January 5, 1996
See introductory and explanatory information for each of the four revisions to this original version of March 25, 1996: Licenses, December 4, 1996; Key Recovery, December 13, 1996; Computers, December 23, 1996; and Encryption Transfer, December 30, 1996.
Return to EAR Table of Contents
[[61 FR 12713]] PART 730, et al [Federal Register: March 25, 1996 (Volume 61, Number 58)] [Rules and Regulations] From the Federal Register Online via GPO Access [wais.access.gpo.gov] _______________________________________________________________________ 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: