    [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.

    -----------------------------------------------------------------------

    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

    [[Page 12758]]
    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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