[Federal Register: March 25, 1996 (Volume 61, Number 58)] [Rules and Regulations] [Page 12713-12763] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [[Page 12713]] _______________________________________________________________________ Part II Department of Commerce _______________________________________________________________________ Bureau of Export Administration _______________________________________________________________________ 15 CFR Part 730, et al. Export Administration Regulation; Simplification of Export Administration Regulations; Final Rule [[Page 12714]] DEPARTMENT OF COMMERCE Bureau of Export Administration 15 CFR Parts 730, 732, 734, 736, 738, 740, 742, 744, 746, 748, 750, 752, 754, 756, 758, 760, 762, 764, 766, 768, 770, 772, and 774, 768A, 769A, 770A, 771A, 772A, 773A, 774A, 775A, 776A, 777A, 778A, 779A, 785A, 786A, 787A, 788A, 789A, 790A, 791A, 799A [Docket No. 950407094-6022-02] RIN 0694-AA67 Export Administration Regulation; Simplification of Export Administration Regulations AGENCY: Bureau of Export Administration, Commerce. ACTION: Interim rule. ----------------------------------------------------------------------- SUMMARY: This interim rule restructures and reorganizes the Export Administration Regulations (EAR), the regulatory regime through which the Bureau of Export Administration imposes export and reexport controls on those items and activities within its jurisdiction. This interim rule clarifies the language of the EAR, simplifies their application, and generally makes the export control regulatory regime more user-friendly. DATES: Effective Dates: This interim rule is effective April 24, 1996, except part 752, which shall be effective March 25, 1996. Removal of newly designated Sec. 771A.25(d) shall be effective March 25, 1996. Removal of newly designated parts 768A through 779A, 785A through 791A, and 799A will be effective November 1, 1996. COMMENTS: Comments on this rule must be received on or before May 24, 1996. USE OF FORMS: On June 15, 1996 BXA will begin requiring applicants to submit certain new forms to implement this interim rule. The new Form BXA-748P, Multipurpose Application will be effective June 15, 1996. Before June 15, 1996 BXA will not accept Form BXA-748P. After June 15, 1996 BXA will not accept existing Forms BXA-622P or BXA-699P. See SUPPLEMENTARY INFORMATION for guidance on which forms to use before June 15, 1996, and which forms to use after that date. ADDRESSES: Written comments should be sent to Cecil Hunt, Deputy Chief Counsel for Export Administration, United States Department of Commerce, Bureau of Export Administration, Fourteenth Street and Constitution Avenue, N.W., Room 3839, Washington, D.C. 20230. FOR FURTHER INFORMATION CONTACT: Larry E. Christensen, Director, Regulatory Policy Division, Bureau of Export Administration, (202) 482- 2440. SUPPLEMENTARY INFORMATION: Background On September 30, 1993, the Secretary of Commerce submitted to the Congress a report of the Trade Promotion Coordinating Committee (TPCC), entitled Toward a National Export Strategy. The report included the following among its goals: Undertake a comprehensive review of the Export Administration Regulations to simplify, clarify, and make the regulations more user-friendly. In November 1993, BXA organized a Task Group, drawn from several of its offices, to carry out the TPCC recommendation. The Task Group launched its review project by publishing an advance notice of proposed rulemaking (ANPRM) in the Federal Register on February 10, 1994 (59 FR 6528). This notice was designed to solicit comments from industry and the interested public. The ANPRM asked for suggestions concerning improvements BXA could make to the EAR and described several specific issues on which BXA was particularly interested in receiving public input. Over seven months during the development of a proposed rule with request for comments that was published in the Federal Register on May 11, 1995, titled ``Export Administration Regulations; Simplification of Export Administration Regulations'' (60 FR 25268) (hereafter referred to as proposed rule), BXA shared four discussion packages with and sought comments from the Regulations & Procedures Technical Advisory Committee (RPTAC), an advisory committee consisting of industry representatives intimately familiar with the private sector's role in using the EAR. The packages were also made available to other interested members of the public, with the last two being made available electronically on FedWorld. The four discussion packages were dated August 2, 1994, September 29, 1994, January 12, 1995, and February 28, 1995. The May 11 proposed rule reflected several new features based upon the comments received from the public pursuant to the ANPRM, and the RPTAC, and BXA's own assessment of how the EAR could be improved. Such features include: <bullet> No license or other authorization would be required for any transaction under BXA jurisdiction unless the regulations affirmatively state the requirement. (Existing regulations state that all exports are prohibited unless an applicable general license has been established or a validated license or other authorization has been granted by BXA.) <bullet> The terms ``general'' license and ``validated'' license would be dropped. The term ``license'' would be used to refer only to authorization issued by BXA upon application. The proposed regulations would convert the many existing general licenses into a smaller number of ``exceptions'' to require the obligation to seek a license when the Commerce Control list indicates that the particular item going to the stated country generally requires a license. <bullet> The parts of the EAR would be arranged to give the reader a logical path to follow. <bullet> The affirmative statements of the need to obtain a license, scattered throughout various parts of the existing EAR, would be consolidated into ten general prohibitions and described in a separate part. One part would contain the license review policy for all list-based license requirements; another part would provide for the requirements and review policies of licenses based on the end-use or end-user involved in a proposed export or reexport; and the list-based license requirements would be contained in the Commerce Control List (CCL) indicating the reason for control and the Country Chart indicating the country scope of each reason for control. <bullet> The Country Groups used in the existing regulations would be revised in favor of Groups which better reflect post-Cold War circumstances. <bullet> The CCL would be redesigned to state the reasons for control more specifically within each Export Control Classification Number (ECCN). <bullet> The redesigned CCL would be used in tandem with a new Country Chart that would indicate whether a license is required for any ECCN to any country in the world and the reason or reasons for control. Over 80 commenters responded to the proposed rule. Many commenters recommended that BXA take sufficient time to draft an interim rule to ensure ample opportunity to review and discuss with industry their comments on the May 11 proposed rule, and incorporate them into an interim rule. BXA has taken the time necessary to thoroughly review, analyze, and discuss industry comments on the proposed rule. In addition, BXA conducted 18 town-hall style fora (hereafter referred to as town-hall fora) that reached over 1,000 industry representatives, and met with the RPTAC and other interested [[Page 12715]] public to discuss their comments and concerns in more detail. Following is a detailed part-by-part description of this interim rule, and a review of comments received pursuant to the May 11 proposed rule: Implementation This interim rule will become effective April 24, 1996; however, final compliance with this interim rule is not compelled until November 1, 1996. During the period between the effective date and the final compliance date of this interim rule, you must comply with the provisions of either the existing Export Administration Regulations (EAR) (redesignated 15 CFR 768A through 799A by this interim rule) including any amendments thereto that are published in the Federal Register or the provisions of this interim rule including any amendments thereto that are published in the Federal Register. Notwithstanding the general effective date of this interim rule, the repeal of the importer statement requirement for General License GCT is effective immediately, and the Special Comprehensive License provisions in part 752 are effective immediately. For up to March 25, 1997, holders of issued and outstanding special licenses may continue to use those special licenses according to their terms and conditions and according to the special license provisions of the existing EAR. The majority of the commenters requested a 90 day delayed effective date plus an additional six to twelve months during which one must comply with either the existing Export Administration Regulations or this interim rule. The cost of changes to internal information systems and the time to train personnel on the new system were the main reasons cited for requesting a delayed effective date and a transition period. Several large companies said that their computer systems will require substantial reprogramming for the new License Exception group symbols, the new Destination Control Statement (DCS), and the renumbering of entries on the Commerce Control List in part 774 to conform to the European Union numbering system. Some firms indicated that implementation costs would be reduced if they were allowed a span of time in which to implement the changes made by this interim rule. Costs would be higher if a single implementation date were required because their information systems departments would not have flexibility regarding scheduling and might be required to hire additional temporary employees or pay overtime. Many large firms cannot implement the computer changes on one given day. After receiving the above comments in writing and during the town-hall fora, BXA made additional contacts with several firms. All acknowledge that they can efficiently implement the changes required by this interim rule within six months. Since those discussions, BXA has determined to modify the Destination Control Statement (DCS) as noted below to closely following the existing DCS widely used by many firms. BXA is hopeful that this decision will further reduce the costs of implementation of this interim rule. BXA is sensitive to the costs of implementation, and that is the reason this interim rule provides for a rather long implementation period. Through this mechanism, BXA hopes to reduce the marginal costs of implementation by reducing necessary overtime, contracting, and training beyond that regularly scheduled. BXA will also assist the business community in training for this interim rule. BXA has already announced a substantial program to conduct training sessions around the United States to make it convenient for firms to train their personnel. The new Multipurpose Application Form, BXA-748P, will replace the Application for Export License (BXA-622P) and the Request for Reexport Authorization (BXA-699P). It will also serve as an application for the Special Comprehensive License. Additionally, the BXA-748P will accommodate Commerce Classification Requests, thus allowing item classifications to be handled electronically. BXA will not accept the new forms listed in this paragraph for applications and requests received before June 15. BXA will not accept existing forms listed in this paragraph for applications and requests received on or after June 15. The existing Form BXA-622P Application for Export License, existing Form BXA-685P, Request for Amendment Action, and existing Form BXA-699P, Request for Reexport Authorization will all be replaced by new Form BXA 748P, Multipurpose Application. The existing Form BXA-622P-A, Commodity Description Supplement will be replaced by new Form BXA-748P-A, Item Appendix. Existing Form 622P-B, End-user Supplement will be replaced by new Form 748P-B, End-user Appendix. Form BXA-6052P, Statement by Foreign Consignee in Support of Special License Application will be replaced by Form BXA-752P, Statement by Consignee in Support of Special Comprehensive License. Existing Form BXA-629P, Statement by Ultimate Consignee and Purchaser will be replaced by new Form BXA-711, Statement by Ultimate Consignee and Purchaser. However, Form BXA-629P may be used until November 1, 1996. Use of Existing Form BXA 686-P, Statement by Foreign Importer of Aircraft or Vessel Repair Parts and Form BXA 6026-P, Service Supply (SL) Statement by U.S. Exporter will be discontinued on March 25, 1996, because the Aircraft and Vessel Repair Station Procedure at Sec. 773A.8 and the Service Supply (SL) Procedure at Sec. 773A.7 of the existing EAR will be replaced by the Special Comprehensive License in part 752 of this interim rule. BXA will stop issuing BXA Form-648P, Notification of Delivery Verification Requirement on June 15, 1996. For licenses issued on or after that date, the delivery verification requirement will be printed on the license itself. The Knowledge Standard One step is being taken in this interim rule that changes language in many parts of the EAR, but without changing the intended meaning. Several commenters noted that the proposed rule continued use in the EAR of differing expressions as to knowledge, such as ``know'' or ``know or have reason to know''. Three commenters called for the removal of the term ``reason to know'' and one commenter requested a uniform adoption of ``know or have reason to know''. BXA has decided to adopt the term ``knowledge'' (together with variants, such as ``know'' or ``knowing'') as the standard usage and defines this term in the EAR. This definition is added to part 772--Definitions. Variants, such as ``reason to believe'' are being retained in the EAR where they are used to follow statutory wording. This definition confirms the intention of BXA that ``know'' and terms such as ``know or have reason to know'' be given the same meaning and that this meaning include more than positive knowledge. This definition is not being applied to part 760-- Restrictive Practices and Boycotts, leaving the interpretation of such terms in this distinct part of the EAR to be independent of export control usage. Part-by-Part Analysis Part 730--General Information Part 730 provides a general introduction to the EAR. It is intended for the first-time reader and is not regulatory. Seven of the public comments referred to part 730. There was broad [[Page 12716]] support for the listing of other control agencies, together with telephone and fax numbers for obtaining information. Four commenters noted that similar information was provided in a supplement to the scope part of the proposed rule, with duplication and some inconsistency. BXA has eliminated that supplement and includes the agency information in this part 730. Three commenters requested that the listing be broadened, and noted the absence of reference to certain controls of other agencies listed in the existing EAR. This listing has been updated and extended. BXA is not, however, acting on requests to add more detailed information on controls administered by other agencies, nor on areas of possible overlap, as this would unduly complicate this brief introduction to the EAR. Three commenters called for combining part 730 with the Steps part in some way. BXA concluded that a merger of the two parts is not advisable, as the amount of detail needed in steps would obscure the more general introductory information offered in part 730. Many comments on the two parts called for flow charts and wiring diagrams. BXA has recently received authorization from the Office of the Federal Register to include such additional aids, and BXA will develop those materials for inclusion in the EAR at a later date. Two commenters questioned the basic, non-regulatory, approach taken in part 730, citing such elements as the Sec. 730.6 reference to the benefits from multilateral controls and the Sec. 730.8 explanation of why the EAR are lengthy and detailed. BXA continues to believe that this kind of introduction to the EAR will be helpful to persons new to the field. Part 732--Steps By cross-references to the relevant provisions, part 732 describes the suggested steps for you to determine applicability of (1) the scope of the EAR described in part 734, (2) each of the general prohibitions in part 736, (3) the License Exceptions in part 740, and (4) other requirements such as clearing the U.S. Customs Service, keeping records, and completing license applications. This part 732 describes the organization of the EAR, informs you of the relationship among the parts and provisions, and describes the appropriate order in which to consider the various provisions of the EAR by cross-referencing those provisions. Supplement No. 1 to this part 732, contains the ``Know Your Customer'' Guidance, which has been moved from part 744--Control Policy--End-user and End-use Based Control. In this interim rule, BXA has also added examples of Red Flags referred to in the ``Know Your Customer'' Guidance. Over thirty commenters referred to the part on steps in the proposed rule, and all but one supported the inclusion of steps to guide the reader. Of these commenters, more than half stated that the steps part should be relocated so that it could serve as a type of road-map in the use of the entire EAR. The proposed rule provided for steps at part 736 after the parts on scope and general prohibitions. BXA agrees that the steps part is more useful if relocated closer to the beginning of the EAR. Therefore, in this interim rule, the steps part is renumbered as part 732; and it precedes the part on scope that is renumbered as part 734 and the part on prohibitions that is renumbered as part 736. About one quarter of the commenters on this part urged some type of restructuring or reordering of the steps within the part; however, the comments were varied. Based upon these written comments and a substantial number of oral comments made during the town-hall fora, BXA believes that it is useful to organize the steps in categories regarding the scope of the EAR, the ten general prohibitions, the License Exceptions, and additional requirements such as keeping records, documentation for clearing the U.S. Customs Service, and completing license applications. In addition, one commenter urged that the steps regarding prohibitions at part 736 make clear the distinction between the first three prohibitions that are shaped by product parameters on the Commerce Control List versus the last seven prohibitions that address certain types of activities without regard to the product parameters on the Commerce Control List. Another common suggestion was to give greater prominence and clarity to the determination of the proper ECCN for items, a process referred to as classification. This interim rule adopts those recommendations. One commenter suggested that the steps part in the proposed rule included too many cross-references to the other parts and required the reader to flip too many pages. Several other commenters recommended additional cross-references in the EAR. BXA believes that the part on steps should continue to contain cross-references for fundamental reasons. The part on steps is not a substitute for the language of other parts of the EAR and the part on steps would be much too long if it contained a complete explanation or repetition of every other provision of the EAR. Rather, it is a type of road-map, guide, or written decision tree that helps the reader understand the order in which to read the various provisions and to determine which provisions are relevant to a given transaction or activity. By this means, the part on steps serves the purpose of describing the relationship among the provisions of the EAR, something that was not done in the EAR before the proposed rule. When these steps are followed in the proper order, the reader will consider those provisions of the EAR necessary to determine his or her rights and duties. It would be impossible to develop a useful series of steps without use of cross-references to the various provisions of the EAR; however, BXA is sensitive to a reader's understandable desire for steps that may be read with an easy flow and with no more cross-referencing than necessary to specify the language that creates regulatory rights and obligations. To this end, where possible, we have inserted brief explanatory references that give the reader an indication of the substance of the referenced provision. One comment made often by the public is that the steps part must contain guidance and not create additional regulatory duties. BXA agrees that part 732 is not controlling for purposes of describing the requirements of the EAR; the parts of the EAR referenced in the steps are controlling. For this reason, part 732 must reference the regulatory provisions in the other parts of the EAR. An organization of trade associations, supported by several other commenters, suggested several additional drafting changes to improve the part on steps. Nearly all of those recommendations are included in this interim rule. Part 734--Scope This part establishes the rules for determining whether commodities, software, technology, software and activities of U.S. and foreign persons are subject to the EAR. ``Subject to the EAR'' is a term used to identify the items and activities that BXA regulates under the EAR. Those items and activities not so identified are not regulated under the EAR. The term ``subject to the EAR'' does not imply that a license is required for any particular item or activity. Licensing requirements are spelled out in other parts of the EAR. The term does define the bounds of the authority that BXA has exercised under the EAR. The term is particularly useful to define the limits of the recordkeeping requirements, certain denial orders, and the end use and end user obligations related to proliferation controls. [[Page 12717]] This part also provides certain key terms and principles used throughout this interim rule. These include definitions for the terms ``export'' and ``reexport.'' A comprehensive listing of definitions is included in part 772. In addition to a change in designation from part 732 in the proposed rule to part 734 in this interim rule, this interim rule makes substantial changes in part 734 as a result of comments received on the proposed rule. BXA received 31 comments on this part. BXA has adopted many of the recommendations contained in the public comments and they are reflected in the interim rule. Section 734.1 has been substantially revised. The proposed rule included a list of all the contents to part 734 with specificity. One commenter urged that this listing amounted to a table of contents and recommended deletion. This interim rule follows this recommendation and, and includes an introduction that explains the contents of this part and how it fits into the overall structure of the EAR. Certain commenters recommended that definitions be included in part 772, Definitions, rather than in this part. This interim rule removes the definitions for the terms ``item'' and ``you'', and moves them to part 772. Because the terms ``export'' and ``reexport'' are so key to the EAR, these terms have been retained in this section, with certain modifications. Section 732.2(d) of the proposed rule defined exports and reexports of technology and software, but did not include a definition of exports and reexports of commodities. This interim rule amends the definition of ``export'' and ``reexport'' to apply to commodities, technology, and software. A number of commenters also noted that, as written in the proposed rule, the reexport in a foreign country of technology by release by one foreign national to another foreign national could be read to include release of foreign-origin technology, with no United States nexus. This interim rule limits this provision to ``items subject to the EAR'' and thereby limits the provision to U.S.-origin technology. This interim rule adds three additional provisions to part 734. Section 734.2(d)(5) reflects the principle that exports that will transit a country on their way to a third country or are intended to be reexported to a third country are deemed under the EAR to be exports to the third country. This principle was not included in the proposed rule, except as it relates to Canada (Sec. 732.12 of the proposed rule). Section 734.2(d)(6) reflects the principle that appeared in Sec. 732.15 of the proposed rule that an export to a territory, possession, or department of a country is deemed under the EAR to be an export to that country. Finally Sec. 734.2(d)(7) clarifies that shipments among the states of the United States and its territories, dependencies, and possessions do not constitute exports or reexports. A significant number of commenters indicated that the provision regarding Canada in Sec. 732.15 of the proposed rule was misleading and tended to confuse the distinction between the scope of the EAR and licensing requirements with respect to Canada. BXA agrees, and this interim rule omits this provision. The minimal number of instances where licenses are required for Canada is reflected on the CCL and does not need to be recited in this part. As noted above, the in-transit and intended reexport principles contained in the Canada provision are retained in this interim rule and are made applicable to all destinations. Finally, any License Exceptions that apply to Canada are reflected in part 740, License Exceptions. In the proposed rule, BXA invited comments on the implementation of a de minimis rule for software and technology. In particular, BXA said that we were considering a requirement for a one-time report on calculations under the de minimis rule. Throughout the comment period, BXA made clear at the town-hall fora that there are three criteria of concern in carrying out the proposal without a reporting requirement. First, for transfers between related parties, the export price of the software or technology exported from the United States must reflect an arms-length price or fair market value. Second, estimates of future sales of foreign-made software must be reasonable. Third, selection of the scope of foreign technology for measuring U.S.-content must be reasonable. BXA sought comments and suggestions on a one-time report. This was to determine how to avoid the potential misuse of the above criteria without requiring a one-time report. BXA also sought comments on whether the calculations should be made only under United States-based generally accepted accounting principles. From the outset, BXA concluded that strict accounting standards would be useful to prevent misuse of the rule through unreasonably low transfer prices for U.S. software or technology transferred to related parties. BXA also believed there is no need to create a new U.S. accounting standard for implementation of this rule. No commenter offered a solution to avoid misuses in the choice amortization assumptions for software and the selection of an appropriate universe to measure U.S.-content in foreign commingled technology. All comments on the report opposed its requirement. Commenters supported the rule with the hope that the de minimis exclusion might be granted by BXA without requiring a report. However, many of these same firms acknowledge that they and foreign parents, subsidiaries and customers will invariably make de minimis calculations on valuation assumptions most likely to result in a finding that U.S. content is below the relevant de minimis level. The tenor of the comments also suggests that most commenters did not fully appreciate that the de minimis relief could not likely be granted without either a one-time report or some other means to avoid the potential misuses of the criteria. Some commenters called the report a burden almost as heavy as the license requirement. Some of those commenters stated expresses a belief that the existing rule is simply not enforced and likely is not enforceable. They also concluded that compliance with the existing commingled rule is weak. However, some commenters acknowledged that without a report requirement in this interim rule, they would nonetheless submit advisory requests before relying on the de minimis exclusions. Such advisory requests would require the same information as the report required by this interim rule. Therefore for such companies, the report requirement of this interim rule does not add costs for use of the relief granted by this interim rule. Almost all foreign commenters on the de minimis rule opposed a requirement for U.S. accounting standards. They argued that they should be permitted to use their home-country accounting standards and that use of U.S. accounting standards would be too costly. BXA has determined to require a one-time report and to permit various accounting standards so long as the export price is not depreciated or otherwise reduced by accounting conventions. With the requirement of a one-time report, there is far less need for a single, strict accounting standard. The report will require a description of the nature and export price of the item exported from the United States, the estimate of future software sales in units and value along with the basis for those estimates within the relevant market category, and a description of the technology and its value for [[Page 12718]] purposes of determining the U.S.-content of technology. The report will not require information regarding destinations and end-users for reexport. BXA has concluded after interagency consultations and review of all the comments that the so-called amortization problem exists for software and does not exist for commodities. Several commenters have asked why. Unlike parts incorporated into end products, the cost of U.S. software code will be attributed or allocated to the future sales of foreign-made software incorporating the U.S. code. In making this calculation for foreign software, you must make an estimate of future software sales of that software if it is commingled with or incorporated with the U.S. code. Unless there is a one-time report revealing the assumptions of such calculations, foreign firms may misuse the de minimis rule and make unrealistic assumptions of large future sales. Such a misuse can result in U.S.-content that is unfairly estimated to be below the de minimis level. BXA has concluded after interagency consultations and review of all the comments that the so-call universe problem exists for technology and not for commodities. Several commenters have asked why. There is the risk that foreign firms will select excessively large categories of foreign technology for division into the U.S.-origin technology content. There is no regulatory criteria or standard that is sufficient to describe the scope of foreign technology that must be divided into the U.S. technology to determine the percentage of U.S.- content. The possible choices of a universe by the reexporter are many and varied. Some commenters wanted BXA to select one U.S. transfer pricing standard such as the standard of the Internal Revenue Service found in section 482 of the Internal Revenue Code. One software producer indicated that it will have very difficult decisions to make in the calculation of U.S.-content for purposes of foreign-made software and asked BXA how it would be done. In this interim rule, we indicate that accepted accounting standards such as section 482, its implementing rules, and related ruling provide one option the exporter or reexport may follow. The Organization for Economic Cooperation and Development (OECD) is considering uniform transfer pricing rules, and such international standards would present an attractive option in the future. However, it will likely be at least a year before they put such OECD standards in place. Other commenters said that their firms do not maintain adequate records to perform calculations of U.S.-content. Of course, for such firms, any value-based de minimis rule will not relieve existing burdens regardless of the report requirement. For decades, all reexport controls under the EAR extended to foreign software and technology incorporating any level of U.S.- content. BXA refers to this as the commingled rule. In 1988, BXA proposed giving some relief from the commingled rule with a type of shifting of presumptions regarding country of origin after a period of time. With one exception, commenters opposed that proposed rule and urged a value-based de minimis exclusion. BXA addressed the issue in its February 1994 proposed renewal of the Export Administration Act. That proposal would have compelled a de minimis exclusion from the commingled rule and reserved the authority of the Executive Branch to require a one-time report. BXA believes that it is appropriate to put reasonable limits on the reach of U.S. reexport controls for foreign-made software and technology. This is to recognize the sensitivities of other nations and to put some outer limits on the obligations of foreign firms doing business with U.S. firms. However, it is not the purpose of this exercise to eliminate reexport controls on software and technology. Reexport controls remain tools of the EAR to prevent diversion contrary to vital national security, nonproliferation, and foreign policy interests of the United States. BXA understands that some foreign firms will benefit from the relief offered in this interim rule and will use this relief by filing the necessary report. For such firms, the de minimis rule and related report is not a new licensing requirement. Rather, it is a means for BXA to assure that the above described three criteria are not misused in a given set of calculations and assumptions. The report is required under a ``report and wait'' procedure. If the reporting firm does not hear from BXA within thirty days, then the reporting firm may thereafter rely upon its reported calculations, and its foreign technology or software described in the filed report is not subject to the EAR. For those reexporters without the desire or ability to take advantage of the de minimis rule, their position under the EAR remains unchanged in any respect by this interim rule. The commingled rule continues to apply as it has for decades. One commenter said that the report requirement would make enforcement easier for BXA than under the existing rule. BXA does not believe that to be true. The existing rule is clear. Reexporters should also be mindful that many authorities for permissive reexports remain available to overcome reexport prohibitions. The de minimis exclusion from the commingle rule determines whether foreign technology or software is subject to the EAR. If certain commingled foreign technology or software is subject to the EAR, then the general prohibitions and License Exceptions define the obligations of the holder of that technology and software. This interim rule also makes several changes to Sec. 734.3, Items Subject to the EAR. In the proposed rule, foreign made products subject to the EAR were separately in Sec. 732.4. These provisions dealing with foreign made products are now included in Sec. 734.3, together with other items subject to the EAR. This interim rule consolidates all related principles in one section. A number of commenters questioned whether BXA intended to limit the coverage of items subject to the EAR only to ``U.S.-origin'' items as reflected in Sec. 732.2(a) of the proposed rule. This interim rule clarifies the intent of the proposed rule and the BXA practice related to this issue. Specifically, this interim rule has asserted jurisdiction over all items subject to the EAR exported from the United States, whether of U.S. or foreign origin, but in practice has limited other controls, such as reexport controls, over EAR-controlled items to those of U.S. origin. Section 734.3(a) of this interim rule reflects these provisions. Section 734.3 also applies to all covered items in the United States, and to all such items that are of U.S.-origin, wherever located. This interim rule also specifically states that foreign origin items in-transit through the United States and in U.S. foreign trade zones are subject to the EAR. For any special licensing treatment that may be accorded such shipments on their export from the United States, exporters should look at the License Exceptions in part 740. This interim rule makes five changes to the proposed rule that are reflected in the provisions of Sec. 734.3(b), which lists the exclusions from items subject to the EAR. 1. In proposed Sec. 732.3(a)(1), BXA excluded items exclusively controlled for export or reexport by other agencies which maintain controls for national security or foreign policy purposes. The agencies were identified in Supplement No. 2 to proposed part 732. To reduce cross-referencing, the agencies are now listed in part 734, and the Supplement has been removed. 2. This interim rule also adds a new provision that excludes from the definition of ``items subject to the EAR'' [[Page 12719]] items included in ECCN 0A98 in the existing EAR, such as films, records, books, and periodicals. This provision was not included in the proposed rule. Under the existing EAR, items included in that ECCN do not require authorization to any destination. This interim rule has the same result. 3. Section 732.2(a)(3) of the proposed rule excluded security- classified technology and software from the coverage of items ``subject to the EAR.'' This provision was based on the theory that classified items are controlled by the Nuclear Regulatory Commission and the Department of State's Office of Defense Trade Controls. One commenter observed that because these agencies control the export of classified items as part of their ``exclusive'' jurisdiction, no specific provision needs to appear for classified items. To avoid confusion, this interim rule omits the reference to classified items. The provision is already implicitly included in part 734 because items controlled exclusively for export by another agency are not subject to the EAR (Sec. 734.3(b)(1)). 4. This interim rule also adopts the term ``publicly available information'' to refer to all information included in General License GTDA of the existing EAR. Such information is listed in Sec. 734.3(b)(3). In the proposed rule, the term ``publicly available'' applied solely to information that was ``generally accessible to the interested public in any form''. This interim rule adopts the term ``published information'' to represent such generally accessible information. 5. A number of commenters objected to the use of the term ``Not on List'' or ``NOL'' to designate and clear for export those items which are subject to the EAR but which do not appear on the CCL. This interim rule drops this term, which will be discussed in greater detail under part 758, General Export Clearance Requirements. However, in response to written comments and audience comments at the town-hall fora, BXA will designate such items under ``EAR99.'' This designation, discussed in Sec. 734.3(c) of this interim rule, will be used for classification and reference purposes only, and will not be required for clearing exports. One commenter recommended that items subject to the EAR be specifically limited to exports and reexports because BXA's statutory authority relates to controlling exports and reexports. This interim rule does not adopt this recommendation because the term ``subject to the EAR'' defines the scope of EAR jurisdiction. The prohibition on exports and reexports of such items based on BXA's statutory authority is reflected in part 736, Prohibitions. Finally, this interim rule expands Supplement No. 2 to include a requirement for the submission of a report to be submitted to BXA if an exporter uses the de minimis for technology or software. Part 736--General Prohibitions Part 736 includes ten general prohibitions. These are the prohibitions that may apply to items subject to the scope of the EAR as described in part 734, Scope. General Prohibitions One, Two, and Three are product controls. The Commerce Control List in Supplement No. 1 to part 774 and the Country Chart in Supplement No. 1 to part 738 are used together to define the product scope and destinations for the license requirements of General Prohibitions One, Two, and Three. General Prohibitions Four through Ten describe certain activities that are not permitted without authorization from BXA. Several commenters recommended liberalization of the existing reexport controls. For example, one commenter suggested a license free zone for all members of the former Coordinating Committee on Export Controls (COCOM), the Missile Technology Control Regime (MTCR), the Nuclear Suppliers Group (NSG), and the Australia Group (AG). BXA notes that a provision in the Export Administration Act of 1979 compels individual validated licenses for items controlled cooperatively by members of the MTCR. BXA is aware of the interest of the exporting community in the further expansion of license free zones. However, this interim rule is not intended to address such fundamental policy decisions and is not an appropriate vehicle to make such changes. Some commenters urged BXA to create a separate part for reexport controls or a separate guideline for reexports. Others supported this view and indicated that it was convenient for them to photocopy newly designated part 774A and send this to firms abroad. BXA believes that part 774A of the EAR does not describe all the duties of reexporters; and reliance upon a reading of only that portion of the regulations could well lead to violations of other portions of the EAR. In response to these comments, BXA has taken care in this interim rule to indicate which requirements of the EAR apply to reexporters and which requirements do not. Part 732, Steps contains explicit indications of applicability of various provisions to reexporters. As suggested by several commenters, part 732, Steps has been substantially expanded to present a road map for the use of these provisions by reexporters. The foreign-produced direct product control described in General Prohibition Three reflects a policy prompted by the Cold War. The Regulations and Procedures Technical Advisory Committee (RPTAC) recommended that BXA not revise this policy during the drafting period that led to the proposed rule. After publication of this interim rule, BXA will initiate a policy review of the foreign-produced direct product rule. All ten general prohibitions in this part 736 apply to firms abroad under some circumstances. Part 734, Scope defines the scope of the regulations for foreign as well as domestic firms. The key factors that make all ten general prohibitions applicable to foreign firms are the scope of the parts and components rule, the foreign-produced direct product rule, and the general prohibition regarding reexports of U.S.- origin items. These are described in detail in part 732, Steps; part 734, Scope; and part 736, General Prohibitions with specific references to reexporters. One commenter asked if we would add a provision regarding the applicability of License Exceptions to General Prohibition Eight concerning the unlading of goods in certain countries. The structure of this prohibition is that it applies only to exports and reexports that require a license. By definition, if you properly use a License Exception authorized by the EAR, General Prohibition Eight does not apply. Rather, it is a prohibition against unlading items that are shipped under a license. Exporters and carriers should note that BXA plans to conduct a policy review of the country scope of General Prohibition Eight following the publication of this interim rule. Several commenters stated that the proposed rule continued to present a complex set of requirements, and many commenters suggested fundamental decontrols and elimination of longstanding regulatory requirements. Such recommendations would necessary entail changes to the general prohibitions. However, the Regulation Reform exercise was not intended to address such fundamental policy decisions, and this interim rule is not an appropriate vehicle to make such changes. Supplement No. 1 to part 736 on General Prohibitions provides for certain General Orders. At this time, Supplement No. 1 is reserved. Supplement No. 2 to part 736 provides [[Page 12720]] for three Administrative Orders. These Administrative Orders continue polices of the existing regulations regarding the technical advisory committees, business conduct before BXA, and certain confidentiality provisions. Part 738--Commerce Control List Overview and Country Chart Part 738 provides an overview of the Commerce Control List (CCL) and the Country Chart. The complete CCL is contained in Supplement No. 1 to part 774, while the Country Chart is contained in this part. A significant change to the proposed rule as it relates to the CCL is the modification of the numbering system used to identify Export Control Classification Numbers (ECCNs) to conform with the European Union (EU) numbering system as described in the supplementary information regarding the CCL. This part provides an overview of the new CCL structure and ECCN numbering system along with a thorough discussion of the components that make up an ECCN. This interim rule eliminates the use of the term ``License Alternative'' and the ``Special Comprehensive License'' reference as described in the proposed rule. In addition, this interim rule adopts the revised reasons for control as identified in the proposed rule (i.e., use of the broad term ``FP'' has been discontinued). New ``Related Definition'' and ``Related Controls'' sections contained in the proposed rule have also been adopted in this interim rule. Several commenters described use of the Country Chart column identifier in the ``License Requirement'' section of each ECCN as a rational model and fundamental to simplifying the task of determining licensing requirements. This interim rule retains this very valuable tool with few modifications. The Country Chart, as described in the proposed rule, has been modified to incorporate columns for destinations eligible for General License GCT and GNSG under the existing EAR. General License GCT eligibility is now determined by NS Column 2, while NP Column 1 now reflects General License GNSG eligibility. NP Column 2 is retained in its original format as reflected in the proposed rule. Accordingly, references to License Exceptions CSR and NSG in the ``License Exceptions'' section within each entry on the Commerce Control List do not appear in this interim rule. A few commenters noted that the proposed title to part 738, Commerce Control List and Country Chart implies that the entire CCL is contained in part 738. The title to this part has been modified to state this part contains an overview of the CCL structure and its relationship to the Country Chart, rather than the actual CCL. Two commenters noted that the cross-reference to part 742, Control Policy--CCL Based Controls should be clarified. This interim rule contains a more descriptive cross-reference to part 742 and is placed in a more appropriate location. A few commenters expressed confusion over the use of UN Column 1. This interim rule removes UN Column 1, because of its limited scope of control and for added clarity. In addition, this interim rule revises the two instances in which the Country Chart is not consulted to determine license requirements. This interim rule expands the proposed list of ECCNs in which the Country Chart cannot be used from 5A80D (5A980) to include 1A988, 2A994, 2D994, 2E994, 2B985, 0A983, 0A986, and 0A988. This interim rule does not adopt the request made by a few commenters that the Country Chart be expanded to incorporate the Country Group identification as described in part 740, License Exceptions. These two lists were developed for separate purposes and allow for systematic licensing determinations (e.g., Country Groups are not reviewed unless a license is required by the Country Chart). In addition, incorporation increases the possibility that readers will make incorrect license determinations. This interim rule expands the example for using the CCL and Country Chart to illustrate more complex fact patterns, as requested by a commenter. Part 740--License Exceptions Part 740 provides for exceptions from license requirements similar to the General Licenses contained in the existing regulations. In addition to License Exceptions for commodities, this part contains License Exceptions for software and technology and permissive reexports. Previously, both technical data and reexports had separate parts. License Exceptions for short supply commodities appear in part 754. Eligibility for License Exceptions may be based on the item to be exported or reexported, the country of ultimate destination, the end- use of the item, or the end-user. If a License Exception is available for a particular transaction, the exporter or reexporter may proceed with the export or reexport without a license. However, the exporter or reexporter is required to meet all the terms of the License Exception; in using a License Exception, the exporter or reexporter will be certifying that all terms, conditions, and provisions for the use of that License Exception have been met. The most significant departure in this interim rule from the proposed rule is the changed relationship between the determination of the applicability of a License Exception to a particular transaction and the documenting of that transaction for export clearance purposes. Previously, each License Exception bore a three-character symbol that transferred directly to shipping documents to certify that the transaction did not require a license and that it met the terms and condition of the stated License Exception. In this interim rule, each three-character symbol that will be used on shipping documents represents a group of License Exceptions rather than a single License Exception. This change means that a few symbols will cover a large percentage of shipments from the United States. Each symbol bears an intuitive relationship to its group of License Exceptions; for example, those based on the Commerce Control List bear the symbol ``LST.'' Some commenters wished to retain the old General License symbols, but a preponderance of exporters preferred intuitive symbols and expressed that preference at the numerous town-hall fora held around the country. Many commenters on the proposed rule protested that certain existing General Licenses--specifically GLR and GTDU--had been needlessly fragmented. In this interim rule, these License Exceptions have been consolidated into Servicing and Replacement (RPL) and Technology and Software--Unrestricted (TSU), respectively. General Licenses GCT and GNSG in the existing EAR, which appeared as License Exceptions CSR and NSG in the proposed rule, have in this interim rule been incorporated into the Country Chart in part 738. Changes made in General Licenses in the intervening period between publication of the proposed rule and this interim rule, including G- BETA for beta test software, G-CTP for computers, and a modification of GCG (shipments to cooperating governments), are reflected in part 740. The former Humanitarian License Procedure, which was included in the Embargo part of the proposed rule, has become a License Exception for humanitarian donations. Part 742--Control Policy--CCL-Based Controls If you have determined that a license application must be filed after reviewing the Country Chart in part 738 and the Commerce Control List (CCL) in part 774, this part 742 provides the licensing [[Page 12721]] policy that BXA will apply in reviewing your application. This part contains licensing review policies for all items listed on the CCL except items controlled for ``short supply'' reasons or to implement ``U.N. Sanctions.'' It consolidates most of newly designated part 785A, Special Country Policies, portions of newly designated part 776A, Special Commodity Policies and all the CCL-based controls described in newly designated part 778A, Proliferation Controls. It also includes control policies for items included on the CCL but not reflected in the Country Chart. Specifically, these items are high performance computers, implements of torture, and communications intercepting devices. Part 742 does not include controls and licensing polices that apply to exports and reexports to embargoed destinations (currently, Cuba, Libya, North Korea, Iraq, Iran, and the Bosnian-Serb controlled areas of Bosnia-Herzegovina), except a description of anti-terrorism controls applicable to Iran (Sec. 742.8) and other terrorist-designated countries (Supplement No. 2 to part 742). Part 746, Embargoes and Other Special Controls, covers the licensing policies for embargoed destinations. This part is structured to assist exporters to easily retrieve licensing information related to the reason for control for each item listed on the CCL. Each ``Reason for Control'' column on the Country Chart in part 738 has a counterpart section in part 742. The sections in this part appear consecutively in the same order as the columns on the chart, reading from left to right. In addition, each section is similarly structured: --Paragraph (a) lists the licensing requirements as stated on the CCL; --Paragraph (b) provides the licensing policy for specific controls on the CCL; --Paragraph (c) describes any contract sanctity dates that apply to particular controls; and --paragraph (d) provides information concerning any multilateral cooperation that may apply to a particular control. BXA believes that the structure and organization of this part is a significant improvement over the existing EAR. It enables an exporter to retrieve specific licensing information relevant to each ECCN on the CCL without having to review extraneous material. Changes were made in Sec. 742.1, Introduction, to accurately describe the structure of this interim rule. Paragraph (c) was added to make clear that controls on embargoed destinations, other than anti- terrorism controls, are covered in part 746, Embargoes and Other Special Controls and do not appear in this part 742. Paragraph (d) generally describes anti-terrorism controls maintained by BXA. Paragraph (e) reminds the reader that items not listed on the CCL are nonetheless subject to the end-use and end-user provisions described in part 744, Control Policy--End-user/End-use Based. In addition, this interim rule contains changes that implement regulations which were issued by BXA but were not reflected in the proposed rule. The interim rule also reflects changes made in response to public comments on the proposed rule. On May 6, 1995, the President issued Executive Order 12959, imposing a virtual embargo on exports of any goods, technology or devices to Iran and on certain reexports of U.S.-origin goods or technology. (The Treasury Department, Office of Foreign Assets Control (OFAC), has principal responsibility for implementing E.O. 12959.) Because of the virtual embargo on exports to Iran, provisions dealing with Iran, except anti-terrorism controls, have been shifted to part 746, Embargoes and Other Special Controls. In this interim rule, Sec. 742.8 describes anti-terrorism controls on exports and reexports to Iran that BXA continues to maintain while the comprehensive embargo administered by OFAC is in effect. This interim rule also includes new anti-terrorism controls on Sudan, described in Sec. 742.10 and in Supplement No. 2 to part 742. The Department will also publish these controls in the format of newly designated part 785A and related parts. The items controlled for anti- terrorism reasons to Sudan include explosive device detectors, which have been moved into a new ECCN. The anti-terrorism control on explosive device detectors also applies to Syria and Iran. Since the publication of the proposed rule, the Department has issued a new regulation on exports of specially designed implements of torture (60 FR 58512). This regulation moved specially designed implements of torture from Export Commerce Control Number (ECCN) 0A82C to a new ECCN, 0A83D, and required a license to all destinations, including Canada. The changes made by that regulation are reflected in the interim rule. Proposed Sec. 742.7 (Crime Control) is revised to eliminate references to implements of torture, and a new Sec. 742.11 (Specially Designed Implements of Torture) is added to this interim rule. The President announced a revision of U.S. export controls on computers on October 6, 1995 that affects the supercomputer controls contained in part 742 (Sec. 742.12) of the proposed rule. The Department published the revised regulations on January 25, 1996 (61 FR 2099). Section 742.12 has been retitled ``High performance computers'' in this interim rule and describes the license requirements and licensing policies applicable to four ``tiers'' of countries. Supplement No. 3 to part 742 describes licensing safeguard conditions that may be imposed on exports of high performance computers to certain destinations. Twelve commenters included comments on part 742 in their submissions. A number of commenters pointed out technical mistakes and omissions in part 742. These are corrected in this interim rule. Following is a discussion of other comments submitted. Two commenters questioned the appropriateness of continuing controls on exports to members of a given multilateral control regime of items controlled by that regime. No License Exceptions are available for items controlled for missile technology reasons because a provision in the Export Administration Act requires individual validated licenses to all destinations. Section 742.2(a)(2) of this interim rule states that licenses are not required for exports of the listed chemicals to Australia Group member countries. This interim rule revises Sec. 742.3(a)(1) to inform the exporter that no license is required for exports of certain nuclear proliferation controlled items to Nuclear Suppliers Group (NSG) member countries. Finally, this interim rule describes, in Sec. 742.4(a), a new national security control level, denoted by ``NS Column 2'' in the Country Chart, which indicates that no license is required for exports to Country Group A:1 and cooperating countries. One commenter noted that proposed Supplement No. 2, listing countries that are party to the Treaty on the Nonproliferation of Nuclear Weapons and to the Treaty for the Prohibition of Nuclear Weapons in Latin America, required updating. Because the list of countries party to these treaties is constantly changing, BXA decided to remove this Supplement rather than risk publishing an inaccurate or outdated list. BXA will maintain and make available to interested persons a current list of the countries party to these treaties. One commenter suggested that part 738, Commerce Control List Overview; part 742, Control Policy--CCL Based [[Page 12722]] Controls; and part 774, The Commerce Control List be combined, since they all concern the Commerce Control List. BXA did not adopt this recommendation. Each of the three parts provides a view of controls from a different vantage point: Part 738 by country; part 742 by type of control; and part 774 by type of item. BXA believes that consolidating the three parts into one would make the interim rule more unwieldy and difficult to use. Two commenters recommended that contract sanctity provisions be established for nuclear nonproliferation, national security, regional stability, crime control or computer controls. BXA did not establish contract sanctity in this interim rule. Decisions on contract sanctity dates are made when new controls are imposed. This interim rule does not impose any new controls. Accordingly, no changes have been made in contract sanctity provisions. Two commenters stated that Sec. 742.2(d) (chemical and biological weapons), Sec. 742.4(d) (national security) and Sec. 742.5(d) (missile technology) incorrectly state that U.S. controls are consistent with multilateral agreements. BXA does not agree with this comment. The only change that BXA is making in this interim rule is to reserve Sec. 742.4(d). On December 19, 1995, the United States and twenty-seven other countries, including its NATO allies and Russia, agreed to establish a new multilateral export control arrangement. The Wassenaar Arrangement for Export Controls for Conventional Arms and Dual-use Goods and Technologies (``Wassenaar Arrangement'') is expected to be operational later in 1996. Any EAR changes that may be needed to carry out the Wassenaar Arrangement will be made at the appropriate time. A commenter suggested that License Exception NSG be extended to South Korea, Taiwan and Mexico. License Exception NSG has been removed in this interim rule. Instead, items on the CCL with ``NP Column 1'' in the Country Chart column of the ``License Requirements'' section of an ECCN do not require a license to NSG member countries. The commenter's suggestion has not been adopted by BXA for Taiwan and Mexico because the regulations simplification initiative was not intended to make substantive changes in license requirements. However, recent regulatory changes have extended such treatment to South Korea, and that change is incorporated into this interim rule. One commenter questioned why ECCN 5A80 (communications intercepting devices) of the proposed rule is not included in Sec. 742.7 (Crime Control). These items are regulated under separate statutory authority and licensing criteria. Items controlled under Sec. 742.7 are those agreed to pursuant to section 6(n) of the Export Administration Act. Controls on communications intercepting devices are maintained in accordance with the Omnibus Crime Controls and Safe Streets Act of 1968, and are therefore separately controlled under Sec. 742.13. Part 744--Control Policy--End-User/End-Use Based This part contains prohibitions against exports, reexports, and activities related to certain end-uses and end-users. Specifically, Sec. 744.2 prohibits exports and reexports of items subject to the EAR, without a license, if at the time of the export or reexport you know that the item will be used in nuclear explosive, or other safeguarded or unsafeguarded nuclear activities. Section 744.3 prohibits the export or reexport, without a license, of certain items to be used for missile end-uses. Similarly, Sec. 744.4 prohibits the export or reexport of items with certain chemical and biological weapon end-uses. Next, Sec. 744.5 prohibits the export or reexport of items to be used for specified nuclear maritime end-uses. Section 744.6 places restrictions on certain proliferation-related activities of U.S. persons. For purposes of this prohibition the term ``U.S. person'' means citizens, permanent resident aliens, or protected individuals as defined in the immigration laws; any juridical person organized under the laws of the United States or any U.S. jurisdiction; and any person physically in the United States. This part also contains prohibitions against exports, reexports, and certain transfers to specified end-users. Section 744.7 imposes restrictions on certain exports to and for the use of certain foreign vessels or aircraft, and Sec. 744.8 places restrictions on certain exports to all countries for Libyan aircraft. Commenters urged BXA to publish a positive list of items and limit the applicability of the nonproliferation related end-use restrictions to items on such a positive list. In addition, commenters asked BXA to publish certain names of end-users as to which individual exporters have been ``informed'' that a license is required by reason of Sec. 744.2(b), Sec. 744.3(b), Sec. 744.4(b), and Sec. 744.6(b). BXA is working within the Administration toward these objectives; however, these are major policy initiatives, they are not part of this interim rule, and they are not necessary to achieve the goals of the Regulations Reform exercise. Commenters suggested that under Sec. 744.2(b) the discretion of BXA to inform an exporter of the trustworthiness of certain end users should be a duty of BXA rather than an option of BXA. The U.S. Government will retain this discretion because of the overriding interests in protecting sources and methods of intelligence gathering and the interests in law enforcement objectives that on occasion require flexibility on the part of the government. One commenter urged BXA to make clearer the treatment of technology that historically was authorized for export under General License GTDA. In the proposed rule, BXA excluded such information from the scope of the EAR. That approach is retained in this interim rule and clarified in the steps that have been added to part 732, Steps to suggest methods for using part 734, Scope of the EAR. Items not subject to the scope of the EAR are not subject to any prohibition of the EAR. Section 744.2(b) contains provisions designed to standardize the procedure for informing exporters that a particular party may present an unacceptable risk of diversion contrary to nuclear policies. Some commenters applauded this addition, and one opposed it. BXA will maintain this provision because the procedural discipline it provides should prove useful for both BXA and exporters. This provision does not change BXA's substantive authorities under the EAR. One commenter suggested additional cross-references to the license review policies for items subject to, for example, missile technology controls identified on the CCL based upon product parameters rather than a prohibited end-use. In the proposed rule and in this interim rule, the license review standard for applications required by reason of the product parameters designated on the CCL are listed in part 742, Control Policy--CCL Based Controls. The license review standards for license requirements defined by end-uses described in part 744 are contained in part 744. Because of the criticism of some commenters that the proposed rule contained too many cross-references, BXA has concluded in this instance that additional cross-references are not advisable. This interim rule continues existing policy regarding the country scope of the nuclear end-use prohibition. A new Supplement No. 3 is added to the part and referenced at Sec. 744.2(a) to exempt designated countries from this prohibition, and those are the same countries that are exempt under the [[Page 12723]] existing EAR. This is a change from the proposed rule. One commenter suggested that BXA remove from Sec. 744.6 words that indicate defined activities are prohibited in the United States. This interim rule accepts this recommendation. One commenter complained that Sec. 744.6 applies to less than all countries in Country Group D:1. The exclusion of Romania and China is consistent with current policy, and is maintained in this interim rule. BXA recognizes that such policy decisions make the use of the Country Groups and the EAR itself more complex. BXA hopes reviewing of provisions of the EAR in the order recommended by the steps in part 732 will minimize this problem. BXA intends to further address such issues in the future. However, policy making in export controls will always present trade offs for exporters when petitioning the government for fairness and precision of export control policy on the one hand versus simplicity and ease of administration for the public on the other. The proposed Sec. 744.6(a)(2) prohibited certain U.S. person activities related to nuclear explosives devices. It was removed from this interim rule because such activity is prohibited under the International Traffic in Arms Regulations (22 CFR 120-130), which regulate defense services for all destinations. Part 746--Embargoes and Other Special Controls Part 746 of the proposed rule contained controls for Cuba, Libya, Iraq, North Korea, and the Federal Republic of Yugoslavia (Serbia and Montenegro), indicating where jurisdiction was divided between BXA and the Department of the Treasury's Office of Foreign Assets Control. It also contained controls implementing U.N. sanctions resulting in additional EAR controls on Rwanda. Controls on Iran, embargoed because of Executive Order 12959 of May 6, 1995, have been added to part 746 in this interim rule. With the suspension of the embargo on the Federal Republic of Yugoslavia (Serbia and Montenegro), controls on that country, as well as on certain areas of Croatia and Bosnia-Herzgovina, have been shifted to a Supplement to part 746. Commenters pointed out that ECCN 0A95, which released food and medical supplies to Libya from reexport control, was unaccounted for in the proposed rule; that oversight has been corrected. The former Humanitarian License Procedure, which was included in the Embargo part of the proposed rule, has become a License Exception for humanitarian donations and is in part 740 of this interim rule. Finally, this part includes Supplements containing general information on embargoes and sanctions administered by other federal agencies. Part 748--Applications (Classification, Advisory, and License) and Documentation Part 748 describes the procedures for submitting license applications, classification requests and advisory opinions. This interim rule places information from throughout the existing EAR into one part. It is intended to provide the reader with all information necessary to submit an application to BXA. This interim rule adopts use of the new Form BXA-748P for the submission of license applications and classification requests, but not advisory opinions. Most commenters favored the use of one form for both exports and reexports. This interim rule clarifies the definition of advisory opinions and states they must be submitted in writing via letter. Commenters were evenly split regarding the proposal to require use of Form BXA-748P for advisory opinions. One commenter proposed adopting the form for use when submitting end-user requests. This suggestion along with one recommending the elimination of unit and total price boxes are not adopted in this interim rule. A number of commenters also queried whether BXA intends to republish the Forms Supplement contained in the existing loose leaf EAR subscription. BXA will republish the Forms Supplement in the subscription to the EAR offered by the National Technical Information Service (NTIS). The Forms Supplement is not published in the Code of Federal Regulations. Sections in part 748 have been redesignated to better describe each section's contents. The addresses in Sec. 748.2 and Sec. 748.14 have been placed in one section. Procedures for submitting applications electronically have been placed in a separate section for easier access. For continuity, the unique license requirements for specific items or transactions have been placed in a separate Supplement No. 2 to this part. This change will allow readers to determine quickly whether the unique requirements apply to their transaction, and if not, to continue quickly with sections relating to support documents. Instructions for completing Form BXA-748P contained in Supplement No. 1 to part 748 have been clarified in response to comments posed by both the public and BXA employees. On the suggestion of one commenter, a reminder that information submitted under the Export Administration Act will be treated in accordance with provisions stated in section 12(c) of the act has been added in this interim rule in Sec. 748.1(c). The section on license application support documents has been revised to eliminate one step in the decision tree. The questions contained in Sec. 748.10(a)(3) in the proposed rule have been combined into one question in this interim rule. Some commenters noted that exceptions for obtaining support documents have decreased in certain circumstances. The changes announced in the proposed rule were due largely to the changing export control environment and proliferation credentials of various countries. Accordingly, this interim rule adopts the requirements contained in the proposed rule with a few modifications. This interim rule also adopts the two year validity period for the Statement by Ultimate Consignee and Purchaser. A few commenters noted that though the development of decision trees will assist in determining support document requirements, BXA should consider the development of a matrix or chart similar to that contained in part 775 of the existing rule. Though a chart has not been included in this interim rule, BXA will explore development of a new matrix/chart based on the support document decision tress in this part. This interim rule also eliminates the last letter in the Export Control Classification Number contained in the existing rule. This letter had been used previously to designate support document requirements, but is no longer necessary. A few commenters requested additional guidance on what constitutes an emergency and clarification of validity periods as they relate to licenses approved under emergency processing. This interim rule clarifies the validity period by cross-referencing the appropriate section in part 750, but does not provide additional language to be used by applicants when submitting emergency requests. In order to retain the emergency nature of these requests, this interim rule does not adopt the suggestion by one commenter to increase the validity period from 30 to 60 days for applications involving reexports. Commenters were evenly split regarding the elimination of Form BXA- 685P for amendments with a few stating the elimination of this form is long overdue. This interim rule adopts the intent to eliminate Form BXA-685P along with Form BXA-648. Changes not [[Page 12724]] listed in Sec. 750.7(c) will require the submission of a Replacement application. One commenter stated the time period for the return of Delivery Verifications to BXA was reduced with elimination of Form BXA- 648. The existing rule states the time frame as ``a reasonable time after the last shipment'' while the instructions contained in the existing Form BXA-648 stated the time frame as ``90 days after the last shipment''. This interim rule eliminates this inconsistency by establishing a 90 day time frame. Form BXA-711 along with its written counterpart is adopted in this interim rule. Commenters stated the ability to use a form or letter was a good idea. Part 750--Application Processing, Issuance and Denial Part 750 describes the processing procedures and time frames for classification requests, advisory opinion requests and license applications. Once an applicant has prepared documents in accordance with part 748, this part describes how the application will be handled by BXA. The time frames detailed in this interim rule are drawn from Executive Order No. 12981 of December 6, 1995 and the draft 1994 Export Administration Act bill written by the Clinton Administration. This interim rule provides a detailed description of the relationship between all agencies and departments involved in the license review process as well as a description of the interagency dispute resolution process. This part also addresses actual issuance, validity periods, denial, revocations, suspensions, transfers, duplicates, and shipping tolerances. This interim rule also eliminates the proposed exceptions to the license processing time frames and limits all license applications to a 90 day processing time frame. A number of commenters made recommendations for revising the time frames for the processing of license applications as well as the types of applications subject to Congressional notification. This interim rule incorporates the processing time frames provided in Executive Order No. 12981. Accordingly, recommendations to establish different time frames have not been adopted. In addition, congressional notification requirements for crude oil and refined petroleum products have not been adopted since they no longer apply to the types of licenses reviewed by the Department. Most commenters supported the clarification of the license processing system and time frames. These commenters agreed that BXA has met the goal of making the process more transparent for the exporter. A number of commenters requested that applicants be given the opportunity to express their views during the license escalation process. These commenters also requested clarification of the term ``registration'' to include language that would require prompt action by BXA upon receipt of a license application. Both of these recommendations have been adopted in this interim rule. One commenter suggested that part 756, Appeals, be combined with this part 750 since most appeals involve license applications. This recommendation was not adopted because the appeals process is open to all administrative actions, not only those relating to license applications. One commenter recommended simplification in the provisions for shipping tolerances. While this recommendation has merit and may be considered at a later date, it was not adopted in this interim rule. Part 752--Special Comprehensive License Part 752 describes the provisions of the Special Comprehensive License (SCL). The SCL consolidates the activities authorized under the Project, Distribution, Service Supply, Service Facilities, Aircraft and Vessel Repair Station Procedure, and Special Chemical Licenses, and provides for additional flexibility to BXA in shaping appropriate SCLs and internal control programs (ICPs). For example, the Project License and Service Supply Procedure authorize exports and reexports to countries of the former Soviet Union, Eastern Europe, and the People's Republic of China, but the Distribution License, which includes an extensive mandatory ICP that is not required for the Project License or the Service Supply Procedure, does not allow exports and reexports for distribution in these countries. This interim rule conforms item and country eligibility under the SCL. All items subject to the EAR are also eligible for export and reexport under the SCL, except a few specified items. Form BXA-686P, Statement by Foreign Importer of Aircraft or Vessel Repair Parts, which was used for certain exports under the Aircraft and Vessel Repair Station Procedure, and Form BXA- 6026P, Service Supply License Statement by U.S. Exporter, are not used under the SCL. BXA received fourteen comments on part 752. Overall, several commenters stated that the SCL is a significant improvement over the existing special license eligibility because it provides broader authority to allow exports of items such as software and technology. Five commenters suggested that existing special license holders retain the right to use existing special licenses until they expire, but apply for amendments to take advantage of the increased item and country scope of the SCL. This interim rule makes the SCL effective March 25, 1996. All existing special licenses will expire on March 25, 1997, unless the special license expires before that time by its own terms. BXA will not grant extensions to existing special licenses. Existing special license holders who want to take advantage of the SCL benefits, must apply for an SCL according to part 752. BXA will not accept amendments to outstanding special licenses. Eight commenters provided comments on item scope for the SCL. Most commenters stated that the proposed rule would not authorize exports under the SCL of items eligible for a License Exception. The proposed rule allowed exports under the SCL of all items subject to the EAR, including items eligible for a License Exception. However, to prevent confusion, the interim rule specifically states in Sec. 752.1 that you may apply for an SCL, when appropriate, in lieu of a license described in part 748 or a License Exception described in part 740. Two commenters stated that the SCL should not exclude any items because it defeats the purpose of the SCL, which is designed to allow greater flexibility in return for increased monitoring of each shipment by the SCL holder and consignees. One commenter added that other agencies have the right to review the applications for an SCL, and restrictions may be placed on a license on a case-by-case basis. However, two commenters stated that there should be no ad-hoc restrictions, adding that the only item restrictions should be those published in the Federal Register, which would be applicable to all companies. This interim rule retains the list of items not eligible for the SCL in Sec. 752.3 to ensure that potential applicants are aware of the few item restrictions before they consider applying for an SCL. If BXA determines that an item must be added to the list to protect national security, nonproliferation, or foreign policy interests, or determines that an item need no longer be prohibited under the SCL, BXA will publish a change in the Federal Register, at which time the change will become effective and apply to all SCL and potential SCL holders. Another commenter was concerned about the general policy of denial for [[Page 12725]] exports to destinations in Country Group D:2 of items controlled for nuclear nonproliferation reasons, and suggested that the SCL specifically state that items controlled for nuclear nonproliferation reasons be authorized on a case-by-case basis provided that the exporter has appropriate controls in place to screen for proscribed end-uses or end-users. The Internal Control Procedures (ICPs) required for most activities authorized under the SCL include screening elements for proliferation end-uses. This interim rule revises the policy of denial language found in Sec. 752.3(b) of the proposed rule to a policy of case-by-case review. In addition, this rule retains the discretion to deny or limit the export or reexport of all items, including those controlled for nonproliferation reasons. Most commenters applauded the expansion of country scope to include the newly independent states and Russia. However, several commenters requested clarification that the SCL is eligible for countries such as Slovenia, Rwanda, Bosnia, and Croatia, which are eligible under existing special licenses . One commenter stated that when BXA declares a country ineligible to receive items under the SCL, BXA should simultaneously list the country in the EAR, and remove it from all SCLs. It is not BXA's intent to roll-back special license country eligibility. This interim rule therefore clarifies that all countries are eligible to receive items under the SCL except Cuba, Iran, Iraq, Libya, North Korea, Syria, and Sudan. If BXA determines that additional countries should become ineligible to receive items under the SCL, it will publish the change in the Federal Register, and notify all SCL holders. Four commenters suggested consolidating Sec. 752.2 into one generic paragraph that describes the representative activities. Another commenter stated that the SCL should not prohibit the export of service parts or upgrades as long as it does not exceed the limits of the SCL parameters. Section 752.2 is intended to provide illustrative examples of the types of activities that may be approved under the SCL. It is not intended to be an inclusive list, and other activities may be approved on a case-by-case basis. This interim rule revises Sec. 752.2 to provide a general description of the types of activities that BXA may approve the under the SCL. These activities fall under the general categories of ``service'', ``end-user'', ``distribution'', and ``other'' activities. Four commenters provided comments on the requirement for a letter of assurance for exports under the SCL of certain technology. One commenter stated that the SCL expands the scope of the existing letter of assurance required for exports under General License GTDR because it would require the letter of assurance from each new recipient overseas. One commenter specifically requested that the letter of assurance be required from only one party overseas. The proposed rule did not expand current policy. Under the existing EAR, any transfers of technical data covered by a letter of assurance would require such assurances from any new recipient of the technology. Two commenters indicated that assurances are not required for exports of technology under a validated license. But, if an assurance must be required, the assurance should be included in the SCL certifications. This interim rule removes the letter of assurance requirement from Sec. 752.5. BXA intends to review requests to export controlled software and technology under the SCL on a case-by-case basis, and impose conditions or restrictions as appropriate. Depending upon the level of software or technology requested for export under the SCL, this may include restrictions on reexport of software or technology, or exports of direct products of the technology. Comments on Sec. 752.5, steps you must follow to apply for an SCL, focused on the comprehensive narrative statement. Many commenters stated that much of the information required in the comprehensive narrative statement is already required on Form BXA-748P, Multipurpose Application, or Form BXA-752, Statement by Consignee in Support of Special Comprehensive License. Five commenters specifically requested that the requirement to state the ratio and dollar volumes of controlled items to those not subject to the EAR be removed, because it is impractical to calculate and fundamentally unreliable. BXA agrees that SCL applicants should not be required to repeat information in a comprehensive narrative statement that is also required on Form BXA- 748P or Form BXA-752. Therefore, this interim rule includes major revisions to the comprehensive narrative statement requirements, limiting that statement to the information that is not required elsewhere. This interim rule also removes the requirement to list the items eligible for a License Exception that will be exported under the SCL because the ICP requirements assure that appropriate controls are in place to prevent diversion. One commenter stated that the application stage was too early to provide BXA a copy of the proposed ICP, and to do so conflicts with the certification requirements that an ICP must be in place upon approval of the SCL. This interim rule retains, under Sec. 752.5(c)(3), the requirement that applicants and consignees submit ICPs at the time of application. This information is necessary for BXA to determine whether to approve the items, activities, or countries requested on the SCL application, or to modify your proposed ICP depending upon the nature of the request. One commenter stated that BXA should not require an SCL holder to inform all consignees of license conditions. Certain conditions may only have relevance to one or two consignees. BXA agrees, and has clarified in Sec. 752.9(a)(4) to state that the SCL holder must inform all relevant consignees of all license conditions prior to making any shipments under the SCL. Four commenters objected to the language that refers to prior reporting of exports of certain items, which is was included in Sec. 752.9(a)(4). This interim rule retains this language. Exporters should note that the list of the special conditions that may be placed on your SCL included in this section only provides examples, and such conditions may not be included on your SCL. Section 752.11 describes the elements of the Internal Control Programs (ICPs) that the SCL holder and consignee must implement upon approval of the SCL to assure that exports and reexports are not made contrary to the EAR. Two commenters stated that the ICP requirements included in the proposed rule should be clear and defined, not generalized. Three commenters suggested that EPCI screening be limited to certain countries. Two commenters requested that BXA clarify when the parties to the application must submit the ICP to BXA. One commenter also requested that upon publication of the SCL, BXA publish guidelines that further define ICP requirements. This interim rule also restructures Sec. 752.11 to consolidate the elements of all three ICPs into one list, and to remove the different levels of ICPs. This simplifies the text, and makes it more user- friendly. This interim rule does not place country limits on screens against customers who are known to have, or suspected of having, unauthorized dealings with specially designated regions and countries for which nonproliferation controls apply. Any such limits must be approved by BXA, and are dependent upon the specific nature of your SCL request. This interim rule also includes information in Sec. 752.11(a)(2) on where you may obtain [[Page 12726]] guidelines to assist you in developing an adequate ICP. This interim rule also makes several other editorial changes to part 752 to consolidate provisions and simplify the text. Section 752.10, Changes to the SCL, has been revised to clearly define the requirements for changing an SCL. Detailed instructions on how to complete Forms BXA-748P, Multipurpose Application, and Form BXA-752, Statement by Consignee in Support of Special Comprehensive License, and other forms related to applying for an SCL are included in supplements to part 752. The servicing provision in Sec. 752.4(b) has been revised to conform with the standard used throughout the EAR. This provision prohibits you from servicing, under the SCL, any item when you know that the item is owned or controlled by, or under the lease or charter of, entities in countries not eligible for the SCL, or any nationals of such countries. Finally, the recordkeeping provisions of Sec. 752.12 have been clarified by providing the appropriate cross-references to part 762, which applies to all transactions subject to the EAR. Part 754--Short Supply This part implements section 7 of the EAA and similar provisions in other laws that authorize or require restrictions on exports for reasons dealing with adequacy of supply of commodities in the United States, as opposed to reasons based on foreign policy, national security, or nonproliferation considerations. Specifically, this part implements controls on exports of crude oil restricted under the EAA and a number of other laws; on exports of petroleum products produced or derived from the Naval Petroleum Reserves; on exports of western red cedar as required by provisions in the EAA; and on exports of horses by sea for the purpose of slaughter. It also provides information relating to two provisions contained in EAA section 7: The registration of agricultural commodities for exemption from short supply controls, and the filing of petitions for the imposition of controls on recyclable metallic materials. Consistent with the revised structure of the proposed and interim rules, this part contains all of the requirements that apply uniquely to commodities controlled for short supply reasons. It sets forth all of the licensing requirements, licensing policy, License Exceptions, and other unique requirements that apply to commodities controlled for short supply reasons on the CCL. Short supply controlled commodities are identified with ``SS'' under ``Reason for Control'' in each relevant ECCN on the CCL. Other requirements of the EAR that are not unique to short supply controls, such as recordkeeping in part 762, also apply to items covered by this part. Six commenters provided comments on this part. A number of revisions have been made to implement the recommendations contained in the comments. Additional revisions were made to incorporate the heavy California crude oil rule published in the Federal Register but not included in the proposed rule. Commenters recommended that the definition of ``crude oil'' in Sec. 754.2 be moved to the front of this section from paragraph (g). The definition of ``crude oil'' is now included in paragraph (a). Section 754.2(b) deals with licensing policy for crude oil. It has been revised significantly to distinguish BXA's licensing policy for shipments of crude oil which have already been found to be in the national interest, by Presidential decision or otherwise, e.g., crude oil from Cook Inlet or California heavy crude, and those which will be approved if BXA makes the necessary findings on a case-by-case review of applications. In the proposed rule all crude oil applications would be reviewed by BXA and approved if the crude oil was not subject to certain statutory restrictions and BXA made a finding that the export was in the national interest and consistent with the purposes of the Energy Policy and Conservation Act. In this interim rule, paragraph (b)(1) of Sec. 754.2 lists the exports that have already been found to be in the national interest and paragraph (b)(2) lists the exports for which BXA must make the necessary findings. Section 754.2(b)(2) also reflects a revision relating to the kinds of transactions that BXA will find to be in the national interest. The proposed rule had cited examples of crude-for-crude and crude-for- product exchanges that would be found to be in the national interest. The language of the proposed rule, however, could have been interpreted as limiting the national interest to these examples. The interim rule makes clear that the cited exchanges are only examples. This interim rule also adds a new paragraph (g) to Sec. 754.2, reflecting regulations that were published in the Federal Register (60 FR 15669, March 27, 1995). Finally, this interim rule creates two new License Exceptions which apply to the exports of crude oil. Section 754.2(h) implements a new License Exception SS-SPR, intended to permit the export of foreign origin oil stored for emergency use by a foreign government in the Strategic Petroleum Reserves (SPR). License Exception SS-SPR permits the export even if the foreign origin oil is commingled with other SPR oil, provided that the Department of Energy certifies that the crude oil being exported is of the same quantity and of comparable quality as the foreign origin oil imported by the foreign government for storage in the SPR. Section 754.2(i) of this interim rule creates a new License Exception, SS-SAMPLE, to permit limited quantities of crude oil for analytical or testing purposes. This revision implements recommendations included in the public comments. Under this License Exception you may ship up to ten barrels of crude oil to any one end- user annually, up to a cumulative limit of 100 barrels per exporter annually. This License Exception codifies a BXA licensing policy for sample shipments that has been in effect for several years. This licensing policy has been included in BXA's annual report to the Congress, but has not been reflected in the EAR. Such de minimis sample shipments have no measurable effect on U.S. oil supplies. Section 754.3 of this interim rule reflects a significant change in the way that the Naval Petroleum Reserves Production Act (NPRPA) restriction on non-crude oil products are implemented. The NPRPA prohibits the export of petroleum origination or derived from the Naval Petroleum Reserve (NPR), unless the President approves the export. Under existing EAR, licenses are required for all petroleum products, and General License G-NNR authorizes shipments of all such product of non-NPR origin or derivation. The proposed rule continued this approach and provided License Exception SS-NPR. Commenters noted that if all NPR crude oil produced in fiscal year 1994 were refined, it would amount to less than one percent of all the crude oil refined in the United States. The commenters recommended that the existing approach be changed to require a license only for petroleum products which were NPR produced or derived. BXA adopted this recommendation and this provision reflects the change. The relevant ECCNs on the CCL have been revised to apply only to petroleum products that were produced or derived from the NPR or became available for export as a result of an exchange of any NPR produced or derived commodities. With this change, General License SS-NNR is no longer necessary and is removed. [[Page 12727]] Section 754.4, unprocessed western red cedar, has been reorganized consistent with a recommendation included in the comments. In the proposed rule, Sec. 754.4(a)(2) contained instructions for filing a license application, and preceded provisions on license policy and exceptions. A commenter noted that an exporter will first look for licensing policy and license exceptions before looking for information on how to fill out a license application. The commenter observed that there is no point in instructing the exporter how to complete a license application if subsequent text informs the exporter either that a license will not be approved or is not necessary. This interim rule adopts this comment and has restructured Sec. 754.4 accordingly. Part 756--Appeals This part describes the procedures applicable to appeals from administrative actions taken by BXA. An administrative action is any action (not including an administrative enforcement proceeding) taken under the EAA or EAR with respect to a particular person, including denial of a license application, return of a license application for other than procedural deficiencies or additional information, or classification of an appellant's item. Essentially, any person directly and adversely affected by an administrative action would be allowed to appeal to the Under Secretary for Export Administration for reconsideration of that administrative action. No substantial comments were received on this part 756. One commenter suggested the possibility of combining this part with part 748, Applications. This interim rule does not adopt the suggestion. With the exception of minor editorial revisions and clarifications, the provisions of part 756 remain unchanged from the proposed rule. Part 758--General Export Clearance Requirements This part deals with requirements imposed on exporters and others regarding the movement of items subject of the Export Administration Regulations (EAR) out of the United States. The purpose of this part is to assure that the movement of items subject to these EAR conforms to the requirements of the export license or other authorization for their export. This part imposes specific responsibilities on the different persons involved in export transactions to ensure compliance with other provisions of the EAR and of the Foreign Trade Statistics Regulations (FTSR) (15 CFR Part 30), including exporters, freight forwarders, exporters' agents, carriers and all other persons. It prohibits any person from engaging in certain proscribed conduct. This part governs some of the same conduct that is governed by the FTSR. This part imposes specific responsibilities for assuring that Shipper's Export Declarations (SEDs), bills of lading and air waybills are accurately filled out and are consistent with the export license or other authorization for the export to which they correspond. It restricts the conduct of exporters, forwarders, carriers and others to assure that the delivery abroad of items subject to the EAR is in accordance with the terms of the export license, exception to the licensing requirement or other authorization. In some cases, it imposes duties on parties to the transaction to return the items to the United States or take steps to prevent them from entering the commerce of a foreign country. The proposed rule made several changes to this part. Approximately 25 commenters made comments on the proposed part 758. A majority of those who commented on part 758 recommended that we eliminate the requirement to place the symbol ``NOL'' on Shippers Export Declarations (SEDs) for transactions involving items not on the CCL. Most of those commenters suggested that we adopt a single symbol ``NLR'' for all transactions where the export does not require a license either because it is on the CCL but does not require a license to the destination in question or because it is not on the CCL. Several commenters went further and recommended that we authorize the use of the symbol ``NLR'' for transactions that are authorized by a License Exception instead of requiring that the License Exception symbol be listed on the SED. We adopted the suggestion to eliminate the symbol ``NOL''. However, this interim rule includes a designator (EAR99) for items that in the proposed rule were subject to the EAR but not on the CCL, that will be used by BXA in responding to classification requests and by exporters for their management systems. The designator will not be used on SEDs. We have also reduced the number of License Exception symbols from which parties filling out SEDs must choose. As noted above in the discussion of License Exceptions, we have created a small number of symbols for various groups of License Exceptions, and it is these symbols for groups of License Exceptions that must appear on the SED. Several commenters suggested that the choice of Destination Control Statements (DCSs) in the proposed rule was unduly complex. In addition, some commenters suggested that the proposed rule on DCSs did not make it clear that the most restrictive DCS could be used for any transaction. This interim rule adopts a single simplified DCS. A number of commenters raised the issue of what information should be shown on SEDs for items which in the proposed rule were not subject to the EAR, but which in the existing EAR are eligible for general license GTDA. In response to these comments this interim rule creates an optional designator TSPA which exporters may use on SEDs for software or technology that the proposed rule and this interim rule define as outside the scope of the EAR. The proposed rule eliminated some information about authority and status of forwarding agents and procedures for correcting SEDs on the grounds that those points are covered in the FTSR (15 CFR part 30) and including them in the EAR was redundant of the FTSR. Some trade associations recommended that we retain these procedures. We did not adopt this suggestion because the FTSR applies to all exports from the United States including those subject to the EAR and those that are not. These procedures need to be in the FTSR because exporters who have no transactions subject to the EAR must follow them. Retaining duplicate language in a regulation that applies to only a portion of the exports from the United States would be redundant and creates the burden of keeping two different sets of regulations identical whenever amendments are adopted. Two commenters suggested that proposed Sec. 758.1 was too long and portions were redundant. They suggested breaking it up into several sections. We did not adopt this suggestion in this interim rule. The section has been shortened because of the elimination of the NOL provisions. Several commenters suggested that the use of the word ``you'' in the proposed rule under Sec. 758.1(a)(1) shifted responsibility from exporters to forwarders. This interim rule does not change that language. The proposed rule, by its terms makes those who obtain licenses from BXA or rely on License Exceptions in their export transactions responsible for the proper use of that license or License Exception. This is a reasonable policy and is retained in this interim rule. Two commenters proposed that forwarding agents not be required to keep a record of the delegation of authority to them unless the [[Page 12728]] responsibility to do so was delegated by the exporter. This interim rule does not adopt this suggestion. The proposed rule and this interim rule conform with the existing EAR and with the FTSR on this issue. Two commenters stated that the use of the phrase ``exporter and the person submitting the document'' in the proposed Secs. 758.3(e) and 758.3(l)(1) expands the scope of the persons making representations to the U.S. Government to include forwarders in instances where the existing EAR does not impose responsibility on forwarders. We accepted this recommendation. This interim rule adopts language from the existing EAR. However, other sections of this interim rule, like the existing EAR, impose liability on forwarders who make misrepresentations to the government. Two commenters recommended that the HTSUS numbers be permitted on SEDs in lieu of Schedule B numbers. We did not adopt this recommendation in this interim rule. The FTSR (15 CFR part 30) which govern all exports from the United States require Schedule B numbers. To the extent that there are differences between the HTSUS and the Schedule B numbers, errors in compiling foreign trade statistics would occur if either classification numbering system were permitted for exports subject to the EAR. One commenter recommended that this rule eliminate the responsibility of exporters and forwarders who file summary monthly reports in lieu of SEDs to ensure that carriers place the destination control statement on bills of lading and air waybills. We did not adopt this suggestion. The proposed rule and this interim rule follow the existing EAR which was designed to assure that exports made under the privileged monthly procedure were totally in compliance with the EAR. Two commenters recommended that the regulations impose a limit on the time that the Government may hold up export shipments for inspection. We did not adopt that suggestion because it was beyond the scope of the regulations reform exercise. Input from a number of other government agencies would be necessary to develop a rational time limit. One commenter recommended that when the government orders a carrier to return or unload a shipment that the government be required to notify the exporter. We did not adopt this suggestion. In some cases the exporter may be the target of an investigation and a notification requirement could jeopardize legitimate law enforcement activities. More than one agency has authority to order return or unloading and developing a rule would require the coordinated input of several agencies. That coordination would be beyond the scope of the regulations reform exercise. One commenter recommended that we require that exporters show the Export Control Classification Number (ECCN) on the SED for all exports. We did not adopt this suggestion. Although exporters need to determine the proper ECCN in order to determine whether they need an export license, requiring them to show that number on SED's for all exports would unduly increase the paperwork burden. To assist in defining parties to an export transaction, one association recommended we adopt as a guide a Power of Attorney utilized by Customs. We did not adopt this recommendation. The EAR defines parties to a transaction in an adequate manner. Parties to transactions additionally are free to adopt any Power of Attorney arrangement that addresses pertinent roles and is not inconsistent with the EAR or other applicable regulations. One commenter questioned the proposed requirement to place the various EAR authorizations for each item being exported under its corresponding line item description. This commenter pointed out that the FTSR requires that same information to be placed in blocks 21 and 22 on the SED form or continuation sheet. This interim rule adopts the FTSR procedure and eliminates the requirement to repeat the authorization under the line item description. This same commenter also recommended that the ``Conformity'' provisions in Sec. 758.4(c)(2)(iii) be changed to allow a name of a party other that the licensee/shipper on the SED to be shown on the bill of lading as shipper. We did not adopt this recommendation. These provisions are designed to assure that new parties are not introduced in transactions contrary to the EAR and that exports are completed in an orderly and legal manner. Additionally, the situation described may be appropriately addressed in the application for license process, by showing the foreign subsidiary as exporter/licensee and the United States affiliated/related company as agent for the exporter. Two commenters recommended eliminating the proposed rule requirements concerning commodity descriptions on the SED (Sec. 758.3(g)(2)(ii)) and the requirement that a copy of the commercial invoice with a DCS be sent to the ultimate consignee (Sec. 758.6(c)(4)). They claimed that these were new requirements. We did not adopt the recommendations in this interim rule because the proposed rule merely retained the requirements of the existing EAR. Part 760--Restrictive Trade Practices or Boycotts This part revises the existing part 769. The recordkeeping requirement found in Sec. 760.5(b)(8) of this interim rule requires the recipient of records relating to a reportable boycott request to keep those records for five years after receipt of the request. The existing EAR Sec. 769.6(b)(8) requires the recipient of records relating to a reportable boycott request to keep those records for three years after receipt of the request. Two sections that were reserved in the existing EAR (769.5 and 769.7) have been removed. As a result of this change, Sec. 769.6 in the existing EAR has been renumbered as Sec. 760.5 in this interim rule. In addition two grace period provisions in the existing EAR have been removed. They are; Sec. 760.2(f)(11) (along with its accompanying example xi) in which certain actions to implement letters of credit prior to the expirations of grace periods and Sec. 769.8 which established a grace period for agreements entered into on or before May 16, 1977 could be complied with. The last such grace period expired on December 31, 1978. Supplement No. 14 which relates to U.S. sanctions against South Africa that have been repealed has also been removed and subsequent supplements renumbered. A new Supplement No. 16 interpreting antiboycott policy in light of recent developments in Jordan has been added by this interim rule. None of the changes made to this part by this interim rule were published in the proposed rule. Part 762--Recordkeeping In this interim rule, this part has been reorganized and revised to eliminate the requirement that regulated persons obtain BXA approval prior to destroying original documents and replacing them with electronic, magnetic, photographic or other images. This interim rule also makes it clear that persons required to keep records may always keep the records in the form in which that person receives or creates it. It extends the recordkeeping period to five years to coincide with the applicable statute of limitations and sets standards of legibility and retrievability for reproductions that are kept in lieu of originals. Several commenters objected to the extension of the recordkeeping requirement to five years in the [[Page 12729]] proposed rule. This interim rule adopts the five year record retention period. A record retention period that coincides with the applicable statute of limitations is needed to promote effective enforcement. In addition, such a retention period benefits firms that comply with the regulations because the EAR require that those who export under a License Exception justify the use of that exception. Such persons will need the records of the transaction to do so. Three commenters suggested that recordkeeping requirements be eliminated for certain categories of exports that do not require a license from BXA. We did not adopt this suggestion. Many transactions that are subject to the EAR do not require a license from BXA. Comprehensive records are necessary for effective enforcement and administration of the EAA and EAR. One commenter objected to a requirement in the proposed rule that records which are the subject of a request for production of records by the government may not be destroyed even if the record retention period has otherwise expired. This provision is a requirement under the existing EAR and is retained in this interim rule. Enforcement and compliance efforts would be undermined if parties were allowed to destroy records after they have been notified that those records are wanted in connection with an audit or investigation. Several commenters recommended that we eliminate the specific requirements for legibility and retrievability of reproduced records that are kept in lieu of originals that appeared in the proposed rule. We did not adopt this suggestion. This interim rule does not impose any requirements of legibility on original records. However, standards of legibility and retrievability are necessary when the originals are destroyed and copies are retained in lieu thereof. BXA will continue to review this issue to ascertain if the standards might be simplified without compromising record integrity. Two commenters recommended that the EAR specifically state that records of certain activities of U.S. persons in connection with the proliferation controls described in Secs. 734.2(b)(7) and 744.6 are subject to the recordkeeping requirement. Although the proposed rule stated that all transactions that are subject to the EAR are subject to these recordkeeping requirements, we adopted this suggestion to make more explicit the fact that activities subject to the proliferation controls are covered. Part 764--Enforcement Eleven of the commenters dealt with part 764. This interim rule makes numerous changes to the proposed rule based upon these comments. This interim rule accepts the suggestion of one commenter and revises Sec. 764.2(e) expressly to limit the offense of acting with knowledge of a violation to actions that are connected with an item that is the object of the violation of the EAA or EAR. Section 764.2(j) is revised to remove from the list of violations a number of actions characterized as ``trafficking and advertising export control documents''. BXA accepted the suggestion that some of the restrictions on the creation of an interest in a licensed transaction are inconsistent with normal trade practice in financing and insuring exports. BXA is eliminating other parts of this section as unnecessary because limitations on license transfer and use are effectively covered by other EAR provisions, such as Sec. 750.10, and concerns regarding disclosure of a person's relationship to a transaction are covered by provisions such as Sec. 764.2(g). This interim rule limits Sec. 764.2(j) to the offense of license, other export control documents or other alteration. Some commenters called for distinguishing between ``substantive'' and ``minor'' violations. BXA did not adopt this suggestion. BXA concludes that such distinctions are not feasible or appropriate with respect to the type of activity covered by the EAR. Some commenters urged BXA to list factors that would mitigate sanctions for violations. BXA did not adopt this suggestion. BXA notes that its practice shows that it is open to the consideration of a wide range of mitigating factors, and it does not believe that a listing of such factors is needed to enhance compliance or to ensure that sanctions will be appropriate. Some commenters called for BXA to include in the EAR a comprehensive denial list that would include the names not only of persons denied export privileges by BXA, but of persons covered by denial orders or designations by other agencies. This interim rule does not contain such a list. BXA cannot make its regulations an official repository of legal action by other agencies. BXA will work with other agencies to try to improve coordination of and access to the lists. This interim rule describes certain measures such as license suspensions and temporary denial orders and places them in a new Sec. 764.6, entitled ``protective administrative measures''. These measures are not punitive, but are intended to protect against activity contrary to the purposes of the EAR. Although these measures were included in the existing EAR and in the proposed rule, they were not all in a single section. Placing these measures in a single section distinguishes them from the sanctions which are covered elsewhere in part 764. Part 766--Administration Enforcement Proceedings Five commenters specifically addressed part 766. Three of these commenters addressed substantially the same points. Three commenters called for changes to protect the interests of persons BXA seeks to add to a denial order on the basis of relationship to the respondent. This interim rule makes three such changes. It revises Sec. 766.23 to clarify that prevention of evasion is the basis for making an order applicable to a related person, to provide more specifically and uniformly for notice to persons that BXA seeks to have named as related, and provides that such persons may oppose or appeal not only the issue of relationship, but also whether the order is justified to prevent evasion. These commenters suggested, further, that related persons be allowed to challenge the order on the merits, that is, as to whether or not there has been a violation or a temporary denial order is necessary in the public interest in order to prevent an imminent violation. BXA did not adopt this suggestion. BXA believes that it is proper to limit contests on the merits to respondents, as it is the alleged conduct of respondents that is the basis for the order. One commenter expressed concern that having the Under Secretary decide appeals from Administrative Law Judge (ALJ) decisions in enforcement proceedings raises doubts about impartiality, due process and fairness. This commenter called for direct appeal from the ALJ to the U.S. Court of Appeals. No such change has been made, as it would be contrary to specific EAA provisions and to general administrative law practice that makes final agency action subject to judicial review. An ALJ decision cannot be final agency action under 50 U.S.C. app. 2412(c) or (d). Moreover, BXA believes that its conduct of administrative proceedings has been marked by fairness and the careful observance of due process. Three commenters called for stating that ``clear and convincing evidence'' is required to sustain an administrative enforcement case. BXA did not adopt this suggestion. The EAA (50 U.S.C. [[Page 12730]] app. 2412(c)) makes the Administrative Procedure Act (5 U.S.C. 556) evidence standard (``reliable, probative, and substantial'') applicable. BXA does not believe that any different EAR standard is needed. Three commenters called for detailed provisions on how much evidence is needed to support a summary decision under Sec. 766.8. BXA did not adopt this suggestion. BXA concludes that the use of the standard ``there is no genuine issue as to any material fact'' is proper and sufficient. Another commenter stated that Sec. 766.24(b) should be revised to define the ``imminent violation'' criterion for issuance of a temporary denial order as requiring a showing of imminence both in nearness of time and in likelihood of occurrence. BXA did not adopt this suggestion. BXA retains its longstanding definition from the existing EAR, consistent with the legislative history of the 1985 amendments to the EAA, that either time or probability imminence will support the issuance or renewal of a temporary denial order. This interim rule adopts many improvements in drafting clarity and precision that were suggested in the comments, along with numerous others that BXA developed. This interim rule revises Sec. 766.7 to make default procedures available in antiboycott proceedings. There were no public comments suggesting this change, but it makes the procedures for imposing administrative sanctions and other measures in antiboycott cases more consistent with other proceedings under the EAR. Finally, BXA decided to remove from this interim rule one provision that appeared in the proposed rule even though no comments on it were received. This interim rule eliminates a provision from Sec. 766.18 of the proposed rule that would have barred reference in a settlement order to a finding of a violation, as the content of such an order is consensual. This deletion makes this interim rule consistent with the existing EAR. Part 768--Foreign Availability Part 768 reflects the provisions described in part 791A of the existing EAR. It implements section 5(h) of the Export Administration Act (EAA) and contains procedures and criteria relating to determinations of foreign availability for national security controlled items. It is substantively unchanged from the existing part 791A. This revised version contains several technical changes, such as use of the term ``claimant'' instead of ``applicant,'' intended to make part 768 easier to read and understand. Only three commenters mentioned this part in their submissions, possibly because the Federal Register notice soliciting comments had stated that BXA did not intend to make any significant changes in this part. One commenter questioned why Cuba is included in the definition of ``controlled countries'' for foreign availability purposes under Sec. 768.1(d) and not for general purposes by inclusion in Country Group D:1, as described in Supplement No. 1 to part 740. Cuba is a ``controlled country'' pursuant to determination made by BXA under section 5(b) of the EAA. (See Export Administration Annual Report 1994, at II-8.) Country Group D:1 does not include countries subject to broad based embargoes, such as Cuba and North Korea, even though they are controlled countries. This interim rule adds a clarifying notation stating that since virtually all exports to Cuba and North Korea currently are subject to an embargo, the foreign availability procedures do not apply to these two controlled countries. A similar notation is included in Supplement No. 1 to part 740. Another commenter suggested that Sec. 768.7(d) be revised to clearly reflect the provision of section 5(f)(3) of the EAA that ``the Secretary shall accept the representations of applicants * * * supported by reasonable evidence, unless contradicted by reliable evidence * * *''. BXA did not make any revisions because Sec. 768.7 paragraphs (c), (d)(1), (d)(2), and (d)(3) of this interim Rule already implement this provision. One comment suggested that the provision in Sec. 768.7(f)((1)(i)(C) for submitting foreign availability determinations to COCOM or a successor regime was unnecessary and should be deleted. When COCOM ceased functioning on March 31, 1994, the United States and other member countries agreed to maintain the control lists that were in place at that time until a successor regime was in place. A change has been made in this interim rule to reflect BXA's intention to conduct any necessary consultations with former member countries. Another commenter questioned why foreign availability procedures do not apply to foreign policy controlled items. Foreign availability is always taken into account whenever foreign policy controls are imposed, expanded, or extended. Because the purposes of foreign policy controls vary, strict procedures for conducting assessments have not been deemed to be warranted. Finally, one commenter suggested that part 768 be revised to reflect the expanded role of the Strategic Industries and Economic Security Office's Economic Analysis Division in considering unfair impact, effectiveness of controls, and foreign availability, and to discuss how exporters may contribute to this work and analysis. BXA will consider such an addition to the EAR in future revisions. Part 770--Interpretations Part 770 contains certain interpretations concerning commodities, software, technology, and de minimis exceptions for chemical mixtures. These are designed to clarify the scope of the controls. BXA intends to add interpretations to this part over time to aid you in interpreting the EAR. Since the publication of the proposed rule, BXA has issued certain interpretations on the application of the de minimis exclusion for certain mixtures of chemicals. Those interpretations are added to part 770 in this interim rule. Some commenters suggested that the part numbers of this chapter and others will overlap with the part numbers of different chapters in earlier versions of the EAR and therefore BXA should use both odd and even numbers for the parts of this interim rule. BXA does not believe that using only even numbers for the parts of this interim rule will cause confusion. BXA further believes that is it useful to retain only even numbers in this interim rule so as to leave room for future parts that cannot now be anticipated. Certain commenters urged BXA to add interpretations of certain issues; and BXA will review those recommendations for inclusion in the future. Commenters also asked BXA to include an interpretation of the phrase ``specially designed.'' BXA is not responding to this recommendation due to pending criminal enforcement action and for other reasons. This part contains certain interpretations regarding the de minimis content of certain chemical mixtures. These reflect amendments to the EAR adopted after the publication of the proposed rule. Part 772--Definitions This part defines terms as used in the EAR. In response to comments, this interim rule combines the definitions part from the proposed rule with the multilaterally-agreed definitions found on the Commerce Control List that are found in Supplement No. 3 to Sec. 799A.1 of the existing EAR. These definitions may be distinguished from other definitions by the fact that they appear in quotation marks. [[Page 12731]] Part 774--The Commerce Control List On May 11, 1995, BXA published an advance notice of public rulemaking in the Federal Register, (60 FR 25480), soliciting comments from industry and interested public on whether and how to conform the numbering system used to identify items controlled by the Export Administration Regulations, or Export Control Classification Numbers (ECCNs), with the numbering system used by the European Union (EU) to identify such items. BXA received a total of eighteen responses to the May 11 notice. Ten commenters responded directly to this notice, while the remaining commenters included comments on the May 11 notice with their comments on the proposed rule. Additional verbal comments were also provided at the town-hall fora conducted throughout the United States by BXA. Overall, industry supports harmonizing the U.S. ECCN system with the EU numbering system. The following is an analysis of the responses to the five questions posed by BXA in the Federal Register notice, followed by other general comments. 1. Should the U.S. Harmonize the ECCNs With the EC Numbers and Encourage Other Countries To Adopt a Uniform Numbering System? Most commenters stated that they were very supportive of adopting the EU numbering system. Four stated that if such a change were to be made, there should be a grace period during which either the ECCN or EU number could be used. One of these commenters stated that the grace period should be six months, and another stated that a minimum of nine months should be allowed for a smooth transition to the new system. One company stated that it would be less costly to plan for such a change now rather than sometime in the ``years ahead''. Another commenter stated that although the initial computerization of the new numbers could be costly, they will be able to use the information to process export declarations electronically, which will make processing the information much more timely. One foreign-based company stated that they do not support converting the ECCNs to the EU numbering system because the U.S.-based ECCN automatically shows that the item is U.S.-origin, and that there are just too many discrepancies between the items controlled by ECCNs and the corresponding EU numbers. Another commenter who does not support conversion to the EU numbering system stated that the use of a common ECCN has little benefit in the export documentation and should not be considered an advantage to exporters. This commenter further stated that it was only recently that they incurred costs of administering the changes BXA made to the ECCNs to implement the Coordinating Committee on Multilateral Export Control's (COCOM) ``Core List'' in 1991 (56 FR 42824, August 29, 1991), and would not want to do it again. Another commenter stated that the ECCN system is a good system that works and that they see no advantage of a world-wide system in this area. One commenter, that supported the conversion of ECCNs to the EU system, stated that BXA should not require conversion to the EU system until the differences between the existing ECCNs and the numbering system used by the EU are resolved, and also until the COCOM successor regime and control lists are finalized and all export destinations agree to adopt the system. Another commenter echoed this opinion, and added that the new U.S. ECCNs should only be developed for U.S.- controlled items now controlled by the EU. One commenter stated that unless the U.S. and EU numbers are identical, there will still be a need for exporters to classify U.S. and EU separately. BXA agrees that complete harmonization between the new ECCN system and the EU system is desirable. Without such harmonization, any resulting list may be confusing for industry and difficult to implement. For multilaterally controlled items, the new ECCNs described in this interim rule are renumbered according to the comparable entry on the EU list. The scope of such controls are generally the same on both lists, however the style of the text may be different. It is important to note that the EU list provides guidance to member states on the control parameters for items controlled by on the Industrial List, the International Atomic Energy List, Missile Technology Control Regime Annex, the Nuclear Supplier's Group, and the list of items controlled by the Australia Group. Each EU member publishes its own national list to implement such controls and any other unilateral controls. Many national lists are therefore different from the EU list, except for the scope of multilateral controls. The U.S. also uses discretion in developing its national list, the CCL, for dual-use items. Certain entries on the CCL have been created for those items that are not controlled multilaterally on the EU list. Such items are identified an unilateral controls. In those few instances where the multilateral entries differ, the U.S. will ask its trading partners to adopt the CCL. 2. What are the Specific Implications If We Change the ECCNs To Conform With the EC Numbering System? For Example, if You Currently Have Computer Programs That Aid in Facilitating Exports and Reexports, What Will be the Programming Implications for Your Firm if We Make This Change? Most of the commenters stated that the reprogramming of computer systems would be a significant undertaking to convert to a EU numbering system. One commenter stated that they estimate it would take approximately 2 person years of effort and $300,000 to change the data base and ancillary associated systems worldwide. The time for performing this effort would be approximately three to four months. Two commenters stated that consideration would need to be given to the diversion of human resources from current tasks to the review of entire product lines against the proposed new classification numbers. This would involve the review of several thousand product part numbers and the time required to enter each new EU-based number into the computer system. Three commenters remarked on the export control personnel retraining requirements requisite to use of the new numbering system. Another commenter stated that changes to their current system would be minimal, but they are now in the process of upgrading relevant programs and processes, and would like to see a change in numbering system now. One commenter stated that they currently give dual classifications (ECCN and EU number) to items on their product matrices, and that the matrices are computerized. Changes to the matrices will be required for the implementation of the EAR simplification project, so it would be beneficial if the ECCN harmonization could be carried out at the same time. BXA is sympathetic to the time and cost involved in implementing a new numbering system. However, as many companies have stated, the benefits of a global numbering system far outweigh the costs of implementing such a system. The new ECCNs identified in this interim rule implement the first steps toward a global control list. [[Page 12732]] 3. What Problems Have You Had in the Past in Tracking Two or More Numbering Systems for Identical Items Controlled by Two or More Countries? One commenter stated that a uniform numbering system would eliminate a potential area for misunderstanding or confusion in references to a specific item while another stated that the current need to track multiple numbering systems adds cost and unnecessary complexity to their compliance programs. This latter commenter also stated that there is added confusion caused by changes on different dates by different countries to the various lists. Another commenter stated that the lack of correlation between the various lists has made it all but impossible to develop a computerized correlation between the various numbers that may apply to one unique product. This commenter also stated there is no correlation in the EU numbering system for ECCNs designated for unilateral controls. 4. What Are the Specific Ways in Which a Uniform Numbering System Would Help Your Company? Five commenters responded to this question. One commenter stated that it would simplify their product matrices, while another two stated that it would streamline their training procedures. One of these commenters also stated that it would also increase their ability to maintain high levels of export control compliance. Another commenter agreed that standardization would allow the company to avoid building and maintaining cross-reference tables as they communicate order requirements and status on U.S. export orders with importing foreign entities. Another commenter also cited simplification as the major benefit of a uniform system, and highlighted the specific benefit of consistency in classification of items. Only one commenter stated that a uniform numbering system would not benefit their company, but provided no further explanation as to why it would not be beneficial. 5. Are There Numbering Systems of Other Countries That You Prefer to the EC System? If So, State Which Ones and Exactly How You Would Reconcile Any Differences in Scope? Two of the ten commenters supported maintaining the current ECCN system. Of the seven commenters that specifically supported a unified numbering system, none identified a system other than the EU as preferable. Four commenters provided additional comments other than those supporting the four specific questions posed in the May 11 Federal Register notice. One commenter, who did not support a conversion to the EU numbering system, stated that the fourth and fifth digits of the EU number do not provide any real benefit or added clarity. This commenter further stated that the alpha-character used at the end of the current ECCNs has been useful in internal control procedures. For example, an ``A'' at the end of a ECCN easily indicates a highly sensitive item, while a ``G'' indicates greater range of exportability. Two commenters, who were supportive of the EU numbering system, also supported the elimination of basket categories. One of these commenters stated that the continued use of such categories would conflict with the objective of harmonizing the ECCNs with the EU list. Another commenter stated that elimination of the ``G'' level basket categories was not favorable. One commenter also stated that there should be no interim or intermediate changes to the ECCN numbering system, and future changes to the control list should be effective on the same date in all countries that are a party to the control regimes using the list. The EU provides guidance to member states for drafting national control lists. Each state is responsible for implementing changes to multilateral control lists based upon agreements reached by the Wassenaar Arrangement, the Missile Technology Control Regime, the Nuclear Suppliers Group, and the Australia Group. BXA will continue to implement agreements reached by each of the regimes through prompt publication in the Federal Register. Another commenter suggested that if the United States were to adopt the EU numbering system, BXA should clarify whether new control numbers (not included on the EU control list) represent new controls, and if so, what items are being suggested for control and the policy basis for such controls. A comprehensive cross-reference will be included in Supplement No. 3 to this part. The Supplement will provide cross- references for both new format to old format and old to new, so that readers will be able to locate new numbers based on their current ECCNs. In this manner, readers will be able to determine the origin of all numbers that do not currently appear on the EU list. Further, the revised CCL implements recent multilateral agreements that have not yet been incorporated in the EU list, such as the NSG revisions published February 1, 1996 (61 FR 3555). Under the new numbering system adopted by this interim rule, it will be easy to identify whether an item is controlled multilaterally (e.g., for national security, missile technology, nuclear nonproliferation, or chemical and biological reasons) or unilaterally, based upon the third digit of the number. ECCNs having a ``9'' as their third digit (i.e., 5A980, surreptitious listening devices) are controls unique to the United States, just as other countries may have their own unique controls. Further, Category 10 has been renumbered, and will appear as Category 0 in conformance with the EU list. Titles of the various categories have also been revised in conformance with the EU. This interim rule retains one ``basket'' entry (EAR99), referenced at the end of each category in the Commerce Control List, which contains all the items that used to be classified under those ECCNs ending with ``96G'' and were thus eligible for General License G-DEST to most destinations. Items classified as EAR99 are those items not specified on the CCL, but still subject to the EAR. Therefore, exporters first must determine that their items are not, in fact, on the CCL; only then may they classify their items as EAR99. As in the existing EAR, terms enclosed in quotation marks (i.e., ``aircraft'' or ``production'') are those with multilaterally agreed definitions that appear throughout the CCL. These definitions, found in Supplement No. 3 to part 799A of the existing EAR, are in this interim rule integrated into part 772 (Definitions). By contrast, definitions or parameters not enclosed in quotation marks and identified by the Related Definitions header in individual ECCNs are unique to particular entries, and therefore appear only in those entries. Administrative Exception Notes, denoting ``favorable consideration'' of licenses for certain items to certain destinations in the existing Supplement No. 1 to part 799A, became meaningless when COCOM disbanded, and they have been removed from the CCL in this interim rule. With the harmonization of the CCL and the EU list, most items will need to be reclassified. Exporter and reexporters may submit requests for reclassification beginning on the effective date of this interim rule. BXA will publish a list of those ECCNs where reclassification is not necessary prior to November 1, 1996. Forms Supplement The new Multipurpose Application Form, BXA-748P, will replace the Application for Export License (BXA-622P) and the Request for Reexport Authorization (BXA-699P). It will also [[Page 12733]] serve as an application for the Special Comprehensive License. Additionally, the BXA-748P will accommodate Commerce Classification Requests, thus allowing item classifications to be handled electronically. The BXA-711P replaces BXA-629P, Statement by Ultimate Consignee and Purchaser. A letter from the ultimate consignee or purchaser may now be substituted for this form, provided the letter contains the same information. The BXA-752P will be required as support documentation for the Special Comprehensive License, replacing the Statement by Foreign Consignee in Support of Special License Application (BXA-6052P). The International Import Certificate (BXA-645P/ATF-4522/DSP-53), the Delivery Verification Certificate (BXA-647P), and the Notification of Delivery Verification Requirement (BXA-648P) remain unchanged. Applicants will now submit replacement licenses rather than amendment requests when their situations change; therefore, the Request for Amendment Action (BXA-685P) will be discontinued. Exporters and reexporters may find instructions for completing forms in part 748, while applicants for the Special Comprehensive License may find instructions in part 752. Applicants must begin using the new forms as of June 15, 1996. Due to the requirements of electronic submission and processing systems, there will be no transition period during which either version of each form may be used. Old forms received after the changeover date will be returned without action to the applicant. Forms may be obtained from U.S. Department of Commerce District Offices or from: Exporter Counselling Division, Bureau of Export Administration, Room 1099, U.S. Department of Commerce, 14th Street and Pennsylvania Avenue, NW., Washington, DC 20230. Telephone (202) 482-4811. Rulemaking Requirements 1. For purposes of Executive Order 12866, this interim rule has been determined to be significant. 2. Notwithstanding any other provision of law, no person is required to respond to nor shall a person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act unless that collection of information displays a currently valid OMB Control Number. This interim rule contains five new collections of information subject to the requirements of the Paperwork Reduction Act, 44 U.S.C. ch. 35, which were cleared by the Office of Management and Budget. The new ``Multipurpose Application'' is cleared under OMB Control Number 0694- 0088, the ``Special Comprehensive License'' is cleared under OMB Control Number 0694-0089, five year record retention is cleared under OMB Control Number 0694-0096, the one-time report on calculations under the de minimis rule for software and technology is cleared under OMB Control Number 0694-0101, requests for appointment of a Technical Advisory Committee is cleared under OMB Control Number 0694-0100, miscellaneous activities are cleared under OMB Control Number and 0694- 0102. All other collections of information contained in the rulemaking have been previously approved by OMB. Supplement No. 2 to part 730 of the EAR contains a table of the current OMB Control Numbers. The public reporting burdens for the new collections of information are estimated to average 45 minutes for the Multipurpose Application, between 20 and 40 hours for the Special Comprehensive License, 10 seconds for recordkeeping, 25 hours for the one-time report, 5 hours for requests for appointment of Technical Advisory Committee, and 5 hours for petitions covered under miscellaneous activities. These estimates include the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collections of information. Send comments regarding these burden estimates or any other aspect of these collections of information, including suggestions for reducing the burden, to Larry E. Christensen, Director, Regulatory Policy Division, Bureau of Export Administration, U.S. Department of Commerce, Washington, D.C. 20230. 3. For purposes of Executive Order 12612, this interim rule does not contain policies with Federalism implications sufficient to warrant preparation of a Federalism Assessment. 4. Pursuant to authority at 5 U.S.C. 553(a)(1) and section 13(a) of the Export Administration Act, 50 U.S.C. 2401-2420 et seq., though prior notice and an opportunity for public comment are provided, such procedures are not required for this regulatory action. As such, no Initial or Final Regulatory Flexibility Analysis is required under sections 3 and 4 of the Regulatory Flexibility Act, 5 U.S.C. 603(a) and 604(a), and none has been prepared. 5. Although the Export Administration Act expired on August 20, 1994, the President invoked his authority under the International Emergency Economic Powers Act, through Executive Order 12924, August 19, 1994, as extended on August 15, 1995, and determined that, to the extent permitted by law, the provisions of the Export Administration Act shall be extended so as to continue in full force and effect and amend, as necessary, the export control system previously implemented, as the Export Administration Regulations, pursuant to the Export Administration Act. However, because of the importance of the issues raised by these regulations, this rule is issued in interim form and comments will be considered in the development of final regulations. Accordingly, the Department encourages interested persons who wish to comment to do so at the earliest possible time to permit the fullest consideration of their views. The period for submission of comments will close May 24, 1996. The Department will consider all comments received before the close of the comment period in developing final regulations. Comments received after the end of the comment period will be considered if possible, but their consideration cannot be assured. The Department will not accept public comments accompanied by a request that a part or all of the material be treated confidentially because of its business proprietary nature or for any other reason. The Department will return such comments and materials to the person submitting the comments and will not consider them in the development of final regulations. All public comments on these regulations will be a matter of public record and will be available for public inspection and copying. In the interest of accuracy and completeness, the Department requires comments in written form. Oral comments must be followed by written memoranda, which will also be a matter of public record and will be available for public review and copying. Communications from agencies of the United States Government or foreign governments will not be made available for public inspection. The public record concerning these regulations will be maintained in the Bureau of Export Administration Freedom of Information Records Inspection Facility, Room 4525, Department of Commerce, 14th Street and Pennsylvania Avenue, N.W., Washington, DC 20230. Records in this facility, including written public comments and memoranda summarizing the substance of oral communications, may be inspected and copied in accordance with regulations published in Part 4 of Title 15 of the Code of Federal Regulations. [[Page 12734]] Information about the inspection and copying of records at the facility may be obtained from Margaret Cornejo, Bureau of Export Administration Freedom of Information Officer, at the above address or by calling (202) 482-5653. List of Subjects 15 CFR Part 730 Administrative practice and procedure, Advisory committees, Exports, Foreign trade, Reporting and recordkeeping requirements, Strategic and critical materials. 15 CFR Part 732 Administrative practice and procedure, Exports, Foreign trade, Reporting and recordkeeping requirements. 15 CFR Part 734 Administrative practice and procedure, Exports, Foreign trade. 15 CFR Part 736 Exports, Foreign trade. 15 CFR Part 738 Exports, Foreign trade. 15 CFR Part 740 Administrative practice and procedure, Exports, Foreign trade, Reporting and recordkeeping requirements. 15 CFR Part 742 Exports, Foreign trade. 15 CFR Part 744 Exports, Foreign trade, Reporting and recordkeeping requirements. 15 CFR Part 746 Embargoes, Exports, Foreign trade, Reporting and recordkeeping requirements. 15 CFR Part 748 Administrative practice and procedure, Exports, Foreign trade, Reporting and recordkeeping requirements. 15 CFR Part 750 Administrative practice and procedure, Exports, Foreign trade, Reporting and recordkeeping requirements. 15 CFR Part 752 Administrative practice and procedure, Exports, Foreign trade, Reporting and recordkeeping requirements. 15 CFR Part 754 Exports, Foreign trade, Forests and forest products, Petroleum, Reporting and recordkeeping requirements. 15 CFR Part 756 Administrative practice and procedure, Exports, Foreign trade, Penalties. 15 CFR Part 758 Administrative practice and procedure, Exports, Foreign trade, Reporting and recordkeeping requirements. 15 CFR Part 760 Boycotts, Exports, Foreign trade, Reporting and recordkeeping requirements. 15 CFR Part 762 Administrative practice and procedure, Business and industry, Confidential business information, Exports, Foreign trade, Reporting and recordkeeping requirements. 15 CFR Part 764 Administrative practice and procedure, Exports, Foreign trade, Law enforcement, Penalties. 15 CFR Part 766 Administrative practice and procedure, Confidential business information, Exports, Foreign trade, Law enforcement, Penalties. 15 CFR Part 768 Administrative practice and procedure, Exports, Foreign trade, Reporting and recordkeeping requirements. 15 CFR Part 770 Exports, Foreign trade. 15 CFR Part 772 Exports, Foreign trade. 15 CFR Part 774 Exports, Foreign trade. Under authority set forth at 50 U.S.C. 2401 et seq., and for the reasons set forth in the preamble, Subchapter C, Chapter 7 of Title 15, Code of Federal Regulations is amended as follows: 1. In Subchapter C, the following parts are redesignated with an A as set forth in the table below: ------------------------------------------------------------------------ Old part New part ------------------------------------------------------------------------ 768....................................... 768A 769....................................... 769A 770....................................... 770A 771....................................... 771A 772....................................... 772A 773....................................... 773A 774....................................... 774A 775....................................... 775A 776....................................... 776A 777....................................... 777A 778....................................... 778A 779....................................... 779A 785....................................... 785A 786....................................... 786A 787....................................... 787A 788....................................... 788A 789....................................... 789A 790....................................... 790A 791....................................... 791A 799....................................... 799A ------------------------------------------------------------------------ 2. All internal references appearing in newly designated parts 768A through 779A, 785A through 791A, and 799A are revised as set forth in the redesignation table set forth above. 3. Effective November 1, 1996, the newly designated parts are removed. 4. Newly designated Sec. 771A.25(d) is removed effective March 25, 1996. 5. Parts 730, 732, 734, 736, 738, 740, 742, 744, 746, 748, 750, 752, 754, 756, 758, 760, 762, 764, 766, 768, 770, 772, and 774 are added to read as follows: PART 730--GENERAL INFORMATION Sec. 730.1 What these regulations cover. 730.2 Statutory authority. 730.3 Dual use exports. 730.4 Other control agencies and departments. 730.5 Coverage of more than exports. 730.6 Control purposes. 730.7 License requirements and exceptions. 730.8 How to proceed and where to get help. 730.9 How the Bureau of Export Administration is organized. 730.10 Advisory information. Supplement No. 1 to Part 730--Information Collection Requirements Under the Paperwork Reduction Act: OMB Control Numbers Supplement No. 2 to Part 730--Technical Advisory Committees Supplement No. 3 to Part 730--Other U.S. Government Departments and Agencies With Export Control Responsibilities Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 10 U.S.C. 7420; 10 U.S.C. 7430(e); 18 U.S.C. 2510 et seq.; 22 U.S.C. 287c; 22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; Sec. 201, Pub. L. 104- 58, 109 Stat. 557 (30 U.S.C. 185(s)); 30 U.S.C. 185(u); 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C. app. 466c; 50 U.S.C. app. 5; E.O. 11912, 3 CFR, 1976 Comp., p. 114; E.O. 12002, 3 CFR, 1977 Comp., p. 133; E.O. 12058, 3 CFR, 1978 Comp., p. 179; E.O. 12214, 3 CFR, 1980 Comp., p. 256; E.O. 12851, 3 CFR, 1993 Comp., p. 608; E.O. 12867, 3 CFR, 1993 Comp., p. 649; E.O. 12918, 3 CFR, 1994 Comp., p. 899; E.O. 12924, 3 CFR, 1994 Comp., p. 917; E.O. 12938, 3 CFR, 1994 Comp., p. 950; Notice of [[Page 12735]] August 15, 1995 (60 FR 42767, August 17, 1995); E.O. 12981, 60 FR 62981. Sec. 730.1 What these regulations cover. In this part, references to the Export Administration Regulations (EAR) are references to 15 CFR chapter VII, subchapter C. The EAR are issued by the United States Department of Commerce, Bureau of Export Administration (BXA) under laws relating to the control of certain exports, reexports, and activities. In addition, the EAR implement antiboycott law provisions requiring regulations to prohibit specified conduct by United States persons that has the effect of furthering or supporting boycotts fostered or imposed by a country against a country friendly to United States. Supplement No. 1 to part 730 lists the control numbers assigned to information collection requirements under the EAR by the Office of Management and Budget pursuant to the Paperwork Reduction Act of 1995. Sec. 730.2 Statutory authority. The EAR have been designed primarily to implement the Export Administration Act of 1979, as amended, 50 U.S.C. app. 2401-2420 (EAA). There are numerous other legal authorities underlying the EAR. These are listed in the Federal Register documents promulgating the EAR and at the beginning of each part of the EAR in the Code of Federal Regulations (CFR). From time to time, the President has exercised authority under the International Emergency Economic Powers Act with respect to the EAR (50 U.S.C. 1701-1706 (IEEPA)). The EAA is not permanent legislation, and when it has lapsed, Presidential executive orders under IEEPA have directed and authorized the continuation in force of the EAR. Sec. 730.3 Dual use exports. The convenient term ``dual use'' is sometimes used to distinguish the types of items covered by the EAR from those that are covered by the regulations of certain other U.S. government departments and agencies with export licensing responsibilities. In general, the term dual use serves to distinguish EAR-controlled items that can be used both in military and other strategic uses (e.g., nuclear) and commercial applications. In general, the term dual use serves to distinguish EAR-controlled items that can be used both in military and other strategic uses and in civil applications from those that are weapons and military related use or design and subject to the controls of the Department of State or subject to the nuclear related controls of the Department of Energy or the Nuclear Regulatory Commission. Note, however, that although the short-hand term dual use may be employed to refer to the entire scope of the EAR, the EAR also apply to some items that have solely civil uses. Sec. 730.4 Other control agencies and departments. In addition to the departments and agencies mentioned in Sec. 730.3 of this part, other departments and agencies have jurisdiction over certain narrower classes of exports and reexports. These include the Department of Treasury's Office of Foreign Assets Control (OFAC), which administers controls against certain countries that are the object of sanctions affecting not only exports and reexports, but also imports and financial dealings. For your convenience, Supplement No. 3 to part 730 identifies other departments and agencies with regulatory jurisdiction over certain types of exports and reexports. This is not a comprehensive list, and the brief descriptions are only generally indicative of the types of controls administered and/or enforced by each agency. Sec. 730.5 Coverage of more than exports. The core of the export control provisions of the EAR concerns exports from the United States. You will find, however, that some provisions give broad meaning to the term ``export'', apply to transactions outside of the United States, or apply to activities other than exports. (a) Reexports. Commodities, software, and technology that have been exported from the United States are generally subject to the EAR with respect to reexport. Many such reexports, however, may go to many destinations without a license or will qualify for an exception from licensing requirements. (b) Foreign products. In some cases, authorization to export technology from the United States will be subject to assurances that items produced abroad that are the direct product of that technology will not be exported to certain destinations without authorization from BXA. (c) Scope of ``exports''. Certain actions that you might not regard as an ``export'' in other contexts do constitute an export subject to the EAR. The release of technology to a foreign national in the United States through such means as demonstration or oral briefing is deemed an export. Other examples of exports under the EAR include the return of foreign equipment to its country of origin after repair in the United States, shipments from a U.S. foreign trade zone, and the electronic transmission of non-public data that will be received abroad. (d) U.S. person activities. To counter the proliferation of weapons of mass destruction, the EAR restrict the involvement of ``United States persons'' anywhere in the world in exports of foreign-origin items, or in providing services or support, that may contribute to such proliferation. Sec. 730.6 Control purposes. The export control provisions of the EAR are intended to serve the national security, foreign policy, nonproliferation, and short supply interests of the United States and, in some cases, to carry out its international obligations. Some controls are designed to restrict access to dual use items by countries or persons that might apply such items to uses inimical to U.S. interests. These include controls designed to stem the proliferation of weapons of mass destruction and controls designed to limit the military and terrorism support capability of certain countries. The effectiveness of many of the controls under the EAR is enhanced by their being maintained as part of multilateral control arrangements. Multilateral export control cooperation is sought through arrangements such as the Nuclear Suppliers Group, the Australia Group, and the Missile Technology Control Regime. The EAR also include some export controls to protect the United States from the adverse impact of the unrestricted export of commodities in short supply. Sec. 730.7 License requirements and exceptions. A relatively small percentage of exports and reexports subject to the EAR require an application to BXA for a license. Many items are not on the Commerce Control List (CCL) (Supplement No. 1 to Sec. 774.1 of the EAR), or, if on the CCL, require a license to only a limited number of countries. Other transactions may be covered by one or more of the License Exceptions in the EAR. In such cases no application need be made to BXA. Sec. 730.8 How to proceed and where to get help. (a) How the EAR are organized. The Export Administration Regulations (EAR) are structured in a logical manner. In dealing with the EAR you may find it helpful to be aware of the overall organization of these regulations. In order to determine what the rules are and what you need to do, review the titles and the introductory sections of the parts of the EAR. [[Page 12736]] (1) How do you go about determining your obligations under the EAR? Part 732 of the EAR provides steps you may follow to determine your obligations under the EAR. You will find guidance to enable you to tell whether or not your transaction is subject to the EAR and, if it is, whether it qualifies for a License Exception or must be authorized through issuance of a license. (2) Are your items or activities subject to the EAR at all? Part 734 of the EAR defines the items and activities that are subject to the EAR. Note that the definition of ``items subject to the EAR'' includes, but is not limited to, items listed on the Commerce Control List in part 774 of the EAR. (3) If subject to the EAR, what do the EAR require? Part 736 of the EAR lists all the prohibitions that are contained in the EAR. Note that certain prohibitions (General Prohibitions One through Three) apply to items as indicated on the CCL, and others (General Prohibitions Four through Ten) prohibit certain activities and apply to all items subject to the EAR unless otherwise indicated. (4) Do you need a license for your item or activity? What policies will BXA apply if you do need to submit license application? The EAR have four principal ways of describing license requirements: (i) The EAR may require a license to a country if your item is listed on the CCL and the Country Chart in part 738 of the EAR tells that a license is required to that country. Virtually all Export Control Classification Numbers (ECCN) on the CCL are covered by the Country Chart in part 738 of the EAR. That part identifies the limited number of entries that are not included on the Chart. These ECCNs will state the specific countries that require a license or refer you to a self-contained section, i.e., Short Supply in part 754 of the EAR, or Embargoes in part 746 of the EAR. If a license is required, you should consult part 740 of the EAR which describes the License Exception that may be available for items on the CCL. Part 742 of the EAR describes the licensing policies that BXA will apply in reviewing an application you file. Note that part 754 of the EAR on short supply controls and part 746 on embargoes are self-contained parts that include the available exceptions and licensing policy. (ii) A license requirement may be based on the end-use or end-user in a transaction, primarily for proliferation reasons. Part 744 of the EAR describes such requirements and relevant licensing policies and includes both restrictions on items and restrictions on the activities of U.S. persons. (iii) A license is required for virtually all exports to embargoed destinations, such as Cuba. Part 746 of the EAR describes all the licensing requirements, license review policies and License Exceptions that apply to such destinations. If your transaction involves one of these countries, you should first look at this part. This part also describes controls that may be maintained under the EAR to implement UN sanctions. (iv) In addition, under Secs. 736.2(b)(9) and (10) of the EAR, you may not engage in a transaction knowing a violation is about to occur or violate any orders, terms, and conditions under the EAR. Part 764 of the EAR describes prohibited transactions with a person denied export privileges or activity that violates the terms or conditions of a denial order. (5) How do you file a license application and what will happen to the application once you do file it? What if you need authorization for multiple transactions? Parts 748 and 750 of the EAR provide information on license submission and processing. Part 752 of the EAR provides for a Special Comprehensive License that authorizes multiple transactions. If your application is denied, part 756 of the EAR provides rules for filing appeals. (6) How do you clear shipments with the U.S. Customs Service? Part 758 of the EAR describes the requirements for clearance of exports. (7) Where do you find the rules on restrictive trade practices and boycotts? Part 760 of the EAR deals with restrictive trade practices and boycotts. (8) Where are the rules on recordkeeping and enforcement? Part 762 of the EAR sets out your recordkeeping requirements, and parts 764 and 766 of the EAR deal with violations and enforcement proceedings. (9) What is the effect of foreign availability? Part 768 of the EAR provides rules for determining foreign availability of items subject to controls. (10) Do the EAR provide definitions and interpretations? Part 770 of the EAR contains interpretations and part 772 of the EAR lists definitions used. (b) Why the EAR are so detailed. Some people will find the great length of the EAR and their extensive use of technical terms intimidating. BXA believes, however, that such detail and precision can and does serve the interests of the public. The detailed listing of technical parameters in the CCL establishes precise, objective criteria. This should, in most cases, enable you to ascertain the appropriate control status. Broader, more subjective criteria would leave exporters and reexporters more dependent upon interpretations and rulings by BXA officials. Moreover, much of the detail in the CCL is derived from multilaterally adopted lists, and the specificity serves to enhance the uniformity and effectiveness of international control practices and to promote a ``level playing field''. The detailed presentation of such elements as licensing and export clearance procedures enables you to find in one place what you need to know to comply with pertinent requirements. Of special importance is the detailed listing of License Exception criteria, as these will enable you to determine quickly, and with confidence, that you may proceed with a transaction without delay. Finally, some of the detail results from the need to draft the EAR with care in order to avoid loop-holes and to permit effective enforcement. (c) Where to get help. Throughout the EAR you will find information on offices you can contact for various purposes and types of information. General information including; assistance in understanding the EAR, information on how to obtain forms, electronic services, publications, and information on training programs offered by BXA, is available from the Office of Exporter Services at the following locations: Exporter Counselling Division, U.S. Department of Commerce, 14th and Pennsylvania Avenue, N.W., Room H1099D, Washington, D.C., 20230, Telephone number: (202) 482-4811, Facsimile number: (202) 482-3617 and Western Regional Office, U.S. Department of Commerce, 3300 Irvine Avenue, Suite 345, Newport Beach, California 92660, Telephone number: (714) 660-0144, Facsimile number: (714) 660-9347 and Santa Clara Branch Office, U.S. Department of Commerce, 5201 Great America Parkway, Suite 333, Santa Clara, California 95054, Telephone number: (408) 748-7450, Facsimile number: (408) 748-7470. Sec. 730.9 How the Bureau of Export Administration is organized. Functionally, the Bureau of Export Administration is divided into two branches, Export Administration and Export Enforcement. Also, BXA manages a number of Technical Advisory Committees consisting of industry and government representatives which advise and assist BXA and other agencies with respect to actions designed to implement the EAR. (a) Export Administration. Export Administration implements and [[Page 12737]] administers the export controls reflected in the EAR. Export Administration consists of five offices located in Washington D.C. and two field offices in California under the supervision of the Assistant Secretary for Export Administration: (1) The Office of Nuclear and Missile Technology Controls is responsible for policy and technical issues and license applications related to the Nuclear Suppliers Group and the Missile Technology Control Regime. This office has responsibility for items associated with those regimes, and missile and nuclear related exports and reexports subject to the Enhanced Proliferation Control Initiative. (2) The Office Chemical/Biological Controls and Treaty Compliance is responsible for implementing multilateral export controls under the Australia Group. This office has licensing responsibility for items associated with the Australia Group and related exports and reexports subject to the Enhanced Proliferation Control Initiative. (3) The Office of Strategic Trade and Foreign Policy Controls is responsible for implementing multilateral export controls dealing with conventional arms and related dual use items. This office is also responsible for computer export control policies, and implements U.S. foreign policy controls (e.g., crime control, anti-terrorism, and regional stability). It also has licensing responsibility for items controlled for national security and foreign policy reasons. (4) The Office of Exporter Services is responsible for the Special Comprehensive License, processing and routing all license applications, and preparing responses to requests for advisory opinions and commodity classifications. This office also provides counselling to exporters and reexporters, conducts educational seminars for the business community, maintains the Export Administration Regulations, and coordinates the operations of two field offices listed in Sec. 730.8(c) of this part. (5) The Office of Strategic Industries and Economic Security implements programs to ensure the continued health of the U.S. defense industrial base, facilitating diversification of U.S. defense related industries into civilian markets, and promoting the conversion of military enterprises. This office is also responsible for analyzing the economic impact of U.S. export controls on industrial competitiveness. (b) Export Enforcement. Export Enforcement implements the enforcement provisions of the EAR, including part 760 of the EAR (Restrictive Trade Practices and Boycotts). This office also conducts outreach programs to assist members of the public in understanding their obligation under EAR. The Office of Export Enforcement is organized into three offices under the supervision of the Assistant Secretary for Export Enforcement. (1) The Office of Export Enforcement (OEE) is comprised of an office in Washington, D.C. and eight field offices. OEE is staffed with criminal investigators and analysts. This office investigates allegations of violations and supports administrative and criminal enforcement proceedings. The addresses and telephone numbers of the eight field offices are listed in Sec. 764.5(c)(7) of the EAR. (2) The Office of Enforcement Support (OES) is located in Washington, D.C. OES supports BXA's preventive enforcement efforts, including conducting pre-license checks and post-shipment verifications. OES also provides administrative and analytical support for OEE. (3) The Office of Antiboycott Compliance administers and enforces the provisions of part 760 of the EAR (Restrictive Trade Practices and Boycotts). It investigates and prepares cases on alleged violations of this part. (c) Technical Advisory Committees. The Technical Advisory Committees (TACs) provide advice and assistance to BXA from U.S. industry regarding the creation and implementation of export controls. For further information regarding establishment of TACs and other information, see Supplement No. 2 to part 730. Existing TACs include the following: (1) The Computer Systems Technical Advisory Committee; (2) The Electronics Technical Advisory Committee; (3) The Materials Technical Advisory Committee; (4) The Materials Processing Equipment Technical Advisory Committee; (5) The Regulations and Procedures Technical Advisory Committee; (6) The Sensors Technical Advisory Committee; (7) The Telecommunications Equipment Technical Advisory Committee; and (8) The Transportation and Related Equipment Technical Advisory Committee. Sec. 730.10 Advisory information. The general information in this part is just that--general. To achieve brevity, so as to give you a quick overview, the information in this part is selective, incomplete, and not expressed with regulatory precision. The controlling language is the language of succeeding parts of the EAR and of any other laws or regulations referred to or applicable. The content of this part is not to be construed as modifying or interpreting any other language or as in any way, limiting the authority of BXA, any of its components or any other government department or agency. You should not take any action based solely on what you read in this part. Supplement No. 1 to Part 730--Information Collection Requirements Under the Paperwork Reduction Act: OMB Control Numbers This Supplement lists the control numbers assigned to the information collection requirements for the Bureau of Export Administration by the Office of Management and Budget (OMB), pursuant to the Paperwork Reduction Act of 1995. This Supplement complies with the requirements of section 3506(c)(1)(B)(i) of the Paperwork Reduction Act requiring agencies to display current control numbers assigned by the Director of OMB for each agency information collection requirement. ------------------------------------------------------------------------ 15 CFR part or section where Current OMB control No. collections of information are identified or described ------------------------------------------------------------------------ 0694-0001................................. Sec. 748.12(d) of the EAR. 0694-0004................................. Part 768 of the EAR. 0694-0008................................. Sec. 748.13, Supplement No. 5 to part 748 of the EAR. 0694-0009................................. Sec. 748.10(e) of the EAR. 0694-0012................................. Part 760 and Sec. 762.2(b) of the EAR. 0694-0013................................. Part 774 of the EAR. 0694-0015................................. Sec. 773.3 of the EAR. 0694-0016................................. Secs. 748.13 and 762.2(b) of the EAR. 0694-0017................................. Sec. 748.10 of the EAR. 0694-0021................................. Secs. 748.11 and 762.2(b) of the EAR. 0694-0023................................. Secs. 740.3(d) and 740.4(c) of the EAR. 0694-0025................................. Secs. 754.4 and 762.2(b) of the EAR. 0694-0026................................. Sec. 754.3 of the EAR. 0694-0027................................. Sec. 754.2 of the EAR. 0694-0029................................. Sec. 740.4(a) of the EAR. 0694-0030................................. Supplement No. 2 to part 748, paragraph (p) of the EAR. 0694-0031................................. Sec. 750.9 of the EAR. 0694-0032................................. Sec. 748.4(d)(2) of the EAR. 0694-0033................................. Secs. 740.7(b) and 762.2(b) of the EAR. 0694-0038................................. Sec. 758.6(e)(2) of the EAR. 0694-0040................................. Secs. 758.5(c)(2) and 758.8 of the EAR. 0694-0047................................. Supplement No. 2 to part 748, paragraph (o)(2) of the EAR. 0694-0048................................. Sec. 748.3 of the EAR. 0694-0050................................. Sec. 752.5(c)(5) of the EAR. [[Page 12738]] 0694-0051................................. Sec. 750.10 of the EAR. 0694-0058................................. Secs. 762.2(b) and 764.5 of the EAR. 0694-0064................................. Secs. 748.9 and 762.2(b) of the EAR. 0694-0065................................. Sec. 754.4(c) of the EAR of the EAR. 0694-0073................................. Sec. 742.12, Supplement No. 3 to part 742, and Sec. 762.2(b) of the EAR. 0694-0078................................. Supplement No. 1 to part 774 of the EAR. 0694-0086................................. Supplement No. 1 to part 774 of the EAR. 0694-0088................................. Parts 746, 748, and 752; Sec. 762.2(b) of the EAR. 0694-0089................................. Part 752 and Sec. 762.2(b) of the EAR. 0694-0093................................. Secs. 748.10 and 762.2(b) of the EAR. 0694-0094................................. Part 758 of the EAR of the EAR. 0694-0095................................. Secs. 740.7(a)(3)(ii) and 758.1(d) of the EAR. 0694-0096................................. Part 760, Sec. 762.6(a) of the EAR. 0694-0097................................. Secs. 752.15(b), 758.6, and 762.2(b) of the EAR. 0694-0102................................. Secs. 754.6 and 754.7 of the EAR. 0694-0101................................. Sec. 734.4 of the EAR. 0694-0100................................. Supplement No. 1 to part 730. 0607-0001................................. Sec. 758.2(m) of the EAR. 0607-0018................................. Secs. 740.1(d), 740.3(a)(3), 752.7(b), Sec. 752.15(a) of the EAR. Secs. 754.2(h) and (i), 754.4(c) 758.1, Secs. 758.2(m) and 758.3 of the EAR. 0607-0152................................. Secs. 740.1(d), 740.3(a)(3), 752.7(b), Secs. 752.15(a) of the EAR. Secs. 754.2(h) and (i), 754.4(c), 758.1, Secs. 758.2(m), and 758.3 of the EAR. ------------------------------------------------------------------------ Supplement No. 2 to Part 730--Technical Advisory Committees (a) Purpose. The purpose of this Supplement is to describe the procedures and criteria for the establishment and operation of Technical Advisory Committees. (b) Technical advisory committees. Any producer of articles, materials, or supplies, including technology, software, and other information, that are subject to export controls, or are being considered for such controls because of their significance to the national security of the United States, may request the Secretary of Commerce to establish a technical advisory committee, under the provisions of section 5(h) of the Export Administration Act of 1979, as amended (EAA) to advise and assist the Department of Commerce and other appropriate U.S. Government agencies or officials with respect to questions involving technical matters; worldwide availability and actual utilization of production technology; licensing procedures that affect the level of export controls applicable to a clearly defined grouping of articles, materials, or supplies, including technology, software, or other information; and exports and reexports subject to all controls that the United States maintains including proposed revisions of any such controls. If producers of articles, materials, or supplies, including technology, software, and other information, that are subject to export controls because of their significance to the national security of the United States, wish a trade association or other representative to submit a written request on their behalf for the appointment to a TAC, such request shall be submitted in accordance with paragraph (b)(4) of this Supplement. (1) Form and substance of requests. Each request for the appointment of a TAC shall be submitted in writing to: Assistant Secretary for Export Administration, P.O. Box 273, Washington, DC 20044. The request shall include: (i) A description of the articles, materials, or supplies including technology and software, in terms of a clear, cohesive grouping (citing the applicable Export Control Classification Numbers where practical); (ii) A statement of the reasons for requesting the appointment of a TAC; and (iii) Any information in support of any contention that may be made that the request meets the criteria described in paragraph (b)(2) of this Supplement. (2) Consideration of request for establishment of a TAC. The Department of Commerce will review all requests for the establishment of a TAC to determine if the following criteria are met: (i) That a substantial segment of the industry producing the specified articles, materials, or supplies including technology desires such a committee; and (ii) That the evaluation of such articles, materials, or supplies including technology and software for export control purposes is difficult because of questions involving technical matters, worldwide availability and actual utilization of production and software technology, or licensing procedures. (3) Requests by a substantial segment of an industry. In determining whether or not a substantial segment of any industry has requested the appointment of a TAC, the Department of Commerce will consider: (i) The number of persons or firms requesting the establishment of a TAC for a particular grouping of commodities, software and technology in relation to the total number of U.S. producers of such items; and (ii) The volume of annual production by such persons or firms of each item in the grouping in relation to the total U.S. production. Generally, a substantial segment of an industry (for purposes of this Supplement) shall consist of: (A) Not less than 30 percent of the total number of U.S. producers of the items concerned; or (B) Three or more U.S. producers who produce a combined total of not less than 30 percent of the total U.S. annual production, by dollar value of the items concerned; or (C) Not less than 20 percent of the total number of U.S. producers of the items concerned, provided that the total of their annual production thereof is not less than 20 percent of the total U.S. annual production, by dollar value. (iii) If it is determined that a substantial segment of the industry concerned has requested the establishment of a TAC concerning a specific grouping of items that the Department of Commerce determines difficult to evaluate for export control purposes, BXA will establish and use the TAC requested. (4) Requests from trade associations or other representatives. Requests from trade associations or other representatives of U.S. producers for the establishment of a TAC must comply with the provisions of paragraphs (b) (1) through (3) of this Supplement. In addition, in order to assist BXA in determining whether the criteria described in paragraph (b)(3) of this Supplement have been met, a trade association or other representative submitting a request for the establishment of a TAC should include the following information: (i) The total number of firms in the particular industry; (ii) The total number of firms in the industry that have authorized the trade association or other representative to act in their behalf in this matter; (iii) The approximate amount of total U.S. annual production by dollar value of the items concerned produced by those firms that have authorized the trade association or other representative to act in their behalf; and (iv) A description of the method by which authorization to act on behalf of these producers was obtained. (5) Nominations for membership on TACs. When the Department of Commerce determines that the establishment of a TAC is warranted, it will request nominations for membership on the committee among the producers of the items and from any other sources that may be able to suggest well-qualified nominees. (6) Selection of industry members of committee. Industry members of a TAC will be selected by the Department of Commerce from a list of the nominees who have indicated their availability for service on the committee. To the extent feasible, the Department of Commerce will select a committee balanced to represent all significant facets of the industry involved, taking into consideration such factors as the size of the firms, their geographical distribution, and their product lines. No industry representative shall serve on a TAC for more than four consecutive years. The membership of a member who is absent from four consecutive meetings shall be terminated. (7) Government members. Government members of a TAC will be selected by the Department of Commerce from the agencies having an interest in the subject matter concerned. (8) Invitation to serve on committee. Invitations to serve on a TAC will be sent by letter to the selected nominees. (9) Election of Chair. The Chair of each TAC shall be elected by a vote of the majority of the members of the committee present and voting. (c) Charter. (1) No TAC established pursuant to this Supplement shall meet or take any action until an advisory committee charter has been filed with the Assistant [[Page 12739]] Secretary for Export Administration of the Department of Commerce and with the standing committees of the Senate and of the House of Representatives having legislative jurisdiction over the Department. Such charter shall contain the following information: (i) The committee's official designation; (ii) The committee's objectives and the scope of its activities; (iii) The period of time necessary for the committee to carry out its purposes; (iv) The agency or official to whom the committee reports; (v) The agency responsible for providing the necessary support for the committee; (vi) A description of the duties for which the committee is responsible, and, if such duties are not solely advisory, a specification of the authority for such functions; (vii) The estimated annual operating costs in dollars and years for such committee; (viii) The estimated number and frequency of committee meetings; (ix) The committee's termination date, if less than two years from the date of the committee's establishment; and (x) The date the charter is filed. (d) Meetings. (1) Each TAC established under the provisions of the EAA and paragraph (b) of this Supplement shall meet at least once every three months at the call of its Chair unless it is specifically determined by the Chair, in consultation with other members of the committee, that a particular meeting is not necessary. (2) No TAC may meet except at the call of its Chair. (3) Each meeting of a TAC shall be conducted in accordance with an agenda approved by a designated Federal government employee. (4) No TAC shall conduct a meeting in the absence of a designated Federal government employee who shall be authorized to adjourn any advisory committee meeting, whenever the Federal government employee determines adjournment to be in the public interest. (e) Public notice. Notice to the public of each meeting of a TAC will be issued at least 20 days in advance and will be published in the Federal Register. The notice will include the time and place of the meeting and the agenda. (f) Public attendance and participation. (1) Any member of the public who wishes to do so may file a written statement with any TAC before or after any meeting of a committee. (2) A request for an opportunity to deliver an oral statement relevant to matters on the agenda of a meeting of a TAC will be granted to the extent that the time available for the meeting permits. A committee may establish procedures requiring such persons to obtain advance approval for such participation. (3) Attendance at meetings of TACs will be open to the public unless it is determined pursuant to section 10(d) of the Federal Advisory Committee Act to be necessary to close all, or some portion, of the meeting to the public. A determination that a meeting or portion thereof be closed to the public may be made if all or a specific portion of a meeting of a TAC is concerned with matters described in section 552(b) of Title 5, U.S.C. (4) Participation by members of the public in open TAC meetings or questioning of committee members or other participants shall not be permitted except in accordance with procedures established by the committee. (5) Every effort will be made to accommodate all members of the public who wish to attend. (g) Minutes. (1) Detailed minutes of each meeting of each TAC will be kept and will contain a record of the persons present, a complete and accurate description of the matters discussed and conclusions reached, and copies of all reports received, issued, or approved by the TAC. (2) The accuracy of all the minutes will be certified to by the TAC Chair. (h) Records. (1) Subject to section 552 of Title 5, U.S.C. and Department of Commerce Administrative Order 205-12, ``Public Information,'' and ``Public Information'' regulations issued by the Department of Commerce that are contained in 15 CFR part 4, Subtitle A, the records, reports, transcripts, minutes, appendices, working papers, draft, studies, agenda, or other documents that were made available to or prepared for or by each TAC will be available for public inspection and copying. (2) Each TAC will prepare once each year a report describing its membership, functions, activities, and such related matters as would be informative to the public consistent with the policy of section 552(b) of Title 5, U.S.C. (3)(i) Requests for records should be addressed to: Bureau of Export Administration, Freedom of Information, Records Inspection Facility, U.S. Department of Commerce, Room 4513, Washington, DC 20230, Telephone (202) 482-2593. (ii) Rules concerning the use of the Records Inspection Facility are contained in 15 CFR part 4, Subtitle A, or may be obtained from this facility. (i) Compensation. If the Department of Commerce deems it appropriate, a member of a TAC may be reimbursed for travel, subsistence, and other necessary expenses incurred in connection with the member's duties. (j) Scope of advisory committee functions. All TACs are limited to the functions described in their charters. (k) Duration of committees. Each TAC will terminate at the end of two years from the date the committee was established or two years from the effective date of its most recent extension, whichever is later. Committees may be continued only for successive two-year periods by appropriate action taken by the authorized officer of the Department of Commerce prior to the date on which such advisory committee would otherwise terminate. TACs may be extended or terminated only after consultation with the committee. (l) Miscellaneous. (1) TACs established in accordance with paragraph (b) of this supplement must conform to the provisions of the Federal Advisory Committee Act (Pub. L. 92-463), Office of Management and Budget Circular A-63 (Revision of March 1974), ``Advisory Committee Management,'' Department of Commerce Administrative Order 205-12, ``Public Information,'' the applicable provisions of the EAA, and any other applicable Department of Commerce regulations or procedures affecting the establishment or operation of advisory committees. (2) Whenever the Department of Commerce desires the advice or assistance of a particular segment of an industry with respect to any export control problem for which the service of a TAC, as described in paragraph (b) of this Supplement is either unavailable or impracticable, an advisory committee may be established pursuant to the provisions of section 9 of the Federal Advisory Committee Act. Such committees will be subject to the requirements of the Federal Advisory Committee Act, OMB Circular A-63 (Revision of March 1974), ``Advisory Committee Management,'' Department of Commerce Administrative Order 205-12, ``Public Information,'' and any other applicable Department of Commerce regulations or procedures affecting the establishment or operation of advisory committees. (3) Nothing in the provisions of this Supplement shall be construed to restrict in any manner the right of any person or firm to discuss any export control matter with the Department of Commerce or to offer advice or information on export control matters. Similarly, nothing in these provisions shall be construed to restrict the Department of Commerce in consulting any person or firm relative to any export control matter. Supplement No. 3 to Part 730--Other U.S. Government Departments and Agencies With Export Control Responsibilities Note: The departments and agencies identified with an asterisk control exports for foreign policy or national security reasons and, in certain cases, such controls may overlap with the controls described in the EAR (see part 734 of the EAR). Defense Services and Defense Articles * Department of State, Office of Defense Trade Controls, Tel. (703) 875-6644, Fax: (703) 875-6647. 22 CFR parts 120 through 130. Drugs, Chemicals and Precursors Drug Enforcement Administration, International Chemical Control Unit, Tel. (202) 307-7202, Fax: (202) 307-8570. 21 CFR parts 1311 through 1313. Controlled Substances: Drug Enforcement Administration, International Drug Unit, Tel. (202) 307-2414, Fax: (202) 307-8570. 21 CFR 1311 through 1313. Drugs and Biologics: Food and Drug Administration, Import/ Export, Tel. (301) 594-3150, Fax: (301) 594-0165. 21 U.S.C. 301 et seq. Investigational drugs permitted: Food and Drug Administration, International Affairs, Tel. (301) 443-4480, Fax: (301) 443-0235. 21 CFR 312.1106. Fish and Wildlife Controls; Endangered Species Department of the Interior, Chief Office of Management Authority, Tel. (703) 358-2093, Fax: (703) 358-2280. 50 CFR 17.21, 17.22, 17.31, 17.32. [[Page 12740]] Foreign Assets and Transactions Controls * Department of Treasury, Office of Foreign Assets Control, Licensing, Tel. (202) 622-2480, Fax: (202) 622-1657. 31 CFR parts 500 through 590. Medical Devices Food and Drug Administration, Office of Compliance, Tel. (301) 594-4699, Fax: (301) 594-4715. 21 U.S.C. 301 et seq. Natural Gas and Electric Power Department of Energy, Office of Fuels Programs, Tel. (202) 586- 9482, Fax: (202) 586-6050. 10 CFR 205.300 through 205.379 and part 590. Nuclear Materials and Equipment * Nuclear Regulatory Commission, Office of International Programs, Tel. (301) 415-2344, Fax: (301) 415-2395. 10 CFR part 110. Nuclear Technology; Technical Data for Nuclear Weapons/Special Nuclear Materials * Department of Energy, Office of Arms Control and Non Proliferation, Export Control Division, Tel. (202) 586-2112, Fax: (202) 586-6977. 10 CFR part 810. Ocean Freight Forwarders Federal Maritime Commission, Office of Freight Forwarders, Tel. (202) 523-5843, Fax: (202) 523-5830. 46 CFR part 510. Patent Filing Data Sent Abroad * Department of Commerce, Patent and Trademark Office, Licensing and Review; Tel. (703) 308-1722, Fax: (703) 305-3603, 3604. 37 CFR part 5. Prohibition of Movement of American Carriers and Prohibition on Transportation of Goods Destined for North Korea Department of Transportation, Office of International Law, General Counsel, Tel. (202) 366-2972, Fax: (202) 366-9188. 44 CFR part 403. U.S. Flagged or U.S. Manufactured Vessels Over 1,000 Gross Tons U.S. Maritime Administration, Division of Vessel Transfer and Disposal, Tel. (202) 366-5821, Fax: (202) 366-3889. 46 CFR part 221. PART 732--STEPS FOR USING THE EAR Sec. 732.1 Steps overview. 732.2 Steps regarding scope of the EAR. 732.3 Steps regarding the ten general prohibitions. 732.4 Steps regarding License Exceptions. 732.5 Steps regarding Shipper's Export Declaration, Destination Control Statements, record keeping, license applications, and other requirements. 732.6 Steps for other requirements. Supplement No. 1--BXA's ``Know Your Customer'' Guidance and Red Flags Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; E.O. 12924, 3 CFR, 1994 Comp., p. 917; Notice of August 15, 1995 (60 FR 42767, August 17, 1995). Sec. 732.1 Steps overview. (a)(1) Introduction. In this part, references to the EAR are references to 15 CFR chapter VII, subchapter C. This part is intended to help you determine your obligations under the EAR by listing logical steps in Sec. 732.2 through Sec. 732.5 of this part that you can take in reviewing these regulations. By cross-references to the relevant provisions of the EAR, this part describes the suggested steps for you to determine applicability of the following: (i) The scope of the EAR (part 734 of the EAR); (ii) Each of the general prohibitions (part 736 of the EAR); (iii) The License Exceptions (part 740 of the EAR); and (iv) Other requirements such as clearing your export with the U.S. Customs Service, keeping records, and completing and documenting license applications. (2) These steps describe the organization of the EAR, the relationship among the provisions of the EAR, and the appropriate order for you to consider the various provisions of the EAR. (b) Facts about your transaction. The following five types of facts determine your obligations under the EAR and will be of help to you in reviewing these steps: (1) What is it? What an item is, for export control purposes, depends on its classification, which is its place on the Commerce Control List (see part 774 of the EAR). (2) Where is it going? The country of ultimate destination for an export or reexport also determines licensing requirements (see parts 738 and 774 of the EAR concerning the Country Chart and the Commerce Control List). (3) Who will receive it? The ultimate end-user of your item cannot be a bad end-user. See General Prohibition Four (Denial Orders) in Sec. 736.2(b)(4) and parts 744 and 764 of the EAR for a reference to the list of persons you may not deal with. (4) What will they do with it? The ultimate end-use of your item cannot be a bad end-use. See General Prohibition Five (End-Use End- User) in Sec. 736.2(b)(5) and part 744 of the EAR for general end-use and end-user restrictions. (5) What else do they do? Conduct such as contracting, financing, and freight forwarding in support of a proliferation project (as described in Sec. 744.6 of the EAR) may prevent you from dealing with someone. (c) Are your items and activities subject to the EAR? You should first determine whether your commodity, software, or technology is subject to the EAR (see part 734 of the EAR concerning scope), and Steps 1 through 6 help you do that. For exports from the United States, only Steps 1 and 2 are relevant. If you already know that your item or activity is subject to the EAR, you should go on to consider the ten general prohibitions in part 736 of the EAR. If your item or activity is not subject to the EAR, you have no obligations under the EAR and may skip the remaining steps. (d) Does your item or activity require a license under one or more of the ten general prohibitions? (1) Brief summary of the ten general prohibitions. The general prohibitions are found in part 736 of the EAR and referred to in these steps. They consist, very briefly, of the following: (i) General Prohibition One (Exports and Reexports): Export and reexport of controlled items to listed countries. (ii) General Prohibition Two (Parts and Components Reexports): Reexport and export from abroad of foreign-made items incorporating more than a de minimis amount of controlled U.S. content. (iii) General Prohibition Three (Foreign-produced Direct Product Reexports): Reexport and export from abroad of the foreign-produced direct product of U.S. technology and software. (iv) General Prohibition Four (Denial Orders): Engaging in actions prohibited by a denial order. (v) General Prohibition Five (End-Use End-User): Export or reexport to prohibited end-user or end-users. (vi) General Prohibition Six (Embargo): Export or reexport to embargoed destinations. (vii) General Prohibition Seven (U.S. Person Proliferation Activity): Support of proliferation activities. (viii) General Prohibition Eight (In-Transit): In-transit shipments and items to be unladen from vessels and aircraft. (ix) General Prohibition Nine (Orders, Terms and Conditions): Violation of any orders, terms, or conditions. (x) General Prohibition Ten (Knowledge Violation to Occur): Proceeding with transactions with knowledge that a violation has occurred or is about to occur. (2) Controls on items on the Commerce Control List (CCL). If your item or activity is subject to the EAR, you should determine whether any one [[Page 12741]] or more of the ten general prohibitions require a license for your export, reexport, or activity. Steps 7 through 11 refer to classification of your item on the Commerce Control List (CCL) (part 774 of the EAR) and how to use the Country Chart (Supplement No. 1 to part 738 of the EAR) to determine whether a license is required based upon the classification of your item. These steps refer to General Prohibitions One (Exports and Reexports), Two (Parts and Components Reexports), and Three (Foreign-Produced Direct Product Reexports) for all countries except: Cuba, Iran, Iraq, Libya, and North Korea. For these countries, you may skip Steps 7 through 11 and go directly to Step 12. (3) Controls on activities. Steps 12 through 18 refer to General Prohibitions Four through Ten. Those general prohibitions apply to all items subject to the EAR, not merely those items listed on the CCL in part 774 of the EAR. For example, they refer to the general prohibitions for persons denied export privileges, prohibited end-uses and end-users, embargoed countries (e.g., Cuba, Iran, Iraq, Libya, and North Korea), prohibited activities of U.S. persons in support of proliferation of weapons of mass destruction, prohibited unlading of shipments, compliance with orders, terms and conditions, and activities when a violation has occurred or is about to occur. (4) General prohibitions. If none of the ten general prohibitions applies, you should skip the steps concerning License Exceptions and for exports from the United States, review Steps 27 through 29 concerning Shipper's Export Declarations to be filed with the U.S. Customs Service, Destination Control Statements for export control documents, and recordkeeping requirements. (e) Is a License Exception available to overcome the license requirement? If you decide by reviewing the CCL in combination with the Country Chart that a license is required for your destination, you should determine whether a License Exception will except you from that requirement. Steps 20 through 24 help you determine whether a License Exception is available. Note that generally License Exceptions are not available to overcome General Prohibitions Four through Ten. However, selected License Exceptions for embargoed destinations are specified in part 746 of the EAR and License Exceptions for short supply controls are specified in part 754 of the EAR. If a License Exception is available and the export is from the United States, you should review Steps 26 through 28 concerning Shipper's Export Declarations to be filed with the U.S. Customs Service, Destination Control Statements for export control documents and recordkeeping requirements. If a License Exception is not available, go on to Steps 25 through 29. (f) How do you apply for a license? If you must file a license application, you should review the requirements of part 748 of the EAR as suggested by Step 26. Then you should review Steps 27 through 29 concerning Shipper's Export Declarations to be filed with the U.S. Customs Service, Destination Control Statements for export control documents, and recordkeeping requirements. Sec. 732.2 Steps regarding scope of the EAR. Steps 1 through 6 aid you in determining the scope of the EAR. (a) Step 1: Items subject to the exclusive jurisdiction of another Federal agency. This step is relevant for both exports and reexports. Determine whether your item is subject to the exclusive jurisdiction of another Federal Agency as provided in Sec. 734.3 of the EAR. (1) If your item is subject to the exclusive jurisdiction of another Federal agency, comply with the regulations of that agency. You need not comply with the EAR and may skip the remaining steps. (2) If your item is not subject to the exclusive jurisdiction of another federal agency, then proceed to Step 2 in paragraph (b) of this section. (b) Step 2: Publicly available technology and software. This step is relevant for both exports and reexports. Determine if your technology or software is publicly available as defined and explained at part 734 of the EAR. Supplement No. 1 to part 734 of the EAR contains several practical examples describing publicly available technology and software that is outside the scope of the EAR. The examples are illustrative, not comprehensive. (1) If your technology or software is publicly available, and therefore outside the scope of the EAR, you may proceed with the export or reexport. You have no obligations under the EAR and need not comply with the EAR. You may skip the remaining steps. (2) If your technology or software is not publicly available and you are exporting from the United States, skip to Step 7 in Sec. 732.3(b) of this part concerning the general prohibitions. (3) If you are exporting items from a foreign country, you should then proceed to Step 3 in paragraph (c) of this section and the other steps concerning the scope of the EAR. (c) Step 3: Reexport of U.S.-origin items. This step is appropriate only for reexporters. For an item in a foreign country, you should determine whether the item is of U.S. origin. If it is of U.S.-origin, skip to Step 7 in Sec. 732.3(b) of this part. If it is not of U.S. origin, then proceed to Step 4 in paragraph (d) of this section. (d) Step 4: Foreign-made items incorporating less than the de minimis level of U.S. parts, components, and materials. This step is appropriate only for items that are made outside the United States. (1) For an item made in a foreign country, you should determine whether controlled U.S.-origin parts, components, or materials are incorporated as provided in Sec. 734.4 of the EAR. Also, determine the value of the U.S.-origin controlled content as provided in Supplement No. 2 to part 734 of the EAR. (2) To determine the value of the U.S.-origin controlled content, you should classify the U.S.-origin content on the CCL, determine those items that would require a license from BXA for reexport to the ultimate destination of the foreign-made product if such parts, components, or materials were reexported to that destination in the form received, and divide the total value of the controlled U.S. parts, components, and materials incorporated into the foreign-made item by the sale price of the foreign-made item. (3) If no U.S. parts, components, or materials are incorporated or if the incorporated U.S. parts, components, and materials are below the de minimis level described in Sec. 734.4 of the EAR, then the foreign- made item is not subject to the EAR by reason of the parts and components rule, the classification of a foreign-made item is irrelevant in determining the scope of the EAR, and you should skip Step 4 and go on to consider Step 5 regarding the foreign-produced direct product rule. (4) If controlled parts, components, or materials are incorporated and are above the de minimis level, then you should go on to Step 5. (e) Step 5: Foreign-made items incorporating more than the de minimis level of U.S. parts, components, or materials. This step is appropriate only for foreign-made items incorporating certain U.S. parts. If the incorporated U.S. parts exceed the relevant de minimis level, then your export from abroad is subject to the EAR. You then should skip to Step 7 at Sec. 732.3 of this part and consider the steps regarding all other general prohibitions, License Exceptions, and other requirements. [[Page 12742]] (f) Step 6: Foreign-made items produced with certain U.S. technology for export to specified destinations. This step is appropriate for foreign-made items in foreign countries. (1) If your foreign-produced item is described in an entry on the CCL and the Country Chart requires a license to your export or reexport destination for national security reasons, you should determine whether your item is subject to General Prohibition Three (Foreign-Produced Direct Product Reexports) (Sec. 736.2(b)(3) of the EAR). Your item is subject to the EAR if it is captured by General Prohibition Three (Foreign-Produced Direct Product Reexports), and that prohibition applies if your transaction meets each of the following conditions: (i) Country scope of prohibition. Your export or reexport destination for the direct product is Cuba, North Korea, Libya, or a destination in Country Group D:1 (see Supplement No. 1 to part 740 of the EAR) (reexports of foreign-produced direct products exported to other destinations are not subject to General Prohibition Three); (ii) Scope of technology or software used to create direct products subject to the prohibition. Technology or software that was used to create the foreign-produced direct product, and such technology or software that was subject to the EAR and required a written assurance as a supporting document for a license or as a precondition for the use of License Exception TSR at Sec. 740.3(d) of the EAR (reexports of foreign-produced direct products created with other technology and software are not subject to General Prohibition Three); and (iii) Scope of direct products subject to the prohibition. The foreign-produced direct products are subject to national security controls as designated on the proper ECCN of the Commerce Control List in part 774 of the EAR (reexports of foreign-produced direct products not subject to national security controls are not subject to General Prohibition Three). (2) License Exceptions. Each License Exception described in part 740 of the EAR overcomes this General Prohibition Three if all terms and conditions of a given License Exception are met by the exporter or reexporter. (3) Subject to the EAR. If your item is captured by the foreign- produced direct product control at General Prohibition Three, then your export from abroad is subject to the EAR. You should next consider the steps regarding all other general prohibitions, License Exceptions, and other requirements. If your item is not captured by General Prohibition Three, then your export from abroad is not subject to the EAR. You have completed the steps necessary to determine whether your transaction is subject to the EAR, and you may skip the remaining steps. Note that in summary, items in foreign countries are subject to the EAR when they are: (i) U.S.-origin commodities, software and technology unless controlled for export exclusively by another Federal agency or unless publicly available; (ii) Foreign-origin commodities, software, and technology that are within the scope of General Prohibition Two (Parts and Components Reexports), or General Prohibition Three (Foreign-Produced Direct Product Reexports). (However, such foreign-made items are also outside the scope of the EAR if they are controlled for export exclusively by another Federal agency or unless publicly available.) Sec. 732.3 Steps regarding the ten general prohibitions. (a) Introduction. If your item or activity is subject to the scope of the EAR, you should then consider each of the ten general prohibitions listed in part 736 of the EAR. General Prohibitions One ((Exports and Reexports), Two (Parts and Components Reexports), and Three (Foreign-Produced Direct Product Reexports) (Sec. 736.2(b) (1), (2), and (3) of the EAR) are product controls that are shaped and limited by parameters specified on the CCL and Country Chart. General Prohibitions Four through Ten are prohibitions on certain activities that are not allowed without authorization from BXA, and these prohibitions apply to all items subject to the EAR unless otherwise specified (Sec. 736.2(b) (4) through (10) of the EAR). (b) Step 7: Classification. (1) You should classify your items in the relevant entry on the CCL, and you may do so on your own without the assistance of BXA. You are responsible for doing so correctly, and your failure to correctly classify your items does not relieve you of the obligation to obtain a license when one is required by the EAR. (2) You have a right to request the applicable classification of your item from BXA, and BXA has a duty to provide that classification to you. For further information on how to obtain classification assistance from BXA, see part 748 of the EAR. (3) For items subject to the EAR but not listed on the CCL, the proper classification is EAR99. This number is a ``basket'' for items not specified under any CCL entry and appears at the end of each Category on the CCL. (c) Step 8: Country of ultimate destination. You should determine the country of ultimate destination. The country of destination determines the applicability of several general prohibitions, License Exceptions, and other requirements. Note that part 754 of the EAR concerning short supply controls is self-contained and is the only location in the EAR that contains both the prohibitions and exceptions applicable to short supply controls. (d) Step 9: Reason for control and the Country Chart. (1) Reason for control and column identifier within the Export Control Classification Number (ECCN). Once you have determined that your item is controlled by a specific ECCN, you must use information contained in the ``License Requirements'' section of that ECCN in combination with the Country Chart to decide whether a license is required under General Prohibitions One, Two, or Three to a particular destination. The CCL and the Country Chart are taken together to define these license requirements. The applicable ECCN will indicate the reason or reasons for control for items within that ECCN. For example, ECCN 6A007 is controlled for national security, missile technology, and anti- terrorism reasons. (2) Reason for control within the Country Chart. With each of the applicable Country Chart column identifiers noted in the correct ECCN, turn to the Country Chart. Locate the correct Country Chart column identifier on the horizontal axis, and determine whether an ``X'' is marked in the cell next to the destination in question. Consult Sec. 738.4 of the EAR for comprehensive instructions on using the Country Chart and a detailed example. (i) An ``X'' in the cell or cells for the relevant country and reason(s) for control column indicates that a license is required for General Prohibitions One (Exports and Reexports in the Form Received), Two (Parts and Components Reexports), and Three (Foreign-Produced Direct Product Reexports). (See Sec. 736.2 (b)(1), (b)(2), and (b)(3) of the EAR). (ii) If one or more cells have an ``X'' in the relevant column, a license is required unless you qualify for a License Exception described in part 740 of the EAR. If a cell does not contain an ``X'' for your destination in one or more relevant columns, a license is not required under the CCL and the Country Chart. (iii) Additional controls may apply to your export. You must go on to steps 12 through 18 described in paragraphs (g) to (m) of this section to determine [[Page 12743]] whether additional limits described in General Prohibition Two (Parts and Components Reexports) and General Prohibition Three (Foreign- Produced Direct Product Reexports ) apply to your proposed transaction. If you are exporting an item from the United States, you should skip Step 10 and Step 11. Proceed directly to Step 12 in paragraph (g) of this section. (3) License requirements not on the Country Chart. There are two instances where the Country Chart cannot be used to determine if a license is required. Items controlled for short supply reasons are not governed by the Country Chart. Part 754 of the EAR contains license requirements and License Exceptions for items subject to short supply controls. A limited number of ECCNs contained on the CCL do not identify a Country Chart column identifier. In these instances, the ECCN states whether a license is required and for which destinations. See Sec. 738.3(a) of the EAR for a list of the ECCNs for which you do not need to consult the Country Chart to determine licensing requirements. (4) Destinations subject to embargo provisions. The Country Chart does not apply to Cuba, Iran, Iraq, Libya, and North Korea; and for those countries you should review the embargo provisions at part 746 of the EAR and may skip this step concerning the Country Chart. For Angola, Bosnia-Herzegovina, Croatia, Rwanda, and Serbia and Montenegro the Country Chart provides for certain license requirements, and part 746 of the EAR provides additional requirements. (5) Items subject to the EAR but not on the CCL. Items subject to the EAR that are not on the CCL are properly classified EAR99. For such items, you may skip this step and proceed directly with Step 12 in paragraph (g) of this section. (e) Step 10: Foreign-made items incorporating U.S.-origin items and the de minimis rule. (1) Parts and components rule. The following considerations are appropriate for items abroad and are the same steps necessary to determine whether a foreign-made item incorporating U.S. parts, components, or materials is subject to the EAR. If your foreign- made item is described in an entry on the CCL and the Country Chart requires a license to your export or reexport destination, you should determine whether the controlled U.S.-origin commodities, software, or technology incorporated into the foreign-made item exceeds the de minimis level applicable to the ultimate destination of the foreign- made item, as follows: (i) A 10% de minimis level to embargoed and terrorist-supporting countries; or (ii) A 25% de minimis level to all other countries. (2) Guidance for calculations. For guidance on how to calculate the U.S.-controlled content, refer to Supplement No. 2 to part 734 of the EAR. Note that certain rules issued by the Office of Foreign Assets Control, certain exports from abroad by U.S.-owned or controlled entities may be prohibited notwithstanding the de minimis provisions of the EAR. In addition, the de minimis exclusions from the parts and components rule do not relieve U.S. persons of the obligation to refrain from supporting the proliferation of weapons of mass- destruction and missiles as provided in General Prohibition Seven (U.S. Person Proliferation Activity) described in Sec. 736.2(b)(7) of the EAR. (f) Step 11: Foreign-produced direct product. The following considerations are appropriate for items abroad and are the same considerations necessary to determine whether a foreign-produced direct product is subject to the EAR under Step 6 in Sec. 732.2(f) of this part. (1) If your foreign-produced item is described in an entry on the CCL and the Country Chart requires a license to your export or reexport destination for national security reasons, you must determine whether your item is subject to General Prohibition Three (Foreign-Produced Direct Product Reexports) (Sec. 736.2(b)(3) of the EAR). Your item is subject to this general prohibition if your transaction meets each of the following conditions: (i) Country scope of prohibition. Your export or reexport destination for the direct product is Cuba, Libya, North Korea, or a destination in Country Group D:1 (see Supplement No. 1 to part 740 of the EAR) (reexports of foreign-produced direct products exported to other destinations are not subject to General Prohibition Three described in Sec. 736.2(b)(3) of the EAR); (ii) Scope of technology or software used to create direct products subject to the prohibition. Technology or software that was used to create the foreign-produced direct product, and such technology or software that was subject to the EAR and required a written assurance as a supporting document for a license or as a precondition for the use of License Exception TSR described Sec. 740.19 of the EAR (reexports of foreign-produced direct products created with other technology and software are not subject to General Prohibition Three); and (iii) Scope of direct products subject to the prohibition. The foreign-produced direct products are controlled for national security reasons indicated in an ECCN on the CCL (reexports of foreign-produced direct products not subject to national security controls are not subject to General Prohibition Three). (2) License Exceptions. Each License Exception described in part 740 of the EAR overcomes General Prohibition Three (Foreign-Produced Direct Product Reexports) if all terms and conditions of a given License Exception are met by the exporter or reexporter. (g) Step 12: Persons denied export privileges. (1) Determine whether your transferee, ultimate end-user, any intermediate consignee, or any other party to a transaction is a person denied export privileges. (See part 764 of the EAR). While it is not a violation of General Prohibition Four (Denial Orders) (Sec. 736.2(b)(4) of the EAR) to fail to check the Denied Persons List prior to a transfer, it is nonetheless a violation of the EAR to engage in any activity that violates the terms or conditions of a denial order. General Prohibition Four (Denial Orders) applies to all items subject to the EAR, i.e. both items on the CCL and within EAR99. (2) There are no License Exceptions to General Prohibition Four (Denial Orders). The prohibition concerning persons denied export privileges may be overcome only by a specific authorization from BXA, something that is rarely granted. (h) STEP 13: Prohibited end-uses and end-users. (1) Review the end- uses and end-users prohibited under General Prohibition Five (End-Use and End-User) (Sec. 736.2(b)(5) of the EAR) described in part 744 of the EAR. Part 744 of the EAR contains all the end-use and end-user license requirements, and those are in addition to the license requirements under General Prohibitions One (Exports and Reexports), Two (Parts and Components Reexports), and Three (Foreign-produced Direct Product Reexports). Unless otherwise indicated, the license requirements of General Prohibition Five (End-Use and End-User) described in part 744 of the EAR apply to all items subject to the EAR, i.e. both items on the CCL and within EAR99. Moreover, the requirements of General Prohibition Five (End-Use and End-User) are in addition to various end-use and end-user limitations placed on certain License Exceptions. (2) There are no License Exceptions to General Prohibition Five (End-Use and End-User) (Sec. 736.2(b)(5) of the EAR) described in part 740 of the EAR. (i) Step 14: Embargoed countries and special destinations. If your destination for any item is Bosnia-Herzegovina, [[Page 12744]] Croatia, Cuba, Iran, Iraq, Libya, North Korea, Rwanda, or Serbia and Montenegro, you must consider the requirements of part 746 of the EAR. Unless otherwise indicated, General Prohibition Six (Embargo) applies to all items subject to the EAR, i.e. both items on the CCL and within EAR99. You may not make an export or reexport contrary to the provisions of part 746 of the EAR without a license unless: (1) You are exporting or reexporting only publicly available technology or software or other items outside the scope of the EAR, or (2) You qualify for a License Exception referenced in part 746 of the EAR concerning embargoed destinations. You may not use a License Exception described in part 740 of the EAR to overcome General Prohibition Six (Embargo) (Sec. 736.2(b)(6) of the EAR) unless it is specifically authorized in part 746 of the EAR. Note that part 754 of the EAR concerning short supply controls is self-contained and is the only location in the EAR for both the prohibitions and exceptions applicable to short supply controls. (j) Step 15: Proliferation activity of U.S. persons unrelated to exports and reexports. (1) Review the scope of activity prohibited by General Prohibition Seven (U.S. Person Proliferation Activity) (Sec. 736.2(b)(7) of the EAR) as that activity is described in Sec. 744.6 of the EAR. Keep in mind that such activity is not limited to exports and reexports and is not limited to items subject to General Prohibition One (Exports and Reexports), Two (Parts and Components Reexports), and Three (Foreign-Produced Direct Product Reexports). Moreover, such activity extends to services and dealing in wholly foreign-origin items in support of the specified proliferation activity and is not limited to items listed on the CCL or included in EAR99. (2) Review the definition of U.S. Person in part 744 of the EAR. (k) Step 16: In-transit. Shippers and operators of vessels or aircraft should review General Prohibition Eight (In-Transit) to determine the countries in which you may not unladen or ship certain items in-transit. General Prohibition Eight applies to all items subject to the EAR, i.e. both items on the CCL and within EAR99. (l) Step 17: Review orders, terms, and conditions. Review the orders, terms, and conditions applicable to your transaction. General Prohibition Nine (Orders, Terms, and Conditions) prohibits the violation of any orders, terms, and conditions imposed under the EAR. Terms and conditions are frequently contained in licenses. In addition, the ten general prohibitions (part 736 of the EAR) and the License Exceptions (part 740 of the EAR) impose terms and conditions or limitations on your proposed transactions and use of License Exceptions. A given license or License Exception may not be used unless each relevant term or condition is met. (m) Step 18: Review the ``Know Your Customer'' Guidance and General Prohibition Ten (Knowledge Violation to Occur). License requirements under the EAR are determined solely by the classification, end-use, end-user, ultimate destination, and conduct of U.S. persons. Supplement No. 1 to part 732 of the EAR is intended to provide helpful guidance regarding the process for the evaluation of information about customers, end-uses, and end-users. General Prohibition Ten (Knowledge Violation to Occur) prohibits anyone from proceeding with a transaction with knowledge that a violation of the EAR has occurred or is about to occur. It also prohibits related shipping, financing, and other services. General Prohibition Ten applies to all items subject to the EAR, i.e. both items on the CCL and within EAR99. (n) Step 19: Complete the review of the general prohibitions. After completion of Steps described in this section and review of all ten general prohibitions in part 736 of the EAR, including cross-referenced regulations in the EAR, you will know which, if any, of the ten general prohibitions of the EAR apply to you and your contemplated transaction or activity. (1) If none of the ten general prohibitions is applicable to your export from the United States, no license from BXA is required, you do not need to qualify for a License Exception under part 740 of the EAR. You should skip the Steps in Sec. 732.4 of this part regarding License Exceptions and proceed directly to the Steps in Sec. 732.5 of this part regarding recordkeeping, clearing the U.S. Customs Service with the appropriate Shipper's Export Declaration, and using the required Destination Control Statement. (2) If none of the ten general prohibitions is applicable to your reexport or export from abroad, no license is required and you should skip all remaining Steps. (3) If one or more of the ten general prohibitions are applicable, continue with the remaining steps. Sec. 732.4 Steps regarding License Exceptions. (a) Introduction to Steps for License Exceptions. If your export or reexport is subject to the EAR and is subject to General Prohibitions One (Exports and Reexports), Two (Parts and Components Reexports), or Three (Foreign-Produced Direct Product Reexports), consider the steps listed in paragraph (b) of this section. If your export or reexport is subject to General Prohibitions Four (Denial Orders), Seven (U.S. Person Proliferation Activity), Eight (In-Transit), Nine (Orders, Terms, and Conditions), or Ten (Knowledge Violation to Occur), there are no License Exceptions available for your export or reexport. If your export is subject to General Prohibition Five (End-Use End-User), consult part 744 of the EAR. If your export or reexport is subject to General Prohibition Six (Embargo), consult part 746 of the EAR for applicable License Exceptions. (b) Steps for License Exceptions. (1) Step 20: Applicability of General Prohibitions. Determine whether any one or more of the general prohibitions described in Sec. 736.2(b) of the EAR apply to your export or reexport. If no general prohibition applies to your export or reexport, then you may proceed with your export or reexport and need not review part 740 of the EAR regarding License Exceptions. You are reminded of your recordkeeping obligations related to the clearance of the U.S. Customs Service provided in parts 762 and 758 of the EAR. (2) Step 21: Applicability of restrictions on all License Exceptions. Determine whether any one or more of the restrictions in Sec. 740.2 of the EAR applies to your export or reexport. If any one or more of these restrictions apply, there are no License Exceptions available to you, and you must either obtain a license or refrain from the export or reexport. (3) Step 22: Terms and conditions of the License Exceptions. (i) If none of the restrictions in Sec. 740.2 of the EAR applies, then review each of the License Exceptions to determine whether any one of them authorizes your export or reexport. Eligibility for License Exceptions is based on the item, the country of ultimate destination, the end-use, and the end-user, along with any special conditions imposed within a specific License Exception. (ii) You may meet the conditions for more than one License Exception. Moreover, although you may not qualify for some License Exceptions you may qualify for others. Review the broadest License Exceptions first, and use any License Exception available to you. You are not required to use the most restrictive applicable License Exception. If you fail to qualify for the License Exception that you first consider, you may consider any other License [[Page 12745]] Exception until you have determined that no License Exception is available. (iii) License Exception groupings TMP, RPL, BAG, AVS, GOV, and TSU authorize exports notwithstanding the provisions of the CCL. License Exceptions in the list-based grouping (LST) are available only to the extent specified on the CCL. Part 740 of the EAR provides authorization for reexports only to the extent each License Exception expressly authorizes reexports. License Exception APR authorizes reexports only. (4) Step 23: Scope of License Exceptions. Some License Exceptions are limited by country or by type of item. (i) Countries are arranged in country groups for ease of reference. For a listing of country groups, please refer to Supplement No. 1 to part 740 of the EAR. Unless otherwise indicated in a License Exception, License Exceptions do not apply to any exports or reexports to embargoed destinations. If your export or reexport is subject to General Prohibition Six (Embargo) for embargoed destinations, License Exceptions are only available to the extent specifically provided in part 746 of the EAR concerning embargoed destinations. (ii) Special commodity controls apply to short supply items. No License Exceptions described in part 740 of the EAR may be used for items listed on the CCL as controlled for Short Supply reasons. License Exceptions for short supply items are found in part 754 of the EAR. (5) Step 24: Compliance with all terms and conditions. If a License Exception is available, you may proceed with your export or reexport. However, you must meet all the terms and conditions required by the License Exception that you determined authorized your export or reexport. You must also consult part 758 and 762 of the EAR to determine your recordkeeping and documentation requirements. (6) Step 25: License requirements. If no License Exception is available, then you must either obtain a license before proceeding with your export or reexport or you must refrain from the proposed export or reexport. (7) Step 26: License applications. If you are going to file a license application with BXA, you should first review the requirements at part 748 of the EAR. Exporters, reexporters, and exporters from abroad should review the instructions concerning applications and required support documents prior to submitting an application for a license. Sec. 732.5 Steps regarding Shipper's Export Declaration, Destination Control Statements, record keeping, license applications, and other requirements. (a) Step 27--Shipper's Export Declaration. You should review Sec. 758.3 of the EAR to determine what notations you must enter on the Shipper's Export Declaration (SED). These steps should be reviewed by exporters. Reexporters and firms exporting from abroad may skip Steps 27 through 29 and proceed directly to Sec. 732.6 of this part. (1) NLR. The term ``NLR'' represents exports of listed items when no license is required. Such exports do not require that you qualify for a License Exception. The symbol ``NLR'' is required on the SED under two circumstances. First, NLR is the correct symbol when exporting an item subject to the EAR not listed on the CCL. Such items are classified EAR99. Secondly, certain items are listed on the CCL but do not require a license to all destinations under General Prohibitions One (Exports and Reexports in the Form Received), Two (Parts and Components Reexports), or Three (Foreign-Produced Direct Product Reexports) (Sec. 736.2 (b)(1), (b)(2), or (b)(3) of the EAR). Such items do not have an ``X'' in the appropriate cell on the Country Chart. If General Prohibitions Four through Ten (Sec. 736.2 (b)(4) of the EAR) through (b)(10) of the EAR) also do not apply, you must clear exports of such items by entering the symbol ``NLR'' in the appropriate place on the SED. (2) License Exception group symbol. You must enter on any required SED the letter code (e.g., LST, TMP) of the group of License Exceptions under which you are exporting. In the case of License Exceptions grouped under LST, the ECCN of the item being exported must also be entered when an SED is required. Please refer to Sec. 758.3 of the EAR for detailed information on use of SEDs. (3) License number. If you are exporting under a license, enter the license number on the SED as required by Sec. 758.3 of the EAR. (b) Step 28: Destination Control Statement. You are required to enter an appropriate Destination Control Statement (DCS) on commercial documents in accordance with the DCS requirements of Sec. 758.6 of the EAR. Exporters should review Sec. 758.6 of the EAR and use the DCS as required. Reexporters and exporters from abroad should review Sec. 752.6 for DCS requirements when using a Special Comprehensive License. Otherwise, DCS requirements do not apply to reexports and exports from abroad. (c) Step 29: Recordkeeping. Records of transactions involving exports under any license or License Exception must be maintained in accordance with the recordkeeping requirements of part 762 of the EAR. Sec. 732.6 Steps for other requirements. Sections 732.1 through 732.4 of this part are useful in determining the license requirements that apply to you. Other portions of the EAR impose other obligations and requirements. Some of them are: (a) Requirements relating to the use of a license in Sec. 758.2 of the EAR. (b) Obligations of carriers, forwarders, exporters and others to take specific steps and prepare and deliver certain documents to assure that items subject to the EAR are delivered to the destination to which they are licensed or authorized by a License Exception or some other provision of the regulations in Sec. 758.4 through Sec. 758.6 of the EAR. (c) Duty of carriers to return or unload shipments at the direction of U.S. Government officials (see Sec. 758.8 of the EAR). (d) Specific obligations imposed on parties to Special Comprehensive licenses in part 752 of the EAR. (e) Recordkeeping requirements imposed in part 762 of the EAR. (f) Requirements of part 764 of the EAR to disclose facts that may come to your attention after you file a license application or make other statements to the government concerning a transaction or proposed transaction that is subject to the EAR. (g) Certain obligations imposed by part 760 of the EAR on parties who receive requests to take actions related to foreign boycotts and prohibits certain actions relating to those boycotts. Supplement No. 1--BXA's ``Know Your Customer'' Guidance and Red Flags ``Know Your Customer'' Guidance Various requirements of the EAR are dependent upon a person's knowledge of the end-use, end-user, ultimate destination, or other facts relating to a transaction or activity. These provisions include the nonproliferation-related ``catch-all'' sections and the prohibition against proceeding with a transaction with knowledge that a violation of the EAR has occurred or is about to occur. (a) BXA provides the following guidance on how individuals and firms should act under this knowledge standard. This guidance does not change or interpret the EAR. (1) Decide whether there are ``red flags''. Take into account any abnormal circumstances in a transaction that indicate that the export may be destined for an inappropriate end-use, end-user, or destination. Such circumstances are referred to as ``red flags''. Included among examples [[Page 12746]] of red flags are orders for items that are inconsistent with the needs of the purchaser, a customer declining installation and testing when included in the sales price or when normally requested, or requests for equipment configurations that are incompatible with the stated destination (e.g., 120 volts in a country with 220 volts). Commerce has developed lists of such red flags that are not all-inclusive but are intended to illustrate the types of circumstances that should cause reasonable suspicion that a transaction will violate the EAR. (2) If there are ``red flags'', inquire. If there are no ``red flags'' in the information that comes to your firm, you should be able to proceed with a transaction in reliance on information you have received. That is, absent ``red flags'' (or an express requirement in the EAR), there is no affirmative duty upon exporters to inquire, verify, or otherwise ``go behind'' the customer's representations. However, when ``red flags'' are raised in information that comes to your firm, you have a duty to check out the suspicious circumstances and inquire about the end-use, end- user, or ultimate country of destination. The duty to check out ``red flags'' is not confined to the use of License Exceptions affected by the ``know'' or ``reason to know'' language in the EAR. Applicants for licenses are required by part 748 of the EAR to obtain documentary evidence concerning the transaction, and misrepresentation or concealment of material facts is prohibited, both in the licensing process and in all export control documents. You can rely upon representations from your customer and repeat them in the documents you file unless red flags oblige you to take verification steps. (3) Do not self-blind. Do not cut off the flow of information that comes to your firm in the normal course of business. For example, do not instruct the sales force to tell potential customers to refrain from discussing the actual end-use, end-user, and ultimate country of destination for the product your firm is seeking to sell. Do not put on blinders that prevent the learning of relevant information. An affirmative policy of steps to avoid ``bad'' information would not insulate a company from liability, and it would usually be considered an aggravating factor in an enforcement proceeding. (4) Employees need to know how to handle ``red flags''. Knowledge possessed by an employee of a company can be imputed to a firm so as to make it liable for a violation. This makes it important for firms to establish clear policies and effective compliance procedures to ensure that such knowledge about transactions can be evaluated by responsible senior officials. Failure to do so could be regarded as a form of self-blinding. (5) Reevaluate all the information after the inquiry. The purpose of this inquiry and reevaluation is to determine whether the ``red flags'' can be explained or justified. If they can, you may proceed with the transaction. If the ``red flags'' cannot be explained or justified and you proceed, you run the risk of having had ``knowledge'' that would make your action a violation of the EAR. (6) Refrain from the transaction or advise BXA and wait. If you continue to have reasons for concern after your inquiry, then you should either refrain from the transaction or submit all the relevant information to BXA in the form of an application for a validated license or in such other form as BXA may specify. (b) Industry has an important role to play in preventing exports and reexports contrary to the national security and foreign policy interests of the United States. BXA will continue to work in partnership with industry to make this front line of defense effective, while minimizing the regulatory burden on exporters. If you have any question about whether you have encountered a ``red flag'', you may contact the Office of Export Enforcement at 1-800- 424-2980 or the Office of Exporter Services at (202) 482-4532. Red Flags Possible indicators that an unlawful diversion might be planned by your customer include the following: 1. The customer or purchasing agent is reluctant to offer information about the end-use of a product. 2. The product's capabilities do not fit the buyer's line of business; for example, a small bakery places an order for several sophisticated lasers. 3. The product ordered is incompatible with the technical level of the country to which the product is being shipped. For example, semiconductor manufacturing equipment would be of little use in a country without an electronics industry. 4. The customer has little or no business background. 5. The customer is willing to pay cash for a very expensive item when the terms of the sale call for financing. 6. The customer is unfamiliar with the product's performance characteristics but still wants the product. 7. Routine installation, training or maintenance services are declined by the customer. 8. Delivery dates are vague, or deliveries are planned for out- of-the-way destinations. 9. A freight forwarding firm is listed as the product's final destination. 10. The shipping route is abnormal for the product and destination. 11. Packaging is inconsistent with the stated method of shipment or destination. 12. When questioned, the buyer is evasive or unclear about whether the purchased product is for domestic use, export or reexport. PART 734--SCOPE OF THE EXPORT ADMINISTRATION REGULATIONS Sec. 734.1 Introduction. 734.2 Important EAR terms and principles. 734.3 Items subject to the EAR. 734.4 De minimis U.S. content. 734.5 Activities of U.S. and foreign persons subject to the EAR. 734.6 Assistance available from BXA for determining licensing and other requirements. 734.7 Published information and software. 734.8 Information resulting from fundamental research. 734.9 Educational information. 734.10 Patent applications. 734.11 Government-sponsored research covered by contract controls. 734.12 Effect on foreign laws and regulations. Supplement No. 1 to Part 734--Questions and Answers--Technology and Software Subject to the EAR Supplement No. 2 to Part 734--Calculation of Values for DE MINIMIS Rules Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; E.O. 12924, 3 CFR, 1994 Comp., p. 917; Notice of August 15, 1995 (60 FR 42767, August 17, 1995). Sec. 734.1 Introduction. (a) In this part, references to the Export Administration Regulations (EAR) are references to 15 CFR chapter VII, subchapter C. This part describes the scope of the Export Administration Regulations (EAR) and explains certain key terms and principles used in the EAR. This part provides the rules you need to use to determine whether items and activities are subject to the EAR. This part is the first step in determining your obligations under the EAR. If your item or activity is not subject to the EAR, then you do not have any obligations under the EAR and you do not need to review other parts of the EAR. If you already know that your item or activity is subject to the EAR, you do not need to review this part and you can go on to review other parts of the EAR to determine your obligations. This part also describes certain key terms and principles used in the EAR. Specifically, it includes the following terms: ``subject to the EAR,'' ``items subject to the EAR,'' ``export,'' and ``reexport.'' These and other terms are also included in part 772 of the EAR, Definitions of Terms, and you should consult part 772 of the EAR for the meaning of terms used in the EAR. Finally, this part makes clear that compliance with the EAR does not relieve any obligations imposed under foreign laws. (b) This part does not address any of the provisions set forth in part 760 of the EAR, Restrictive Trade Practices or Boycotts. (c) This part does not define the scope of legal authority to regulate exports, including reexports, or activities found in the Export Administration Act and other statutes. What this part does do is set forth the extent to which such legal authority has been exercised through the EAR. Sec. 734.2 Important EAR terms and principles. (a) Subject to the EAR--Definition. (1) ``Subject to the EAR'' is a term used in the EAR to describe those items and [[Page 12747]] activities over which BXA exercises regulatory jurisdiction under the EAR. Conversely, items and activities that are not subject to the EAR are outside the regulatory jurisdiction of the EAR and are not affected by these regulations. The items and activities subject to the EAR are described in Sec. 734.2 through Sec. 734.5 of this part. You should review the Commerce Control List (CCL) and any applicable parts of the EAR to determine whether an item or activity is subject to the EAR. However, if you need help in determining whether an item or activity is subject to the EAR, see Sec. 734.6 of this part. Publicly available technology and software not subject to the EAR are described in Sec. 734.7 through Sec. 734.11 and Supplement No. 1 to this part. (2) Items and activities subject to the EAR may also be controlled under export-related programs administered by other agencies. Items and activities subject to the EAR are not necessarily exempted from the control programs of other agencies. Although BXA and other agencies that maintain controls for national security and foreign policy reasons try to minimize overlapping jurisdiction, you should be aware that in some instances you may have to comply with more than one regulatory program. (3) The term ``subject to the EAR'' should not be confused with licensing or other requirements imposed in other parts of the EAR. Just because an item or activity is subject to the EAR does not mean that a license or other requirement automatically applies. A license or other requirement applies only in those cases where other parts of the EAR impose a licensing or other requirement on such items or activities. (b) Export and reexport. (1) Definition of export. ``Export'' means an actual shipment or transmission of items subject to the EAR out of the United States; or release of technology or software subject to the EAR to a foreign national in the United States, as described in paragraph (b)(2)(ii) of this section. See part 772 of the EAR for the definition that applies to exports of satellites subject to the EAR. (2) Export of technology or software. ``Export'' of technology or software includes: (i) Any release of technology or software subject to the EAR in a foreign country; or (ii) Any release of technology or source code subject to the EAR to a foreign national. Such release is deemed to be an export to the home country or countries of the foreign national. This deemed export rule does not apply to persons lawfully admitted for permanent residence in the United States and does not apply to persons who are protected individuals under the Immigration and Naturalization Act (8 U.S.C. 1324b(a)(3)). Note that the release of any item to any party with knowledge a violation is about to occur is prohibited by Sec. 736.2(b)(10) of the EAR. (3) Definition of ``release'' of technology or software. Technology or software is ``released'' for export through: (i) Visual inspection by foreign nationals of U.S.-origin equipment and facilities; (ii) Oral exchanges of information in the United States or abroad; or (iii) The application to situations abroad of personal knowledge or technical experience acquired in the United States. (4) Definition of reexport. ``Reexport'' means an actual shipment or transmission of items subject to the EAR from one foreign country to another foreign country; or release of technology or software subject to the EAR to a foreign national outside the United States, as described in paragraph (b)(5) of this section. See part 772 of the EAR for the definition that applies to reexports of satellites subject to the EAR. (5) Reexport of technology or software. Any release of technology or source code subject to the EAR to a foreign national of another country is a deemed reexport to the home country or countries of the foreign national. However, this deemed reexport definition does not apply to persons lawfully admitted for permanent residence. The term ``release'' is defined in paragraph (b)(3) of this section. Note that the release of any item to any party with knowledge or reason to know a violation is about to occur is prohibited by Sec. 736.2(b)(10) of the EAR. (6) For purposes of the EAR, the export or reexport of items subject to the EAR that will transit through a country or countries or be transshipped in a country or countries to a new country or are intended for reexport to the new country, are deemed to be exports to the new country. (7) If a territory, possession, or department of a foreign country is not listed on the Country Chart in Supplement No. 1 to part 738 of the EAR, the export or reexport of items subject to the EAR to such destination is deemed under the EAR to be an export to the foreign country. For example, a shipment to the Cayman Islands, a dependent territory of the United Kingdom, is deemed to be a shipment to the United Kingdom. (8) Export or reexport of items subject to the EAR does not include shipments among any of the states of the United States, the Commonwealth of Puerto Rico, or the Commonwealth of the Northern Mariana Islands or any territory, dependency, or possession of the United States. These destinations are listed in Schedules C & E, Classification of Country and Territory Designations for U.S. Export Statistics, issued by the Bureau of the Census. Sec. 734.3 Items subject to the EAR. (a) Except for items excluded in paragraph (b) of this section, the following items are subject to the EAR: (1) All items in the United States, including in a U.S. Foreign Trade Zone or moving intransit through the United States from one foreign country to another; (2) All U.S. origin items wherever located; (3) U.S. origin parts, components, materials or other commodities incorporated abroad into foreign-made products, U.S. origin software commingled with foreign software, and U.S. origin technology commingled with foreign technology, in quantities exceeding de minimis levels as described in Sec. 734.4 and Supplement No. 2 of this part; (4) Certain foreign-made direct products of U.S. origin technology or software, as described in Sec. 736.2(b)(3) of the EAR. The term ``direct product'' means the immediate product (including processes and services) produced directly by the use of technology or software; and (5) Certain commodities produced by any plant or major component of a plant located outside the United States that is a direct product of U.S.-origin technology or software, as described in Sec. 736.2(b)(3) of the EAR. (b) The following items are not subject to the EAR: (1) Items that are exclusively controlled for export or reexport by the following departments and agencies of the U.S. Government which regulate exports or reexports for national security or foreign policy purposes: (i) Department of State. The International Traffic in Arms Regulations (22 CFR part 121) administered by the Office of Defense Trade Controls relate to defense articles and defense services on the U.S. Munitions List. Section 38 of the Arms Export Control Act (22 U.S.C. 2778). (ii) Treasury Department, Office of Foreign Assets Control (OFAC). Regulations administered by OFAC implement broad controls and embargo transactions with certain foreign countries. These regulations include controls on exports and reexports to [[Page 12748]] certain countries (31 CFR chapter V). Trading with the Enemy Act (50 U.S.C. app. section 1 et seq.), and International Emergency Economic Powers Act (50 U.S.C. 1701, et seq.) (iii) U.S. Nuclear Regulatory Commission (NRC). Regulations administered by NRC control the export and reexport of commodities related to nuclear reactor vessels (10 CFR part 110). Atomic Energy Act of 1954, as amended (42 U.S.C. part 2011 et seq.). (iv) Department of Energy (DOE). Regulations administered by DOE control the export and reexport of technology related to the production of special nuclear materials (10 CFR part 810). Atomic Energy Act of 1954, as amended (42 U.S.C. section 2011 et seq.). (v) Patent and Trademark Office (PTO). Regulations administered by PTO provide for the export to a foreign country of unclassified technology in the form of a patent application or an amendment, modification, or supplement thereto or division thereof (37 CFR part 5). BXA has delegated authority under the Export Administration Act to the PTO to approve exports and reexports of such technology which is subject to the EAR. Exports and reexports of such technology not approved under PTO regulations must comply with the EAR. (2) Prerecorded phonograph records reproducing in whole or in part, the content of printed books, pamphlets, and miscellaneous publications, including newspapers and periodicals; printed books, pamphlets, and miscellaneous publications including bound newspapers and periodicals; children's picture and painting books; newspaper and periodicals, unbound, excluding waste; music books; sheet music; calendars and calendar blocks, paper; maps, hydrographical charts, atlases, gazetteers, globe covers, and globes (terrestrial and celestial); exposed and developed microfilm reproducing, in whole or in part, the content of any of the above; exposed and developed motion picture film and soundtrack; and advertising printed matter exclusively related thereto. (3) Publicly available technology and software that: (i) Are already published or will be published as described in Sec. 734.7 of this part; (ii) Arise during, or result from, fundamental research, as described in Sec. 734.8 of this part; (iii) Are educational, as described in Sec. 734.9 of this part; or (iv) Are included in certain patent applications, as described in Sec. 734.10 of this part. (4) Foreign made items that have de minimis U.S. content based on the principles described in Sec. 734.4 of this part. (c) ``Items subject to the EAR'' consist of the items listed on the Commerce Control List (CCL) in part 774 of the EAR and all other items which meet the definition of that term. For ease of reference and classification purposes, items subject to the EAR which are not listed on the CCL are designated as ``EAR99.'' Sec. 734.4 De minimis U.S. content. (a) There is no de minimis level for the export from a foreign country of a foreign-made computer exceeding 7000 MTOPS containing U.S.-origin controlled semiconductors (other than memory circuits) classified under ECCN 3A001 or high speed interconnect devices (ECCN 4A003.g) to Computer Tier 3 and 4 countries described in Sec. 742.12 of the EAR. (b) Except as provided in paragraph (a) of this section for certain computers, for embargoed countries in part 746 of the EAR, and for countries named as terrorist-supporting countries in part 744 of the EAR, the following are not subject to the EAR: (1) Reexports of a foreign-made commodity incorporating controlled U.S.-origin commodities valued at 10% or less of the total value of the foreign-made commodity; (2) Reexports of foreign-made software incorporating controlled U.S.-origin software valued at 10% or less of the total value of the foreign-made software; or (3) Reexports of foreign technology commingled with or drawn from controlled U.S. origin technology valued at 10% or less of the total value of the foreign technology. (c) Except as provided in paragraph (a) of this section for certain computers, for all other countries not included in paragraph (b) of this section, the following are not subject to the EAR: (1) Reexports of a foreign-made commodity incorporating controlled U.S.-origin commodities valued at 25% or less of the total value of the foreign-made commodity; (2) Reexports of foreign-made software incorporating controlled U.S.-origin software valued at 25% or less of the total value of the foreign-made software; or (3) Reexports of foreign technology commingled with or drawn from controlled U.S.-origin technology valued at 25% or less of the total value of the foreign technology. (d) For purposes of determining de minimis levels, technology and source code used to design or produce foreign-made commodities or software are not considered to be incorporated into such foreign-made commodities or software. Commodities subject only to short supply controls are not included in calculating U.S. content. (e) You are responsible for making the necessary calculations to determine whether the de minimis provisions apply to your situation. See Supplement No. 2 to part 734 for guidance regarding calculation of U.S. controlled content. (f) See Sec. 770.3 of the EAR for principles that apply to commingled U.S.-origin technology and software. Sec. 734.5 Activities of U.S. and foreign persons subject to the EAR. The following kinds of activities are subject to the EAR: (a) Certain activities of U.S. persons related to the proliferation of chemical or biological weapons or of missile technology as described in Sec. 744.6 of the EAR. (b) Activities of U.S. or foreign persons prohibited by any order issued under the EAR, including a Denial Order issued pursuant to part 766 of the EAR. Sec. 734.6 Assistance available from BXA for determining licensing and other requirements. (a) If you are not sure whether a commodity, software, technology, or activity is subject to the EAR, or is subject to licensing or other requirements under the EAR, you may ask BXA for an advisory opinion, classification, or a determination whether a particular item or activity is subject to the EAR. In many instances, including those where the item is specially designed, developed, configured, adapted, or modified for military application, the item may fall under the licensing jurisdiction of the Department of State and may be subject to the controls of the International Traffic in Arms Regulations (22 CFR parts 120 through 130) (ITAR). In order to determine if the Department of State has licensing jurisdiction over an item, you should submit a request for a commodity jurisdiction determination to the Department of State, Office of Defense Trade Controls. Exporters should note that in a very limited number of cases, the categories of items may be subject to both the ITAR and the EAR. The relevant departments are working to eliminate any unnecessary overlaps that may exist. (b) As the agency responsible for administering the EAR, BXA is the only agency that has the responsibility for determining whether an item or activity [[Page 12749]] is subject to the EAR and, if so, what licensing or other requirements apply under the EAR. Such a determination only affects EAR requirements, and does not affect the applicability of any other regulatory programs. (c) If you need help in determining BXA licensing or other requirements you may ask BXA for help by following the procedures described in Sec. 748.3 of the EAR. Sec. 734.7 Published information and software. (a) Information is ``published'' when it becomes generally accessible to the interested public in any form, including: (1) Publication in periodicals, books, print, electronic, or any other media available for general distribution to any member of the public or to a community of persons interested in the subject matter, such as those in a scientific or engineering discipline, either free or at a price that does not exceed the cost of reproduction and distribution (See Supplement No. 1 to this part, Questions A(1) through A(6)); (2) Ready availability at libraries open to the public or at university libraries (See Supplement No. 1 to this part, Question A(6)); (3) Patents and open (published) patent applications available at any patent office; and (4) Release at an open conference, meeting, seminar, trade show, or other open gathering. (i) A conference or gathering is ``open'' if all technically qualified members of the public are eligible to attend and attendees are permitted to take notes or otherwise make a personal record (not necessarily a recording) of the proceedings and presentations. (ii) All technically qualified members of the public may be considered eligible to attend a conference or other gathering notwithstanding a registration fee reasonably related to cost and reflecting an intention that all interested and technically qualified persons be able to attend, or a limitation on actual attendance, as long as attendees either are the first who have applied or are selected on the basis of relevant scientific or technical competence, experience, or responsibility (See Supplement No. 1 to this part, Questions B(1) through B(6)). (iii) ``Publication'' includes submission of papers to domestic or foreign editors or reviewers of journals, or to organizers of open conferences or other open gatherings, with the understanding that the papers will be made publicly available if favorably received. (See Supplement No. 1 to this part, Questions A(1) and A(3)). (b) Software and information is published when it is available for general distribution either for free or at a price that does not exceed the cost of reproduction and distribution. See Supplement No. 1 to this part, Questions G(1) through G(3). Sec. 734.8 Information resulting from fundamental research. (a) Fundamental research. Paragraphs (b) through (d) of this section and Sec. 734.11 of this part provide specific rules that will be used to determine whether research in particular institutional contexts qualifies as ``fundamental research''. The intent behind these rules is to identify as ``fundamental research'' basic and applied research in science and engineering, where the resulting information is ordinarily published and shared broadly within the scientific community. Such research can be distinguished from proprietary research and from industrial development, design, production, and product utilization, the results of which ordinarily are restricted for proprietary reasons or specific national security reasons as defined in Sec. 732.10 of this part. (See Supplement No. 1 to this part, Question D(8)). (b) University based research. (1) Research conducted by scientists, engineers, or students at a university normally will be considered fundamental research, as described in paragraphs (b) (2) through (6) of this section. (``University'' means any accredited institution of higher education located in the United States.) (2) Prepublication review by a sponsor of university research solely to insure that the publication would not inadvertently divulge proprietary information that the sponsor has furnished to the researchers does not change the status of the research as fundamental research. However, release of information from a corporate sponsor to university researchers where the research results are subject to prepublication review, is subject to the EAR. (See Supplement No. 1 to this part, Questions D(7), D(9), and D(10).) (3) Prepublication review by a sponsor of university research solely to ensure that publication would not compromise patent rights does not change the status of fundamental research, so long as the review causes no more than a temporary delay in publication of the research results. (4) The initial transfer of information from an industry sponsor to university researchers is subject to the EAR where the parties have agreed that the sponsor may withhold from publication some or all of the information so provided. (See Supplement No. 1 to this part, Question D(2).) (5) University based research is not considered ``fundamental research'' if the university or its researchers accept (at the request, for example, of an industrial sponsor) other restrictions on publication of scientific and technical information resulting from the project or activity. Scientific and technical information resulting from the research will nonetheless qualify as fundamental research once all such restrictions have expired or have been removed. (See Supplement No. 1 to this part, Question D(7) and D(9).) (6) The provisions of Sec. 734.11 of this part will apply if a university or its researchers accept specific national security controls (as defined in Sec. 732.11 of this part) on a research project or activity sponsored by the U.S. Government. (See Supplement No. 1 to this part, Questions E(1) and E(2).) (c) Research based at Federal agencies or FFRDCs. Research conducted by scientists or engineers working for a Federal agency or a Federally Funded Research and Development Center (FFRDC) may be designated as ``fundamental research'' within any appropriate system devised by the agency or the FFRDC to control the release of information by such scientists and engineers. (See Supplement No. 1 to this part, Questions D(8) and D(11).) (d) Corporate research. (1) Research conducted by scientists or engineers working for a business entity will be considered ``fundamental research'' at such time and to the extent that the researchers are free to make scientific and technical information resulting from the research publicly available without restriction or delay based on proprietary concerns or specific national security controls as defined in Sec. 734.11 of this part. (2) Prepublication review by the company solely to ensure that the publication would compromise no proprietary information provided by the company to the researchers is not considered to be a proprietary restriction under paragraph (d)(1) of this section. However, paragraph (d)(1) of this section does not authorize the release of information to university researchers where the research results are subject to prepublication review. (See Supplement No. 1 to this part, Questions D(8), D(9), and D(10).) (3) Prepublication review by the company solely to ensure that prepublication would compromise no patent rights will not be considered a proprietary restriction for this purpose, so long as the review causes no more [[Page 12750]] than a temporary delay in publication of the research results. (4) However, the initial transfer of information from a business entity to researchers is not authorized under the ``fundamental research'' provision where the parties have agreed that the business entity may withhold from publication some or all of the information so provided. (e) Research based elsewhere. Research conducted by scientists or engineers who are not working for any of the institutions described in paragraphs (b) through (d) of this section will be treated as corporate research, as described in paragraph (d) of this section. (See Supplement No. 1 to this part, Question D(8).) Sec. 734.9 Educational information. ``Educational information'' referred to in Sec. 734.3(b)(3)(iii) of this part is not subject to the EAR if it is released by instruction in catalog courses and associated teaching laboratories of academic institutions. Dissertation research is discussed in Sec. 734.8(b) of this part. (See Supplement No. 1 to this part, Question C(1) through C(6).) Sec. 734.10 Patent applications. The information referred to in Sec. 734.3(b)(3)(iv) of this part is: (a) Information contained in a patent application prepared wholly from foreign-origin technical data where the application is being sent to the foreign inventor to be executed and returned to the United States for subsequent filing in the U.S. Patent and Trademark Office; (b) Information contained in a patent application, or an amendment, modification, supplement or division of an application, and authorized for filing in a foreign country in accordance with the regulations of the Patent and Trademark Office, 37 CFR part 5; <SUP>1 or \1\ Regulations issued by the Patent and Trademark Office in 37 CFR part 5 provide for the export to a foreign country of unclassified technical data in the form of a patent application or an amendment, modification, or supplement thereto or division thereof. --------------------------------------------------------------------------- (c) Information contained in a patent application when sent to a foreign country before or within six months after the filing of a United States patent application for the purpose of obtaining the signature of an inventor who was in the United States when the invention was made or who is a co-inventor with a person residing in the United States. Sec. 734.11 Government-sponsored research covered by contract controls. (a) If research is funded by the U.S. Government, and specific national security controls are agreed on to protect information resulting from the research, Sec. 734.3(b)(3) of this part will not apply to any export or reexport of such information in violation of such controls. However, any export or reexport of information resulting from the research that is consistent with the specific controls may nonetheless be made under this provision. (b) Examples of ``specific national security controls'' include requirements for prepublication review by the Government, with right to withhold permission for publication; restrictions on prepublication dissemination of information to non-U.S. citizens or other categories of persons; or restrictions on participation of non-U.S. citizens or other categories of persons in the research. A general reference to one or more export control laws or regulations or a general reminder that the Government retains the right to classify is not a ``specific national security control''. (See Supplement No. 1 to this part, Questions E(1) and E(2).) Sec. 734.12 Effect on foreign laws and regulations. Any person who complies with any of the license or other requirements of the EAR is not relieved of the responsibility of complying with applicable foreign laws and regulations. Conversely, any person who complies with the license or other requirements of a foreign law or regulation is not relieved of the responsibility of complying with U.S. laws and regulations, including the EAR. Supplement No. 1 to Part 734--Questions and Answers--Technology and Software Subject to the EAR This Supplement No. 1 contains explanatory questions and answers relating to technology and software that is subject to the EAR. It is intended to give the public guidance in understanding how BXA interprets this part, but is only illustrative, not comprehensive. In addition, facts or circumstances that differ in any material way from those set forth in the questions or answers will be considered under the applicable provisions of the EAR. This Supplement is divided into nine sections according to topic as follows: Section A: Publication of technology and exports and reexports of technology that has been or will be published. Section B: Release of technology at conferences. Section C: Educational instruction. Section D: Research, correspondence, and informal scientific exchanges. Section E: Federal contract controls. Section F: Commercial consulting. Section G: Software. Section H: Availability in a public library. Section I: Miscellaneous. Section A: Publication Question A(1): I plan to publish in a foreign journal a scientific paper describing the results of my research, which is in an area listed in the EAR as requiring a license to all countries except Canada. Do I need a license to send a copy to my publisher abroad? Answer: No. This export transaction is not subject to the EAR. The EAR do not cover technology that is already publicly available, as well as technology that is made public by the transaction in question (Secs. 734.3 and 734.7 of this part). Your research results would be made public by the planned publication. You would not need a license. Question A(2): Would the answer differ depending on where I work or where I performed the research? Answer: No. Of course, the result would be different if your employer or another sponsor of your research imposed restrictions on its publication (Sec. 734.8 of this part). Question (A)3: Would I need a license to send the paper to the editors of a foreign journal for review to determine whether it will be accepted for publication? Answer: No. This export transaction is not subject to the EAR because you are submitting the paper to the editors with the intention that the paper will be published if favorably received (Sec. 734.7(a)(4)(iii) of this part). Question A(4): The research on which I will be reporting in my paper is supported by a grant from the Department of Energy (DOE). The grant requires prepublication clearance by DOE. Does that make any difference under the Export Administration Regulations? Answer: No, the transaction is not subject to the EAR. But if you published in violation of any Department of Energy controls you have accepted in the grant, you may be subject to appropriate administrative, civil, or criminal sanctions under other laws. Question A(5): We provide consulting services on the design, layout, and construction of integrated circuit plants and production lines. A major part of our business is the publication for sale to clients of detailed handbooks and reference manuals on key aspects on the design and manufacturing processes. A typical cost of publishing such a handbook and manual might be $500; the typical sales price is about $15,000. Is the publication and sale of such handbooks or manuals subject to the EAR? Answer: Yes. The price is above the cost of reproduction and distribution (Sec. 734.7(a)(1) of this part). Thus, you would need to obtain a license or qualify for a License Exception before you could export or reexport any of these handbooks or manuals. Question A(6): My Ph.D. thesis is on technology, listed in the EAR as requiring a license to all destinations except Canada, which has never been published for general distribution. However, the thesis is available at the institution from which I took the degree. Do I need a license to send another copy to a colleague overseas? Answer: That may depend on where in the institution it is available. If it is not readily available in the university library (e.g., by filing in open stacks with a reference in the [[Page 12751]] catalog), it is not ``publicly available'' and the export or reexport would be subject to the EAR on that ground. The export or reexport would not be subject to the EAR if your Ph.D. research qualified as ``fundamental research'' under Sec. 734.8 of this part. If not, however, you will need to obtain a license or qualify for a License Exception before you can send a copy out of the country. Question A(7): We sell electronically recorded information, including software and databases, at wholesale and retail. Our products are available by mail order to any member of the public, though intended for specialists in various fields. They are priced to maximize sales to persons in those fields. Do we need a license to sell our products to foreign customers? Answer: You would not need a license for otherwise controlled technology or software if the technology and software are made publicly available at a price that does not exceed the cost of production and distribution to the technical community. Even if priced at a higher level, the export or reexport of the technology or software source code in a library accessible to the public is not subject to the EAR (Sec. 734.7(a) of this part). Section B: Conferences Question B(1): I have been invited to give a paper at a prestigious international scientific conference on a subject listed as requiring a license under the EAR to all countries, except Canada. Scientists in the field are given an opportunity to submit applications to attend. Invitations are given to those judged to be the leading researchers in the field, and attendance is by invitation only. Attendees will be free to take notes, but not make electronic or verbatim recordings of the presentations or discussions. Some of the attendees will be foreigners. Do I need a license to give my paper? Answer: No. Release of information at an open conference and information that has been released at an open conference is not subject to the EAR. The conference you describe fits the definition of an open conference (Sec. 734.7(d) of this part). Question B(2): Would it make any difference if there were a prohibition on making any notes or other personal record of what transpires at the conference? Answer: Yes. To qualify as an ``open'' conference, attendees must be permitted to take notes or otherwise make a personal record (although not necessarily a recording). If note taking or the making of personal records is altogether prohibited, the conference would not be considered ``open''. Question B(3): Would it make any difference if there were also a registration fee? Answer: That would depend on whether the fee is reasonably related to costs and reflects an intention that all interested and technically qualified persons should be able to attend (Sec. 734.7(d)(4)(ii) of this part). Question B(4): Would it make any difference if the conference were to take place in another country? Answer: No. Question B(5): Must I have a license to send the paper I propose to present at such a foreign conference to the conference organizer for review? Answer: No. A license is not required under the EAR to submit papers to foreign organizers of open conferences or other open gatherings with the intention that the papers will be delivered at the conference, and so made publicly available, if favorably received. The submission of the papers is not subject to the EAR (Sec. 734.7(d)(4)(iii) of this part). Question B(6): Would the answers to any of the foregoing questions be different if my work were supported by the Federal Government? Answer: No. You may export and reexport the papers, even if the release of the paper violates any agreements you have made with your government sponsor. However, nothing in the EAR relieves you of responsibility for conforming to any controls you have agreed to in your Federal grant or contract. Section C: Educational Instruction Question C(1): I teach a university graduate course on design and manufacture of very high-speed integrated circuitry. Many of the students are foreigners. Do I need a license to teach this course? Answer: No. Release of information by instruction in catalog courses and associated teaching laboratories of academic institutions is not subject to the EAR (Sec. 734.9 of this part). Question C(2): Would it make any difference if some of the students were from countries to which export licenses are required? Answer: No. Question C(3): Would it make any difference if I talk about recent and as yet unpublished results from my laboratory research? Answer: No. Question C(4): Even if that research is funded by the Government? Answer: Even then, but you would not be released from any separate obligations you have accepted in your grant or contract. Question C(5): Would it make any difference if I were teaching at a foreign university? Answer: No. Question C(6): We teach proprietary courses on design and manufacture of high-performance machine tools. Is the instruction in our classes subject to the EAR? Answer: Yes. That instruction would not qualify as ``release of educational information'' under Sec. 734.9 of this part because your proprietary business does not qualify as an ``academic institution'' within the meaning of Sec. 734.9 of this part. Conceivably, however, the instruction might qualify as ``release at an open * * * seminar, * * * or other open gathering'' under Sec. 734.7(d) of this part. The conditions for qualification of such a seminar or gathering as ``open'', including a fee ``reasonably related to costs (of the conference, not of producing the data) and reflecting an intention that all interested and technically qualified persons be able to attend,'' would have to be satisfied. Section D: Research, Correspondence, and Informal Scientific Exchanges Question D(1): Do I need a license in order for a foreign graduate student to work in my laboratory? Answer: Not if the research on which the foreign student is working qualifies as ``fundamental research'' under Sec. 734.8 of this part. In that case, the research is not subject to the EAR. Question D(2): Our company has entered into a cooperative research arrangement with a research group at a university. One of the researchers in that group is a PRC national. We would like to share some of our proprietary information with the university research group. We have no way of guaranteeing that this information will not get into the hands of the PRC scientist. Do we need to obtain a license to protect against that possibility? Answer: No. The EAR do not cover the disclosure of information to any scientists, engineers, or students at a U.S. university in the course of industry-university research collaboration under specific arrangements between the firm and the university, provided these arrangements do not permit the sponsor to withhold from publication any of the information that he provides to the researchers. However, if your company and the researchers have agreed to a prohibition on publication, then you must obtain a license or qualify for a License Exception before transferring the information to the university. It is important that you as the corporate sponsor and the university get together to discuss whether foreign nationals will have access to the information, so that you may obtain any necessary authorization prior to transferring the information to the research team. Question D(3): My university will host a prominent scientist from the PRC who is an expert on research in engineered ceramics and composite materials. Do I require a license before telling our visitor about my latest, as yet unpublished, research results in those fields? Answer: Probably not. If you performed your research at the university, and you were subject to no contract controls on release of the research, your research would qualify as ``fundamental research'' (Sec. 734.8(a) of this part). Information arising during or resulting from such research is not subject to the EAR (Sec. 734.3(b)(3) of this part). You should probably assume, however, that your visitor will be debriefed later about anything of potential military value he learns from you. If you are concerned that giving such information to him, even though permitted, could jeopardize U.S. security interests, the Commerce Department can put you in touch with appropriate Government scientists who can advise you. Write to Department of Commerce, Bureau of Export Administration, P.O. Box 273, Washington, DC 20044. Question D(4): Would it make any difference if I were proposing to talk with a PRC expert in China? Answer: No, if the information in question arose during or resulted from the same ``fundamental research.'' [[Page 12752]] Question D(5): Could I properly do some work with him in his research laboratory inside China? Answer: Application abroad of personal knowledge or technical experience acquired in the United States constitutes an export of that knowledge and experience, and such an export may be subject to the EAR. If any of the knowledge or experience you export in this way requires a license under the EAR, you must obtain such a license or qualify for a License Exception. Question D(6): I would like to correspond and share research results with an Iranian expert in my field, which deals with technology that requires a license to all destinations except Canada. Do I need a license to do so? Answer: Not as long as we are still talking about information that arose during or resulted from research that qualifies as ``fundamental'' under the rules spelled out in Sec. 734.8(a) of this part. Question D(7): Suppose the research in question were funded by a corporate sponsor and I had agreed to prepublication review of any paper arising from the research? Answer: Whether your research would still qualify as ``fundamental'' would depend on the nature and purpose of the prepublication review. If the review is intended solely to ensure that your publications will neither compromise patent rights nor inadvertently divulge proprietary information that the sponsor has furnished to you, the research could still qualify as ``fundamental.'' But if the sponsor will consider as part of its prepublication review whether it wants to hold your new research results as trade secrets or otherwise proprietary information (even if your voluntary cooperation would be needed for it to do so), your research would no longer qualify as ``fundamental.'' As used in these regulations it is the actual and intended openness of research results that primarily determines whether the research counts as ``fundamental'' and so is not subject to the EAR. Question D(8): In determining whether research is thus open and therefore counts as ``fundamental,'' does it matter where or in what sort of institution the research is performed? Answer: In principle, no. ``Fundamental research'' is performed in industry, Federal laboratories, or other types of institutions, as well as in universities. The regulations introduce some operational presumptions and procedures that can be used both by those subject to the regulations and by those who administer them to determine with some precision whether a particular research activity is covered. Recognizing that common and predictable norms operate in different types of institutions, the regulations use the institutional locus of the research as a starting point for these presumptions and procedures. Nonetheless, it remains the type of research, and particularly the intent and freedom to publish, that identifies ``fundamental research,'' not the institutional locus (Sec. 734.8(a) of this part). Question D(9): I am doing research on high-powered lasers in the central basic-research laboratory of an industrial corporation. I am required to submit the results of my research for prepublication review before I can publish them or otherwise make them public. I would like to compare research results with a scientific colleague from Vietnam and discuss the results of the research with her when she visits the United States. Do I need a license to do so? Answer: You probably do need a license (Sec. 734.8(d) of this part). However, if the only restriction on your publishing any of that information is a prepublication review solely to ensure that publication would compromise no patent rights or proprietary information provided by the company to the researcher your research may be considered ``fundamental research,'' in which case you may be able to share information because it is not subject to the EAR. Note that the information will be subject to the EAR if the prepublication review is intended to withhold the results of the research from publication. Question D(10): Suppose I have already cleared my company's review process and am free to publish all the information I intend to share with my colleague, though I have not yet published? Answer: If the clearance from your company means that you are free to make all the information publicly available without restriction or delay, the information is not subject to the EAR. (Sec. 734.8(d) of this part) Question D(11): I work as a researcher at a Government-owned, contractor-operated research center. May I share the results of my unpublished research with foreign nationals without concern for export controls under the EAR? Answer: That is up to the sponsoring agency and the center's management. If your research is designated ``fundamental research'' within any appropriate system devised by them to control release of information by scientists and engineers at the center, it will be treated as such by the Commerce Department, and the research will not be subject to the EAR. Otherwise, you would need to obtain a license or qualify for a License Exception, except to publish or otherwise make the information public (Sec. 734.8(c) of this part). Section E: Federal Contract Controls Question E(1): In a contract for performance of research entered into with the Department of Defense (DOD), we have agreed to certain national security controls. DOD is to have ninety days to review any papers we proposed before they are published and must approve assignment of any foreign nationals to the project. The work in question would otherwise qualify as ``fundamental research'' section under Sec. 734.8 of this part. Is the information arising during or resulting from this sponsored research subject to the EAR? Answer: Under Sec. 734.11 of this part, any export or reexport of information resulting from government-sponsored research that is inconsistent with contract controls you have agreed to will not qualify as ``fundamental research'' and any such export or reexport would be subject to the EAR. Any such export or reexport that is consistent with the controls will continue to be eligible for export and reexport under the ``fundamental research'' rule set forth in Sec. 734.8(a) of this part. Thus, if you abide by the specific controls you have agreed to, you need not be concerned about violating the EAR. If you violate those controls and export or reexport information as ``fundamental research'' under Sec. 734.8(a) of this part, you may subject yourself to the sanctions provided for under the EAR, including criminal sanctions, in addition to administrative and civil penalties for breach of contract under other law. Question E(2): Do the Export Administration Regulations restrict my ability to publish the results of my research? Answer: The Export Administration Regulations are not the means for enforcing the national security controls you have agreed to. If such a publication violates the contract, you would be subject to administrative, civil, and possible criminal penalties under other law. Section F: Commercial Consulting Question F(1): I am a professor at a U.S. university, with expertise in design and creation of submicron devices. I have been asked to be a consultant for a ``third-world'' company that wishes to manufacture such devices. Do I need a license to do so? Answer: Quite possibly you do. Application abroad of personal knowledge or technical experience acquired in the United States constitutes an export of that knowledge and experience that is subject to the Export Administration Regulations. If any part of the knowledge or experience your export or reexport deals with technology that requires a license under the EAR, you will need to obtain a license or qualify for a License Exception. Section G: Software <SUP>2 \2\ Exporters should note that these provisions do not apply to software controlled under the International Traffic in Arms Regulations (e.g., certain encryption software). --------------------------------------------------------------------------- Question G(1): Is the export or reexport of software in machine readable code subject to the EAR when the source code for such software is publicly available? Answer: If the source code of a software program is publicly available, then the machine readable code compiled from the source code is software that is publicly available and therefore not subject to the EAR. Question G(2): Is the export or reexport of software sold at a price that does not exceed the cost of reproduction and distribution subject to the EAR? Answer: Software in machine readable code is publicly available if it is available to a community at a price that does not exceed the cost of reproduction and distribution. Such reproduction and distribution costs may include variable and fixed allocations of overhead and normal profit for the reproduction and distribution functions either in your company or in a third party distribution system. In your company, such costs may not include recovery for development, design, or acquisition. In this case, the provider of the software does not receive a fee for the inherent value of the software. [[Page 12753]] Question G(3): Is the export or reexport of software subject to the EAR if it is sold at a price BXA concludes in a classification letter to be sufficiently low so as not to subject it to the EAR? Answer: In response to classification requests, BXA may choose to classify certain software as not subject to the EAR even though it is sold at a price above the costs of reproduction and distribution as long as the price is nonetheless sufficiently low to qualify for such a classification in the judgment of BXA. Section H: Available in a Public Library Question H(1): Is the export or reexport of information subject to the EAR if it is available in a library and sold through an electronic or print service? Answer: Electronic and print services for the distribution of information may be relatively expensive in the marketplace because of the value vendors add in retrieving and organizing information in a useful way. If such information is also available in a library-- itself accessible to the public--or has been published in any way, that information is ``publicly available'' for those reasons, and the information itself continues not to be subject to the EAR even though you access the information through an electronic or print service for which you or your employer pay a substantial fee. Question H(2): Is the export or reexport of information subject to the EAR if the information is available in an electronic form in a library at no charge to the library patron? Answer: Information available in an electronic form at no charge to the library patron in a library accessible to the public is information publicly available even though the library pays a substantial subscription fee for the electronic retrieval service. Question H(3): Is the export or reexport of information subject to the EAR if the information is available in a library and sold for more than the cost of reproduction and distribution? Answer: Information from books, magazines, dissertations, papers, electronic data bases, and other information available in a library that is accessible to the public is not subject to the EAR. This is true even if you purchase such a book at more than the cost of reproduction and distribution. In other words, such information is ``publicly available'' even though the author makes a profit on your particular purchase for the inherent value of the information. Section I: Miscellaneous Question I(1): The manufacturing plant that I work at is planning to begin admitting groups of the general public to tour the plant facilities. We are concerned that a license might be required if the tour groups include foreign nationals. Would such a tour constitute an export? If so, is the export subject to the EAR? Answer: The EAR define exports and reexports of technology to include release through visual inspection by foreign nationals of U.S.-origin equipment and facilities. Such an export or reexport qualifies under the ``publicly available'' provision and would not be subject to the EAR so long as the tour is truly open to all members of the public, including your competitors, and you do not charge a fee that is not reasonably related to the cost of conducting the tours. Otherwise, you will have to obtain a license, or qualify for a License Exception, prior to permitting foreign nationals to tour your facilities (Sec. 734.7 of this part). Question I(2): Is the export or reexport of information subject to the EAR if the information is not in a library or published, but sold at a price that does not exceed the cost of reproduction and distribution? Answer: Information that is not in a library accessible to the public and that has not been published in any way, may nonetheless become ``publicly available'' if you make it both available to a community of persons and if you sell it at no more than the cost of reproduction and distribution. Such reproduction and distribution costs may include variable and fixed cost allocations of overhead and normal profit for the reproduction and distribution functions either in your company or in a third party distribution system. In your company, such costs may not include recovery for development, design, or acquisition costs of the technology or software. The reason for this conclusion is that the provider of the information receives nothing for the inherent value of the information. Question I(3): Is the export or reexport of information contributed to an electronic bulletin board subject to the EAR? Answer: Assume each of the following: 1. Information is uploaded to an electronic bulletin board by a person that is the owner or originator of the information; 2. That person does not charge a fee to the bulletin board administrator or the subscribers of the bulletin board; and 3. The bulletin board is available for subscription to any subscriber in a given community regardless of the cost of subscription. Such information is ``publicly available'' and therefore not subject to the EAR even if it is not elsewhere published and is not in a library. The reason for this conclusion is that the bulletin board subscription charges or line charges are for distribution exclusively, and the provider of the information receives nothing for the inherent value of the information. Question I(4): Is the export or reexport of patented information fully disclosed on the public record subject to the EAR? Answer: Information to the extent it is disclosed on the patent record open to the public is not subject to the EAR even though you may use such information only after paying a fee in excess of the costs of reproduction and distribution. In this case the seller does receive a fee for the inherent value of the technical data; however, the export or reexport of the information is nonetheless not subject to the EAR because any person can obtain the technology from the public record and further disclose or publish the information. For that reason, it is impossible to impose export controls that deny access to the information. Supplement No. 2 to Part 734--Calculation of Values for De Minimis Rules (a) Use the following guidelines in determining values for establishing exemptions or for submission of a request for authorization: (1) U.S. content value. (i) U.S. content value is the delivered cost to the foreign manufacturer of the U.S. origin parts, components, or materials. (When affiliated firms have special arrangements that result in lower than normal pricing, the cost should reflect ``fair market'' prices that would normally be charged to similar, unaffiliated customers.) (ii) In calculating the U.S. content value, do not include parts, components, or materials that, according to the CCL (part 774 of the EAR) and the Country Chart (part 738 of the EAR), could be exported from the United States to the new country of destination without a license (designated as ``NLR'') or under License Exception GBS (see part 740 of the EAR). (2) The foreign-made product value is the normal selling price f.o.b. factory (excluding value added taxes or excise taxes). (3) To determine the value of the U.S.-origin controlled content, you should classify the U.S.-origin content on the Commerce Control List, determine those items that would require a license from BXA for reexport to the ultimate destination of the foreign- made product if such parts, components, or materials were reexported to that destination in the form received, and divide the total value of the controlled U.S. parts, components, and materials incorporated into the foreign-made item by the sale price of the foreign-made item. (4) If no U.S. parts, components or materials are incorporated or if the incorporated U.S. parts, components, and materials are below the de minimis level, then the foreign-made item is not subject to the EAR by reason of Sec. 734.4 of this part, the classification of a foreign-made item is irrelevant in determining the scope of the EAR, and you should skip Step 4 in Sec. 732.2(d) and go on to consider Step 6 in Sec. 732.2(f) of the EAR regarding the foreign-produced direct product rule. (b) One-time report prior to reliance upon the de minimis exclusion. (1) Report requirement. Before you may rely upon the de minimis exclusion for foreign software and technology commingled with U.S. software or technology, you must file a one-time report for the foreign software or technology. The report must include the percentage of U.S.-content by value and a description of your calculations including relevant values, assumptions, and the basis or methodologies for making the percentage calculation. The three criteria important to BXA in its review of your report will be the export price of the U.S.-content, the assumption regarding future sales of software, and the choice of the scope of foreign technology. Your methodologies must be based upon the accounting standards used in the operation of your business, and you must specify that standard in your report. Regardless of the accounting systems, [[Page 12754]] standard, or conventions you use in the operation of your business, you may not depreciate the fair market values reported or otherwise reduce the fair market values by other accounting conventions such as depreciation. You may rely upon the de minimis exclusion from the commingled rule only to the extent you have reported the relevant calculations, values, assumptions, and the basis or methodologies for the calculations. These values may be historic or projected. You may rely on projected values only to the extent that and for so long as they remain consistent with your report or future values reduce the U.S.-content under your reported assumptions, basis, and methodologies. You are not required to file the above report if you do not choose to take advantage of the de minimis exclusion from the commingled rule. (2) Export price. The report must include a description of the U.S.-content including its classification on the Commerce Control List, its performance characteristics and features, and the method of calculating its fair market value. The fair market value shall be the arms-length transaction price, if it is available. If an arms- length transaction price is unavailable, then the report will describe the valuation method chosen to calculate or derive the fair market value. Such methods may include comparable market prices or costs of production and distribution. This rule does not require calculations based upon any one accounting system or U.S. accounting standards. However, you must specify the accepted accounting standards you have chosen, and cost-based methods of valuation must be based upon records you maintain in the normal course of business. You should also indicate whether reported values are actual arms- length market prices or derived from comparable transactions or costs of production, overhead, and profit. For example, if you chose to make calculations under the transfer pricing rules of the United States Internal Revenue Code at section 482, your report should indicate that this is the source for your methodology, and you should also indicate which of the several methodologies in these transfer pricing rules you have chosen. (3) Future software sales. For calculations of U.S.-content in foreign software, you shall include your estimate of future software sales in units and value along with the rationale and basis for those estimates in the report. (4) Foreign technology and software. For calculations of U.S.- content in foreign technology and software, you shall include in the report a description of the foreign technology or software and a description of its fair market value along with the rationale and basis for the selection and valuation of such foreign software or technology. The report does not require information regarding destinations and end users for reexport. The purpose of the report is solely to permit the U.S. Government to evaluate the reasonableness of U.S.-content calculations. (5) Report and wait. If you have not been contacted by BXA concerning your report within thirty days after filing the report with BXA, you may rely upon the calculations in your report and the de minimis exclusions for software and technology for so long as you are not contacted by BXA. BXA may contact you concerning your report to inquire of you further or to indicate that BXA does not accept the assumptions or rationale for your calculations. If you receive such a contact or communication from BXA, you may not rely upon the de minimis exclusions for software and technology in Sec. 734.4 of this part until BXA has indicated whether or not you may do so in the future. You must include in your report the name, title, address, telephone number, and facsimile number of the person BXA may contact concerning your report. PART 736--GENERAL PROHIBITIONS Sec. 736.1 Introduction. 736.2 General prohibitions and determination of applicability. Supplement No. 1--General Orders Supplement No. 2--Administrative Orders Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; E.O. 12924, 3 CFR, 1994 Comp., p. 917; E.O. 12938, 3 CFR, 1994 Comp., p. 950; Notice of August 15, 1995 (60 FR 42767, August 17, 1995). Sec. 736.1 Introduction. In this part, references to the EAR are references to 15 CFR chapter VII, subchapter C. A person may undertake transactions subject to the EAR without a license or other authorization, unless the regulations affirmatively state such a requirement. As such, if an export, reexport, or activity is subject to the EAR, the general prohibitions contained in this part and the License Exceptions specified in part 740 of the EAR must be reviewed to determine if a license is necessary. In the case of all exports from the United States, you must document your export as described in part 762 of the EAR regarding recordkeeping and clear your export through the U.S. Customs Service as described in part 758 of the EAR regarding export clearance requirements. Also note that for short supply controls all prohibitions and License Exceptions are in part 754 of the EAR. (a) In this part we tell you: (1) The facts that make your proposed export, reexport, or conduct subject to these general prohibitions, and (2) The ten general prohibitions. (b) Your obligations under the ten general prohibitions and under the EAR depend in large part upon the five types of information described in Sec. 736.2(a) of this part and upon the general prohibitions described in Sec. 736.2(b) of this part. The ten general prohibitions contain cross-references to other parts of the EAR that further define the breadth of the general prohibitions. For that reason, this part is not freestanding. In part 732, we provide certain steps you may follow in proper order to help you understand the general prohibitions and their relationship to other parts of the EAR. (c) If you violate any of these ten general prohibitions, or engage in other conduct contrary to the Export Administration Act, the EAR, or any order, license, License Exception, or authorization issued thereunder, as described in part 764 of the EAR regarding enforcement, you will be subject to the sanctions described in that part. Sec. 736.2 General prohibitions and determination of applicability. (a) Information or facts that determine the applicability of the general prohibitions. The following five types of facts determine your obligations under the ten general prohibitions and the EAR generally: (1) Classification of the item. The classification of the item on the Commerce Control List (see part 774 of the EAR); (2) Destination. The country of ultimate destination for an export or reexport (see parts 738 and 774 of the EAR concerning the Country Chart and the Commerce Control List); (3) End-user. The ultimate end-user (see General Prohibition Four (paragraph (b)(4) of this section) and parts 744 and 764 of the EAR for a reference to the list of persons you may not deal with); (4) End-use. The ultimate end-use (see General Prohibition Five (paragraph (b)(5) of this section) and part 744 of the EAR for general end-use restrictions); and (5) Conduct. Conduct such as contracting, financing, and freight forwarding in support of a proliferation project as described in part 744 of the EAR. (b) General prohibitions. The following ten general prohibitions describe certain exports, reexports, and other conduct, subject to the scope of the EAR, in which you may not engage unless you either have a license from the Bureau of Export Administration (BXA) or qualify under part 740 of the EAR for a License Exception from each applicable general prohibition in this paragraph. The License Exceptions at part 740 of the EAR apply only to General Prohibitions One (Exports and Reexports in the Form Received), Two (Parts and Components Reexports), and Three (Foreign-Produced Direct Product Reexports); however, selected License Exceptions are specifically referenced and authorized in part 746 of the EAR concerning embargo destinations and in Sec. 744.2(c) of the EAR regarding nuclear end-uses. [[Page 12755]] (1) General Prohibition One--Export and reexport of controlled items to listed countries (Exports and Reexports). You may not, without a license or License Exception, export any item subject to the EAR to another country or reexport any item of U.S.-origin if each of the following is true: (i) The item is controlled for a reason indicated in the applicable Export Control Classification Number (ECCN), and (ii) Export to the country of destination requires a license for the control reason as indicated on the Country Chart at part 738 of the EAR. (The scope of this prohibition is determined by the correct classification of your item and the ultimate destination as that combination is reflected on the Country Chart.) <SUP>1 Note that each License Exception described at part 740 of the EAR supersedes General Prohibition One if all terms and conditions of a given License Exception are met by the exporter or reexporter. \1\ See part 738 of the EAR for selected controls that are not specified on the Country Chart. --------------------------------------------------------------------------- (2) General Prohibition Two--Reexport and export from abroad of foreign-made items incorporating more than a de minimis amount of controlled U.S. content (Parts and Components Reexports). (i) You may not, without a license or License Exception, export, reexport or export from abroad any foreign-made commodity, software, or technology incorporating U.S.-origin commodities, software, or technology respectively that is controlled to the country of ultimate destination if the foreign-made item meets all three of the following conditions: (A) It incorporates more than the de minimis amount of controlled U.S. content, as defined in Sec. 734.4 of the EAR concerning the scope of the EAR; (B) It is controlled for a reason indicated in the applicable ECCN; and (C) Its export to the country of destination requires a license for that control reason as indicated on the Country Chart. (The scope of this prohibition is determined by the correct classification of your foreign-made item and the ultimate destination, as that combination is reflected on the Country Chart.) (ii) Each License Exception described at part 740 of the EAR supersedes General Prohibition One if all terms and conditions of a given License Exception are met by the exporter or reexporter. (3) General Prohibition Three--Reexport and export from abroad of the foreign-produced direct product of U.S. technology and software (Foreign-Produced Direct Product Reexports). (i) Country scope of prohibition. You may not export, reexport, or export from abroad items subject to the scope of this General Prohibition Three to Cuba, North Korea, Libya, or a destination in Country Group D:1 (See Supplement No. 1 to part 740 of the EAR). (ii) Product scope of foreign-made items subject to prohibition. This General Prohibition 3 applies if an item meets either the Conditions defining the direct product of technology or the Conditions defining the direct product of a plant in paragraph (b)(3)(ii)(A) of this section: (A) Conditions defining direct product of technology. Foreign-made items are subject to this General Prohibition 3 if they meet both of the following conditions: (1) They are the direct product of technology or software that requires a written assurance as a supporting document for a license or as a precondition for the use of License Exception TSR at Sec. 740.3(d) of the EAR, and (2) They are subject to national security controls as designated on the applicable ECCN of the Commerce Control List at part 774 of the EAR. (B) Conditions defining direct product of a plant. Foreign-made items are also subject to this General Prohibition 3 if they are the direct product of a complete plant or any major component of a plant if both of the following conditions are met: (1) Such plant or component is the direct product of technology that requires a written assurance as a supporting document for a license or as a precondition for the use of License Exception TSR at Sec. 740.3(d) of the EAR, and (2) Such foreign-made direct products of the plant or component are subject to national security controls as designated on the applicable ECCN of the Commerce Control List at part 774 of the EAR. (iii) License Exceptions. Each License Exception described at part 740 of the EAR supersedes this General Prohibition Three if all terms and conditions of a given exception are met by the exporter or reexporter. (4) General Prohibition Four (Denial Orders)--Engaging in actions prohibited by a denial order. (i) You may not take any action that is prohibited by a denial order issued under part 766 of the EAR, Administrative Enforcement Proceedings. These orders prohibit many actions in addition to direct exports by the person denied export privileges, including some transfers within a single country either in the United States or abroad by other persons. You are responsible for ensuring that any of your transactions in which a person who is denied export privileges is involved do not violate the terms of the order. The names of persons denied export privileges are published in the Federal Register and are also included on the Denied Persons List, which is referenced in Supplement No. 2 to part 764 of the EAR, Enforcement. The terms of the standard denial order are set forth in Supplement No. 1 to part 764. You should note that some denial orders differ from the standard denial order. BXA may, on an exceptional basis, authorize activity otherwise prohibited by a denial order. See Sec. 764.3(a)(3) of the EAR. (ii) There are no License Exceptions described in part 740 of the EAR that authorize conduct prohibited by this General Prohibition Four. (5) General Prohibition Five--Export or reexport to prohibited end- uses or end-users (End-Use End-User). You may not, without a license, knowingly export or reexport any item subject to the EAR to an end-user of end-use that is prohibited by part 744 of the EAR. (6) General Prohibition Six--Export or reexport to embargoed destinations (Embargo). (i) You may not, without a license or License Exception authorized under part 746, export or reexport any item subject to the EAR to a country that is embargoed by the United States or otherwise made subject to controls as both are described at part 746 of the EAR. (ii) License Exceptions to this General Prohibition Six are described at part 746 of the EAR on Embargoes and Other Special Controls; and unless a License Exception is authorized in part 746 of the EAR, the License Exceptions at part 740 of the EAR are not available to overcome this general prohibition. (7) General Prohibition Seven--Support of Proliferation Activities (U.S. Person Proliferation Activity). If you are a U.S. Person as that term is defined at Sec. 744.6(c) of the EAR, you may not engage in any activities prohibited by Sec. 744.6 (a) or (b) of the EAR which prohibits the performance, without a license from BXA, of certain financing, contracting, service, support, transportation, freight forwarding, or employment that you know will assist in certain proliferation activities described further at part 744 of the EAR. There are no License Exceptions to this General Prohibition Seven in part 740 of the EAR unless specifically authorized in that part. (8) General Prohibition Eight--In transit shipments and items to be [[Page 12756]] unladen from vessels or aircraft (Intransit). (i) Unlading and shipping in transit. You may not export an item through or transit through a country listed in (b)(8)(ii) of this section unless a License Exception or license authorizes such an export directly to such a country of transit. (ii) Country scope. This General Prohibition Eight applies to Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Cambodia, Cuba, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Laos, Latvia, Lithuania, Mongolia, North Korea, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbkeistan, Vietnam. (9) General Prohibition Nine--Violation of any order, terms, and conditions (Orders, Terms, and Conditions). You may not violate terms or conditions of a license or of a License Exception issued under or made a part of the EAR, and you may not violate any order issued under or made a part of the EAR. There are no License Exceptions to this General Prohibition Nine in part 740 of the EAR. Supplements Nos. 1 and 2 to this part provide for certain General Orders and Administrative Orders. (10) General Prohibition Ten--Proceeding with transactions with knowledge that a violation has occurred or is about to occur (Knowledge Violation to Occur). You may not sell, transfer, export, reexport, finance, order, buy, remove, conceal, store, use, loan, dispose of, transfer, transport, forward, or otherwise service, in whole or in part, any item subject to the EAR and exported or to be exported with knowledge that a violation of the Export Administration Regulations, the Export Administration Act or any order, license, License Exception, or other authorization issued thereunder has occurred, is about to occur, or is intended to occur in connection with the item. Nor may you rely upon any license or License Exception after notice to you of the suspension or revocation of that license or exception. There are no License Exceptions to this General Prohibition Ten in part 740 of the EAR. Supplement No. 1 to Part 736--General Orders [Reserved] Supplement No. 2 to Part 736--Administrative Orders Administrative Order One: Disclosure of License Issuance and Other Information. Consistent with section 12(c) of the Export Administration Act of 1979, as amended, information obtained by the U.S. Department of Commerce for the purpose of consideration of or concerning license applications, as well as related information, will not be publicly disclosed without the approval of the Secretary of Commerce. Shipper's Export Declarations also are exempt from public disclosure, except with the approval of the Secretary of Commerce, in accordance with Sec. 301(g) of Title 13, United States Code. Administrative Order Two: Conduct of Business and Practice in Connection with Export Control Matters. (a) Conduct of business and practice in connection with export control matters. (1) Exclusion of persons guilty of unethical conduct or not possessing required integrity and ethical standards. (i) Who may be excluded. Any person, whether acting on his own behalf or on behalf of another, who shall be found guilty of engaging in any unethical activity or who shall be demonstrated not to possess the required integrity and ethical standards, may be excluded from (denied) export privileges on his own behalf, or may be excluded from practice before BXA on behalf of another, in connection with any export control matter, or both, as provided in part 764 of the EAR. (ii) Grounds for exclusion. Among the grounds for exclusion are the following: (A) Inducing or attempting to induce by gifts, promises, bribes, or otherwise, any officer or employee of BXA or any customs or post office official, to take any action with respect to the issuance of licenses or any other aspects of the administration of the Export Administration Act, whether or not in violation of any regulation; (B) Offering or making gifts or promises thereof to any such officer or employee for any other reason; (C) Soliciting by advertisement or otherwise the handling of business before BXA on the representation, express or implied, that such person, through personal acquaintance or otherwise, possesses special influence over any officer or employee of BXA; (D) Charging, or proposing to charge, for any service performed in connection with the issuance of any license, any fee wholly contingent upon the granting of such license and the amount or value thereof. This provision will not be construed to prohibit the charge of any fee agreed to by the parties; provided that the out-of-pocket expenditures and the reasonable value of the services performed, whether or not the license is issued and regardless of the amount thereof, are fairly compensated; and (E) Knowingly violating or participating in the violation of, or an attempt to violate, any regulation with respect to the export of commodities or technical data, including the making of or inducing another to make any false representations to facilitate any export in violation of the Export Administration Act or any order or regulation issued thereunder. (iii) Definition. As used in this Administration Order, the terms ``practice before BXA'' and ``appear before BXA'' include: (A) The submission on behalf of another of applications for export licenses or other documents required to be filed with BXA, or the execution of the same; (B) Conferences or other communications on behalf of another with officers or employees of BXA for the purpose of soliciting or expediting approval by BXA of applications for export licenses or other documents, or with respect to quotas, allocations, requirements or other export control actions, pertaining to matters within the jurisdiction of BXA; (C) Participating on behalf of another in any proceeding pending before BXA; and (D) Submission to a customs official on behalf of another of a license or Shipper's Export Declaration or other export control document. (iv) Proceedings. All proceedings under this Administrative Order shall be conducted in the same manner as provided in part 766 of the EAR. (2) Employees and former employees. Persons who are or at any time have been employed on a full-time or part-time, compensated or uncompensated, basis by the U.S. Government are subject to the provisions of 18 U.S.C. 203, 205, and 207 (Pub. L. 87-849, 87th Congress) in connection with representing a private party or interest before the U.S. Department of Commerce in connection with any export control matter. PART 738--COMMERCE CONTROL LIST OVERVIEW AND THE COUNTRY CHART Sec. 738.1 Introduction. 738.2 Commerce Control List (CCL) structure. 738.3 Commerce Country Chart structure. 738.4 Determining whether a license is required. Supplement No. 1 to Part 738--Commerce Country Chart Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 10 U.S.C. 7420; 10 U.S.C. 7430(e); 18 U.S.C. 2510 et seq.; 22 U.S.C. 287c; 22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; Sec. 201, Pub. L. 104- 58, 109 Stat. 557 (30 U.S.C. 185(s)); 30 U.S.C. 185(u); 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C. app. 466c; 50 U.S.C. app. 5; E.O. 12924, 3 CFR, 1994 Comp., p. 917; Notice of August 15, 1995 (60 FR 42767, August 17, 1995). Sec. 738.1 Introduction. (a) Commerce Control List scope. (1) In this part, references to the EAR are references to 15 CFR chapter VII, subchapter C. The Bureau of Export Administration (BXA) maintains the Commerce Control List (CCL) within the Export Administration Regulations (EAR), which includes items (i.e., commodities, software, and technology) subject to the export licensing authority of BXA. The CCL does not include those items exclusively controlled for export or reexport by another department or agency of the U.S. Government. In instances where agencies other than the Department of Commerce administer [[Page 12757]] controls over related items, entries in the CCL contain a reference to these controls. (2) The CCL is contained in Supplement No. 1 to part 774 of the EAR. Supplement No. 2 to part 774 of the EAR contains the General Technology and Software Notes relevant to entries contained in the CCL. (b) Commerce Country Chart scope. BXA also maintains the Commerce Country Chart. The Commerce Country Chart, located in Supplement No. 1 to part 738, contains licensing requirements based on destination and Reason for Control. In combination with the CCL, the Commerce Country Chart allows you to determine whether a license is required for items on the CCL to any country in the world. Sec. 738.2 Commerce Control List (CCL) structure. (a) Categories. The CCL is divided into 10 categories, numbered as follows: 0--Nuclear Materials, Facilities and Equipment and Miscellaneous 1--Materials, Chemicals, ``Microorganisms,'' and Toxins 2--Materials Processing 3--Electronics 4--Computers 5--Telecommunications and Information Security 6--Lasers and Sensors 7--Navigation and Avionics 8--Marine 9--Propulsion Systems, Space Vehicles and Related Equipment (b) Groups. Within each category, items are arranged by group. Each category contains the same five groups. Each Group is identified by the letters A through E, as follows: A--Equipment, Assemblies and Components B--Test, Inspection and Production Equipment C--Materials D--Software E--Technology (c) Order of review. In order to classify your item against the CCL, you should begin with a review of the general characteristics of your item. This will usually guide you to the appropriate category on the CCL. Once the appropriate category is identified, you should match the particular characteristics and functions of your item to a specific ECCN. If the ECCN contains a list under the ``Items'' heading, you should review the list to determine within which subparagraph(s) your items are identified. (d) Entries. (1) Composition of an entry. Within each group, individual items are identified by an Export Control Classification Number (ECCN). Each number consists of a set of digits and a letter. The first digit identifies the general category within which the entry falls (e.g., 3A001). The letter immediately following this first digit identifies under which of the five groups the item is listed (e.g., 3A001). The second digit differentiates individual entries by identifying the type of controls associated with the items contained in the entry (e.g., 3A001). Listed below are the Reasons for Control associated with this second digit. 0: National Security reasons (including Dual Use and International Munitions List) and Items on the NSG Dual Use Annex and Trigger List 1: Missile Technology reasons 2: Nuclear Nonproliferation reasons 3: Chemical & Biological Weapons reasons 9: Anti-terrorism, Crime Control, Regional Stability, Short Supply, UN Sanctions, etc. (i) Since Reasons for Control are not mutually exclusive, numbers are assigned in order of precedence. As an example, if an item is controlled for both National Security and Missile Technology reasons, the entry's third digit will be a ``0''. If the item is controlled only for Missile Technology the third digit will be ``1''. (ii) The numbers in either the second or third digit (e.g., 3A001) serve to differentiate between multilateral and unilateral entries. An entry with the number ``9'' as the second digit, identifies the entire entry as controlled for a unilateral concern (e.g., 2B991 for anti- terrorism reasons). If the number ``9'' appears as the third digit, the item is controlled for unilateral purposes based on a proliferation concern (e.g., 2A292 is controlled for unilateral purposes based on nuclear nonproliferation concerns). (2) Reading an ECCN. A brief description is provided next to each ECCN. Following this description is the actual entry containing ``License Requirements,'' ``License Exceptions,'' and ``List of Items Controlled'' sections. A brief description of each section and its use follows: (i) License Requirements. This section contains a separate line identifying all possible Reasons for Control in order of precedence, and two columns entitled ``Control(s)'' and ``Country Chart''. (A) The ``Controls'' header identifies all applicable Reasons for Control, in order of restrictiveness, and to what extent each applies (e.g., to the entire entry or only to certain subparagraphs). Those requiring licenses for a larger number of countries and/or items are listed first. As you read down the list the number of countries and/or items requiring a license declines. Since Reasons for Control are not mutually exclusive, items controlled within a particular ECCN may be controlled for more than one reason. The following is a list of all possible Reasons for Control: AT Anti-Terrorism CB Chemical & Biological Weapons CC Crime Control MT Missile Technology NS National Security NP Nuclear Nonproliferation RS Regional Stability SS Short Supply XP Computers (B) The ``Country Chart'' header identifies, for each applicable Reason for Control, a column name and number (e.g., CB Column 1). These column identifiers are used to direct you from the CCL to the appropriate column identifying the countries requiring a license. Consult part 742 of the EAR for an indepth discussion of the licensing requirements and policies applicable to each Country Chart column. (ii) License Exceptions. This section provides a brief eligibility statement for each ECCN-driven License Exception that may be applicable to your transaction, and should be consulted only AFTER you have determined a license is required based on an analysis of the entry and the Country Chart. The brief eligibility statement in this section is provided to assist you in deciding which ECCN-driven License Exception related to your particular item and destination you should explore prior to submitting an application. The word ``Yes'' (followed in some instances by the scope of Yes) appears next to each available ECCN- driven License Exception. ``N/A'' will be noted for License Exceptions that are not available within a particular entry. If one or more License Exceptions appear to apply to your transaction, you must consult part 740 of the EAR to review the conditions and restrictions applicable to each available License Exception. (iii) List of Items Controlled. (A) Units. The unit of measure applicable to each entry is identified in the ``Units'' header. Most measurements used in the CCL are expressed in metric units with an inch-pound conversion where appropriate. Note that in some ECCNs the inch-pound unit will be listed first. In instances where other units are in general usage or specified by law, these will be used instead of metric. Generally, when there is a difference [[Page 12758]] between the metric and inch-pound figures, the metric standard will be used for classification and licensing purposes. (B) Related definitions. This header identifies, where appropriate, definitions or parameters that apply to all items controlled by the entry. The information provided in this section is unique to the entry, and hence not listed in the definitions contained in part 772 of the EAR. (C) Related controls. If another U.S. government agency or department has export licensing authority over items related to those controlled by an entry, a statement is included identifying the agency or department along with the applicable regulatory cite. An additional cross-reference may be included in instances where the scope of controls differs between a CCL entry and its corresponding entry on list maintained by the European Union. This information is provided to assist readers who use both lists. (D) Items. This header contains a positive list of all items controlled by a particular entry and must be reviewed to determine whether your item is controlled by that entry. In some entries, the list is contained within the entry heading. In these entries a note is included to direct you to the entry heading. Sec. 738.3 Commerce Country Chart structure. (a) Scope. The Commerce Country Chart (Country Chart) allows you to determine, based on the Reason(s) for Control associated with your item, if you need a license to export or reexport your item to a particular destination. There are only two instances where the chart cannot be used for this purpose: (1) Items controlled for short supply reasons. Due to the unique nature of these controls, entries controlled for Short Supply reasons will send you directly to part 754 of the EAR. Part 754 of the EAR is self-contained and includes information on licensing requirements, licensing policies, and all available License Exceptions, for items controlled for Short Supply reasons. (2) Unique entries. The following are unique entries where you do not need to consult the Country Chart to determine whether a license is required. (A) ECCNs 0A983 and 5A980. A license is required for all destinations of items controlled under these entries. No License Exceptions apply. If your item is controlled by 0A983 or 5A980 you should proceed directly to part 748 of the EAR for license application instructions and Sec. 742.11 or Sec. 742.13 of the EAR for information on the licensing policy relevant to these types of applications. (B) ECCNs 0A986, 0A988, 1A988, 2A994, 2D994, 2E994 and 2B985. A license is required for items controlled under these entries only to the specific countries identified within each entry. (b) Countries. The first column of the Country Chart lists all countries in alphabetical order. There are a number of destinations that are not listed in the Country Chart contained in Supplement No. 1 to part 738. If your destination is not listed on the Country Chart and such destination is a territory, possession, or department of a country included on the Country Chart, the EAR accords your destination the same licensing treatment as the country of which it is a territory, possession, or department. For example, if your destination is the Cayman Islands, a dependent territory of the United Kingdom, consult the United Kingdom on the Country Chart for licensing requirements. (c) Columns. Stretching out to the right are horizontal headers identifying the various Reasons for Control. Under each Reason for Control header are diagonal column identifiers capping individual columns. Each column identifier consists of the two letter Reason for Control and a column number. (e.g., CB Column 1). The column identifiers correspond to those listed in the ``Country Chart'' header within the ``License Requirements'' section of each ECCN. (d) Cells. The symbol ``X'' is used to denote licensing requirements on the Country Chart. If an ``X'' appears in a particular cell, transactions subject to that particular Reason for Control/ Destination combination require a license. There is a direct correlation between the number of ``X''s applicable to your transaction and the number of licensing reviews your application will undergo. Sec. 738.4 Determining whether a license is required. (a) Using the CCL and the Country Chart. (1) Overview. Once you have determined that your item is controlled by a specific ECCN, you must use information contained in the ``License Requirements'' section of that ECCN in combination with the Country Chart to decide whether a license is required. (2) License decision making process. The following decision making process must be followed in order to determine whether a license is required to export or reexport a particular item to a specific destination: (i) Examine the appropriate ECCN in the CCL. Is the item you intend to export or reexport controlled for a single Reason for Control? (A) If yes, identify the single Reason for Control and the relevant Country Chart column identifier (e.g., CB Column 1). (B) If no, identify the Country Chart column identifier for each applicable Reason for Control (e.g., NS Column 1, NP Column 1, etc.). (ii) Review the Country Chart. With each of the applicable Country Chart Column identifiers noted, turn to the Country Chart (Supplement No. 1 to part 738). Locate the correct Country Chart column identifier on the diagonal headings, and determine whether an ``X'' is marked in the cell next to the country in question for each Country Chart column identified in the applicable ECCN. If your item is subject to more than one reason for control, repeat this step using each unique Country Chart column identifier. (A) If yes, a license application must be submitted based on the particular reason for control and destination, unless a License Exception applies. If ``Yes'' is noted next to any of the listed License Exceptions, you should consult part 740 of the EAR to determine whether you can use any of the available ECCN-drvien License Exceptions to effect your shipment, rather than applying for a license. Each affirmative license requirement must be overcome by a License Exception. If you are unable to qualify for a License Exception based on each license requirement noted on the Country Chart, you must apply for a license. Note that other License Exceptions, not related to the CCL, may also apply to your transaction (See part 740 of the EAR). (B) If no, a license is not required based on the particular reason for control and destination. Provided General Prohibitions Four through Ten do not apply to your proposed transaction, you may effect your shipment using the symbol ``NLR''. Proceed to parts 758 and 762 of the EAR for information on export clearance procedures and recordkeeping requirements. Note that although you may stop after determining a license is required based on the first Reason for Control, it is best to work through each applicable Reason for Control. A full analysis of every possible licensing requirement based on each applicable Reason for Control is required to determine the most advantageous License Exception available for your particular transaction and, if a license is required, ascertain the scope of review conducted by BXA on your license application. [[Page 12759]] (b) Sample analysis using the CCL and Country Chart. (1) Scope. The following sample entry and related analysis is provided to illustrate the type of thought process you must complete in order to determine whether a license is required to export or reexport a particular item to a specific destination using the CCL in combination with the Country Chart. (2) Sample CCL entry. 2A000: Entry heading. License Requirements Reason for Control: NS, NP, AT ------------------------------------------------------------------------ Control(s) Country Chart ------------------------------------------------------------------------ NS applies to entire entry............. NS Column 2. NP applies to 2A000.b.................. NP Column 1. AT applies to entire entry............. AT Column 1. ------------------------------------------------------------------------ License Exceptions LVS: $5,000 GBS: Yes CIV: N/A List of Items Controlled Unit: Number Related Definition: N/A Related Controls: N/A Items: a. Having x. b. Having z. (3) Sample analysis. After consulting the CCL, I determine my item, valued at $10,000, is classified under ECCN 2A000.a. I read that the entire entry is controlled for national security, and anti-terrorism reasons. Since my item is classified under paragraph .a, and not .b, I understand that though nuclear nonproliferation controls apply to a portion the entry, they do not apply to my item. I note that the appropriate Country Chart column identifiers are NS Column 2 and AT Column 1. Turning to the Country Chart, I locate my specific destination, India, and see that an ``X'' appears in the NS Column 2 cell for India, but not in the AT Column 1 cell. I understand that a license is required, unless my transaction qualifies for a License Exception or Special Comprehensive License. From the License Exception LVS value listed in the entry, I know immediately that my proposed transaction exceeds the value limitation associated with LVS. Noting that License Exception GBS is ``Yes'' for this entry, I turn to part 740 of the EAR to review the provisions related to use of GBS. BILLING CODE 3510-DT-P [[Page 12760]] [GRAPHIC] [TIFF OMITTED] TR25MR96.000 [[Page 12761]] [GRAPHIC] [TIFF OMITTED] TR25MR96.001 [[Page 12762]] [GRAPHIC] [TIFF OMITTED] TR25MR96.002 [[Page 12763]] [GRAPHIC] [TIFF OMITTED] TR25MR96.003 [[Continued on page 12764]]