplement No. 1 to part 799A, became meaningless when
COCOM disbanded, and they have been removed from the CCL in this
interim rule.
With the harmonization of the CCL and the EU list, most items will
need to be reclassified. Exporter and reexporters may submit requests
for reclassification beginning on the effective date of this interim
rule. BXA will publish a list of those ECCNs where reclassification is
not necessary prior to November 1, 1996.
Forms Supplement
The new Multipurpose Application Form, BXA-748P, will replace the
Application for Export License (BXA-622P) and the Request for Reexport
Authorization (BXA-699P). It will also
[[Page 12733]]
serve as an application for the Special Comprehensive License.
Additionally, the BXA-748P will accommodate Commerce Classification
Requests, thus allowing item classifications to be handled
electronically.
The BXA-711P replaces BXA-629P, Statement by Ultimate Consignee and
Purchaser. A letter from the ultimate consignee or purchaser may now be
substituted for this form, provided the letter contains the same
information. The BXA-752P will be required as support documentation for
the Special Comprehensive License, replacing the Statement by Foreign
Consignee in Support of Special License Application (BXA-6052P).
The International Import Certificate (BXA-645P/ATF-4522/DSP-53),
the Delivery Verification Certificate (BXA-647P), and the Notification
of Delivery Verification Requirement (BXA-648P) remain unchanged.
Applicants will now submit replacement licenses rather than amendment
requests when their situations change; therefore, the Request for
Amendment Action (BXA-685P) will be discontinued.
Exporters and reexporters may find instructions for completing
forms in part 748, while applicants for the Special Comprehensive
License may find instructions in part 752.
Applicants must begin using the new forms as of June 15, 1996. Due
to the requirements of electronic submission and processing systems,
there will be no transition period during which either version of each
form may be used. Old forms received after the changeover date will be
returned without action to the applicant. Forms may be obtained from
U.S. Department of Commerce District Offices or from: Exporter
Counselling Division, Bureau of Export Administration, Room 1099, U.S.
Department of Commerce, 14th Street and Pennsylvania Avenue, NW.,
Washington, DC 20230. Telephone (202) 482-4811.
Rulemaking Requirements
1. For purposes of Executive Order 12866, this interim rule has
been determined to be significant.
2. Notwithstanding any other provision of law, no person is
required to respond to nor shall a person be subject to a penalty for
failure to comply with a collection of information subject to the
requirements of the Paperwork Reduction Act unless that collection of
information displays a currently valid OMB Control Number. This interim
rule contains five new collections of information subject to the
requirements of the Paperwork Reduction Act, 44 U.S.C. ch. 35, which
were cleared by the Office of Management and Budget. The new
``Multipurpose Application'' is cleared under OMB Control Number 0694-
0088, the ``Special Comprehensive License'' is cleared under OMB
Control Number 0694-0089, five year record retention is cleared under
OMB Control Number 0694-0096, the one-time report on calculations under
the de minimis rule for software and technology is cleared under OMB
Control Number 0694-0101, requests for appointment of a Technical
Advisory Committee is cleared under OMB Control Number 0694-0100,
miscellaneous activities are cleared under OMB Control Number and 0694-
0102. All other collections of information contained in the rulemaking
have been previously approved by OMB. Supplement No. 2 to part 730 of
the EAR contains a table of the current OMB Control Numbers. The public
reporting burdens for the new collections of information are estimated
to average 45 minutes for the Multipurpose Application, between 20 and
40 hours for the Special Comprehensive License, 10 seconds for
recordkeeping, 25 hours for the one-time report, 5 hours for requests
for appointment of Technical Advisory Committee, and 5 hours for
petitions covered under miscellaneous activities. These estimates
include the time for reviewing instructions, searching existing data
sources, gathering and maintaining the data needed, and completing and
reviewing the collections of information. Send comments regarding these
burden estimates or any other aspect of these collections of
information, including suggestions for reducing the burden, to Larry E.
Christensen, Director, Regulatory Policy Division, Bureau of Export
Administration, U.S. Department of Commerce, Washington, D.C. 20230.
3. For purposes of Executive Order 12612, this interim rule does
not contain policies with Federalism implications sufficient to warrant
preparation of a Federalism Assessment.
4. Pursuant to authority at 5 U.S.C. 553(a)(1) and section 13(a) of
the Export Administration Act, 50 U.S.C. 2401-2420 et seq., though
prior notice and an opportunity for public comment are provided, such
procedures are not required for this regulatory action. As such, no
Initial or Final Regulatory Flexibility Analysis is required under
sections 3 and 4 of the Regulatory Flexibility Act, 5 U.S.C. 603(a) and
604(a), and none has been prepared.
5. Although the Export Administration Act expired on August 20,
1994, the President invoked his authority under the International
Emergency Economic Powers Act, through Executive Order 12924, August
19, 1994, as extended on August 15, 1995, and determined that, to the
extent permitted by law, the provisions of the Export Administration
Act shall be extended so as to continue in full force and effect and
amend, as necessary, the export control system previously implemented,
as the Export Administration Regulations, pursuant to the Export
Administration Act.
However, because of the importance of the issues raised by these
regulations, this rule is issued in interim form and comments will be
considered in the development of final regulations. Accordingly, the
Department encourages interested persons who wish to comment to do so
at the earliest possible time to permit the fullest consideration of
their views.
The period for submission of comments will close May 24, 1996. The
Department will consider all comments received before the close of the
comment period in developing final regulations. Comments received after
the end of the comment period will be considered if possible, but their
consideration cannot be assured. The Department will not accept public
comments accompanied by a request that a part or all of the material be
treated confidentially because of its business proprietary nature or
for any other reason. The Department will return such comments and
materials to the person submitting the comments and will not consider
them in the development of final regulations. All public comments on
these regulations will be a matter of public record and will be
available for public inspection and copying. In the interest of
accuracy and completeness, the Department requires comments in written
form.
Oral comments must be followed by written memoranda, which will
also be a matter of public record and will be available for public
review and copying. Communications from agencies of the United States
Government or foreign governments will not be made available for public
inspection.
The public record concerning these regulations will be maintained
in the Bureau of Export Administration Freedom of Information Records
Inspection Facility, Room 4525, Department of Commerce, 14th Street and
Pennsylvania Avenue, N.W., Washington, DC 20230. Records in this
facility, including written public comments and memoranda summarizing
the substance of oral communications, may be inspected and copied in
accordance with regulations published in Part 4 of Title 15 of the Code
of Federal Regulations.
[[Page 12734]]
Information about the inspection and copying of records at the facility
may be obtained from Margaret Cornejo, Bureau of Export Administration
Freedom of Information Officer, at the above address or by calling
(202) 482-5653.
List of Subjects
15 CFR Part 730
Administrative practice and procedure, Advisory committees,
Exports, Foreign trade, Reporting and recordkeeping requirements,
Strategic and critical materials.
15 CFR Part 732
Administrative practice and procedure, Exports, Foreign trade,
Reporting and recordkeeping requirements.
15 CFR Part 734
Administrative practice and procedure, Exports, Foreign trade.
15 CFR Part 736
Exports, Foreign trade.
15 CFR Part 738
Exports, Foreign trade.
15 CFR Part 740
Administrative practice and procedure, Exports, Foreign trade,
Reporting and recordkeeping requirements.
15 CFR Part 742
Exports, Foreign trade.
15 CFR Part 744
Exports, Foreign trade, Reporting and recordkeeping requirements.
15 CFR Part 746
Embargoes, Exports, Foreign trade, Reporting and recordkeeping
requirements.
15 CFR Part 748
Administrative practice and procedure, Exports, Foreign trade,
Reporting and recordkeeping requirements.
15 CFR Part 750
Administrative practice and procedure, Exports, Foreign trade,
Reporting and recordkeeping requirements.
15 CFR Part 752
Administrative practice and procedure, Exports, Foreign trade,
Reporting and recordkeeping requirements.
15 CFR Part 754
Exports, Foreign trade, Forests and forest products, Petroleum,
Reporting and recordkeeping requirements.
15 CFR Part 756
Administrative practice and procedure, Exports, Foreign trade,
Penalties.
15 CFR Part 758
Administrative practice and procedure, Exports, Foreign trade,
Reporting and recordkeeping requirements.
15 CFR Part 760
Boycotts, Exports, Foreign trade, Reporting and recordkeeping
requirements.
15 CFR Part 762
Administrative practice and procedure, Business and industry,
Confidential business information, Exports, Foreign trade, Reporting
and recordkeeping requirements.
15 CFR Part 764
Administrative practice and procedure, Exports, Foreign trade, Law
enforcement, Penalties.
15 CFR Part 766
Administrative practice and procedure, Confidential business
information, Exports, Foreign trade, Law enforcement, Penalties.
15 CFR Part 768
Administrative practice and procedure, Exports, Foreign trade,
Reporting and recordkeeping requirements.
15 CFR Part 770
Exports, Foreign trade.
15 CFR Part 772
Exports, Foreign trade.
15 CFR Part 774
Exports, Foreign trade.
Under authority set forth at 50 U.S.C. 2401 et seq., and for the
reasons set forth in the preamble, Subchapter C, Chapter 7 of Title 15,
Code of Federal Regulations is amended as follows:
1. In Subchapter C, the following parts are redesignated with an A
as set forth in the table below:
------------------------------------------------------------------------
Old part New part
------------------------------------------------------------------------
768....................................... 768A
769....................................... 769A
770....................................... 770A
771....................................... 771A
772....................................... 772A
773....................................... 773A
774....................................... 774A
775....................................... 775A
776....................................... 776A
777....................................... 777A
778....................................... 778A
779....................................... 779A
785....................................... 785A
786....................................... 786A
787....................................... 787A
788....................................... 788A
789....................................... 789A
790....................................... 790A
791....................................... 791A
799....................................... 799A
------------------------------------------------------------------------
2. All internal references appearing in newly designated parts 768A
through 779A, 785A through 791A, and 799A are revised as set forth in
the redesignation table set forth above.
3. Effective November 1, 1996, the newly designated parts are
removed.
4. Newly designated Sec. 771A.25(d) is removed effective March 25,
1996.
5. Parts 730, 732, 734, 736, 738, 740, 742, 744, 746, 748, 750,
752, 754, 756, 758, 760, 762, 764, 766, 768, 770, 772, and 774 are
added to read as follows:
PART 730--GENERAL INFORMATION
Sec.
730.1 What these regulations cover.
730.2 Statutory authority.
730.3 Dual use exports.
730.4 Other control agencies and departments.
730.5 Coverage of more than exports.
730.6 Control purposes.
730.7 License requirements and exceptions.
730.8 How to proceed and where to get help.
730.9 How the Bureau of Export Administration is organized.
730.10 Advisory information.
Supplement No. 1 to Part 730--Information Collection Requirements Under
the Paperwork Reduction Act: OMB Control Numbers
Supplement No. 2 to Part 730--Technical Advisory Committees
Supplement No. 3 to Part 730--Other U.S. Government Departments and
Agencies With Export Control Responsibilities
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
10 U.S.C. 7420; 10 U.S.C. 7430(e); 18 U.S.C. 2510 et seq.; 22 U.S.C.
287c; 22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; Sec. 201, Pub. L. 104-
58, 109 Stat. 557 (30 U.S.C. 185(s)); 30 U.S.C. 185(u); 42 U.S.C.
2139a; 42 U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C. app. 466c; 50
U.S.C. app. 5; E.O. 11912, 3 CFR, 1976 Comp., p. 114; E.O. 12002, 3
CFR, 1977 Comp., p. 133; E.O. 12058, 3 CFR, 1978 Comp., p. 179; E.O.
12214, 3 CFR, 1980 Comp., p. 256; E.O. 12851, 3 CFR, 1993 Comp., p.
608; E.O. 12867, 3 CFR, 1993 Comp., p. 649; E.O. 12918, 3 CFR, 1994
Comp., p. 899; E.O. 12924, 3 CFR, 1994 Comp., p. 917; E.O. 12938, 3
CFR, 1994 Comp., p. 950; Notice of
[[Page 12735]]
August 15, 1995 (60 FR 42767, August 17, 1995); E.O. 12981, 60 FR
62981.
Sec. 730.1 What these regulations cover.
In this part, references to the Export Administration Regulations
(EAR) are references to 15 CFR chapter VII, subchapter C. The EAR are
issued by the United States Department of Commerce, Bureau of Export
Administration (BXA) under laws relating to the control of certain
exports, reexports, and activities. In addition, the EAR implement
antiboycott law provisions requiring regulations to prohibit specified
conduct by United States persons that has the effect of furthering or
supporting boycotts fostered or imposed by a country against a country
friendly to United States. Supplement No. 1 to part 730 lists the
control numbers assigned to information collection requirements under
the EAR by the Office of Management and Budget pursuant to the
Paperwork Reduction Act of 1995.
Sec. 730.2 Statutory authority.
The EAR have been designed primarily to implement the Export
Administration Act of 1979, as amended, 50 U.S.C. app. 2401-2420 (EAA).
There are numerous other legal authorities underlying the EAR. These
are listed in the Federal Register documents promulgating the EAR and
at the beginning of each part of the EAR in the Code of Federal
Regulations (CFR). From time to time, the President has exercised
authority under the International Emergency Economic Powers Act with
respect to the EAR (50 U.S.C. 1701-1706 (IEEPA)). The EAA is not
permanent legislation, and when it has lapsed, Presidential executive
orders under IEEPA have directed and authorized the continuation in
force of the EAR.
Sec. 730.3 Dual use exports.
The convenient term ``dual use'' is sometimes used to distinguish
the types of items covered by the EAR from those that are covered by
the regulations of certain other U.S. government departments and
agencies with export licensing responsibilities. In general, the term
dual use serves to distinguish EAR-controlled items that can be used
both in military and other strategic uses (e.g., nuclear) and
commercial applications. In general, the term dual use serves to
distinguish EAR-controlled items that can be used both in military and
other strategic uses and in civil applications from those that are
weapons and military related use or design and subject to the controls
of the Department of State or subject to the nuclear related controls
of the Department of Energy or the Nuclear Regulatory Commission. Note,
however, that although the short-hand term dual use may be employed to
refer to the entire scope of the EAR, the EAR also apply to some items
that have solely civil uses.
Sec. 730.4 Other control agencies and departments.
In addition to the departments and agencies mentioned in Sec. 730.3
of this part, other departments and agencies have jurisdiction over
certain narrower classes of exports and reexports. These include the
Department of Treasury's Office of Foreign Assets Control (OFAC), which
administers controls against certain countries that are the object of
sanctions affecting not only exports and reexports, but also imports
and financial dealings. For your convenience, Supplement No. 3 to part
730 identifies other departments and agencies with regulatory
jurisdiction over certain types of exports and reexports. This is not a
comprehensive list, and the brief descriptions are only generally
indicative of the types of controls administered and/or enforced by
each agency.
Sec. 730.5 Coverage of more than exports.
The core of the export control provisions of the EAR concerns
exports from the United States. You will find, however, that some
provisions give broad meaning to the term ``export'', apply to
transactions outside of the United States, or apply to activities other
than exports.
(a) Reexports. Commodities, software, and technology that have been
exported from the United States are generally subject to the EAR with
respect to reexport. Many such reexports, however, may go to many
destinations without a license or will qualify for an exception from
licensing requirements.
(b) Foreign products. In some cases, authorization to export
technology from the United States will be subject to assurances that
items produced abroad that are the direct product of that technology
will not be exported to certain destinations without authorization from
BXA.
(c) Scope of ``exports''. Certain actions that you might not regard
as an ``export'' in other contexts do constitute an export subject to
the EAR. The release of technology to a foreign national in the United
States through such means as demonstration or oral briefing is deemed
an export. Other examples of exports under the EAR include the return
of foreign equipment to its country of origin after repair in the
United States, shipments from a U.S. foreign trade zone, and the
electronic transmission of non-public data that will be received
abroad.
(d) U.S. person activities. To counter the proliferation of weapons
of mass destruction, the EAR restrict the involvement of ``United
States persons'' anywhere in the world in exports of foreign-origin
items, or in providing services or support, that may contribute to such
proliferation.
Sec. 730.6 Control purposes.
The export control provisions of the EAR are intended to serve the
national security, foreign policy, nonproliferation, and short supply
interests of the United States and, in some cases, to carry out its
international obligations. Some controls are designed to restrict
access to dual use items by countries or persons that might apply such
items to uses inimical to U.S. interests. These include controls
designed to stem the proliferation of weapons of mass destruction and
controls designed to limit the military and terrorism support
capability of certain countries. The effectiveness of many of the
controls under the EAR is enhanced by their being maintained as part of
multilateral control arrangements. Multilateral export control
cooperation is sought through arrangements such as the Nuclear
Suppliers Group, the Australia Group, and the Missile Technology
Control Regime. The EAR also include some export controls to protect
the United States from the adverse impact of the unrestricted export of
commodities in short supply.
Sec. 730.7 License requirements and exceptions.
A relatively small percentage of exports and reexports subject to
the EAR require an application to BXA for a license. Many items are not
on the Commerce Control List (CCL) (Supplement No. 1 to Sec. 774.1 of
the EAR), or, if on the CCL, require a license to only a limited number
of countries. Other transactions may be covered by one or more of the
License Exceptions in the EAR. In such cases no application need be
made to BXA.
Sec. 730.8 How to proceed and where to get help.
(a) How the EAR are organized. The Export Administration
Regulations (EAR) are structured in a logical manner. In dealing with
the EAR you may find it helpful to be aware of the overall organization
of these regulations. In order to determine what the rules are and what
you need to do, review the titles and the introductory sections of the
parts of the EAR.
[[Page 12736]]
(1) How do you go about determining your obligations under the EAR?
Part 732 of the EAR provides steps you may follow to determine your
obligations under the EAR. You will find guidance to enable you to tell
whether or not your transaction is subject to the EAR and, if it is,
whether it qualifies for a License Exception or must be authorized
through issuance of a license.
(2) Are your items or activities subject to the EAR at all? Part
734 of the EAR defines the items and activities that are subject to the
EAR. Note that the definition of ``items subject to the EAR'' includes,
but is not limited to, items listed on the Commerce Control List in
part 774 of the EAR.
(3) If subject to the EAR, what do the EAR require? Part 736 of the
EAR lists all the prohibitions that are contained in the EAR. Note that
certain prohibitions (General Prohibitions One through Three) apply to
items as indicated on the CCL, and others (General Prohibitions Four
through Ten) prohibit certain activities and apply to all items subject
to the EAR unless otherwise indicated.
(4) Do you need a license for your item or activity? What policies
will BXA apply if you do need to submit license application? The EAR
have four principal ways of describing license requirements:
(i) The EAR may require a license to a country if your item is
listed on the CCL and the Country Chart in part 738 of the EAR tells
that a license is required to that country. Virtually all Export
Control Classification Numbers (ECCN) on the CCL are covered by the
Country Chart in part 738 of the EAR. That part identifies the limited
number of entries that are not included on the Chart. These ECCNs will
state the specific countries that require a license or refer you to a
self-contained section, i.e., Short Supply in part 754 of the EAR, or
Embargoes in part 746 of the EAR. If a license is required, you should
consult part 740 of the EAR which describes the License Exception that
may be available for items on the CCL. Part 742 of the EAR describes
the licensing policies that BXA will apply in reviewing an application
you file. Note that part 754 of the EAR on short supply controls and
part 746 on embargoes are self-contained parts that include the
available exceptions and licensing policy.
(ii) A license requirement may be based on the end-use or end-user
in a transaction, primarily for proliferation reasons. Part 744 of the
EAR describes such requirements and relevant licensing policies and
includes both restrictions on items and restrictions on the activities
of U.S. persons.
(iii) A license is required for virtually all exports to embargoed
destinations, such as Cuba. Part 746 of the EAR describes all the
licensing requirements, license review policies and License Exceptions
that apply to such destinations. If your transaction involves one of
these countries, you should first look at this part. This part also
describes controls that may be maintained under the EAR to implement UN
sanctions.
(iv) In addition, under Secs. 736.2(b)(9) and (10) of the EAR, you
may not engage in a transaction knowing a violation is about to occur
or violate any orders, terms, and conditions under the EAR. Part 764 of
the EAR describes prohibited transactions with a person denied export
privileges or activity that violates the terms or conditions of a
denial order.
(5) How do you file a license application and what will happen to
the application once you do file it? What if you need authorization for
multiple transactions? Parts 748 and 750 of the EAR provide information
on license submission and processing. Part 752 of the EAR provides for
a Special Comprehensive License that authorizes multiple transactions.
If your application is denied, part 756 of the EAR provides rules for
filing appeals.
(6) How do you clear shipments with the U.S. Customs Service? Part
758 of the EAR describes the requirements for clearance of exports.
(7) Where do you find the rules on restrictive trade practices and
boycotts? Part 760 of the EAR deals with restrictive trade practices
and boycotts.
(8) Where are the rules on recordkeeping and enforcement? Part 762
of the EAR sets out your recordkeeping requirements, and parts 764 and
766 of the EAR deal with violations and enforcement proceedings.
(9) What is the effect of foreign availability? Part 768 of the EAR
provides rules for determining foreign availability of items subject to
controls.
(10) Do the EAR provide definitions and interpretations? Part 770
of the EAR contains interpretations and part 772 of the EAR lists
definitions used.
(b) Why the EAR are so detailed. Some people will find the great
length of the EAR and their extensive use of technical terms
intimidating. BXA believes, however, that such detail and precision can
and does serve the interests of the public. The detailed listing of
technical parameters in the CCL establishes precise, objective
criteria. This should, in most cases, enable you to ascertain the
appropriate control status. Broader, more subjective criteria would
leave exporters and reexporters more dependent upon interpretations and
rulings by BXA officials. Moreover, much of the detail in the CCL is
derived from multilaterally adopted lists, and the specificity serves
to enhance the uniformity and effectiveness of international control
practices and to promote a ``level playing field''. The detailed
presentation of such elements as licensing and export clearance
procedures enables you to find in one place what you need to know to
comply with pertinent requirements. Of special importance is the
detailed listing of License Exception criteria, as these will enable
you to determine quickly, and with confidence, that you may proceed
with a transaction without delay. Finally, some of the detail results
from the need to draft the EAR with care in order to avoid loop-holes
and to permit effective enforcement.
(c) Where to get help. Throughout the EAR you will find information
on offices you can contact for various purposes and types of
information. General information including; assistance in understanding
the EAR, information on how to obtain forms, electronic services,
publications, and information on training programs offered by BXA, is
available from the Office of Exporter Services at the following
locations:
Exporter Counselling Division, U.S. Department of Commerce, 14th and
Pennsylvania Avenue, N.W., Room H1099D, Washington, D.C., 20230,
Telephone number: (202) 482-4811, Facsimile number: (202) 482-3617
and
Western Regional Office, U.S. Department of Commerce, 3300 Irvine
Avenue, Suite 345, Newport Beach, California 92660, Telephone
number: (714) 660-0144, Facsimile number: (714) 660-9347
and
Santa Clara Branch Office, U.S. Department of Commerce, 5201 Great
America Parkway, Suite 333, Santa Clara, California 95054, Telephone
number: (408) 748-7450, Facsimile number: (408) 748-7470.
Sec. 730.9 How the Bureau of Export Administration is organized.
Functionally, the Bureau of Export Administration is divided into
two branches, Export Administration and Export Enforcement. Also, BXA
manages a number of Technical Advisory Committees consisting of
industry and government representatives which advise and assist BXA and
other agencies with respect to actions designed to implement the EAR.
(a) Export Administration. Export Administration implements and
[[Page 12737]]
administers the export controls reflected in the EAR. Export
Administration consists of five offices located in Washington D.C. and
two field offices in California under the supervision of the Assistant
Secretary for Export Administration:
(1) The Office of Nuclear and Missile Technology Controls is
responsible for policy and technical issues and license applications
related to the Nuclear Suppliers Group and the Missile Technology
Control Regime. This office has responsibility for items associated
with those regimes, and missile and nuclear related exports and
reexports subject to the Enhanced Proliferation Control Initiative.
(2) The Office Chemical/Biological Controls and Treaty Compliance
is responsible for implementing multilateral export controls under the
Australia Group. This office has licensing responsibility for items
associated with the Australia Group and related exports and reexports
subject to the Enhanced Proliferation Control Initiative.
(3) The Office of Strategic Trade and Foreign Policy Controls is
responsible for implementing multilateral export controls dealing with
conventional arms and related dual use items. This office is also
responsible for computer export control policies, and implements U.S.
foreign policy controls (e.g., crime control, anti-terrorism, and
regional stability). It also has licensing responsibility for items
controlled for national security and foreign policy reasons.
(4) The Office of Exporter Services is responsible for the Special
Comprehensive License, processing and routing all license applications,
and preparing responses to requests for advisory opinions and commodity
classifications. This office also provides counselling to exporters and
reexporters, conducts educational seminars for the business community,
maintains the Export Administration Regulations, and coordinates the
operations of two field offices listed in Sec. 730.8(c) of this part.
(5) The Office of Strategic Industries and Economic Security
implements programs to ensure the continued health of the U.S. defense
industrial base, facilitating diversification of U.S. defense related
industries into civilian markets, and promoting the conversion of
military enterprises. This office is also responsible for analyzing the
economic impact of U.S. export controls on industrial competitiveness.
(b) Export Enforcement. Export Enforcement implements the
enforcement provisions of the EAR, including part 760 of the EAR
(Restrictive Trade Practices and Boycotts). This office also conducts
outreach programs to assist members of the public in understanding
their obligation under EAR. The Office of Export Enforcement is
organized into three offices under the supervision of the Assistant
Secretary for Export Enforcement.
(1) The Office of Export Enforcement (OEE) is comprised of an
office in Washington, D.C. and eight field offices. OEE is staffed with
criminal investigators and analysts. This office investigates
allegations of violations and supports administrative and criminal
enforcement proceedings. The addresses and telephone numbers of the
eight field offices are listed in Sec. 764.5(c)(7) of the EAR.
(2) The Office of Enforcement Support (OES) is located in
Washington, D.C. OES supports BXA's preventive enforcement efforts,
including conducting pre-license checks and post-shipment
verifications. OES also provides administrative and analytical support
for OEE.
(3) The Office of Antiboycott Compliance administers and enforces
the provisions of part 760 of the EAR (Restrictive Trade Practices and
Boycotts). It investigates and prepares cases on alleged violations of
this part.
(c) Technical Advisory Committees. The Technical Advisory
Committees (TACs) provide advice and assistance to BXA from U.S.
industry regarding the creation and implementation of export controls.
For further information regarding establishment of TACs and other
information, see Supplement No. 2 to part 730. Existing TACs include
the following:
(1) The Computer Systems Technical Advisory Committee;
(2) The Electronics Technical Advisory Committee;
(3) The Materials Technical Advisory Committee;
(4) The Materials Processing Equipment Technical Advisory
Committee;
(5) The Regulations and Procedures Technical Advisory Committee;
(6) The Sensors Technical Advisory Committee;
(7) The Telecommunications Equipment Technical Advisory Committee;
and
(8) The Transportation and Related Equipment Technical Advisory
Committee.
Sec. 730.10 Advisory information.
The general information in this part is just that--general. To
achieve brevity, so as to give you a quick overview, the information in
this part is selective, incomplete, and not expressed with regulatory
precision. The controlling language is the language of succeeding parts
of the EAR and of any other laws or regulations referred to or
applicable. The content of this part is not to be construed as
modifying or interpreting any other language or as in any way, limiting
the authority of BXA, any of its components or any other government
department or agency. You should not take any action based solely on
what you read in this part.
Supplement No. 1 to Part 730--Information Collection Requirements
Under the Paperwork Reduction Act: OMB Control Numbers
This Supplement lists the control numbers assigned to the
information collection requirements for the Bureau of Export
Administration by the Office of Management and Budget (OMB), pursuant
to the Paperwork Reduction Act of 1995. This Supplement complies with
the requirements of section 3506(c)(1)(B)(i) of the Paperwork Reduction
Act requiring agencies to display current control numbers assigned by
the Director of OMB for each agency information collection requirement.
------------------------------------------------------------------------
15 CFR part or section where
Current OMB control No. collections of information
are identified or described
------------------------------------------------------------------------
0694-0001................................. Sec. 748.12(d) of the EAR.
0694-0004................................. Part 768 of the EAR.
0694-0008................................. Sec. 748.13, Supplement No.
5 to part 748 of the EAR.
0694-0009................................. Sec. 748.10(e) of the EAR.
0694-0012................................. Part 760 and Sec. 762.2(b)
of the EAR.
0694-0013................................. Part 774 of the EAR.
0694-0015................................. Sec. 773.3 of the EAR.
0694-0016................................. Secs. 748.13 and 762.2(b)
of the EAR.
0694-0017................................. Sec. 748.10 of the EAR.
0694-0021................................. Secs. 748.11 and 762.2(b)
of the EAR.
0694-0023................................. Secs. 740.3(d) and 740.4(c)
of the EAR.
0694-0025................................. Secs. 754.4 and 762.2(b) of
the EAR.
0694-0026................................. Sec. 754.3 of the EAR.
0694-0027................................. Sec. 754.2 of the EAR.
0694-0029................................. Sec. 740.4(a) of the EAR.
0694-0030................................. Supplement No. 2 to part
748, paragraph (p) of the
EAR.
0694-0031................................. Sec. 750.9 of the EAR.
0694-0032................................. Sec. 748.4(d)(2) of the
EAR.
0694-0033................................. Secs. 740.7(b) and 762.2(b)
of the EAR.
0694-0038................................. Sec. 758.6(e)(2) of the
EAR.
0694-0040................................. Secs. 758.5(c)(2) and 758.8
of the EAR.
0694-0047................................. Supplement No. 2 to part
748, paragraph (o)(2) of
the EAR.
0694-0048................................. Sec. 748.3 of the EAR.
0694-0050................................. Sec. 752.5(c)(5) of the
EAR.
[[Page 12738]]
0694-0051................................. Sec. 750.10 of the EAR.
0694-0058................................. Secs. 762.2(b) and 764.5 of
the EAR.
0694-0064................................. Secs. 748.9 and 762.2(b) of
the EAR.
0694-0065................................. Sec. 754.4(c) of the EAR of
the EAR.
0694-0073................................. Sec. 742.12, Supplement No.
3 to part 742, and Sec.
762.2(b) of the EAR.
0694-0078................................. Supplement No. 1 to part 774
of the EAR.
0694-0086................................. Supplement No. 1 to part 774
of the EAR.
0694-0088................................. Parts 746, 748, and 752;
Sec. 762.2(b) of the EAR.
0694-0089................................. Part 752 and Sec. 762.2(b)
of the EAR.
0694-0093................................. Secs. 748.10 and 762.2(b)
of the EAR.
0694-0094................................. Part 758 of the EAR of the
EAR.
0694-0095................................. Secs. 740.7(a)(3)(ii) and
758.1(d) of the EAR.
0694-0096................................. Part 760, Sec. 762.6(a) of
the EAR.
0694-0097................................. Secs. 752.15(b), 758.6, and
762.2(b) of the EAR.
0694-0102................................. Secs. 754.6 and 754.7 of
the EAR.
0694-0101................................. Sec. 734.4 of the EAR.
0694-0100................................. Supplement No. 1 to part
730.
0607-0001................................. Sec. 758.2(m) of the EAR.
0607-0018................................. Secs. 740.1(d),
740.3(a)(3), 752.7(b), Sec.
752.15(a) of the EAR.
Secs. 754.2(h) and (i),
754.4(c) 758.1, Secs.
758.2(m) and 758.3 of the
EAR.
0607-0152................................. Secs. 740.1(d),
740.3(a)(3), 752.7(b),
Secs. 752.15(a) of the
EAR.
Secs. 754.2(h) and (i),
754.4(c), 758.1, Secs.
758.2(m), and 758.3 of the
EAR.
------------------------------------------------------------------------
Supplement No. 2 to Part 730--Technical Advisory Committees
(a) Purpose. The purpose of this Supplement is to describe the
procedures and criteria for the establishment and operation of
Technical Advisory Committees.
(b) Technical advisory committees. Any producer of articles,
materials, or supplies, including technology, software, and other
information, that are subject to export controls, or are being
considered for such controls because of their significance to the
national security of the United States, may request the Secretary of
Commerce to establish a technical advisory committee, under the
provisions of section 5(h) of the Export Administration Act of 1979,
as amended (EAA) to advise and assist the Department of Commerce and
other appropriate U.S. Government agencies or officials with respect
to questions involving technical matters; worldwide availability and
actual utilization of production technology; licensing procedures
that affect the level of export controls applicable to a clearly
defined grouping of articles, materials, or supplies, including
technology, software, or other information; and exports and
reexports subject to all controls that the United States maintains
including proposed revisions of any such controls. If producers of
articles, materials, or supplies, including technology, software,
and other information, that are subject to export controls because
of their significance to the national security of the United States,
wish a trade association or other representative to submit a written
request on their behalf for the appointment to a TAC, such request
shall be submitted in accordance with paragraph (b)(4) of this
Supplement.
(1) Form and substance of requests. Each request for the
appointment of a TAC shall be submitted in writing to: Assistant
Secretary for Export Administration, P.O. Box 273, Washington, DC
20044.
The request shall include:
(i) A description of the articles, materials, or supplies
including technology and software, in terms of a clear, cohesive
grouping (citing the applicable Export Control Classification
Numbers where practical);
(ii) A statement of the reasons for requesting the appointment
of a TAC; and
(iii) Any information in support of any contention that may be
made that the request meets the criteria described in paragraph
(b)(2) of this Supplement.
(2) Consideration of request for establishment of a TAC. The
Department of Commerce will review all requests for the
establishment of a TAC to determine if the following criteria are
met:
(i) That a substantial segment of the industry producing the
specified articles, materials, or supplies including technology
desires such a committee; and
(ii) That the evaluation of such articles, materials, or
supplies including technology and software for export control
purposes is difficult because of questions involving technical
matters, worldwide availability and actual utilization of production
and software technology, or licensing procedures.
(3) Requests by a substantial segment of an industry. In
determining whether or not a substantial segment of any industry has
requested the appointment of a TAC, the Department of Commerce will
consider:
(i) The number of persons or firms requesting the establishment
of a TAC for a particular grouping of commodities, software and
technology in relation to the total number of U.S. producers of such
items; and
(ii) The volume of annual production by such persons or firms of
each item in the grouping in relation to the total U.S. production.
Generally, a substantial segment of an industry (for purposes of
this Supplement) shall consist of:
(A) Not less than 30 percent of the total number of U.S.
producers of the items concerned; or
(B) Three or more U.S. producers who produce a combined total of
not less than 30 percent of the total U.S. annual production, by
dollar value of the items concerned; or
(C) Not less than 20 percent of the total number of U.S.
producers of the items concerned, provided that the total of their
annual production thereof is not less than 20 percent of the total
U.S. annual production, by dollar value.
(iii) If it is determined that a substantial segment of the
industry concerned has requested the establishment of a TAC
concerning a specific grouping of items that the Department of
Commerce determines difficult to evaluate for export control
purposes, BXA will establish and use the TAC requested.
(4) Requests from trade associations or other representatives.
Requests from trade associations or other representatives of U.S.
producers for the establishment of a TAC must comply with the
provisions of paragraphs (b) (1) through (3) of this Supplement. In
addition, in order to assist BXA in determining whether the criteria
described in paragraph (b)(3) of this Supplement have been met, a
trade association or other representative submitting a request for
the establishment of a TAC should include the following information:
(i) The total number of firms in the particular industry;
(ii) The total number of firms in the industry that have
authorized the trade association or other representative to act in
their behalf in this matter;
(iii) The approximate amount of total U.S. annual production by
dollar value of the items concerned produced by those firms that
have authorized the trade association or other representative to act
in their behalf; and
(iv) A description of the method by which authorization to act
on behalf of these producers was obtained.
(5) Nominations for membership on TACs. When the Department of
Commerce determines that the establishment of a TAC is warranted, it
will request nominations for membership on the committee among the
producers of the items and from any other sources that may be able
to suggest well-qualified nominees.
(6) Selection of industry members of committee. Industry members
of a TAC will be selected by the Department of Commerce from a list
of the nominees who have indicated their availability for service on
the committee. To the extent feasible, the Department of Commerce
will select a committee balanced to represent all significant facets
of the industry involved, taking into consideration such factors as
the size of the firms, their geographical distribution, and their
product lines. No industry representative shall serve on a TAC for
more than four consecutive years. The membership of a member who is
absent from four consecutive meetings shall be terminated.
(7) Government members. Government members of a TAC will be
selected by the Department of Commerce from the agencies having an
interest in the subject matter concerned.
(8) Invitation to serve on committee. Invitations to serve on a
TAC will be sent by letter to the selected nominees.
(9) Election of Chair. The Chair of each TAC shall be elected by
a vote of the majority of the members of the committee present and
voting.
(c) Charter. (1) No TAC established pursuant to this Supplement
shall meet or take any action until an advisory committee charter
has been filed with the Assistant
[[Page 12739]]
Secretary for Export Administration of the Department of Commerce
and with the standing committees of the Senate and of the House of
Representatives having legislative jurisdiction over the Department.
Such charter shall contain the following information:
(i) The committee's official designation;
(ii) The committee's objectives and the scope of its activities;
(iii) The period of time necessary for the committee to carry
out its purposes;
(iv) The agency or official to whom the committee reports;
(v) The agency responsible for providing the necessary support
for the committee;
(vi) A description of the duties for which the committee is
responsible, and, if such duties are not solely advisory, a
specification of the authority for such functions;
(vii) The estimated annual operating costs in dollars and years
for such committee;
(viii) The estimated number and frequency of committee meetings;
(ix) The committee's termination date, if less than two years
from the date of the committee's establishment; and
(x) The date the charter is filed.
(d) Meetings. (1) Each TAC established under the provisions of
the EAA and paragraph (b) of this Supplement shall meet at least
once every three months at the call of its Chair unless it is
specifically determined by the Chair, in consultation with other
members of the committee, that a particular meeting is not
necessary.
(2) No TAC may meet except at the call of its Chair.
(3) Each meeting of a TAC shall be conducted in accordance with
an agenda approved by a designated Federal government employee.
(4) No TAC shall conduct a meeting in the absence of a
designated Federal government employee who shall be authorized to
adjourn any advisory committee meeting, whenever the Federal
government employee determines adjournment to be in the public
interest.
(e) Public notice. Notice to the public of each meeting of a TAC
will be issued at least 20 days in advance and will be published in
the Federal Register. The notice will include the time and place of
the meeting and the agenda.
(f) Public attendance and participation. (1) Any member of the
public who wishes to do so may file a written statement with any TAC
before or after any meeting of a committee.
(2) A request for an opportunity to deliver an oral statement
relevant to matters on the agenda of a meeting of a TAC will be
granted to the extent that the time available for the meeting
permits. A committee may establish procedures requiring such persons
to obtain advance approval for such participation.
(3) Attendance at meetings of TACs will be open to the public
unless it is determined pursuant to section 10(d) of the Federal
Advisory Committee Act to be necessary to close all, or some
portion, of the meeting to the public. A determination that a
meeting or portion thereof be closed to the public may be made if
all or a specific portion of a meeting of a TAC is concerned with
matters described in section 552(b) of Title 5, U.S.C.
(4) Participation by members of the public in open TAC meetings
or questioning of committee members or other participants shall not
be permitted except in accordance with procedures established by the
committee.
(5) Every effort will be made to accommodate all members of the
public who wish to attend.
(g) Minutes. (1) Detailed minutes of each meeting of each TAC
will be kept and will contain a record of the persons present, a
complete and accurate description of the matters discussed and
conclusions reached, and copies of all reports received, issued, or
approved by the TAC.
(2) The accuracy of all the minutes will be certified to by the
TAC Chair.
(h) Records. (1) Subject to section 552 of Title 5, U.S.C. and
Department of Commerce Administrative Order 205-12, ``Public
Information,'' and ``Public Information'' regulations issued by the
Department of Commerce that are contained in 15 CFR part 4, Subtitle
A, the records, reports, transcripts, minutes, appendices, working
papers, draft, studies, agenda, or other documents that were made
available to or prepared for or by each TAC will be available for
public inspection and copying.
(2) Each TAC will prepare once each year a report describing its
membership, functions, activities, and such related matters as would
be informative to the public consistent with the policy of section
552(b) of Title 5, U.S.C.
(3)(i) Requests for records should be addressed to: Bureau of
Export Administration, Freedom of Information, Records Inspection
Facility, U.S. Department of Commerce, Room 4513, Washington, DC
20230, Telephone (202) 482-2593.
(ii) Rules concerning the use of the Records Inspection Facility
are contained in 15 CFR part 4, Subtitle A, or may be obtained from
this facility.
(i) Compensation. If the Department of Commerce deems it
appropriate, a member of a TAC may be reimbursed for travel,
subsistence, and other necessary expenses incurred in connection
with the member's duties.
(j) Scope of advisory committee functions. All TACs are limited
to the functions described in their charters.
(k) Duration of committees. Each TAC will terminate at the end
of two years from the date the committee was established or two
years from the effective date of its most recent extension,
whichever is later. Committees may be continued only for successive
two-year periods by appropriate action taken by the authorized
officer of the Department of Commerce prior to the date on which
such advisory committee would otherwise terminate. TACs may be
extended or terminated only after consultation with the committee.
(l) Miscellaneous. (1) TACs established in accordance with
paragraph (b) of this supplement must conform to the provisions of
the Federal Advisory Committee Act (Pub. L. 92-463), Office of
Management and Budget Circular A-63 (Revision of March 1974),
``Advisory Committee Management,'' Department of Commerce
Administrative Order 205-12, ``Public Information,'' the applicable
provisions of the EAA, and any other applicable Department of
Commerce regulations or procedures affecting the establishment or
operation of advisory committees.
(2) Whenever the Department of Commerce desires the advice or
assistance of a particular segment of an industry with respect to
any export control problem for which the service of a TAC, as
described in paragraph (b) of this Supplement is either unavailable
or impracticable, an advisory committee may be established pursuant
to the provisions of section 9 of the Federal Advisory Committee
Act. Such committees will be subject to the requirements of the
Federal Advisory Committee Act, OMB Circular A-63 (Revision of March
1974), ``Advisory Committee Management,'' Department of Commerce
Administrative Order 205-12, ``Public Information,'' and any other
applicable Department of Commerce regulations or procedures
affecting the establishment or operation of advisory committees.
(3) Nothing in the provisions of this Supplement shall be
construed to restrict in any manner the right of any person or firm
to discuss any export control matter with the Department of Commerce
or to offer advice or information on export control matters.
Similarly, nothing in these provisions shall be construed to
restrict the Department of Commerce in consulting any person or firm
relative to any export control matter.
Supplement No. 3 to Part 730--Other U.S. Government Departments and
Agencies With Export Control Responsibilities
Note: The departments and agencies identified with an asterisk
control exports for foreign policy or national security reasons and,
in certain cases, such controls may overlap with the controls
described in the EAR (see part 734 of the EAR).
Defense Services and Defense Articles
* Department of State, Office of Defense Trade Controls, Tel.
(703) 875-6644, Fax: (703) 875-6647.
22 CFR parts 120 through 130.
Drugs, Chemicals and Precursors
Drug Enforcement Administration, International Chemical Control
Unit, Tel. (202) 307-7202, Fax: (202) 307-8570.
21 CFR parts 1311 through 1313.
Controlled Substances: Drug Enforcement Administration,
International Drug Unit, Tel. (202) 307-2414, Fax: (202) 307-8570.
21 CFR 1311 through 1313.
Drugs and Biologics: Food and Drug Administration, Import/
Export, Tel. (301) 594-3150, Fax: (301) 594-0165.
21 U.S.C. 301 et seq.
Investigational drugs permitted: Food and Drug Administration,
International Affairs, Tel. (301) 443-4480, Fax: (301) 443-0235.
21 CFR 312.1106.
Fish and Wildlife Controls; Endangered Species
Department of the Interior, Chief Office of Management
Authority, Tel. (703) 358-2093, Fax: (703) 358-2280.
50 CFR 17.21, 17.22, 17.31, 17.32.
[[Page 12740]]
Foreign Assets and Transactions Controls
* Department of Treasury, Office of Foreign Assets Control,
Licensing, Tel. (202) 622-2480, Fax: (202) 622-1657.
31 CFR parts 500 through 590.
Medical Devices
Food and Drug Administration, Office of Compliance, Tel. (301)
594-4699, Fax: (301) 594-4715.
21 U.S.C. 301 et seq.
Natural Gas and Electric Power
Department of Energy, Office of Fuels Programs, Tel. (202) 586-
9482, Fax: (202) 586-6050.
10 CFR 205.300 through 205.379 and part 590.
Nuclear Materials and Equipment
* Nuclear Regulatory Commission, Office of International
Programs, Tel. (301) 415-2344, Fax: (301) 415-2395.
10 CFR part 110.
Nuclear Technology; Technical Data for Nuclear Weapons/Special Nuclear
Materials
* Department of Energy, Office of Arms Control and Non
Proliferation, Export Control Division, Tel. (202) 586-2112, Fax:
(202) 586-6977.
10 CFR part 810.
Ocean Freight Forwarders
Federal Maritime Commission, Office of Freight Forwarders, Tel.
(202) 523-5843, Fax: (202) 523-5830.
46 CFR part 510.
Patent Filing Data Sent Abroad
* Department of Commerce, Patent and Trademark Office, Licensing
and Review; Tel. (703) 308-1722, Fax: (703) 305-3603, 3604.
37 CFR part 5.
Prohibition of Movement of American Carriers and Prohibition on
Transportation of Goods Destined for North Korea
Department of Transportation, Office of International Law,
General Counsel, Tel. (202) 366-2972, Fax: (202) 366-9188.
44 CFR part 403.
U.S. Flagged or U.S. Manufactured Vessels Over 1,000 Gross Tons
U.S. Maritime Administration, Division of Vessel Transfer and
Disposal, Tel. (202) 366-5821, Fax: (202) 366-3889.
46 CFR part 221.
PART 732--STEPS FOR USING THE EAR
Sec.
732.1 Steps overview.
732.2 Steps regarding scope of the EAR.
732.3 Steps regarding the ten general prohibitions.
732.4 Steps regarding License Exceptions.
732.5 Steps regarding Shipper's Export Declaration, Destination
Control Statements, record keeping, license applications, and other
requirements.
732.6 Steps for other requirements.
Supplement No. 1--BXA's ``Know Your Customer'' Guidance and Red Flags
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
E.O. 12924, 3 CFR, 1994 Comp., p. 917; Notice of August 15, 1995 (60
FR 42767, August 17, 1995).
Sec. 732.1 Steps overview.
(a)(1) Introduction. In this part, references to the EAR are
references to 15 CFR chapter VII, subchapter C. This part is intended
to help you determine your obligations under the EAR by listing logical
steps in Sec. 732.2 through Sec. 732.5 of this part that you can take
in reviewing these regulations. By cross-references to the relevant
provisions of the EAR, this part describes the suggested steps for you
to determine applicability of the following:
(i) The scope of the EAR (part 734 of the EAR);
(ii) Each of the general prohibitions (part 736 of the EAR);
(iii) The License Exceptions (part 740 of the EAR); and
(iv) Other requirements such as clearing your export with the U.S.
Customs Service, keeping records, and completing and documenting
license applications.
(2) These steps describe the organization of the EAR, the
relationship among the provisions of the EAR, and the appropriate order
for you to consider the various provisions of the EAR.
(b) Facts about your transaction. The following five types of facts
determine your obligations under the EAR and will be of help to you in
reviewing these steps:
(1) What is it? What an item is, for export control purposes,
depends on its classification, which is its place on the Commerce
Control List (see part 774 of the EAR).
(2) Where is it going? The country of ultimate destination for an
export or reexport also determines licensing requirements (see parts
738 and 774 of the EAR concerning the Country Chart and the Commerce
Control List).
(3) Who will receive it? The ultimate end-user of your item cannot
be a bad end-user. See General Prohibition Four (Denial Orders) in
Sec. 736.2(b)(4) and parts 744 and 764 of the EAR for a reference to
the list of persons you may not deal with.
(4) What will they do with it? The ultimate end-use of your item
cannot be a bad end-use. See General Prohibition Five (End-Use End-
User) in Sec. 736.2(b)(5) and part 744 of the EAR for general end-use
and end-user restrictions.
(5) What else do they do? Conduct such as contracting, financing,
and freight forwarding in support of a proliferation project (as
described in Sec. 744.6 of the EAR) may prevent you from dealing with
someone.
(c) Are your items and activities subject to the EAR? You should
first determine whether your commodity, software, or technology is
subject to the EAR (see part 734 of the EAR concerning scope), and
Steps 1 through 6 help you do that. For exports from the United States,
only Steps 1 and 2 are relevant. If you already know that your item or
activity is subject to the EAR, you should go on to consider the ten
general prohibitions in part 736 of the EAR. If your item or activity
is not subject to the EAR, you have no obligations under the EAR and
may skip the remaining steps.
(d) Does your item or activity require a license under one or more
of the ten general prohibitions?
(1) Brief summary of the ten general prohibitions. The general
prohibitions are found in part 736 of the EAR and referred to in these
steps. They consist, very briefly, of the following:
(i) General Prohibition One (Exports and Reexports): Export and
reexport of controlled items to listed countries.
(ii) General Prohibition Two (Parts and Components Reexports):
Reexport and export from abroad of foreign-made items incorporating
more than a de minimis amount of controlled U.S. content.
(iii) General Prohibition Three (Foreign-produced Direct Product
Reexports): Reexport and export from abroad of the foreign-produced
direct product of U.S. technology and software.
(iv) General Prohibition Four (Denial Orders): Engaging in actions
prohibited by a denial order.
(v) General Prohibition Five (End-Use End-User): Export or reexport
to prohibited end-user or end-users.
(vi) General Prohibition Six (Embargo): Export or reexport to
embargoed destinations.
(vii) General Prohibition Seven (U.S. Person Proliferation
Activity): Support of proliferation activities.
(viii) General Prohibition Eight (In-Transit): In-transit shipments
and items to be unladen from vessels and aircraft.
(ix) General Prohibition Nine (Orders, Terms and Conditions):
Violation of any orders, terms, or conditions.
(x) General Prohibition Ten (Knowledge Violation to Occur):
Proceeding with transactions with knowledge that a violation has
occurred or is about to occur.
(2) Controls on items on the Commerce Control List (CCL). If your
item or activity is subject to the EAR, you should determine whether
any one
[[Page 12741]]
or more of the ten general prohibitions require a license for your
export, reexport, or activity. Steps 7 through 11 refer to
classification of your item on the Commerce Control List (CCL) (part
774 of the EAR) and how to use the Country Chart (Supplement No. 1 to
part 738 of the EAR) to determine whether a license is required based
upon the classification of your item. These steps refer to General
Prohibitions One (Exports and Reexports), Two (Parts and Components
Reexports), and Three (Foreign-Produced Direct Product Reexports) for
all countries except: Cuba, Iran, Iraq, Libya, and North Korea. For
these countries, you may skip Steps 7 through 11 and go directly to
Step 12.
(3) Controls on activities. Steps 12 through 18 refer to General
Prohibitions Four through Ten. Those general prohibitions apply to all
items subject to the EAR, not merely those items listed on the CCL in
part 774 of the EAR. For example, they refer to the general
prohibitions for persons denied export privileges, prohibited end-uses
and end-users, embargoed countries (e.g., Cuba, Iran, Iraq, Libya, and
North Korea), prohibited activities of U.S. persons in support of
proliferation of weapons of mass destruction, prohibited unlading of
shipments, compliance with orders, terms and conditions, and activities
when a violation has occurred or is about to occur.
(4) General prohibitions. If none of the ten general prohibitions
applies, you should skip the steps concerning License Exceptions and
for exports from the United States, review Steps 27 through 29
concerning Shipper's Export Declarations to be filed with the U.S.
Customs Service, Destination Control Statements for export control
documents, and recordkeeping requirements.
(e) Is a License Exception available to overcome the license
requirement? If you decide by reviewing the CCL in combination with the
Country Chart that a license is required for your destination, you
should determine whether a License Exception will except you from that
requirement. Steps 20 through 24 help you determine whether a License
Exception is available. Note that generally License Exceptions are not
available to overcome General Prohibitions Four through Ten. However,
selected License Exceptions for embargoed destinations are specified in
part 746 of the EAR and License Exceptions for short supply controls
are specified in part 754 of the EAR. If a License Exception is
available and the export is from the United States, you should review
Steps 26 through 28 concerning Shipper's Export Declarations to be
filed with the U.S. Customs Service, Destination Control Statements for
export control documents and recordkeeping requirements. If a License
Exception is not available, go on to Steps 25 through 29.
(f) How do you apply for a license? If you must file a license
application, you should review the requirements of part 748 of the EAR
as suggested by Step 26. Then you should review Steps 27 through 29
concerning Shipper's Export Declarations to be filed with the U.S.
Customs Service, Destination Control Statements for export control
documents, and recordkeeping requirements.
Sec. 732.2 Steps regarding scope of the EAR.
Steps 1 through 6 aid you in determining the scope of the EAR.
(a) Step 1: Items subject to the exclusive jurisdiction of another
Federal agency. This step is relevant for both exports and reexports.
Determine whether your item is subject to the exclusive jurisdiction of
another Federal Agency as provided in Sec. 734.3 of the EAR.
(1) If your item is subject to the exclusive jurisdiction of
another Federal agency, comply with the regulations of that agency. You
need not comply with the EAR and may skip the remaining steps.
(2) If your item is not subject to the exclusive jurisdiction of
another federal agency, then proceed to Step 2 in paragraph (b) of this
section.
(b) Step 2: Publicly available technology and software. This step
is relevant for both exports and reexports. Determine if your
technology or software is publicly available as defined and explained
at part 734 of the EAR. Supplement No. 1 to part 734 of the EAR
contains several practical examples describing publicly available
technology and software that is outside the scope of the EAR. The
examples are illustrative, not comprehensive.
(1) If your technology or software is publicly available, and
therefore outside the scope of the EAR, you may proceed with the export
or reexport. You have no obligations under the EAR and need not comply
with the EAR. You may skip the remaining steps.
(2) If your technology or software is not publicly available and
you are exporting from the United States, skip to Step 7 in
Sec. 732.3(b) of this part concerning the general prohibitions.
(3) If you are exporting items from a foreign country, you should
then proceed to Step 3 in paragraph (c) of this section and the other
steps concerning the scope of the EAR.
(c) Step 3: Reexport of U.S.-origin items. This step is appropriate
only for reexporters. For an item in a foreign country, you should
determine whether the item is of U.S. origin. If it is of U.S.-origin,
skip to Step 7 in Sec. 732.3(b) of this part. If it is not of U.S.
origin, then proceed to Step 4 in paragraph (d) of this section.
(d) Step 4: Foreign-made items incorporating less than the de
minimis level of U.S. parts, components, and materials. This step is
appropriate only for items that are made outside the United States.
(1) For an item made in a foreign country, you should determine
whether controlled U.S.-origin parts, components, or materials are
incorporated as provided in Sec. 734.4 of the EAR. Also, determine the
value of the U.S.-origin controlled content as provided in Supplement
No. 2 to part 734 of the EAR.
(2) To determine the value of the U.S.-origin controlled content,
you should classify the U.S.-origin content on the CCL, determine those
items that would require a license from BXA for reexport to the
ultimate destination of the foreign-made product if such parts,
components, or materials were reexported to that destination in the
form received, and divide the total value of the controlled U.S. parts,
components, and materials incorporated into the foreign-made item by
the sale price of the foreign-made item.
(3) If no U.S. parts, components, or materials are incorporated or
if the incorporated U.S. parts, components, and materials are below the
de minimis level described in Sec. 734.4 of the EAR, then the foreign-
made item is not subject to the EAR by reason of the parts and
components rule, the classification of a foreign-made item is
irrelevant in determining the scope of the EAR, and you should skip
Step 4 and go on to consider Step 5 regarding the foreign-produced
direct product rule.
(4) If controlled parts, components, or materials are incorporated
and are above the de minimis level, then you should go on to Step 5.
(e) Step 5: Foreign-made items incorporating more than the de
minimis level of U.S. parts, components, or materials. This step is
appropriate only for foreign-made items incorporating certain U.S.
parts. If the incorporated U.S. parts exceed the relevant de minimis
level, then your export from abroad is subject to the EAR. You then
should skip to Step 7 at Sec. 732.3 of this part and consider the steps
regarding all other general prohibitions, License Exceptions, and other
requirements.
[[Page 12742]]
(f) Step 6: Foreign-made items produced with certain U.S.
technology for export to specified destinations. This step is
appropriate for foreign-made items in foreign countries.
(1) If your foreign-produced item is described in an entry on the
CCL and the Country Chart requires a license to your export or reexport
destination for national security reasons, you should determine whether
your item is subject to General Prohibition Three (Foreign-Produced
Direct Product Reexports) (Sec. 736.2(b)(3) of the EAR). Your item is
subject to the EAR if it is captured by General Prohibition Three
(Foreign-Produced Direct Product Reexports), and that prohibition
applies if your transaction meets each of the following conditions:
(i) Country scope of prohibition. Your export or reexport
destination for the direct product is Cuba, North Korea, Libya, or a
destination in Country Group D:1 (see Supplement No. 1 to part 740 of
the EAR) (reexports of foreign-produced direct products exported to
other destinations are not subject to General Prohibition Three);
(ii) Scope of technology or software used to create direct products
subject to the prohibition. Technology or software that was used to
create the foreign-produced direct product, and such technology or
software that was subject to the EAR and required a written assurance
as a supporting document for a license or as a precondition for the use
of License Exception TSR at Sec. 740.3(d) of the EAR (reexports of
foreign-produced direct products created with other technology and
software are not subject to General Prohibition Three); and
(iii) Scope of direct products subject to the prohibition. The
foreign-produced direct products are subject to national security
controls as designated on the proper ECCN of the Commerce Control List
in part 774 of the EAR (reexports of foreign-produced direct products
not subject to national security controls are not subject to General
Prohibition Three).
(2) License Exceptions. Each License Exception described in part
740 of the EAR overcomes this General Prohibition Three if all terms
and conditions of a given License Exception are met by the exporter or
reexporter.
(3) Subject to the EAR. If your item is captured by the foreign-
produced direct product control at General Prohibition Three, then your
export from abroad is subject to the EAR. You should next consider the
steps regarding all other general prohibitions, License Exceptions, and
other requirements. If your item is not captured by General Prohibition
Three, then your export from abroad is not subject to the EAR. You have
completed the steps necessary to determine whether your transaction is
subject to the EAR, and you may skip the remaining steps. Note that in
summary, items in foreign countries are subject to the EAR when they
are:
(i) U.S.-origin commodities, software and technology unless
controlled for export exclusively by another Federal agency or unless
publicly available;
(ii) Foreign-origin commodities, software, and technology that are
within the scope of General Prohibition Two (Parts and Components
Reexports), or General Prohibition Three (Foreign-Produced Direct
Product Reexports). (However, such foreign-made items are also outside
the scope of the EAR if they are controlled for export exclusively by
another Federal agency or unless publicly available.)
Sec. 732.3 Steps regarding the ten general prohibitions.
(a) Introduction. If your item or activity is subject to the scope
of the EAR, you should then consider each of the ten general
prohibitions listed in part 736 of the EAR. General Prohibitions One
((Exports and Reexports), Two (Parts and Components Reexports), and
Three (Foreign-Produced Direct Product Reexports) (Sec. 736.2(b) (1),
(2), and (3) of the EAR) are product controls that are shaped and
limited by parameters specified on the CCL and Country Chart. General
Prohibitions Four through Ten are prohibitions on certain activities
that are not allowed without authorization from BXA, and these
prohibitions apply to all items subject to the EAR unless otherwise
specified (Sec. 736.2(b) (4) through (10) of the EAR).
(b) Step 7: Classification. (1) You should classify your items in
the relevant entry on the CCL, and you may do so on your own without
the assistance of BXA. You are responsible for doing so correctly, and
your failure to correctly classify your items does not relieve you of
the obligation to obtain a license when one is required by the EAR.
(2) You have a right to request the applicable classification of
your item from BXA, and BXA has a duty to provide that classification
to you. For further information on how to obtain classification
assistance from BXA, see part 748 of the EAR.
(3) For items subject to the EAR but not listed on the CCL, the
proper classification is EAR99. This number is a ``basket'' for items
not specified under any CCL entry and appears at the end of each
Category on the CCL.
(c) Step 8: Country of ultimate destination. You should determine
the country of ultimate destination. The country of destination
determines the applicability of several general prohibitions, License
Exceptions, and other requirements. Note that part 754 of the EAR
concerning short supply controls is self-contained and is the only
location in the EAR that contains both the prohibitions and exceptions
applicable to short supply controls.
(d) Step 9: Reason for control and the Country Chart. (1) Reason
for control and column identifier within the Export Control
Classification Number (ECCN). Once you have determined that your item
is controlled by a specific ECCN, you must use information contained in
the ``License Requirements'' section of that ECCN in combination with
the Country Chart to decide whether a license is required under General
Prohibitions One, Two, or Three to a particular destination. The CCL
and the Country Chart are taken together to define these license
requirements. The applicable ECCN will indicate the reason or reasons
for control for items within that ECCN. For example, ECCN 6A007 is
controlled for national security, missile technology, and anti-
terrorism reasons.
(2) Reason for control within the Country Chart. With each of the
applicable Country Chart column identifiers noted in the correct ECCN,
turn to the Country Chart. Locate the correct Country Chart column
identifier on the horizontal axis, and determine whether an ``X'' is
marked in the cell next to the destination in question. Consult
Sec. 738.4 of the EAR for comprehensive instructions on using the
Country Chart and a detailed example.
(i) An ``X'' in the cell or cells for the relevant country and
reason(s) for control column indicates that a license is required for
General Prohibitions One (Exports and Reexports in the Form Received),
Two (Parts and Components Reexports), and Three (Foreign-Produced
Direct Product Reexports). (See Sec. 736.2 (b)(1), (b)(2), and (b)(3)
of the EAR).
(ii) If one or more cells have an ``X'' in the relevant column, a
license is required unless you qualify for a License Exception
described in part 740 of the EAR. If a cell does not contain an ``X''
for your destination in one or more relevant columns, a license is not
required under the CCL and the Country Chart.
(iii) Additional controls may apply to your export. You must go on
to steps 12 through 18 described in paragraphs (g) to (m) of this
section to determine
[[Page 12743]]
whether additional limits described in General Prohibition Two (Parts
and Components Reexports) and General Prohibition Three (Foreign-
Produced Direct Product Reexports ) apply to your proposed transaction.
If you are exporting an item from the United States, you should skip
Step 10 and Step 11. Proceed directly to Step 12 in paragraph (g) of
this section.
(3) License requirements not on the Country Chart. There are two
instances where the Country Chart cannot be used to determine if a
license is required. Items controlled for short supply reasons are not
governed by the Country Chart. Part 754 of the EAR contains license
requirements and License Exceptions for items subject to short supply
controls. A limited number of ECCNs contained on the CCL do not
identify a Country Chart column identifier. In these instances, the
ECCN states whether a license is required and for which destinations.
See Sec. 738.3(a) of the EAR for a list of the ECCNs for which you do
not need to consult the Country Chart to determine licensing
requirements.
(4) Destinations subject to embargo provisions. The Country Chart
does not apply to Cuba, Iran, Iraq, Libya, and North Korea; and for
those countries you should review the embargo provisions at part 746 of
the EAR and may skip this step concerning the Country Chart. For
Angola, Bosnia-Herzegovina, Croatia, Rwanda, and Serbia and Montenegro
the Country Chart provides for certain license requirements, and part
746 of the EAR provides additional requirements.
(5) Items subject to the EAR but not on the CCL. Items subject to
the EAR that are not on the CCL are properly classified EAR99. For such
items, you may skip this step and proceed directly with Step 12 in
paragraph (g) of this section.
(e) Step 10: Foreign-made items incorporating U.S.-origin items and
the de minimis rule. (1) Parts and components rule. The following
considerations are appropriate for items abroad and are the same steps
necessary to determine whether a foreign-made item incorporating U.S.
parts, components, or materials is subject to the EAR. If your foreign-
made item is described in an entry on the CCL and the Country Chart
requires a license to your export or reexport destination, you should
determine whether the controlled U.S.-origin commodities, software, or
technology incorporated into the foreign-made item exceeds the de
minimis level applicable to the ultimate destination of the foreign-
made item, as follows:
(i) A 10% de minimis level to embargoed and terrorist-supporting
countries; or
(ii) A 25% de minimis level to all other countries.
(2) Guidance for calculations. For guidance on how to calculate the
U.S.-controlled content, refer to Supplement No. 2 to part 734 of the
EAR. Note that certain rules issued by the Office of Foreign Assets
Control, certain exports from abroad by U.S.-owned or controlled
entities may be prohibited notwithstanding the de minimis provisions of
the EAR. In addition, the de minimis exclusions from the parts and
components rule do not relieve U.S. persons of the obligation to
refrain from supporting the proliferation of weapons of mass-
destruction and missiles as provided in General Prohibition Seven (U.S.
Person Proliferation Activity) described in Sec. 736.2(b)(7) of the
EAR.
(f) Step 11: Foreign-produced direct product. The following
considerations are appropriate for items abroad and are the same
considerations necessary to determine whether a foreign-produced direct
product is subject to the EAR under Step 6 in Sec. 732.2(f) of this
part.
(1) If your foreign-produced item is described in an entry on the
CCL and the Country Chart requires a license to your export or reexport
destination for national security reasons, you must determine whether
your item is subject to General Prohibition Three (Foreign-Produced
Direct Product Reexports) (Sec. 736.2(b)(3) of the EAR). Your item is
subject to this general prohibition if your transaction meets each of
the following conditions:
(i) Country scope of prohibition. Your export or reexport
destination for the direct product is Cuba, Libya, North Korea, or a
destination in Country Group D:1 (see Supplement No. 1 to part 740 of
the EAR) (reexports of foreign-produced direct products exported to
other destinations are not subject to General Prohibition Three
described in Sec. 736.2(b)(3) of the EAR);
(ii) Scope of technology or software used to create direct products
subject to the prohibition. Technology or software that was used to
create the foreign-produced direct product, and such technology or
software that was subject to the EAR and required a written assurance
as a supporting document for a license or as a precondition for the use
of License Exception TSR described Sec. 740.19 of the EAR (reexports of
foreign-produced direct products created with other technology and
software are not subject to General Prohibition Three); and
(iii) Scope of direct products subject to the prohibition. The
foreign-produced direct products are controlled for national security
reasons indicated in an ECCN on the CCL (reexports of foreign-produced
direct products not subject to national security controls are not
subject to General Prohibition Three).
(2) License Exceptions. Each License Exception described in part
740 of the EAR overcomes General Prohibition Three (Foreign-Produced
Direct Product Reexports) if all terms and conditions of a given
License Exception are met by the exporter or reexporter.
(g) Step 12: Persons denied export privileges. (1) Determine
whether your transferee, ultimate end-user, any intermediate consignee,
or any other party to a transaction is a person denied export
privileges. (See part 764 of the EAR). While it is not a violation of
General Prohibition Four (Denial Orders) (Sec. 736.2(b)(4) of the EAR)
to fail to check the Denied Persons List prior to a transfer, it is
nonetheless a violation of the EAR to engage in any activity that
violates the terms or conditions of a denial order. General Prohibition
Four (Denial Orders) applies to all items subject to the EAR, i.e. both
items on the CCL and within EAR99.
(2) There are no License Exceptions to General Prohibition Four
(Denial Orders). The prohibition concerning persons denied export
privileges may be overcome only by a specific authorization from BXA,
something that is rarely granted.
(h) STEP 13: Prohibited end-uses and end-users. (1) Review the end-
uses and end-users prohibited under General Prohibition Five (End-Use
and End-User) (Sec. 736.2(b)(5) of the EAR) described in part 744 of
the EAR. Part 744 of the EAR contains all the end-use and end-user
license requirements, and those are in addition to the license
requirements under General Prohibitions One (Exports and Reexports),
Two (Parts and Components Reexports), and Three (Foreign-produced
Direct Product Reexports). Unless otherwise indicated, the license
requirements of General Prohibition Five (End-Use and End-User)
described in part 744 of the EAR apply to all items subject to the EAR,
i.e. both items on the CCL and within EAR99. Moreover, the requirements
of General Prohibition Five (End-Use and End-User) are in addition to
various end-use and end-user limitations placed on certain License
Exceptions.
(2) There are no License Exceptions to General Prohibition Five
(End-Use and End-User) (Sec. 736.2(b)(5) of the EAR) described in part
740 of the EAR.
(i) Step 14: Embargoed countries and special destinations. If your
destination for any item is Bosnia-Herzegovina,
[[Page 12744]]
Croatia, Cuba, Iran, Iraq, Libya, North Korea, Rwanda, or Serbia and
Montenegro, you must consider the requirements of part 746 of the EAR.
Unless otherwise indicated, General Prohibition Six (Embargo) applies
to all items subject to the EAR, i.e. both items on the CCL and within
EAR99. You may not make an export or reexport contrary to the
provisions of part 746 of the EAR without a license unless:
(1) You are exporting or reexporting only publicly available
technology or software or other items outside the scope of the EAR, or
(2) You qualify for a License Exception referenced in part 746 of
the EAR concerning embargoed destinations. You may not use a License
Exception described in part 740 of the EAR to overcome General
Prohibition Six (Embargo) (Sec. 736.2(b)(6) of the EAR) unless it is
specifically authorized in part 746 of the EAR. Note that part 754 of
the EAR concerning short supply controls is self-contained and is the
only location in the EAR for both the prohibitions and exceptions
applicable to short supply controls.
(j) Step 15: Proliferation activity of U.S. persons unrelated to
exports and reexports. (1) Review the scope of activity prohibited by
General Prohibition Seven (U.S. Person Proliferation Activity)
(Sec. 736.2(b)(7) of the EAR) as that activity is described in
Sec. 744.6 of the EAR. Keep in mind that such activity is not limited
to exports and reexports and is not limited to items subject to General
Prohibition One (Exports and Reexports), Two (Parts and Components
Reexports), and Three (Foreign-Produced Direct Product Reexports).
Moreover, such activity extends to services and dealing in wholly
foreign-origin items in support of the specified proliferation activity
and is not limited to items listed on the CCL or included in EAR99.
(2) Review the definition of U.S. Person in part 744 of the EAR.
(k) Step 16: In-transit. Shippers and operators of vessels or
aircraft should review General Prohibition Eight (In-Transit) to
determine the countries in which you may not unladen or ship certain
items in-transit. General Prohibition Eight applies to all items
subject to the EAR, i.e. both items on the CCL and within EAR99.
(l) Step 17: Review orders, terms, and conditions. Review the
orders, terms, and conditions applicable to your transaction. General
Prohibition Nine (Orders, Terms, and Conditions) prohibits the
violation of any orders, terms, and conditions imposed under the EAR.
Terms and conditions are frequently contained in licenses. In addition,
the ten general prohibitions (part 736 of the EAR) and the License
Exceptions (part 740 of the EAR) impose terms and conditions or
limitations on your proposed transactions and use of License
Exceptions. A given license or License Exception may not be used unless
each relevant term or condition is met.
(m) Step 18: Review the ``Know Your Customer'' Guidance and General
Prohibition Ten (Knowledge Violation to Occur). License requirements
under the EAR are determined solely by the classification, end-use,
end-user, ultimate destination, and conduct of U.S. persons. Supplement
No. 1 to part 732 of the EAR is intended to provide helpful guidance
regarding the process for the evaluation of information about
customers, end-uses, and end-users. General Prohibition Ten (Knowledge
Violation to Occur) prohibits anyone from proceeding with a transaction
with knowledge that a violation of the EAR has occurred or is about to
occur. It also prohibits related shipping, financing, and other
services. General Prohibition Ten applies to all items subject to the
EAR, i.e. both items on the CCL and within EAR99.
(n) Step 19: Complete the review of the general prohibitions. After
completion of Steps described in this section and review of all ten
general prohibitions in part 736 of the EAR, including cross-referenced
regulations in the EAR, you will know which, if any, of the ten general
prohibitions of the EAR apply to you and your contemplated transaction
or activity.
(1) If none of the ten general prohibitions is applicable to your
export from the United States, no license from BXA is required, you do
not need to qualify for a License Exception under part 740 of the EAR.
You should skip the Steps in Sec. 732.4 of this part regarding License
Exceptions and proceed directly to the Steps in Sec. 732.5 of this part
regarding recordkeeping, clearing the U.S. Customs Service with the
appropriate Shipper's Export Declaration, and using the required
Destination Control Statement.
(2) If none of the ten general prohibitions is applicable to your
reexport or export from abroad, no license is required and you should
skip all remaining Steps.
(3) If one or more of the ten general prohibitions are applicable,
continue with the remaining steps.
Sec. 732.4 Steps regarding License Exceptions.
(a) Introduction to Steps for License Exceptions. If your export or
reexport is subject to the EAR and is subject to General Prohibitions
One (Exports and Reexports), Two (Parts and Components Reexports), or
Three (Foreign-Produced Direct Product Reexports), consider the steps
listed in paragraph (b) of this section. If your export or reexport is
subject to General Prohibitions Four (Denial Orders), Seven (U.S.
Person Proliferation Activity), Eight (In-Transit), Nine (Orders,
Terms, and Conditions), or Ten (Knowledge Violation to Occur), there
are no License Exceptions available for your export or reexport. If
your export is subject to General Prohibition Five (End-Use End-User),
consult part 744 of the EAR. If your export or reexport is subject to
General Prohibition Six (Embargo), consult part 746 of the EAR for
applicable License Exceptions.
(b) Steps for License Exceptions. (1) Step 20: Applicability of
General Prohibitions. Determine whether any one or more of the general
prohibitions described in Sec. 736.2(b) of the EAR apply to your export
or reexport. If no general prohibition applies to your export or
reexport, then you may proceed with your export or reexport and need
not review part 740 of the EAR regarding License Exceptions. You are
reminded of your recordkeeping obligations related to the clearance of
the U.S. Customs Service provided in parts 762 and 758 of the EAR.
(2) Step 21: Applicability of restrictions on all License
Exceptions. Determine whether any one or more of the restrictions in
Sec. 740.2 of the EAR applies to your export or reexport. If any one or
more of these restrictions apply, there are no License Exceptions
available to you, and you must either obtain a license or refrain from
the export or reexport.
(3) Step 22: Terms and conditions of the License Exceptions. (i) If
none of the restrictions in Sec. 740.2 of the EAR applies, then review
each of the License Exceptions to determine whether any one of them
authorizes your export or reexport. Eligibility for License Exceptions
is based on the item, the country of ultimate destination, the end-use,
and the end-user, along with any special conditions imposed within a
specific License Exception.
(ii) You may meet the conditions for more than one License
Exception. Moreover, although you may not qualify for some License
Exceptions you may qualify for others. Review the broadest License
Exceptions first, and use any License Exception available to you. You
are not required to use the most restrictive applicable License
Exception. If you fail to qualify for the License Exception that you
first consider, you may consider any other License
[[Page 12745]]
Exception until you have determined that no License Exception is
available.
(iii) License Exception groupings TMP, RPL, BAG, AVS, GOV, and TSU
authorize exports notwithstanding the provisions of the CCL. License
Exceptions in the list-based grouping (LST) are available only to the
extent specified on the CCL. Part 740 of the EAR provides authorization
for reexports only to the extent each License Exception expressly
authorizes reexports. License Exception APR authorizes reexports only.
(4) Step 23: Scope of License Exceptions. Some License Exceptions
are limited by country or by type of item.
(i) Countries are arranged in country groups for ease of reference.
For a listing of country groups, please refer to Supplement No. 1 to
part 740 of the EAR. Unless otherwise indicated in a License Exception,
License Exceptions do not apply to any exports or reexports to
embargoed destinations. If your export or reexport is subject to
General Prohibition Six (Embargo) for embargoed destinations, License
Exceptions are only available to the extent specifically provided in
part 746 of the EAR concerning embargoed destinations.
(ii) Special commodity controls apply to short supply items. No
License Exceptions described in part 740 of the EAR may be used for
items listed on the CCL as controlled for Short Supply reasons. License
Exceptions for short supply items are found in part 754 of the EAR.
(5) Step 24: Compliance with all terms and conditions. If a License
Exception is available, you may proceed with your export or reexport.
However, you must meet all the terms and conditions required by the
License Exception that you determined authorized your export or
reexport. You must also consult part 758 and 762 of the EAR to
determine your recordkeeping and documentation requirements.
(6) Step 25: License requirements. If no License Exception is
available, then you must either obtain a license before proceeding with
your export or reexport or you must refrain from the proposed export or
reexport.
(7) Step 26: License applications. If you are going to file a
license application with BXA, you should first review the requirements
at part 748 of the EAR. Exporters, reexporters, and exporters from
abroad should review the instructions concerning applications and
required support documents prior to submitting an application for a
license.
Sec. 732.5 Steps regarding Shipper's Export Declaration, Destination
Control Statements, record keeping, license applications, and other
requirements.
(a) Step 27--Shipper's Export Declaration. You should review
Sec. 758.3 of the EAR to determine what notations you must enter on the
Shipper's Export Declaration (SED). These steps should be reviewed by
exporters. Reexporters and firms exporting from abroad may skip Steps
27 through 29 and proceed directly to Sec. 732.6 of this part.
(1) NLR. The term ``NLR'' represents exports of listed items when
no license is required. Such exports do not require that you qualify
for a License Exception. The symbol ``NLR'' is required on the SED
under two circumstances. First, NLR is the correct symbol when
exporting an item subject to the EAR not listed on the CCL. Such items
are classified EAR99. Secondly, certain items are listed on the CCL but
do not require a license to all destinations under General Prohibitions
One (Exports and Reexports in the Form Received), Two (Parts and
Components Reexports), or Three (Foreign-Produced Direct Product
Reexports) (Sec. 736.2 (b)(1), (b)(2), or (b)(3) of the EAR). Such
items do not have an ``X'' in the appropriate cell on the Country
Chart. If General Prohibitions Four through Ten (Sec. 736.2 (b)(4) of
the EAR) through (b)(10) of the EAR) also do not apply, you must clear
exports of such items by entering the symbol ``NLR'' in the appropriate
place on the SED.
(2) License Exception group symbol. You must enter on any required
SED the letter code (e.g., LST, TMP) of the group of License Exceptions
under which you are exporting. In the case of License Exceptions
grouped under LST, the ECCN of the item being exported must also be
entered when an SED is required. Please refer to Sec. 758.3 of the EAR
for detailed information on use of SEDs.
(3) License number. If you are exporting under a license, enter the
license number on the SED as required by Sec. 758.3 of the EAR.
(b) Step 28: Destination Control Statement. You are required to
enter an appropriate Destination Control Statement (DCS) on commercial
documents in accordance with the DCS requirements of Sec. 758.6 of the
EAR. Exporters should review Sec. 758.6 of the EAR and use the DCS as
required. Reexporters and exporters from abroad should review
Sec. 752.6 for DCS requirements when using a Special Comprehensive
License. Otherwise, DCS requirements do not apply to reexports and
exports from abroad.
(c) Step 29: Recordkeeping. Records of transactions involving
exports under any license or License Exception must be maintained in
accordance with the recordkeeping requirements of part 762 of the EAR.
Sec. 732.6 Steps for other requirements.
Sections 732.1 through 732.4 of this part are useful in determining
the license requirements that apply to you. Other portions of the EAR
impose other obligations and requirements. Some of them are:
(a) Requirements relating to the use of a license in Sec. 758.2 of
the EAR.
(b) Obligations of carriers, forwarders, exporters and others to
take specific steps and prepare and deliver certain documents to assure
that items subject to the EAR are delivered to the destination to which
they are licensed or authorized by a License Exception or some other
provision of the regulations in Sec. 758.4 through Sec. 758.6 of the
EAR.
(c) Duty of carriers to return or unload shipments at the direction
of U.S. Government officials (see Sec. 758.8 of the EAR).
(d) Specific obligations imposed on parties to Special
Comprehensive licenses in part 752 of the EAR.
(e) Recordkeeping requirements imposed in part 762 of the EAR.
(f) Requirements of part 764 of the EAR to disclose facts that may
come to your attention after you file a license application or make
other statements to the government concerning a transaction or proposed
transaction that is subject to the EAR.
(g) Certain obligations imposed by part 760 of the EAR on parties
who receive requests to take actions related to foreign boycotts and
prohibits certain actions relating to those boycotts.
Supplement No. 1--BXA's ``Know Your Customer'' Guidance and Red
Flags
``Know Your Customer'' Guidance
Various requirements of the EAR are dependent upon a person's
knowledge of the end-use, end-user, ultimate destination, or other
facts relating to a transaction or activity. These provisions
include the nonproliferation-related ``catch-all'' sections and the
prohibition against proceeding with a transaction with knowledge
that a violation of the EAR has occurred or is about to occur.
(a) BXA provides the following guidance on how individuals and
firms should act under this knowledge standard. This guidance does
not change or interpret the EAR.
(1) Decide whether there are ``red flags''. Take into account
any abnormal circumstances in a transaction that indicate that the
export may be destined for an inappropriate end-use, end-user, or
destination. Such circumstances are referred to as ``red flags''.
Included among examples
[[Page 12746]]
of red flags are orders for items that are inconsistent with the
needs of the purchaser, a customer declining installation and
testing when included in the sales price or when normally requested,
or requests for equipment configurations that are incompatible with
the stated destination (e.g., 120 volts in a country with 220
volts). Commerce has developed lists of such red flags that are not
all-inclusive but are intended to illustrate the types of
circumstances that should cause reasonable suspicion that a
transaction will violate the EAR.
(2) If there are ``red flags'', inquire. If there are no ``red
flags'' in the information that comes to your firm, you should be
able to proceed with a transaction in reliance on information you
have received. That is, absent ``red flags'' (or an express
requirement in the EAR), there is no affirmative duty upon exporters
to inquire, verify, or otherwise ``go behind'' the customer's
representations. However, when ``red flags'' are raised in
information that comes to your firm, you have a duty to check out
the suspicious circumstances and inquire about the end-use, end-
user, or ultimate country of destination. The duty to check out
``red flags'' is not confined to the use of License Exceptions
affected by the ``know'' or ``reason to know'' language in the EAR.
Applicants for licenses are required by part 748 of the EAR to
obtain documentary evidence concerning the transaction, and
misrepresentation or concealment of material facts is prohibited,
both in the licensing process and in all export control documents.
You can rely upon representations from your customer and repeat them
in the documents you file unless red flags oblige you to take
verification steps.
(3) Do not self-blind. Do not cut off the flow of information
that comes to your firm in the normal course of business. For
example, do not instruct the sales force to tell potential customers
to refrain from discussing the actual end-use, end-user, and
ultimate country of destination for the product your firm is seeking
to sell. Do not put on blinders that prevent the learning of
relevant information. An affirmative policy of steps to avoid
``bad'' information would not insulate a company from liability, and
it would usually be considered an aggravating factor in an
enforcement proceeding.
(4) Employees need to know how to handle ``red flags''.
Knowledge possessed by an employee of a company can be imputed to a
firm so as to make it liable for a violation. This makes it
important for firms to establish clear policies and effective
compliance procedures to ensure that such knowledge about
transactions can be evaluated by responsible senior officials.
Failure to do so could be regarded as a form of self-blinding.
(5) Reevaluate all the information after the inquiry. The
purpose of this inquiry and reevaluation is to determine whether the
``red flags'' can be explained or justified. If they can, you may
proceed with the transaction. If the ``red flags'' cannot be
explained or justified and you proceed, you run the risk of having
had ``knowledge'' that would make your action a violation of the
EAR.
(6) Refrain from the transaction or advise BXA and wait. If you
continue to have reasons for concern after your inquiry, then you
should either refrain from the transaction or submit all the
relevant information to BXA in the form of an application for a
validated license or in such other form as BXA may specify.
(b) Industry has an important role to play in preventing exports
and reexports contrary to the national security and foreign policy
interests of the United States. BXA will continue to work in
partnership with industry to make this front line of defense
effective, while minimizing the regulatory burden on exporters. If
you have any question about whether you have encountered a ``red
flag'', you may contact the Office of Export Enforcement at 1-800-
424-2980 or the Office of Exporter Services at (202) 482-4532.
Red Flags
Possible indicators that an unlawful diversion might be planned
by your customer include the following:
1. The customer or purchasing agent is reluctant to offer
information about the end-use of a product.
2. The product's capabilities do not fit the buyer's line of
business; for example, a small bakery places an order for several
sophisticated lasers.
3. The product ordered is incompatible with the technical level
of the country to which the product is being shipped. For example,
semiconductor manufacturing equipment would be of little use in a
country without an electronics industry.
4. The customer has little or no business background.
5. The customer is willing to pay cash for a very expensive item
when the terms of the sale call for financing.
6. The customer is unfamiliar with the product's performance
characteristics but still wants the product.
7. Routine installation, training or maintenance services are
declined by the customer.
8. Delivery dates are vague, or deliveries are planned for out-
of-the-way destinations.
9. A freight forwarding firm is listed as the product's final
destination.
10. The shipping route is abnormal for the product and
destination.
11. Packaging is inconsistent with the stated method of shipment
or destination.
12. When questioned, the buyer is evasive or unclear about
whether the purchased product is for domestic use, export or
reexport.
PART 734--SCOPE OF THE EXPORT ADMINISTRATION REGULATIONS
Sec.
734.1 Introduction.
734.2 Important EAR terms and principles.
734.3 Items subject to the EAR.
734.4 De minimis U.S. content.
734.5 Activities of U.S. and foreign persons subject to the EAR.
734.6 Assistance available from BXA for determining licensing and
other requirements.
734.7 Published information and software.
734.8 Information resulting from fundamental research.
734.9 Educational information.
734.10 Patent applications.
734.11 Government-sponsored research covered by contract controls.
734.12 Effect on foreign laws and regulations.
Supplement No. 1 to Part 734--Questions and Answers--Technology and
Software Subject to the EAR
Supplement No. 2 to Part 734--Calculation of Values for DE MINIMIS
Rules
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
E.O. 12924, 3 CFR, 1994 Comp., p. 917; Notice of August 15, 1995 (60
FR 42767, August 17, 1995).
Sec. 734.1 Introduction.
(a) In this part, references to the Export Administration
Regulations (EAR) are references to 15 CFR chapter VII, subchapter C.
This part describes the scope of the Export Administration Regulations
(EAR) and explains certain key terms and principles used in the EAR.
This part provides the rules you need to use to determine whether items
and activities are subject to the EAR. This part is the first step in
determining your obligations under the EAR. If your item or activity is
not subject to the EAR, then you do not have any obligations under the
EAR and you do not need to review other parts of the EAR. If you
already know that your item or activity is subject to the EAR, you do
not need to review this part and you can go on to review other parts of
the EAR to determine your obligations. This part also describes certain
key terms and principles used in the EAR. Specifically, it includes the
following terms: ``subject to the EAR,'' ``items subject to the EAR,''
``export,'' and ``reexport.'' These and other terms are also included
in part 772 of the EAR, Definitions of Terms, and you should consult
part 772 of the EAR for the meaning of terms used in the EAR. Finally,
this part makes clear that compliance with the EAR does not relieve any
obligations imposed under foreign laws.
(b) This part does not address any of the provisions set forth in
part 760 of the EAR, Restrictive Trade Practices or Boycotts.
(c) This part does not define the scope of legal authority to
regulate exports, including reexports, or activities found in the
Export Administration Act and other statutes. What this part does do is
set forth the extent to which such legal authority has been exercised
through the EAR.
Sec. 734.2 Important EAR terms and principles.
(a) Subject to the EAR--Definition. (1) ``Subject to the EAR'' is a
term used in the EAR to describe those items and
[[Page 12747]]
activities over which BXA exercises regulatory jurisdiction under the
EAR. Conversely, items and activities that are not subject to the EAR
are outside the regulatory jurisdiction of the EAR and are not affected
by these regulations. The items and activities subject to the EAR are
described in Sec. 734.2 through Sec. 734.5 of this part. You should
review the Commerce Control List (CCL) and any applicable parts of the
EAR to determine whether an item or activity is subject to the EAR.
However, if you need help in determining whether an item or activity is
subject to the EAR, see Sec. 734.6 of this part. Publicly available
technology and software not subject to the EAR are described in
Sec. 734.7 through Sec. 734.11 and Supplement No. 1 to this part.
(2) Items and activities subject to the EAR may also be controlled
under export-related programs administered by other agencies. Items and
activities subject to the EAR are not necessarily exempted from the
control programs of other agencies. Although BXA and other agencies
that maintain controls for national security and foreign policy reasons
try to minimize overlapping jurisdiction, you should be aware that in
some instances you may have to comply with more than one regulatory
program.
(3) The term ``subject to the EAR'' should not be confused with
licensing or other requirements imposed in other parts of the EAR. Just
because an item or activity is subject to the EAR does not mean that a
license or other requirement automatically applies. A license or other
requirement applies only in those cases where other parts of the EAR
impose a licensing or other requirement on such items or activities.
(b) Export and reexport. (1) Definition of export. ``Export'' means
an actual shipment or transmission of items subject to the EAR out of
the United States; or release of technology or software subject to the
EAR to a foreign national in the United States, as described in
paragraph (b)(2)(ii) of this section. See part 772 of the EAR for the
definition that applies to exports of satellites subject to the EAR.
(2) Export of technology or software. ``Export'' of technology or
software includes:
(i) Any release of technology or software subject to the EAR in a
foreign country; or
(ii) Any release of technology or source code subject to the EAR to
a foreign national. Such release is deemed to be an export to the home
country or countries of the foreign national. This deemed export rule
does not apply to persons lawfully admitted for permanent residence in
the United States and does not apply to persons who are protected
individuals under the Immigration and Naturalization Act (8 U.S.C.
1324b(a)(3)). Note that the release of any item to any party with
knowledge a violation is about to occur is prohibited by
Sec. 736.2(b)(10) of the EAR.
(3) Definition of ``release'' of technology or software. Technology
or software is ``released'' for export through:
(i) Visual inspection by foreign nationals of U.S.-origin equipment
and facilities;
(ii) Oral exchanges of information in the United States or abroad;
or
(iii) The application to situations abroad of personal knowledge or
technical experience acquired in the United States.
(4) Definition of reexport. ``Reexport'' means an actual shipment
or transmission of items subject to the EAR from one foreign country to
another foreign country; or release of technology or software subject
to the EAR to a foreign national outside the United States, as
described in paragraph (b)(5) of this section. See part 772 of the EAR
for the definition that applies to reexports of satellites subject to
the EAR.
(5) Reexport of technology or software. Any release of technology
or source code subject to the EAR to a foreign national of another
country is a deemed reexport to the home country or countries of the
foreign national. However, this deemed reexport definition does not
apply to persons lawfully admitted for permanent residence. The term
``release'' is defined in paragraph (b)(3) of this section. Note that
the release of any item to any party with knowledge or reason to know a
violation is about to occur is prohibited by Sec. 736.2(b)(10) of the
EAR.
(6) For purposes of the EAR, the export or reexport of items
subject to the EAR that will transit through a country or countries or
be transshipped in a country or countries to a new country or are
intended for reexport to the new country, are deemed to be exports to
the new country.
(7) If a territory, possession, or department of a foreign country
is not listed on the Country Chart in Supplement No. 1 to part 738 of
the EAR, the export or reexport of items subject to the EAR to such
destination is deemed under the EAR to be an export to the foreign
country. For example, a shipment to the Cayman Islands, a dependent
territory of the United Kingdom, is deemed to be a shipment to the
United Kingdom.
(8) Export or reexport of items subject to the EAR does not include
shipments among any of the states of the United States, the
Commonwealth of Puerto Rico, or the Commonwealth of the Northern
Mariana Islands or any territory, dependency, or possession of the
United States. These destinations are listed in Schedules C & E,
Classification of Country and Territory Designations for U.S. Export
Statistics, issued by the Bureau of the Census.
Sec. 734.3 Items subject to the EAR.
(a) Except for items excluded in paragraph (b) of this section, the
following items are subject to the EAR:
(1) All items in the United States, including in a U.S. Foreign
Trade Zone or moving intransit through the United States from one
foreign country to another;
(2) All U.S. origin items wherever located;
(3) U.S. origin parts, components, materials or other commodities
incorporated abroad into foreign-made products, U.S. origin software
commingled with foreign software, and U.S. origin technology commingled
with foreign technology, in quantities exceeding de minimis levels as
described in Sec. 734.4 and Supplement No. 2 of this part;
(4) Certain foreign-made direct products of U.S. origin technology
or software, as described in Sec. 736.2(b)(3) of the EAR. The term
``direct product'' means the immediate product (including processes and
services) produced directly by the use of technology or software; and
(5) Certain commodities produced by any plant or major component of
a plant located outside the United States that is a direct product of
U.S.-origin technology or software, as described in Sec. 736.2(b)(3) of
the EAR.
(b) The following items are not subject to the EAR:
(1) Items that are exclusively controlled for export or reexport by
the following departments and agencies of the U.S. Government which
regulate exports or reexports for national security or foreign policy
purposes:
(i) Department of State. The International Traffic in Arms
Regulations (22 CFR part 121) administered by the Office of Defense
Trade Controls relate to defense articles and defense services on the
U.S. Munitions List. Section 38 of the Arms Export Control Act (22
U.S.C. 2778).
(ii) Treasury Department, Office of Foreign Assets Control (OFAC).
Regulations administered by OFAC implement broad controls and embargo
transactions with certain foreign countries. These regulations include
controls on exports and reexports to
[[Page 12748]]
certain countries (31 CFR chapter V). Trading with the Enemy Act (50
U.S.C. app. section 1 et seq.), and International Emergency Economic
Powers Act (50 U.S.C. 1701, et seq.)
(iii) U.S. Nuclear Regulatory Commission (NRC). Regulations
administered by NRC control the export and reexport of commodities
related to nuclear reactor vessels (10 CFR part 110). Atomic Energy Act
of 1954, as amended (42 U.S.C. part 2011 et seq.).
(iv) Department of Energy (DOE). Regulations administered by DOE
control the export and reexport of technology related to the production
of special nuclear materials (10 CFR part 810). Atomic Energy Act of
1954, as amended (42 U.S.C. section 2011 et seq.).
(v) Patent and Trademark Office (PTO). Regulations administered by
PTO provide for the export to a foreign country of unclassified
technology in the form of a patent application or an amendment,
modification, or supplement thereto or division thereof (37 CFR part
5). BXA has delegated authority under the Export Administration Act to
the PTO to approve exports and reexports of such technology which is
subject to the EAR. Exports and reexports of such technology not
approved under PTO regulations must comply with the EAR.
(2) Prerecorded phonograph records reproducing in whole or in part,
the content of printed books, pamphlets, and miscellaneous
publications, including newspapers and periodicals; printed books,
pamphlets, and miscellaneous publications including bound newspapers
and periodicals; children's picture and painting books; newspaper and
periodicals, unbound, excluding waste; music books; sheet music;
calendars and calendar blocks, paper; maps, hydrographical charts,
atlases, gazetteers, globe covers, and globes (terrestrial and
celestial); exposed and developed microfilm reproducing, in whole or in
part, the content of any of the above; exposed and developed motion
picture film and soundtrack; and advertising printed matter exclusively
related thereto.
(3) Publicly available technology and software that:
(i) Are already published or will be published as described in
Sec. 734.7 of this part;
(ii) Arise during, or result from, fundamental research, as
described in Sec. 734.8 of this part;
(iii) Are educational, as described in Sec. 734.9 of this part; or
(iv) Are included in certain patent applications, as described in
Sec. 734.10 of this part.
(4) Foreign made items that have de minimis U.S. content based on
the principles described in Sec. 734.4 of this part.
(c) ``Items subject to the EAR'' consist of the items listed on the
Commerce Control List (CCL) in part 774 of the EAR and all other items
which meet the definition of that term. For ease of reference and
classification purposes, items subject to the EAR which are not listed
on the CCL are designated as ``EAR99.''
Sec. 734.4 De minimis U.S. content.
(a) There is no de minimis level for the export from a foreign
country of a foreign-made computer exceeding 7000 MTOPS containing
U.S.-origin controlled semiconductors (other than memory circuits)
classified under ECCN 3A001 or high speed interconnect devices (ECCN
4A003.g) to Computer Tier 3 and 4 countries described in Sec. 742.12 of
the EAR.
(b) Except as provided in paragraph (a) of this section for certain
computers, for embargoed countries in part 746 of the EAR, and for
countries named as terrorist-supporting countries in part 744 of the
EAR, the following are not subject to the EAR:
(1) Reexports of a foreign-made commodity incorporating controlled
U.S.-origin commodities valued at 10% or less of the total value of the
foreign-made commodity;
(2) Reexports of foreign-made software incorporating controlled
U.S.-origin software valued at 10% or less of the total value of the
foreign-made software; or
(3) Reexports of foreign technology commingled with or drawn from
controlled U.S. origin technology valued at 10% or less of the total
value of the foreign technology.
(c) Except as provided in paragraph (a) of this section for certain
computers, for all other countries not included in paragraph (b) of
this section, the following are not subject to the EAR:
(1) Reexports of a foreign-made commodity incorporating controlled
U.S.-origin commodities valued at 25% or less of the total value of the
foreign-made commodity;
(2) Reexports of foreign-made software incorporating controlled
U.S.-origin software valued at 25% or less of the total value of the
foreign-made software; or
(3) Reexports of foreign technology commingled with or drawn from
controlled U.S.-origin technology valued at 25% or less of the total
value of the foreign technology.
(d) For purposes of determining de minimis levels, technology and
source code used to design or produce foreign-made commodities or
software are not considered to be incorporated into such foreign-made
commodities or software. Commodities subject only to short supply
controls are not included in calculating U.S. content.
(e) You are responsible for making the necessary calculations to
determine whether the de minimis provisions apply to your situation.
See Supplement No. 2 to part 734 for guidance regarding calculation of
U.S. controlled content.
(f) See Sec. 770.3 of the EAR for principles that apply to
commingled U.S.-origin technology and software.
Sec. 734.5 Activities of U.S. and foreign persons subject to the EAR.
The following kinds of activities are subject to the EAR:
(a) Certain activities of U.S. persons related to the proliferation
of chemical or biological weapons or of missile technology as described
in Sec. 744.6 of the EAR.
(b) Activities of U.S. or foreign persons prohibited by any order
issued under the EAR, including a Denial Order issued pursuant to part
766 of the EAR.
Sec. 734.6 Assistance available from BXA for determining licensing and
other requirements.
(a) If you are not sure whether a commodity, software, technology,
or activity is subject to the EAR, or is subject to licensing or other
requirements under the EAR, you may ask BXA for an advisory opinion,
classification, or a determination whether a particular item or
activity is subject to the EAR. In many instances, including those
where the item is specially designed, developed, configured, adapted,
or modified for military application, the item may fall under the
licensing jurisdiction of the Department of State and may be subject to
the controls of the International Traffic in Arms Regulations (22 CFR
parts 120 through 130) (ITAR). In order to determine if the Department
of State has licensing jurisdiction over an item, you should submit a
request for a commodity jurisdiction determination to the Department of
State, Office of Defense Trade Controls. Exporters should note that in
a very limited number of cases, the categories of items may be subject
to both the ITAR and the EAR. The relevant departments are working to
eliminate any unnecessary overlaps that may exist.
(b) As the agency responsible for administering the EAR, BXA is the
only agency that has the responsibility for determining whether an item
or activity
[[Page 12749]]
is subject to the EAR and, if so, what licensing or other requirements
apply under the EAR. Such a determination only affects EAR
requirements, and does not affect the applicability of any other
regulatory programs.
(c) If you need help in determining BXA licensing or other
requirements you may ask BXA for help by following the procedures
described in Sec. 748.3 of the EAR.
Sec. 734.7 Published information and software.
(a) Information is ``published'' when it becomes generally
accessible to the interested public in any form, including:
(1) Publication in periodicals, books, print, electronic, or any
other media available for general distribution to any member of the
public or to a community of persons interested in the subject matter,
such as those in a scientific or engineering discipline, either free or
at a price that does not exceed the cost of reproduction and
distribution (See Supplement No. 1 to this part, Questions A(1) through
A(6));
(2) Ready availability at libraries open to the public or at
university libraries (See Supplement No. 1 to this part, Question
A(6));
(3) Patents and open (published) patent applications available at
any patent office; and
(4) Release at an open conference, meeting, seminar, trade show, or
other open gathering.
(i) A conference or gathering is ``open'' if all technically
qualified members of the public are eligible to attend and attendees
are permitted to take notes or otherwise make a personal record (not
necessarily a recording) of the proceedings and presentations.
(ii) All technically qualified members of the public may be
considered eligible to attend a conference or other gathering
notwithstanding a registration fee reasonably related to cost and
reflecting an intention that all interested and technically qualified
persons be able to attend, or a limitation on actual attendance, as
long as attendees either are the first who have applied or are selected
on the basis of relevant scientific or technical competence,
experience, or responsibility (See Supplement No. 1 to this part,
Questions B(1) through B(6)).
(iii) ``Publication'' includes submission of papers to domestic or
foreign editors or reviewers of journals, or to organizers of open
conferences or other open gatherings, with the understanding that the
papers will be made publicly available if favorably received. (See
Supplement No. 1 to this part, Questions A(1) and A(3)).
(b) Software and information is published when it is available for
general distribution either for free or at a price that does not exceed
the cost of reproduction and distribution. See Supplement No. 1 to this
part, Questions G(1) through G(3).
Sec. 734.8 Information resulting from fundamental research.
(a) Fundamental research. Paragraphs (b) through (d) of this
section and Sec. 734.11 of this part provide specific rules that will
be used to determine whether research in particular institutional
contexts qualifies as ``fundamental research''. The intent behind these
rules is to identify as ``fundamental research'' basic and applied
research in science and engineering, where the resulting information is
ordinarily published and shared broadly within the scientific
community. Such research can be distinguished from proprietary research
and from industrial development, design, production, and product
utilization, the results of which ordinarily are restricted for
proprietary reasons or specific national security reasons as defined in
Sec. 732.10 of this part. (See Supplement No. 1 to this part, Question
D(8)).
(b) University based research. (1) Research conducted by
scientists, engineers, or students at a university normally will be
considered fundamental research, as described in paragraphs (b) (2)
through (6) of this section. (``University'' means any accredited
institution of higher education located in the United States.)
(2) Prepublication review by a sponsor of university research
solely to insure that the publication would not inadvertently divulge
proprietary information that the sponsor has furnished to the
researchers does not change the status of the research as fundamental
research. However, release of information from a corporate sponsor to
university researchers where the research results are subject to
prepublication review, is subject to the EAR. (See Supplement No. 1 to
this part, Questions D(7), D(9), and D(10).)
(3) Prepublication review by a sponsor of university research
solely to ensure that publication would not compromise patent rights
does not change the status of fundamental research, so long as the
review causes no more than a temporary delay in publication of the
research results.
(4) The initial transfer of information from an industry sponsor to
university researchers is subject to the EAR where the parties have
agreed that the sponsor may withhold from publication some or all of
the information so provided. (See Supplement No. 1 to this part,
Question D(2).)
(5) University based research is not considered ``fundamental
research'' if the university or its researchers accept (at the request,
for example, of an industrial sponsor) other restrictions on
publication of scientific and technical information resulting from the
project or activity. Scientific and technical information resulting
from the research will nonetheless qualify as fundamental research once
all such restrictions have expired or have been removed. (See
Supplement No. 1 to this part, Question D(7) and D(9).)
(6) The provisions of Sec. 734.11 of this part will apply if a
university or its researchers accept specific national security
controls (as defined in Sec. 732.11 of this part) on a research project
or activity sponsored by the U.S. Government. (See Supplement No. 1 to
this part, Questions E(1) and E(2).)
(c) Research based at Federal agencies or FFRDCs. Research
conducted by scientists or engineers working for a Federal agency or a
Federally Funded Research and Development Center (FFRDC) may be
designated as ``fundamental research'' within any appropriate system
devised by the agency or the FFRDC to control the release of
information by such scientists and engineers. (See Supplement No. 1 to
this part, Questions D(8) and D(11).)
(d) Corporate research. (1) Research conducted by scientists or
engineers working for a business entity will be considered
``fundamental research'' at such time and to the extent that the
researchers are free to make scientific and technical information
resulting from the research publicly available without restriction or
delay based on proprietary concerns or specific national security
controls as defined in Sec. 734.11 of this part.
(2) Prepublication review by the company solely to ensure that the
publication would compromise no proprietary information provided by the
company to the researchers is not considered to be a proprietary
restriction under paragraph (d)(1) of this section. However, paragraph
(d)(1) of this section does not authorize the release of information to
university researchers where the research results are subject to
prepublication review. (See Supplement No. 1 to this part, Questions
D(8), D(9), and D(10).)
(3) Prepublication review by the company solely to ensure that
prepublication would compromise no patent rights will not be considered
a proprietary restriction for this purpose, so long as the review
causes no more
[[Page 12750]]
than a temporary delay in publication of the research results.
(4) However, the initial transfer of information from a business
entity to researchers is not authorized under the ``fundamental
research'' provision where the parties have agreed that the business
entity may withhold from publication some or all of the information so
provided.
(e) Research based elsewhere. Research conducted by scientists or
engineers who are not working for any of the institutions described in
paragraphs (b) through (d) of this section will be treated as corporate
research, as described in paragraph (d) of this section. (See
Supplement No. 1 to this part, Question D(8).)
Sec. 734.9 Educational information.
``Educational information'' referred to in Sec. 734.3(b)(3)(iii) of
this part is not subject to the EAR if it is released by instruction in
catalog courses and associated teaching laboratories of academic
institutions. Dissertation research is discussed in Sec. 734.8(b) of
this part. (See Supplement No. 1 to this part, Question C(1) through
C(6).)
Sec. 734.10 Patent applications.
The information referred to in Sec. 734.3(b)(3)(iv) of this part
is:
(a) Information contained in a patent application prepared wholly
from foreign-origin technical data where the application is being sent
to the foreign inventor to be executed and returned to the United
States for subsequent filing in the U.S. Patent and Trademark Office;
(b) Information contained in a patent application, or an amendment,
modification, supplement or division of an application, and authorized
for filing in a foreign country in accordance with the regulations of
the Patent and Trademark Office, 37 CFR part 5; <SUP>1 or
\1\ Regulations issued by the Patent and Trademark Office in 37
CFR part 5 provide for the export to a foreign country of
unclassified technical data in the form of a patent application or
an amendment, modification, or supplement thereto or division
thereof.
---------------------------------------------------------------------------
(c) Information contained in a patent application when sent to a
foreign country before or within six months after the filing of a
United States patent application for the purpose of obtaining the
signature of an inventor who was in the United States when the
invention was made or who is a co-inventor with a person residing in
the United States.
Sec. 734.11 Government-sponsored research covered by contract
controls.
(a) If research is funded by the U.S. Government, and specific
national security controls are agreed on to protect information
resulting from the research, Sec. 734.3(b)(3) of this part will not
apply to any export or reexport of such information in violation of
such controls. However, any export or reexport of information resulting
from the research that is consistent with the specific controls may
nonetheless be made under this provision.
(b) Examples of ``specific national security controls'' include
requirements for prepublication review by the Government, with right to
withhold permission for publication; restrictions on prepublication
dissemination of information to non-U.S. citizens or other categories
of persons; or restrictions on participation of non-U.S. citizens or
other categories of persons in the research. A general reference to one
or more export control laws or regulations or a general reminder that
the Government retains the right to classify is not a ``specific
national security control''. (See Supplement No. 1 to this part,
Questions E(1) and E(2).)
Sec. 734.12 Effect on foreign laws and regulations.
Any person who complies with any of the license or other
requirements of the EAR is not relieved of the responsibility of
complying with applicable foreign laws and regulations. Conversely, any
person who complies with the license or other requirements of a foreign
law or regulation is not relieved of the responsibility of complying
with U.S. laws and regulations, including the EAR.
Supplement No. 1 to Part 734--Questions and Answers--Technology and
Software Subject to the EAR
This Supplement No. 1 contains explanatory questions and answers
relating to technology and software that is subject to the EAR. It
is intended to give the public guidance in understanding how BXA
interprets this part, but is only illustrative, not comprehensive.
In addition, facts or circumstances that differ in any material way
from those set forth in the questions or answers will be considered
under the applicable provisions of the EAR. This Supplement is
divided into nine sections according to topic as follows:
Section A: Publication of technology and exports and reexports
of technology that has been or will be published.
Section B: Release of technology at conferences.
Section C: Educational instruction.
Section D: Research, correspondence, and informal scientific
exchanges.
Section E: Federal contract controls.
Section F: Commercial consulting.
Section G: Software.
Section H: Availability in a public library.
Section I: Miscellaneous.
Section A: Publication
Question A(1): I plan to publish in a foreign journal a
scientific paper describing the results of my research, which is in
an area listed in the EAR as requiring a license to all countries
except Canada. Do I need a license to send a copy to my publisher
abroad?
Answer: No. This export transaction is not subject to the EAR.
The EAR do not cover technology that is already publicly available,
as well as technology that is made public by the transaction in
question (Secs. 734.3 and 734.7 of this part). Your research results
would be made public by the planned publication. You would not need
a license.
Question A(2): Would the answer differ depending on where I work
or where I performed the research?
Answer: No. Of course, the result would be different if your
employer or another sponsor of your research imposed restrictions on
its publication (Sec. 734.8 of this part).
Question (A)3: Would I need a license to send the paper to the
editors of a foreign journal for review to determine whether it will
be accepted for publication?
Answer: No. This export transaction is not subject to the EAR
because you are submitting the paper to the editors with the
intention that the paper will be published if favorably received
(Sec. 734.7(a)(4)(iii) of this part).
Question A(4): The research on which I will be reporting in my
paper is supported by a grant from the Department of Energy (DOE).
The grant requires prepublication clearance by DOE. Does that make
any difference under the Export Administration Regulations?
Answer: No, the transaction is not subject to the EAR. But if
you published in violation of any Department of Energy controls you
have accepted in the grant, you may be subject to appropriate
administrative, civil, or criminal sanctions under other laws.
Question A(5): We provide consulting services on the design,
layout, and construction of integrated circuit plants and production
lines. A major part of our business is the publication for sale to
clients of detailed handbooks and reference manuals on key aspects
on the design and manufacturing processes. A typical cost of
publishing such a handbook and manual might be $500; the typical
sales price is about $15,000. Is the publication and sale of such
handbooks or manuals subject to the EAR?
Answer: Yes. The price is above the cost of reproduction and
distribution (Sec. 734.7(a)(1) of this part). Thus, you would need
to obtain a license or qualify for a License Exception before you
could export or reexport any of these handbooks or manuals.
Question A(6): My Ph.D. thesis is on technology, listed in the
EAR as requiring a license to all destinations except Canada, which
has never been published for general distribution. However, the
thesis is available at the institution from which I took the degree.
Do I need a license to send another copy to a colleague overseas?
Answer: That may depend on where in the institution it is
available. If it is not readily available in the university library
(e.g., by filing in open stacks with a reference in the
[[Page 12751]]
catalog), it is not ``publicly available'' and the export or
reexport would be subject to the EAR on that ground. The export or
reexport would not be subject to the EAR if your Ph.D. research
qualified as ``fundamental research'' under Sec. 734.8 of this part.
If not, however, you will need to obtain a license or qualify for a
License Exception before you can send a copy out of the country.
Question A(7): We sell electronically recorded information,
including software and databases, at wholesale and retail. Our
products are available by mail order to any member of the public,
though intended for specialists in various fields. They are priced
to maximize sales to persons in those fields. Do we need a license
to sell our products to foreign customers?
Answer: You would not need a license for otherwise controlled
technology or software if the technology and software are made
publicly available at a price that does not exceed the cost of
production and distribution to the technical community. Even if
priced at a higher level, the export or reexport of the technology
or software source code in a library accessible to the public is not
subject to the EAR (Sec. 734.7(a) of this part).
Section B: Conferences
Question B(1): I have been invited to give a paper at a
prestigious international scientific conference on a subject listed
as requiring a license under the EAR to all countries, except
Canada. Scientists in the field are given an opportunity to submit
applications to attend. Invitations are given to those judged to be
the leading researchers in the field, and attendance is by
invitation only. Attendees will be free to take notes, but not make
electronic or verbatim recordings of the presentations or
discussions. Some of the attendees will be foreigners. Do I need a
license to give my paper?
Answer: No. Release of information at an open conference and
information that has been released at an open conference is not
subject to the EAR. The conference you describe fits the definition
of an open conference (Sec. 734.7(d) of this part).
Question B(2): Would it make any difference if there were a
prohibition on making any notes or other personal record of what
transpires at the conference?
Answer: Yes. To qualify as an ``open'' conference, attendees
must be permitted to take notes or otherwise make a personal record
(although not necessarily a recording). If note taking or the making
of personal records is altogether prohibited, the conference would
not be considered ``open''.
Question B(3): Would it make any difference if there were also a
registration fee?
Answer: That would depend on whether the fee is reasonably
related to costs and reflects an intention that all interested and
technically qualified persons should be able to attend
(Sec. 734.7(d)(4)(ii) of this part).
Question B(4): Would it make any difference if the conference
were to take place in another country?
Answer: No.
Question B(5): Must I have a license to send the paper I propose
to present at such a foreign conference to the conference organizer
for review?
Answer: No. A license is not required under the EAR to submit
papers to foreign organizers of open conferences or other open
gatherings with the intention that the papers will be delivered at
the conference, and so made publicly available, if favorably
received. The submission of the papers is not subject to the EAR
(Sec. 734.7(d)(4)(iii) of this part).
Question B(6): Would the answers to any of the foregoing
questions be different if my work were supported by the Federal
Government?
Answer: No. You may export and reexport the papers, even if the
release of the paper violates any agreements you have made with your
government sponsor. However, nothing in the EAR relieves you of
responsibility for conforming to any controls you have agreed to in
your Federal grant or contract.
Section C: Educational Instruction
Question C(1): I teach a university graduate course on design
and manufacture of very high-speed integrated circuitry. Many of the
students are foreigners. Do I need a license to teach this course?
Answer: No. Release of information by instruction in catalog
courses and associated teaching laboratories of academic
institutions is not subject to the EAR (Sec. 734.9 of this part).
Question C(2): Would it make any difference if some of the
students were from countries to which export licenses are required?
Answer: No.
Question C(3): Would it make any difference if I talk about
recent and as yet unpublished results from my laboratory research?
Answer: No.
Question C(4): Even if that research is funded by the
Government?
Answer: Even then, but you would not be released from any
separate obligations you have accepted in your grant or contract.
Question C(5): Would it make any difference if I were teaching
at a foreign university?
Answer: No.
Question C(6): We teach proprietary courses on design and
manufacture of high-performance machine tools. Is the instruction in
our classes subject to the EAR?
Answer: Yes. That instruction would not qualify as ``release of
educational information'' under Sec. 734.9 of this part because your
proprietary business does not qualify as an ``academic institution''
within the meaning of Sec. 734.9 of this part. Conceivably, however,
the instruction might qualify as ``release at an open * * * seminar,
* * * or other open gathering'' under Sec. 734.7(d) of this part.
The conditions for qualification of such a seminar or gathering as
``open'', including a fee ``reasonably related to costs (of the
conference, not of producing the data) and reflecting an intention
that all interested and technically qualified persons be able to
attend,'' would have to be satisfied.
Section D: Research, Correspondence, and Informal Scientific
Exchanges
Question D(1): Do I need a license in order for a foreign
graduate student to work in my laboratory?
Answer: Not if the research on which the foreign student is
working qualifies as ``fundamental research'' under Sec. 734.8 of
this part. In that case, the research is not subject to the EAR.
Question D(2): Our company has entered into a cooperative
research arrangement with a research group at a university. One of
the researchers in that group is a PRC national. We would like to
share some of our proprietary information with the university
research group. We have no way of guaranteeing that this information
will not get into the hands of the PRC scientist. Do we need to
obtain a license to protect against that possibility?
Answer: No. The EAR do not cover the disclosure of information
to any scientists, engineers, or students at a U.S. university in
the course of industry-university research collaboration under
specific arrangements between the firm and the university, provided
these arrangements do not permit the sponsor to withhold from
publication any of the information that he provides to the
researchers. However, if your company and the researchers have
agreed to a prohibition on publication, then you must obtain a
license or qualify for a License Exception before transferring the
information to the university. It is important that you as the
corporate sponsor and the university get together to discuss whether
foreign nationals will have access to the information, so that you
may obtain any necessary authorization prior to transferring the
information to the research team.
Question D(3): My university will host a prominent scientist
from the PRC who is an expert on research in engineered ceramics and
composite materials. Do I require a license before telling our
visitor about my latest, as yet unpublished, research results in
those fields?
Answer: Probably not. If you performed your research at the
university, and you were subject to no contract controls on release
of the research, your research would qualify as ``fundamental
research'' (Sec. 734.8(a) of this part). Information arising during
or resulting from such research is not subject to the EAR
(Sec. 734.3(b)(3) of this part).
You should probably assume, however, that your visitor will be
debriefed later about anything of potential military value he learns
from you. If you are concerned that giving such information to him,
even though permitted, could jeopardize U.S. security interests, the
Commerce Department can put you in touch with appropriate Government
scientists who can advise you. Write to Department of Commerce,
Bureau of Export Administration, P.O. Box 273, Washington, DC 20044.
Question D(4): Would it make any difference if I were proposing
to talk with a PRC expert in China?
Answer: No, if the information in question arose during or
resulted from the same ``fundamental research.''
[[Page 12752]]
Question D(5): Could I properly do some work with him in his
research laboratory inside China?
Answer: Application abroad of personal knowledge or technical
experience acquired in the United States constitutes an export of
that knowledge and experience, and such an export may be subject to
the EAR. If any of the knowledge or experience you export in this
way requires a license under the EAR, you must obtain such a license
or qualify for a License Exception.
Question D(6): I would like to correspond and share research
results with an Iranian expert in my field, which deals with
technology that requires a license to all destinations except
Canada. Do I need a license to do so?
Answer: Not as long as we are still talking about information
that arose during or resulted from research that qualifies as
``fundamental'' under the rules spelled out in Sec. 734.8(a) of this
part.
Question D(7): Suppose the research in question were funded by a
corporate sponsor and I had agreed to prepublication review of any
paper arising from the research?
Answer: Whether your research would still qualify as
``fundamental'' would depend on the nature and purpose of the
prepublication review. If the review is intended solely to ensure
that your publications will neither compromise patent rights nor
inadvertently divulge proprietary information that the sponsor has
furnished to you, the research could still qualify as
``fundamental.'' But if the sponsor will consider as part of its
prepublication review whether it wants to hold your new research
results as trade secrets or otherwise proprietary information (even
if your voluntary cooperation would be needed for it to do so), your
research would no longer qualify as ``fundamental.'' As used in
these regulations it is the actual and intended openness of research
results that primarily determines whether the research counts as
``fundamental'' and so is not subject to the EAR.
Question D(8): In determining whether research is thus open and
therefore counts as ``fundamental,'' does it matter where or in what
sort of institution the research is performed?
Answer: In principle, no. ``Fundamental research'' is performed
in industry, Federal laboratories, or other types of institutions,
as well as in universities. The regulations introduce some
operational presumptions and procedures that can be used both by
those subject to the regulations and by those who administer them to
determine with some precision whether a particular research activity
is covered. Recognizing that common and predictable norms operate in
different types of institutions, the regulations use the
institutional locus of the research as a starting point for these
presumptions and procedures. Nonetheless, it remains the type of
research, and particularly the intent and freedom to publish, that
identifies ``fundamental research,'' not the institutional locus
(Sec. 734.8(a) of this part).
Question D(9): I am doing research on high-powered lasers in the
central basic-research laboratory of an industrial corporation. I am
required to submit the results of my research for prepublication
review before I can publish them or otherwise make them public. I
would like to compare research results with a scientific colleague
from Vietnam and discuss the results of the research with her when
she visits the United States. Do I need a license to do so?
Answer: You probably do need a license (Sec. 734.8(d) of this
part). However, if the only restriction on your publishing any of
that information is a prepublication review solely to ensure that
publication would compromise no patent rights or proprietary
information provided by the company to the researcher your research
may be considered ``fundamental research,'' in which case you may be
able to share information because it is not subject to the EAR. Note
that the information will be subject to the EAR if the
prepublication review is intended to withhold the results of the
research from publication.
Question D(10): Suppose I have already cleared my company's
review process and am free to publish all the information I intend
to share with my colleague, though I have not yet published?
Answer: If the clearance from your company means that you are
free to make all the information publicly available without
restriction or delay, the information is not subject to the EAR.
(Sec. 734.8(d) of this part)
Question D(11): I work as a researcher at a Government-owned,
contractor-operated research center. May I share the results of my
unpublished research with foreign nationals without concern for
export controls under the EAR?
Answer: That is up to the sponsoring agency and the center's
management. If your research is designated ``fundamental research''
within any appropriate system devised by them to control release of
information by scientists and engineers at the center, it will be
treated as such by the Commerce Department, and the research will
not be subject to the EAR. Otherwise, you would need to obtain a
license or qualify for a License Exception, except to publish or
otherwise make the information public (Sec. 734.8(c) of this part).
Section E: Federal Contract Controls
Question E(1): In a contract for performance of research entered
into with the Department of Defense (DOD), we have agreed to certain
national security controls. DOD is to have ninety days to review any
papers we proposed before they are published and must approve
assignment of any foreign nationals to the project. The work in
question would otherwise qualify as ``fundamental research'' section
under Sec. 734.8 of this part. Is the information arising during or
resulting from this sponsored research subject to the EAR?
Answer: Under Sec. 734.11 of this part, any export or reexport
of information resulting from government-sponsored research that is
inconsistent with contract controls you have agreed to will not
qualify as ``fundamental research'' and any such export or reexport
would be subject to the EAR. Any such export or reexport that is
consistent with the controls will continue to be eligible for export
and reexport under the ``fundamental research'' rule set forth in
Sec. 734.8(a) of this part. Thus, if you abide by the specific
controls you have agreed to, you need not be concerned about
violating the EAR. If you violate those controls and export or
reexport information as ``fundamental research'' under Sec. 734.8(a)
of this part, you may subject yourself to the sanctions provided for
under the EAR, including criminal sanctions, in addition to
administrative and civil penalties for breach of contract under
other law.
Question E(2): Do the Export Administration Regulations restrict
my ability to publish the results of my research?
Answer: The Export Administration Regulations are not the means
for enforcing the national security controls you have agreed to. If
such a publication violates the contract, you would be subject to
administrative, civil, and possible criminal penalties under other
law.
Section F: Commercial Consulting
Question F(1): I am a professor at a U.S. university, with
expertise in design and creation of submicron devices. I have been
asked to be a consultant for a ``third-world'' company that wishes
to manufacture such devices. Do I need a license to do so?
Answer: Quite possibly you do. Application abroad of personal
knowledge or technical experience acquired in the United States
constitutes an export of that knowledge and experience that is
subject to the Export Administration Regulations. If any part of the
knowledge or experience your export or reexport deals with
technology that requires a license under the EAR, you will need to
obtain a license or qualify for a License Exception.
Section G: Software <SUP>2
\2\ Exporters should note that these provisions do not apply to
software controlled under the International Traffic in Arms
Regulations (e.g., certain encryption software).
---------------------------------------------------------------------------
Question G(1): Is the export or reexport of software in machine
readable code subject to the EAR when the source code for such
software is publicly available?
Answer: If the source code of a software program is publicly
available, then the machine readable code compiled from the source
code is software that is publicly available and therefore not
subject to the EAR.
Question G(2): Is the export or reexport of software sold at a
price that does not exceed the cost of reproduction and distribution
subject to the EAR?
Answer: Software in machine readable code is publicly available
if it is available to a community at a price that does not exceed
the cost of reproduction and distribution. Such reproduction and
distribution costs may include variable and fixed allocations of
overhead and normal profit for the reproduction and distribution
functions either in your company or in a third party distribution
system. In your company, such costs may not include recovery for
development, design, or acquisition. In this case, the provider of
the software does not receive a fee for the inherent value of the
software.
[[Page 12753]]
Question G(3): Is the export or reexport of software subject to
the EAR if it is sold at a price BXA concludes in a classification
letter to be sufficiently low so as not to subject it to the EAR?
Answer: In response to classification requests, BXA may choose
to classify certain software as not subject to the EAR even though
it is sold at a price above the costs of reproduction and
distribution as long as the price is nonetheless sufficiently low to
qualify for such a classification in the judgment of BXA.
Section H: Available in a Public Library
Question H(1): Is the export or reexport of information subject
to the EAR if it is available in a library and sold through an
electronic or print service?
Answer: Electronic and print services for the distribution of
information may be relatively expensive in the marketplace because
of the value vendors add in retrieving and organizing information in
a useful way. If such information is also available in a library--
itself accessible to the public--or has been published in any way,
that information is ``publicly available'' for those reasons, and
the information itself continues not to be subject to the EAR even
though you access the information through an electronic or print
service for which you or your employer pay a substantial fee.
Question H(2): Is the export or reexport of information subject
to the EAR if the information is available in an electronic form in
a library at no charge to the library patron?
Answer: Information available in an electronic form at no charge
to the library patron in a library accessible to the public is
information publicly available even though the library pays a
substantial subscription fee for the electronic retrieval service.
Question H(3): Is the export or reexport of information subject
to the EAR if the information is available in a library and sold for
more than the cost of reproduction and distribution?
Answer: Information from books, magazines, dissertations,
papers, electronic data bases, and other information available in a
library that is accessible to the public is not subject to the EAR.
This is true even if you purchase such a book at more than the cost
of reproduction and distribution. In other words, such information
is ``publicly available'' even though the author makes a profit on
your particular purchase for the inherent value of the information.
Section I: Miscellaneous
Question I(1): The manufacturing plant that I work at is
planning to begin admitting groups of the general public to tour the
plant facilities. We are concerned that a license might be required
if the tour groups include foreign nationals. Would such a tour
constitute an export? If so, is the export subject to the EAR?
Answer: The EAR define exports and reexports of technology to
include release through visual inspection by foreign nationals of
U.S.-origin equipment and facilities. Such an export or reexport
qualifies under the ``publicly available'' provision and would not
be subject to the EAR so long as the tour is truly open to all
members of the public, including your competitors, and you do not
charge a fee that is not reasonably related to the cost of
conducting the tours. Otherwise, you will have to obtain a license,
or qualify for a License Exception, prior to permitting foreign
nationals to tour your facilities (Sec. 734.7 of this part).
Question I(2): Is the export or reexport of information subject
to the EAR if the information is not in a library or published, but
sold at a price that does not exceed the cost of reproduction and
distribution?
Answer: Information that is not in a library accessible to the
public and that has not been published in any way, may nonetheless
become ``publicly available'' if you make it both available to a
community of persons and if you sell it at no more than the cost of
reproduction and distribution. Such reproduction and distribution
costs may include variable and fixed cost allocations of overhead
and normal profit for the reproduction and distribution functions
either in your company or in a third party distribution system. In
your company, such costs may not include recovery for development,
design, or acquisition costs of the technology or software. The
reason for this conclusion is that the provider of the information
receives nothing for the inherent value of the information.
Question I(3): Is the export or reexport of information
contributed to an electronic bulletin board subject to the EAR?
Answer: Assume each of the following:
1. Information is uploaded to an electronic bulletin board by a
person that is the owner or originator of the information;
2. That person does not charge a fee to the bulletin board
administrator or the subscribers of the bulletin board; and
3. The bulletin board is available for subscription to any
subscriber in a given community regardless of the cost of
subscription.
Such information is ``publicly available'' and therefore not
subject to the EAR even if it is not elsewhere published and is not
in a library. The reason for this conclusion is that the bulletin
board subscription charges or line charges are for distribution
exclusively, and the provider of the information receives nothing
for the inherent value of the information.
Question I(4): Is the export or reexport of patented information
fully disclosed on the public record subject to the EAR?
Answer: Information to the extent it is disclosed on the patent
record open to the public is not subject to the EAR even though you
may use such information only after paying a fee in excess of the
costs of reproduction and distribution. In this case the seller does
receive a fee for the inherent value of the technical data; however,
the export or reexport of the information is nonetheless not subject
to the EAR because any person can obtain the technology from the
public record and further disclose or publish the information. For
that reason, it is impossible to impose export controls that deny
access to the information.
Supplement No. 2 to Part 734--Calculation of Values for De Minimis
Rules
(a) Use the following guidelines in determining values for
establishing exemptions or for submission of a request for
authorization:
(1) U.S. content value.
(i) U.S. content value is the delivered cost to the foreign
manufacturer of the U.S. origin parts, components, or materials.
(When affiliated firms have special arrangements that result in
lower than normal pricing, the cost should reflect ``fair market''
prices that would normally be charged to similar, unaffiliated
customers.)
(ii) In calculating the U.S. content value, do not include
parts, components, or materials that, according to the CCL (part 774
of the EAR) and the Country Chart (part 738 of the EAR), could be
exported from the United States to the new country of destination
without a license (designated as ``NLR'') or under License Exception
GBS (see part 740 of the EAR).
(2) The foreign-made product value is the normal selling price
f.o.b. factory (excluding value added taxes or excise taxes).
(3) To determine the value of the U.S.-origin controlled
content, you should classify the U.S.-origin content on the Commerce
Control List, determine those items that would require a license
from BXA for reexport to the ultimate destination of the foreign-
made product if such parts, components, or materials were reexported
to that destination in the form received, and divide the total value
of the controlled U.S. parts, components, and materials incorporated
into the foreign-made item by the sale price of the foreign-made
item.
(4) If no U.S. parts, components or materials are incorporated
or if the incorporated U.S. parts, components, and materials are
below the de minimis level, then the foreign-made item is not
subject to the EAR by reason of Sec. 734.4 of this part, the
classification of a foreign-made item is irrelevant in determining
the scope of the EAR, and you should skip Step 4 in Sec. 732.2(d)
and go on to consider Step 6 in Sec. 732.2(f) of the EAR regarding
the foreign-produced direct product rule.
(b) One-time report prior to reliance upon the de minimis
exclusion.
(1) Report requirement. Before you may rely upon the de minimis
exclusion for foreign software and technology commingled with U.S.
software or technology, you must file a one-time report for the
foreign software or technology. The report must include the
percentage of U.S.-content by value and a description of your
calculations including relevant values, assumptions, and the basis
or methodologies for making the percentage calculation. The three
criteria important to BXA in its review of your report will be the
export price of the U.S.-content, the assumption regarding future
sales of software, and the choice of the scope of foreign
technology. Your methodologies must be based upon the accounting
standards used in the operation of your business, and you must
specify that standard in your report. Regardless of the accounting
systems,
[[Page 12754]]
standard, or conventions you use in the operation of your business,
you may not depreciate the fair market values reported or otherwise
reduce the fair market values by other accounting conventions such
as depreciation. You may rely upon the de minimis exclusion from the
commingled rule only to the extent you have reported the relevant
calculations, values, assumptions, and the basis or methodologies
for the calculations. These values may be historic or projected. You
may rely on projected values only to the extent that and for so long
as they remain consistent with your report or future values reduce
the U.S.-content under your reported assumptions, basis, and
methodologies. You are not required to file the above report if you
do not choose to take advantage of the de minimis exclusion from the
commingled rule.
(2) Export price. The report must include a description of the
U.S.-content including its classification on the Commerce Control
List, its performance characteristics and features, and the method
of calculating its fair market value. The fair market value shall be
the arms-length transaction price, if it is available. If an arms-
length transaction price is unavailable, then the report will
describe the valuation method chosen to calculate or derive the fair
market value. Such methods may include comparable market prices or
costs of production and distribution. This rule does not require
calculations based upon any one accounting system or U.S. accounting
standards. However, you must specify the accepted accounting
standards you have chosen, and cost-based methods of valuation must
be based upon records you maintain in the normal course of business.
You should also indicate whether reported values are actual arms-
length market prices or derived from comparable transactions or
costs of production, overhead, and profit. For example, if you chose
to make calculations under the transfer pricing rules of the United
States Internal Revenue Code at section 482, your report should
indicate that this is the source for your methodology, and you
should also indicate which of the several methodologies in these
transfer pricing rules you have chosen.
(3) Future software sales. For calculations of U.S.-content in
foreign software, you shall include your estimate of future software
sales in units and value along with the rationale and basis for
those estimates in the report.
(4) Foreign technology and software. For calculations of U.S.-
content in foreign technology and software, you shall include in the
report a description of the foreign technology or software and a
description of its fair market value along with the rationale and
basis for the selection and valuation of such foreign software or
technology. The report does not require information regarding
destinations and end users for reexport. The purpose of the report
is solely to permit the U.S. Government to evaluate the
reasonableness of U.S.-content calculations.
(5) Report and wait. If you have not been contacted by BXA
concerning your report within thirty days after filing the report
with BXA, you may rely upon the calculations in your report and the
de minimis exclusions for software and technology for so long as you
are not contacted by BXA. BXA may contact you concerning your report
to inquire of you further or to indicate that BXA does not accept
the assumptions or rationale for your calculations. If you receive
such a contact or communication from BXA, you may not rely upon the
de minimis exclusions for software and technology in Sec. 734.4 of
this part until BXA has indicated whether or not you may do so in
the future. You must include in your report the name, title,
address, telephone number, and facsimile number of the person BXA
may contact concerning your report.
PART 736--GENERAL PROHIBITIONS
Sec.
736.1 Introduction.
736.2 General prohibitions and determination of applicability.
Supplement No. 1--General Orders
Supplement No. 2--Administrative Orders
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
E.O. 12924, 3 CFR, 1994 Comp., p. 917; E.O. 12938, 3 CFR, 1994
Comp., p. 950; Notice of August 15, 1995 (60 FR 42767, August 17,
1995).
Sec. 736.1 Introduction.
In this part, references to the EAR are references to 15 CFR
chapter VII, subchapter C. A person may undertake transactions subject
to the EAR without a license or other authorization, unless the
regulations affirmatively state such a requirement. As such, if an
export, reexport, or activity is subject to the EAR, the general
prohibitions contained in this part and the License Exceptions
specified in part 740 of the EAR must be reviewed to determine if a
license is necessary. In the case of all exports from the United
States, you must document your export as described in part 762 of the
EAR regarding recordkeeping and clear your export through the U.S.
Customs Service as described in part 758 of the EAR regarding export
clearance requirements. Also note that for short supply controls all
prohibitions and License Exceptions are in part 754 of the EAR.
(a) In this part we tell you:
(1) The facts that make your proposed export, reexport, or conduct
subject to these general prohibitions, and
(2) The ten general prohibitions.
(b) Your obligations under the ten general prohibitions and under
the EAR depend in large part upon the five types of information
described in Sec. 736.2(a) of this part and upon the general
prohibitions described in Sec. 736.2(b) of this part. The ten general
prohibitions contain cross-references to other parts of the EAR that
further define the breadth of the general prohibitions. For that
reason, this part is not freestanding. In part 732, we provide certain
steps you may follow in proper order to help you understand the general
prohibitions and their relationship to other parts of the EAR.
(c) If you violate any of these ten general prohibitions, or engage
in other conduct contrary to the Export Administration Act, the EAR, or
any order, license, License Exception, or authorization issued
thereunder, as described in part 764 of the EAR regarding enforcement,
you will be subject to the sanctions described in that part.
Sec. 736.2 General prohibitions and determination of applicability.
(a) Information or facts that determine the applicability of the
general prohibitions. The following five types of facts determine your
obligations under the ten general prohibitions and the EAR generally:
(1) Classification of the item. The classification of the item on
the Commerce Control List (see part 774 of the EAR);
(2) Destination. The country of ultimate destination for an export
or reexport (see parts 738 and 774 of the EAR concerning the Country
Chart and the Commerce Control List);
(3) End-user. The ultimate end-user (see General Prohibition Four
(paragraph (b)(4) of this section) and parts 744 and 764 of the EAR for
a reference to the list of persons you may not deal with);
(4) End-use. The ultimate end-use (see General Prohibition Five
(paragraph (b)(5) of this section) and part 744 of the EAR for general
end-use restrictions); and
(5) Conduct. Conduct such as contracting, financing, and freight
forwarding in support of a proliferation project as described in part
744 of the EAR.
(b) General prohibitions. The following ten general prohibitions
describe certain exports, reexports, and other conduct, subject to the
scope of the EAR, in which you may not engage unless you either have a
license from the Bureau of Export Administration (BXA) or qualify under
part 740 of the EAR for a License Exception from each applicable
general prohibition in this paragraph. The License Exceptions at part
740 of the EAR apply only to General Prohibitions One (Exports and
Reexports in the Form Received), Two (Parts and Components Reexports),
and Three (Foreign-Produced Direct Product Reexports); however,
selected License Exceptions are specifically referenced and authorized
in part 746 of the EAR concerning embargo destinations and in
Sec. 744.2(c) of the EAR regarding nuclear end-uses.
[[Page 12755]]
(1) General Prohibition One--Export and reexport of controlled
items to listed countries (Exports and Reexports). You may not, without
a license or License Exception, export any item subject to the EAR to
another country or reexport any item of U.S.-origin if each of the
following is true:
(i) The item is controlled for a reason indicated in the applicable
Export Control Classification Number (ECCN), and
(ii) Export to the country of destination requires a license for
the control reason as indicated on the Country Chart at part 738 of the
EAR. (The scope of this prohibition is determined by the correct
classification of your item and the ultimate destination as that
combination is reflected on the Country Chart.) <SUP>1 Note that each
License Exception described at part 740 of the EAR supersedes General
Prohibition One if all terms and conditions of a given License
Exception are met by the exporter or reexporter.
\1\ See part 738 of the EAR for selected controls that are not
specified on the Country Chart.
---------------------------------------------------------------------------
(2) General Prohibition Two--Reexport and export from abroad of
foreign-made items incorporating more than a de minimis amount of
controlled U.S. content (Parts and Components Reexports).
(i) You may not, without a license or License Exception, export,
reexport or export from abroad any foreign-made commodity, software, or
technology incorporating U.S.-origin commodities, software, or
technology respectively that is controlled to the country of ultimate
destination if the foreign-made item meets all three of the following
conditions:
(A) It incorporates more than the de minimis amount of controlled
U.S. content, as defined in Sec. 734.4 of the EAR concerning the scope
of the EAR;
(B) It is controlled for a reason indicated in the applicable ECCN;
and
(C) Its export to the country of destination requires a license for
that control reason as indicated on the Country Chart. (The scope of
this prohibition is determined by the correct classification of your
foreign-made item and the ultimate destination, as that combination is
reflected on the Country Chart.)
(ii) Each License Exception described at part 740 of the EAR
supersedes General Prohibition One if all terms and conditions of a
given License Exception are met by the exporter or reexporter.
(3) General Prohibition Three--Reexport and export from abroad of
the foreign-produced direct product of U.S. technology and software
(Foreign-Produced Direct Product Reexports).
(i) Country scope of prohibition. You may not export, reexport, or
export from abroad items subject to the scope of this General
Prohibition Three to Cuba, North Korea, Libya, or a destination in
Country Group D:1 (See Supplement No. 1 to part 740 of the EAR).
(ii) Product scope of foreign-made items subject to prohibition.
This General Prohibition 3 applies if an item meets either the
Conditions defining the direct product of technology or the Conditions
defining the direct product of a plant in paragraph (b)(3)(ii)(A) of
this section:
(A) Conditions defining direct product of technology. Foreign-made
items are subject to this General Prohibition 3 if they meet both of
the following conditions:
(1) They are the direct product of technology or software that
requires a written assurance as a supporting document for a license or
as a precondition for the use of License Exception TSR at Sec. 740.3(d)
of the EAR, and
(2) They are subject to national security controls as designated on
the applicable ECCN of the Commerce Control List at part 774 of the
EAR.
(B) Conditions defining direct product of a plant. Foreign-made
items are also subject to this General Prohibition 3 if they are the
direct product of a complete plant or any major component of a plant if
both of the following conditions are met:
(1) Such plant or component is the direct product of technology
that requires a written assurance as a supporting document for a
license or as a precondition for the use of License Exception TSR at
Sec. 740.3(d) of the EAR, and
(2) Such foreign-made direct products of the plant or component are
subject to national security controls as designated on the applicable
ECCN of the Commerce Control List at part 774 of the EAR.
(iii) License Exceptions. Each License Exception described at part
740 of the EAR supersedes this General Prohibition Three if all terms
and conditions of a given exception are met by the exporter or
reexporter.
(4) General Prohibition Four (Denial Orders)--Engaging in actions
prohibited by a denial order. (i) You may not take any action that is
prohibited by a denial order issued under part 766 of the EAR,
Administrative Enforcement Proceedings. These orders prohibit many
actions in addition to direct exports by the person denied export
privileges, including some transfers within a single country either in
the United States or abroad by other persons. You are responsible for
ensuring that any of your transactions in which a person who is denied
export privileges is involved do not violate the terms of the order.
The names of persons denied export privileges are published in the
Federal Register and are also included on the Denied Persons List,
which is referenced in Supplement No. 2 to part 764 of the EAR,
Enforcement. The terms of the standard denial order are set forth in
Supplement No. 1 to part 764. You should note that some denial orders
differ from the standard denial order. BXA may, on an exceptional
basis, authorize activity otherwise prohibited by a denial order. See
Sec. 764.3(a)(3) of the EAR.
(ii) There are no License Exceptions described in part 740 of the
EAR that authorize conduct prohibited by this General Prohibition Four.
(5) General Prohibition Five--Export or reexport to prohibited end-
uses or end-users (End-Use End-User). You may not, without a license,
knowingly export or reexport any item subject to the EAR to an end-user
of end-use that is prohibited by part 744 of the EAR.
(6) General Prohibition Six--Export or reexport to embargoed
destinations (Embargo). (i) You may not, without a license or License
Exception authorized under part 746, export or reexport any item
subject to the EAR to a country that is embargoed by the United States
or otherwise made subject to controls as both are described at part 746
of the EAR.
(ii) License Exceptions to this General Prohibition Six are
described at part 746 of the EAR on Embargoes and Other Special
Controls; and unless a License Exception is authorized in part 746 of
the EAR, the License Exceptions at part 740 of the EAR are not
available to overcome this general prohibition.
(7) General Prohibition Seven--Support of Proliferation Activities
(U.S. Person Proliferation Activity). If you are a U.S. Person as that
term is defined at Sec. 744.6(c) of the EAR, you may not engage in any
activities prohibited by Sec. 744.6 (a) or (b) of the EAR which
prohibits the performance, without a license from BXA, of certain
financing, contracting, service, support, transportation, freight
forwarding, or employment that you know will assist in certain
proliferation activities described further at part 744 of the EAR.
There are no License Exceptions to this General Prohibition Seven in
part 740 of the EAR unless specifically authorized in that part.
(8) General Prohibition Eight--In transit shipments and items to be
[[Page 12756]]
unladen from vessels or aircraft (Intransit). (i) Unlading and shipping
in transit. You may not export an item through or transit through a
country listed in (b)(8)(ii) of this section unless a License Exception
or license authorizes such an export directly to such a country of
transit.
(ii) Country scope. This General Prohibition Eight applies to
Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Cambodia, Cuba,
Estonia, Georgia, Kazakhstan, Kyrgyzstan, Laos, Latvia, Lithuania,
Mongolia, North Korea, Russia, Tajikistan, Turkmenistan, Ukraine,
Uzbkeistan, Vietnam.
(9) General Prohibition Nine--Violation of any order, terms, and
conditions (Orders, Terms, and Conditions). You may not violate terms
or conditions of a license or of a License Exception issued under or
made a part of the EAR, and you may not violate any order issued under
or made a part of the EAR. There are no License Exceptions to this
General Prohibition Nine in part 740 of the EAR. Supplements Nos. 1 and
2 to this part provide for certain General Orders and Administrative
Orders.
(10) General Prohibition Ten--Proceeding with transactions with
knowledge that a violation has occurred or is about to occur (Knowledge
Violation to Occur). You may not sell, transfer, export, reexport,
finance, order, buy, remove, conceal, store, use, loan, dispose of,
transfer, transport, forward, or otherwise service, in whole or in
part, any item subject to the EAR and exported or to be exported with
knowledge that a violation of the Export Administration Regulations,
the Export Administration Act or any order, license, License Exception,
or other authorization issued thereunder has occurred, is about to
occur, or is intended to occur in connection with the item. Nor may you
rely upon any license or License Exception after notice to you of the
suspension or revocation of that license or exception. There are no
License Exceptions to this General Prohibition Ten in part 740 of the
EAR.
Supplement No. 1 to Part 736--General Orders
[Reserved]
Supplement No. 2 to Part 736--Administrative Orders
Administrative Order One: Disclosure of License Issuance and
Other Information. Consistent with section 12(c) of the Export
Administration Act of 1979, as amended, information obtained by the
U.S. Department of Commerce for the purpose of consideration of or
concerning license applications, as well as related information,
will not be publicly disclosed without the approval of the Secretary
of Commerce. Shipper's Export Declarations also are exempt from
public disclosure, except with the approval of the Secretary of
Commerce, in accordance with Sec. 301(g) of Title 13, United States
Code.
Administrative Order Two: Conduct of Business and Practice in
Connection with Export Control Matters.
(a) Conduct of business and practice in connection with export
control matters.
(1) Exclusion of persons guilty of unethical conduct or not
possessing required integrity and ethical standards.
(i) Who may be excluded. Any person, whether acting on his own
behalf or on behalf of another, who shall be found guilty of
engaging in any unethical activity or who shall be demonstrated not
to possess the required integrity and ethical standards, may be
excluded from (denied) export privileges on his own behalf, or may
be excluded from practice before BXA on behalf of another, in
connection with any export control matter, or both, as provided in
part 764 of the EAR.
(ii) Grounds for exclusion. Among the grounds for exclusion are
the following:
(A) Inducing or attempting to induce by gifts, promises, bribes,
or otherwise, any officer or employee of BXA or any customs or post
office official, to take any action with respect to the issuance of
licenses or any other aspects of the administration of the Export
Administration Act, whether or not in violation of any regulation;
(B) Offering or making gifts or promises thereof to any such
officer or employee for any other reason;
(C) Soliciting by advertisement or otherwise the handling of
business before BXA on the representation, express or implied, that
such person, through personal acquaintance or otherwise, possesses
special influence over any officer or employee of BXA;
(D) Charging, or proposing to charge, for any service performed
in connection with the issuance of any license, any fee wholly
contingent upon the granting of such license and the amount or value
thereof. This provision will not be construed to prohibit the charge
of any fee agreed to by the parties; provided that the out-of-pocket
expenditures and the reasonable value of the services performed,
whether or not the license is issued and regardless of the amount
thereof, are fairly compensated; and
(E) Knowingly violating or participating in the violation of, or
an attempt to violate, any regulation with respect to the export of
commodities or technical data, including the making of or inducing
another to make any false representations to facilitate any export
in violation of the Export Administration Act or any order or
regulation issued thereunder.
(iii) Definition. As used in this Administration Order, the
terms ``practice before BXA'' and ``appear before BXA'' include:
(A) The submission on behalf of another of applications for
export licenses or other documents required to be filed with BXA, or
the execution of the same;
(B) Conferences or other communications on behalf of another
with officers or employees of BXA for the purpose of soliciting or
expediting approval by BXA of applications for export licenses or
other documents, or with respect to quotas, allocations,
requirements or other export control actions, pertaining to matters
within the jurisdiction of BXA;
(C) Participating on behalf of another in any proceeding pending
before BXA; and
(D) Submission to a customs official on behalf of another of a
license or Shipper's Export Declaration or other export control
document.
(iv) Proceedings. All proceedings under this Administrative
Order shall be conducted in the same manner as provided in part 766
of the EAR.
(2) Employees and former employees. Persons who are or at any
time have been employed on a full-time or part-time, compensated or
uncompensated, basis by the U.S. Government are subject to the
provisions of 18 U.S.C. 203, 205, and 207 (Pub. L. 87-849, 87th
Congress) in connection with representing a private party or
interest before the U.S. Department of Commerce in connection with
any export control matter.
PART 738--COMMERCE CONTROL LIST OVERVIEW AND THE COUNTRY CHART
Sec.
738.1 Introduction.
738.2 Commerce Control List (CCL) structure.
738.3 Commerce Country Chart structure.
738.4 Determining whether a license is required.
Supplement No. 1 to Part 738--Commerce Country Chart
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
10 U.S.C. 7420; 10 U.S.C. 7430(e); 18 U.S.C. 2510 et seq.; 22 U.S.C.
287c; 22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; Sec. 201, Pub. L. 104-
58, 109 Stat. 557 (30 U.S.C. 185(s)); 30 U.S.C. 185(u); 42 U.S.C.
2139a; 42 U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C. app. 466c; 50
U.S.C. app. 5; E.O. 12924, 3 CFR, 1994 Comp., p. 917; Notice of
August 15, 1995 (60 FR 42767, August 17, 1995).
Sec. 738.1 Introduction.
(a) Commerce Control List scope. (1) In this part, references to
the EAR are references to 15 CFR chapter VII, subchapter C. The Bureau
of Export Administration (BXA) maintains the Commerce Control List
(CCL) within the Export Administration Regulations (EAR), which
includes items (i.e., commodities, software, and technology) subject to
the export licensing authority of BXA. The CCL does not include those
items exclusively controlled for export or reexport by another
department or agency of the U.S. Government. In instances where
agencies other than the Department of Commerce administer
[[Page 12757]]
controls over related items, entries in the CCL contain a reference to
these controls.
(2) The CCL is contained in Supplement No. 1 to part 774 of the
EAR. Supplement No. 2 to part 774 of the EAR contains the General
Technology and Software Notes relevant to entries contained in the CCL.
(b) Commerce Country Chart scope. BXA also maintains the Commerce
Country Chart. The Commerce Country Chart, located in Supplement No. 1
to part 738, contains licensing requirements based on destination and
Reason for Control. In combination with the CCL, the Commerce Country
Chart allows you to determine whether a license is required for items
on the CCL to any country in the world.
Sec. 738.2 Commerce Control List (CCL) structure.
(a) Categories. The CCL is divided into 10 categories, numbered as
follows:
0--Nuclear Materials, Facilities and Equipment and Miscellaneous
1--Materials, Chemicals, ``Microorganisms,'' and Toxins
2--Materials Processing
3--Electronics
4--Computers
5--Telecommunications and Information Security
6--Lasers and Sensors
7--Navigation and Avionics
8--Marine
9--Propulsion Systems, Space Vehicles and Related Equipment
(b) Groups. Within each category, items are arranged by group. Each
category contains the same five groups. Each Group is identified by the
letters A through E, as follows:
A--Equipment, Assemblies and Components
B--Test, Inspection and Production Equipment
C--Materials
D--Software
E--Technology
(c) Order of review. In order to classify your item against the
CCL, you should begin with a review of the general characteristics of
your item. This will usually guide you to the appropriate category on
the CCL. Once the appropriate category is identified, you should match
the particular characteristics and functions of your item to a specific
ECCN. If the ECCN contains a list under the ``Items'' heading, you
should review the list to determine within which subparagraph(s) your
items are identified.
(d) Entries. (1) Composition of an entry. Within each group,
individual items are identified by an Export Control Classification
Number (ECCN). Each number consists of a set of digits and a letter.
The first digit identifies the general category within which the entry
falls (e.g., 3A001). The letter immediately following this first digit
identifies under which of the five groups the item is listed (e.g.,
3A001). The second digit differentiates individual entries by
identifying the type of controls associated with the items contained in
the entry (e.g., 3A001). Listed below are the Reasons for Control
associated with this second digit.
0: National Security reasons (including Dual Use and International
Munitions List) and Items on the NSG Dual Use Annex and Trigger List
1: Missile Technology reasons
2: Nuclear Nonproliferation reasons
3: Chemical & Biological Weapons reasons
9: Anti-terrorism, Crime Control, Regional Stability, Short Supply, UN
Sanctions, etc.
(i) Since Reasons for Control are not mutually exclusive, numbers
are assigned in order of precedence. As an example, if an item is
controlled for both National Security and Missile Technology reasons,
the entry's third digit will be a ``0''. If the item is controlled only
for Missile Technology the third digit will be ``1''.
(ii) The numbers in either the second or third digit (e.g., 3A001)
serve to differentiate between multilateral and unilateral entries. An
entry with the number ``9'' as the second digit, identifies the entire
entry as controlled for a unilateral concern (e.g., 2B991 for anti-
terrorism reasons). If the number ``9'' appears as the third digit, the
item is controlled for unilateral purposes based on a proliferation
concern (e.g., 2A292 is controlled for unilateral purposes based on
nuclear nonproliferation concerns).
(2) Reading an ECCN. A brief description is provided next to each
ECCN. Following this description is the actual entry containing
``License Requirements,'' ``License Exceptions,'' and ``List of Items
Controlled'' sections. A brief description of each section and its use
follows:
(i) License Requirements. This section contains a separate line
identifying all possible Reasons for Control in order of precedence,
and two columns entitled ``Control(s)'' and ``Country Chart''.
(A) The ``Controls'' header identifies all applicable Reasons for
Control, in order of restrictiveness, and to what extent each applies
(e.g., to the entire entry or only to certain subparagraphs). Those
requiring licenses for a larger number of countries and/or items are
listed first. As you read down the list the number of countries and/or
items requiring a license declines. Since Reasons for Control are not
mutually exclusive, items controlled within a particular ECCN may be
controlled for more than one reason. The following is a list of all
possible Reasons for Control:
AT Anti-Terrorism
CB Chemical & Biological Weapons
CC Crime Control
MT Missile Technology
NS National Security
NP Nuclear Nonproliferation
RS Regional Stability
SS Short Supply
XP Computers
(B) The ``Country Chart'' header identifies, for each applicable
Reason for Control, a column name and number (e.g., CB Column 1). These
column identifiers are used to direct you from the CCL to the
appropriate column identifying the countries requiring a license.
Consult part 742 of the EAR for an indepth discussion of the licensing
requirements and policies applicable to each Country Chart column.
(ii) License Exceptions. This section provides a brief eligibility
statement for each ECCN-driven License Exception that may be applicable
to your transaction, and should be consulted only AFTER you have
determined a license is required based on an analysis of the entry and
the Country Chart. The brief eligibility statement in this section is
provided to assist you in deciding which ECCN-driven License Exception
related to your particular item and destination you should explore
prior to submitting an application. The word ``Yes'' (followed in some
instances by the scope of Yes) appears next to each available ECCN-
driven License Exception. ``N/A'' will be noted for License Exceptions
that are not available within a particular entry. If one or more
License Exceptions appear to apply to your transaction, you must
consult part 740 of the EAR to review the conditions and restrictions
applicable to each available License Exception.
(iii) List of Items Controlled. (A) Units. The unit of measure
applicable to each entry is identified in the ``Units'' header. Most
measurements used in the CCL are expressed in metric units with an
inch-pound conversion where appropriate. Note that in some ECCNs the
inch-pound unit will be listed first. In instances where other units
are in general usage or specified by law, these will be used instead of
metric. Generally, when there is a difference
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between the metric and inch-pound figures, the metric standard will be
used for classification and licensing purposes.
(B) Related definitions. This header identifies, where appropriate,
definitions or parameters that apply to all items controlled by the
entry. The information provided in this section is unique to the entry,
and hence not listed in the definitions contained in part 772 of the
EAR.
(C) Related controls. If another U.S. government agency or
department has export licensing authority over items related to those
controlled by an entry, a statement is included identifying the agency
or department along with the applicable regulatory cite. An additional
cross-reference may be included in instances where the scope of
controls differs between a CCL entry and its corresponding entry on
list maintained by the European Union. This information is provided to
assist readers who use both lists.
(D) Items. This header contains a positive list of all items
controlled by a particular entry and must be reviewed to determine
whether your item is controlled by that entry. In some entries, the
list is contained within the entry heading. In these entries a note is
included to direct you to the entry heading.
Sec. 738.3 Commerce Country Chart structure.
(a) Scope. The Commerce Country Chart (Country Chart) allows you to
determine, based on the Reason(s) for Control associated with your
item, if you need a license to export or reexport your item to a
particular destination. There are only two instances where the chart
cannot be used for this purpose:
(1) Items controlled for short supply reasons. Due to the unique
nature of these controls, entries controlled for Short Supply reasons
will send you directly to part 754 of the EAR. Part 754 of the EAR is
self-contained and includes information on licensing requirements,
licensing policies, and all available License Exceptions, for items
controlled for Short Supply reasons.
(2) Unique entries. The following are unique entries where you do
not need to consult the Country Chart to determine whether a license is
required.
(A) ECCNs 0A983 and 5A980. A license is required for all
destinations of items controlled under these entries. No License
Exceptions apply. If your item is controlled by 0A983 or 5A980 you
should proceed directly to part 748 of the EAR for license application
instructions and Sec. 742.11 or Sec. 742.13 of the EAR for information
on the licensing policy relevant to these types of applications.
(B) ECCNs 0A986, 0A988, 1A988, 2A994, 2D994, 2E994 and 2B985. A
license is required for items controlled under these entries only to
the specific countries identified within each entry.
(b) Countries. The first column of the Country Chart lists all
countries in alphabetical order. There are a number of destinations
that are not listed in the Country Chart contained in Supplement No. 1
to part 738. If your destination is not listed on the Country Chart and
such destination is a territory, possession, or department of a country
included on the Country Chart, the EAR accords your destination the
same licensing treatment as the country of which it is a territory,
possession, or department. For example, if your destination is the
Cayman Islands, a dependent territory of the United Kingdom, consult
the United Kingdom on the Country Chart for licensing requirements.
(c) Columns. Stretching out to the right are horizontal headers
identifying the various Reasons for Control. Under each Reason for
Control header are diagonal column identifiers capping individual
columns. Each column identifier consists of the two letter Reason for
Control and a column number. (e.g., CB Column 1). The column
identifiers correspond to those listed in the ``Country Chart'' header
within the ``License Requirements'' section of each ECCN.
(d) Cells. The symbol ``X'' is used to denote licensing
requirements on the Country Chart. If an ``X'' appears in a particular
cell, transactions subject to that particular Reason for Control/
Destination combination require a license. There is a direct
correlation between the number of ``X''s applicable to your transaction
and the number of licensing reviews your application will undergo.
Sec. 738.4 Determining whether a license is required.
(a) Using the CCL and the Country Chart. (1) Overview. Once you
have determined that your item is controlled by a specific ECCN, you
must use information contained in the ``License Requirements'' section
of that ECCN in combination with the Country Chart to decide whether a
license is required.
(2) License decision making process. The following decision making
process must be followed in order to determine whether a license is
required to export or reexport a particular item to a specific
destination:
(i) Examine the appropriate ECCN in the CCL. Is the item you intend
to export or reexport controlled for a single Reason for Control?
(A) If yes, identify the single Reason for Control and the relevant
Country Chart column identifier (e.g., CB Column 1).
(B) If no, identify the Country Chart column identifier for each
applicable Reason for Control (e.g., NS Column 1, NP Column 1, etc.).
(ii) Review the Country Chart. With each of the applicable Country
Chart Column identifiers noted, turn to the Country Chart (Supplement
No. 1 to part 738). Locate the correct Country Chart column identifier
on the diagonal headings, and determine whether an ``X'' is marked in
the cell next to the country in question for each Country Chart column
identified in the applicable ECCN. If your item is subject to more than
one reason for control, repeat this step using each unique Country
Chart column identifier.
(A) If yes, a license application must be submitted based on the
particular reason for control and destination, unless a License
Exception applies. If ``Yes'' is noted next to any of the listed
License Exceptions, you should consult part 740 of the EAR to determine
whether you can use any of the available ECCN-drvien License Exceptions
to effect your shipment, rather than applying for a license. Each
affirmative license requirement must be overcome by a License
Exception. If you are unable to qualify for a License Exception based
on each license requirement noted on the Country Chart, you must apply
for a license. Note that other License Exceptions, not related to the
CCL, may also apply to your transaction (See part 740 of the EAR).
(B) If no, a license is not required based on the particular reason
for control and destination. Provided General Prohibitions Four through
Ten do not apply to your proposed transaction, you may effect your
shipment using the symbol ``NLR''. Proceed to parts 758 and 762 of the
EAR for information on export clearance procedures and recordkeeping
requirements. Note that although you may stop after determining a
license is required based on the first Reason for Control, it is best
to work through each applicable Reason for Control. A full analysis of
every possible licensing requirement based on each applicable Reason
for Control is required to determine the most advantageous License
Exception available for your particular transaction and, if a license
is required, ascertain the scope of review conducted by BXA on your
license application.
[[Page 12759]]
(b) Sample analysis using the CCL and Country Chart. (1) Scope. The
following sample entry and related analysis is provided to illustrate
the type of thought process you must complete in order to determine
whether a license is required to export or reexport a particular item
to a specific destination using the CCL in combination with the Country
Chart.
(2) Sample CCL entry.
2A000: Entry heading.
License Requirements
Reason for Control: NS, NP, AT
------------------------------------------------------------------------
Control(s) Country Chart
------------------------------------------------------------------------
NS applies to entire entry............. NS Column 2.
NP applies to 2A000.b.................. NP Column 1.
AT applies to entire entry............. AT Column 1.
------------------------------------------------------------------------
License Exceptions
LVS: $5,000
GBS: Yes
CIV: N/A
List of Items Controlled
Unit: Number
Related Definition: N/A
Related Controls: N/A
Items:
a. Having x.
b. Having z.
(3) Sample analysis. After consulting the CCL, I determine my item,
valued at $10,000, is classified under ECCN 2A000.a. I read that the
entire entry is controlled for national security, and anti-terrorism
reasons. Since my item is classified under paragraph .a, and not .b, I
understand that though nuclear nonproliferation controls apply to a
portion the entry, they do not apply to my item. I note that the
appropriate Country Chart column identifiers are NS Column 2 and AT
Column 1. Turning to the Country Chart, I locate my specific
destination, India, and see that an ``X'' appears in the NS Column 2
cell for India, but not in the AT Column 1 cell. I understand that a
license is required, unless my transaction qualifies for a License
Exception or Special Comprehensive License. From the License Exception
LVS value listed in the entry, I know immediately that my proposed
transaction exceeds the value limitation associated with LVS. Noting
that License Exception GBS is ``Yes'' for this entry, I turn to part
740 of the EAR to review the provisions related to use of GBS.
BILLING CODE 3510-DT-P
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