14 October 1998
Source: http://www.access.gpo.gov/su_docs/aces/aaces002.html

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[Federal Register: October 14, 1998 (Volume 63, Number 198)]
[Rules and Regulations]
[Page 55017-55020]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14oc98-6]

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DEPARTMENT OF COMMERCE

Bureau of Export Administration

15 CFR Parts 740 and 743

[Docket No. 980814218-8218-01]
RIN 0694-AB724


Clarification of Reporting Requirements Under the Wassenaar
Arrangement

AGENCY: Bureau of Export Administration, Commerce.

ACTION: Interim rule with request for comments.

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SUMMARY: On January 15, 1998, the Bureau of Export Administration (BXA)
published an interim rule implementing the Wassenaar Arrangement list
of dual-use items and reporting requirements under the Wassenaar
Arrangement. On February 17, 1998, BXA published an interim final rule
that conformed the savings clause date for shipments of items removed
from eligibility for export or reexport under a particular License
Exception authorization or the designator NLR until April 15, 1998. The
February 17 rule did not affect the reporting requirement provisions
and any item removed from License Exception or NLR eligibility as a
result of the January 15 rule continues to be subject to the reporting
requirements of the Wassenaar Arrangement. This interim rule provides
further clarification on the savings clause provisions and the
reporting requirements under the Wassenaar Arrangement. Specifically,
this rule clarifies: the reporting requirement obligations of items
described on the Wassenaar Arrangements Annex 1 (Sensitive List) and
Annex 2 (Very Sensitive List) of the List of Dual-Use Goods and
Technologies, including clarification on the timing of the first report
in accordance with the savings clause provision; the reporting
requirements for computers controlled under Export Control
Classification Number (ECCN) 4A003.b; the reporting requirement
procedures under License Exception TSR; and that the reporting
requirement provisions do not apply to reexports, release of technology
or source code to foreign nationals in the United States (i.e.,
``deemed exports'' to foreign nationals), or to items not controlled
for National Security (NS) reasons.
    In addition, this rule revises the country scope for reporting
requirements.

DATES: Effective Date: This rule is effective October 14, 1998.
    Comment Date: Comments on this rule must be received on or before
December 14, 1998.

ADDRESSES: Written comments should be sent to Patricia Muldonian,
Regulatory Policy Division, Bureau of Export Administration, Department
of Commerce, P.O. Box 273, Washington, DC 20044.

FOR FURTHER INFORMATION CONTACT: Patricia Muldonian, Regulatory Policy
Division, Bureau of Export Administration, telephone: (202) 482-2440.

SUPPLEMENTARY INFORMATION:

Background

    On January 15, 1998, the Bureau of Export Administration (BXA)
published an interim rule (63 FR 2452) that made changes to the
Commerce Control List necessary to implement the Wassenaar Arrangement
List of Dual-Use Goods and Technologies. In addition, the January 15
rule imposed new reporting requirements on persons that export certain
items controlled under the Wassenaar Arrangement to countries outside
of Country Group A:1 in order to fulfill the information exchange
requirements of the Wassenaar Arrangement. The January 15 rule also
removed License Exception availability for certain items controlled for
missile technology reasons and for certain other items controlled for
national security reasons for which the U.S. has agreed to license with
extreme vigilance.
    BXA received many industry comments on the savings clause provision
date of February 17, 1998, for submission of license applications for
items removed from eligibility for export or reexport under a
particular License Exception authorization or the designator NLR,
stating that more time

[[Page 55018]]

was required to determine how the rule affected their products and to
develop and revise their export compliance software necessary to
implement the provisions of the Export Administration Regulations. In
response to the industry issues raised, BXA published an interim rule
on February 17, 1998 (63 FR 7699) that conformed the saving clause date
for shipments of items removed from eligibility for export or reexport
under a particular License Exception authorization or NLR until April
15, 1998. The February 17 rule did not affect the reporting
requirements of section 743.1 of the Export Administration Regulations,
and any item removed from License Exception or NLR eligibility as a
result of the January 15 rule continued to be subject to reporting
requirements.
    This rule provides further clarification on the savings clause
provision of the February 17 rule and on reporting requirements under
the Wassenaar Arrangement.

Clarification of Reporting Requirements of Items on the Wassenaar
Arrangement's Annex 1 and Annex 2

    Reporting obligations under the Wassenaar Arrangement are required
for exports in accordance with the provisions of Sec. 743.1 of the
Export Administration Regulations (items on the Wassenaar Arrangement's
Annex 1--List of Dual-Use Goods and Technologies (Sensitive List)),
effective from January 15, 1998 until April 15, 1998, and for the
following items on the Wassenaar Arrangement's Annex 2--List of Dual-
Use Goods and Technologies (Very Sensitive List), in which License
Exceptions or the designator NLR have been removed and export license
requirements imposed in accordance with the savings clause provision.
Reports for Annex 2 items are also effective from January 15, 1998
until April 15, 1998. After April 15, 1998, these items require a
license for export or reexport.
    License Exception eligibility has been removed and licensing
requirements imposed for the following ECCNs on the Wassenaar
Arrangement's Annex 2--List of Dual-Use Goods and Technologies:
1A002.a, 1C001, 1E001, 4A003.b, 4A003.c, 4D001, 4E001, 5A001.b.9,
5D001, 5E001.a, 6A001.a.2.a.1, 6A001.a.2.a.2, 6A001.a.2.a.7,
6A001.a.2.b, 6A001.a.2.c, 6A001.a.2.e, 6A008.l.3, 6B008, 6D001,
6D003.a, 6E001, 6E002, 8A001.b, 8A001.d, 8A002.o.3.b, 8D001, 8E001, and
9A001. The Bureau of Export Administration will extract the necessary
information from licenses to report these exports to the Arrangement.
    The Wassenaar reporting requirement provisions do not apply to:
    (1) Reexports;
    (2) Any release of technology or source code subject to the EAR to
a foreign national in the United States; or
    (3) Items controlled solely for Missile Technology (MT), Nuclear
Nonproliferation (NP), Chemical and Biological Weapons (CB), or Short
Supply (SS) reasons.

Clarification of License Exception TSR

    BXA received comments from industry requesting guidance on how to
comply with the Wassenaar reporting requirements for exports of
technology under License Exception TSR. This rule clarifies that, for
exports of technology under License Exception TSR for which reports are
required under Sec. 743.1(c) of the EAR, exporters should report the
number of units in the shipment as one (1) for the initial export of
the technology to a single ultimate consignee. Additional exports of
the technology must be reported only when the type or scope of
technology changes or exports are made to other ultimate consignees. In
addition, release of controlled technology or source code to foreign
nationals in the U.S., should not be included in the reports.

Revisions to the Reporting Requirements for Computers

    In order to reduce duplicative reporting requirements on industry,
this rule revises Sec. 743.1(c)(2) by eliminating the reporting
requirement for computers controlled under 4A003.b for exports to
destinations in Computer Tier 3. Reporting requirements for exports of
such computers to destinations in Computer Tier 3 continue to be
required under the post-shipment verification reporting requirements of
Sec. 740.7(d)(4)(v) and Sec. 742.12(b)(3)(iv).

Clarification of Reporting Requirement for License Exception GOV

    This rule corrects an inadvertent error in the January 15 rule for
License Exception GOV. This rule revises Sec. 740.11(b)(2)(iii)(A) and
paragraph (a) to Supplement No. 1 to Sec. 740.11 by revising the phrase
``Items for official use within a national territory by agencies of the
U.S. Government'' to read ``Items for official use within a national
territory by agencies of cooperating governments''.

Additions to the Commerce Control List and Clarification of the
Savings Clause Provision

    BXA received comments from industry requesting that BXA clearly
describe the new entries that were added in the January 15 rule and
explain the impact of those entries in accordance with the February 17
extension of the savings clause provision. This rule clarifies that, in
addition to the modifications in some parameters of items controlled on
the Commerce Control List, the following new entries have been added
that control items previously (prior to January 15, 1998) eligible for
export or reexport under the designator NLR. Items changed from NLR
eligibility to requiring a license for export or reexport were
authorized for export or reexport under the designator NLR in
accordance with the February 17 rule until April 15, 1998. After April
15, 1998, these items require a license for export or reexport.
However, use of the designator NLR until April 15, 1998, does not
relieve exporters of their responsibility to provide reports for items
subject to the reporting requirements under the Wassenaar Arrangement
retroactive from January 15, 1998 to April 15, 1998.

New ECCNs Added to the Commerce Control List by the January 15 Rule

    1A005: Body armor, and specially designed components therefor, not
manufactured to military standards or specifications, not to their
equivalents in performance.
    1C006.d: Certain fluorocarbon electronic cooling fluids.
    1C007.f: Certain ceramic-ceramic composite materials with oxide or
glass matrix.
    1C009.b: Fluorinated polymides containing 10% by weight or more of
combined fluorine. (Note that this control is a slight rollback, based
on % by weight of combined fluorine.)
    1C011: Certain metals and compounds.
    2B007.d: Robots specially designed to operate at altitudes
exceeding 30,000 m.
    2B009: Certain spin-forming/flow forming machines.
    5E001.b.10: Development technology for spread spectrum and
frequency hopping techniques.
    6A001.a.2.e: Certain bottom or bay cable systems.
    6A005.a.4.c.1: Carbon dioxide lasers having a pulse energy
exceeding 5 J per pulse. (Note that this control is a slight rollback,
because ``peak power'' is no longer a controlling parameter.)
    6D003.a.3: Software for bottom or bay cable systems.
    7D003.e: Computer aided design software.
    7E004.a.5: Technology for the development or production of electric
actuators specially designed for primary flight control.

[[Page 55019]]

    7E004.a.6: Technology for the development or production of flight
control optical sensor arrays.
    8A002.j.4: Certain stirling cycle engine air independent power
systems.
    9B004: Intermetallic airfoil-to-disk combinations.
    In addition, this rule revises the country scope for reports under
the Wassenaar Arrangement. The January 15 rule stated that reporting
requirements apply to all destinations, except Country Group A:1. This
rule revises Sec. 743.1(d), Country Exceptions, to state that the
reporting requirements apply to all destinations, except Wassenaar
member countries, as identified in a new Supplement No. 1 to part 743.
    Although the Export Administration Act (EAA) expired on August 20,
1994, the President invoked the International Emergency Economic Powers
Act and continued in effect the EAR, and, to the extent permitted by
law, the provisions of the EAA in Executive Order 12924 of August 19,
1994, as extended by the President's notices of August 15, 1995 (60 FR
42767), August 14, 1996 (61 FR 42527), August 13, 1997 (62 FR 43629),
and August 13, 1998 (63 FR 44121).

Rulemaking Requirements

    1. This interim rule has been determined to be not significant for
purposes of E.O. 12866.
    2. Notwithstanding any other provision of law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with a collection of information, subject to the
requirements of the Paperwork Reduction Act (PRA), unless that
collection of information displays a currently valid OMB Control
Number. This rule involves collections of information subject to the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) These
collections has been approved by the Office of Management and Budget
under control numbers 0694-0088 and 0694-0201.
    3. This rule does not contain policies with Federalism implications
sufficient to warrant preparation of a Federalism assessment under
Executive Order 12612.
    4. The provisions of the Administrative Procedure Act (5 U.S.C.
553) requiring notice of proposed rulemaking, the opportunity for
public participation, and a delay in effective date, are inapplicable
because this regulation involves a military and foreign affairs
function of the United States (Sec. 5 U.S.C. 553(a)(1)). Further, no
other law requires that a notice of proposed rulemaking and an
opportunity for public comment be given for this interim rule. Because
a notice of proposed rulemaking and an opportunity for public comment
are not required to be given for this rule under 5 U.S.C. or by any
other law, the analytical requirements of the Regulatory Flexibility
Act (5 U.S.C. 601 et seq. ) are not applicable.
    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 December 14, 1998.
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, NW., 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. 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 in 15 CFR Parts 740 and 743

    Administrative practice and procedure, Exports, Foreign trade,
Reporting and recordkeeping requirements.

    Accordingly, parts 740 and 743 of the Export Administration
Regulations (15 CFR parts 730 through 799) are amended as follows:
    1. The authority citation for part 740 is revised to read as
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
E.O. 12924, 59 FR 43437, 3 CFR, 1994 Comp., p. 917; Notice of August
15, 1995, 3 CFR, 1995 Comp., p. 501; Notice of August 14, 1996, 3
CFR, 1996 Comp., p. 289; Notice of August 13, 1997 (62 FR 43629,
August 15, 1997); and Notice of August 13, 1998 (63 FR 44121).

    2. The authority citation for part 743 is revised to read as
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
E.O. 12924, 59 FR 43437, 3 CFR, 1994 Comp., p. 917; Notice of August
15, 1995, 3 CFR, 1995 Comp., p. 501; Notice of August 14, 1996, 3
CFR, 1996 Comp., p. 289; Notice of August 13, 1997 (62 FR 43629,
August 15, 1997); and Notice of August 13, 1998 (63 FR 44121).

PART 740--[AMENDED]

    3. Section 740.6 is amended by revising paragraph (b) to read as
follows:

Sec. 740.6  Technology and software under restriction (TSR).

* * * * *
    (b) Reporting requirements. See Sec. 743.1 of the EAR for reporting
requirements for exports of certain items under License Exception TSR.
Note that reports are not required for release of technology or source
code subject to the EAR to foreign nationals in the U.S. under the
provisions of License Exception TSR.
    4. Section 740.11 is amended:
    a. By revising the heading of paragraph (b)(2)(iii)(A); and
    b. By revising the first sentence of paragraph (a) in Supplement
No. 1, to read as follows:

Sec. 740.11  Governments and international organizations (GOV).

* * * * *
    (b) * * *
    (2) * * *
    (iii) * * *
    (A) Items for official use within national territory by agencies of
cooperating governments. * * *
* * * * *

[[Page 55020]]

Supplement No. 1 to Sec. 740.11--Additional Restrictions on Use of
License Exception GOV

    (a) Items for official use within the national territory by
agencies of cooperating governments. * * *
* * * * *

PART 743--[AMENDED]

    5. Section 743.1 is amended:
    a. By revising paragraph (b);
    b. By adding a note immediately following paragraph (c)(2);
    c. By revising paragraph (d); and
    d. By adding a note immediately following paragraph (e)(1)(ii), to
read as follows:

Sec. 743.1  Wassenaar Arrangement.

* * * * *
    (b) Requirements. You must submit two (2) copies of each report
required under the provisions of this section and maintain accurate
supporting records (see Sec. 762.2(b) of the EAR) for all exports of
items specified in paragraph (c) of this section under any of the
following License Exceptions authorized by part 740 of the EAR: License
Exceptions GBS, CIV, TSR, LVS, CTP, GOV and KMI (under the provisions
of Sec. 740.8(b)(2)(ii) and (iii) only). Exports of technology and
source code under License Exception TSR to foreign nationals in the
U.S. should not be reported. For purposes of this part 743, ``you'' has
the same meaning as ``U.S. exporter'', as defined in part 772 of the
EAR.
    (c) * * *
    (2) * * *

    Note to paragraph (c)(2): Exports of computers controlled under
4A003.b to destinations in Computer Tier 3 (see Sec. 740.7(d)(1) of
the EAR) should not be included in the reports required under
paragraph (c) of this section. Reporting for computers under 4A003.b
to Computer Tier 3 destinations should be reported under the post-
shipment verification reporting provisions of Sec. 740.7(d)(4)(v) or
under Sec. 742.12(b)(3)(iv) of the EAR.

    (d) Country Exceptions. You must report each export subject to the
provisions of this section, except for exports to Wassenaar member
countries, as identified in Supplement No. 1 to part 743.
    (e) * * *
    (1) * * *
    (ii) * * *

    Note to paragraph (e)(1)(ii): For exports of technology for
which reports are required under Sec. 743.1(c) of this section, the
number of units in the shipment should be reported as one (1) for
the initial export of the technology to a single ultimate consignee.
Additional exports of the technology must be reported only when the
type or scope of technology changes or exports are made to other
ultimate consignees. Additionally, do not report the release of
technology or source code subject to the EAR to foreign nationals in
the U.S.
* * * * *
    6. Part 743 is amended by adding a new Supplement No. 1 to read as
follows:

Supplement No. 1 to Part 743--Wassenaar Arrangement Member Countries

Argentina
Australia
Austria
Belgium
Bulgaria
Canada
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Japan
Luxembourg
Netherlands
New Zealand
Norway
Poland
Portugal
Romania
Russia
Slovakia
South Korea
Spain
Sweden
Switzerland
Turkey
Ukraine
United Kingdom
United States

    Dated: October 5, 1998.
R. Roger Majak,
Assistant Secretary for Export Administration.
[FR Doc. 98-27391 Filed 10-13-98; 8:45 am]
BILLING CODE 3510-33-P
