[Federal Register: June 19, 2007 (Volume 72, Number 117)]
[Rules and Regulations]
[Page 33646-33662]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19jn07-8]
[[Page 33646]]
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DEPARTMENT OF COMMERCE
Bureau of Industry and Security
15 CFR Parts 742, 743, 744, 748, 750 and 758
[Docket No. 061205125-7125-01]
RIN 0694-AD75
Revisions and Clarification of Export and Reexport Controls for
the People's Republic of China (PRC); New Authorization Validated End-
User; Revision of Import Certificate and PRC End-User Statement
Requirements
AGENCY: Bureau of Industry and Security, Commerce.
ACTION: Final rule.
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SUMMARY: In this final rule, the Bureau of Industry and Security (BIS)
amends the Export Administration Regulations (EAR) to revise and
clarify U.S. licensing requirements and licensing policy on exports and
reexports of items to the People's Republic of China (PRC). BIS
published a revised policy and related amendments in proposed form in
the Federal Register with a request for comments.
This final rule establishes a control, based on knowledge of a
``military end-use,'' on exports and reexports to the PRC of certain
items on the Commerce Control List (CCL) that otherwise do not require
a license to the PRC. It also includes a revision to the license
application review policy for items destined for the PRC that are
controlled on the CCL for reasons of national security, and revises the
license review policy for items controlled for reasons of chemical and
biological weapons proliferation, nuclear nonproliferation, and missile
technology for export to the PRC, requiring that applications involving
such items be reviewed in conjunction with the revised national
security licensing policy. This rule also creates a new authorization
for ``validated end-users'' to which specified items may be exported or
reexported without a license. Validated end-users will be placed on a
list in the EAR after review and approval by the United States
Government. The process for such review is also set forth in this final
rule. This rule also revises the circumstances in which End-User
Statements, issued by the PRC Ministry of Commerce (MOFCOM), must be
obtained, requiring them for transactions that both require a license
to the PRC for any reason and (for most exports) exceed a total value
of $50,000. This final rule also includes other minor corrections and
conforming amendments.
DATES: This rule is effective June 19, 2007. Comments may be submitted
at any time.
ADDRESSES: Although this is a final rule, BIS welcomes comments, which
should be sent by fax to (202) 482-3355, e-mail to
publiccomments@bis.doc.gov, or by mail to Sheila Quarterman, Regulatory
Policy Division, Bureau of Industry and Security, Department of
Commerce, P.O. Box 273, Washington, DC 20044. Please refer to
regulatory identification number (RIN) 0694-[AD75 final] in all
comments, and in the subject line of e-mail comments. Comments on the
collection of information should be sent to David Rostker, Office of
Management and Budget (OMB) by e-mail to David_Rostker@omb.eop.gov, or
by fax to (202) 395-7285.
FOR FURTHER INFORMATION CONTACT: For technology related issues, contact
Bernard Kritzer, Director, Office of National Security and Technology
Transfer Controls, Bureau of Industry and Security, Department of
Commerce, P.O. Box 273, Washington, DC 20044; by telephone (202) 482-
0092; or by e-mail to bkritzer@bis.doc.gov.
For issues related to the Validated End-User authorization, contact
Michael Rithmire, Export Administration Intelligence Liaison, Bureau of
Industry and Security, Department of Commerce, P.O. Box 273,
Washington, DC 20044; by telephone (202) 482-6105; or by e-mail to
mrithmir@bis.doc.gov.
For general questions or a copy of the economic analysis, please
contact Sheila Quarterman at the address listed in the ADDRESSES
section.
SUPPLEMENTARY INFORMATION:
Background
It is the policy of the United States Government to facilitate U.S.
exports to legitimate civilian end-users in the People's Republic of
China (PRC), while preventing exports that would enhance the military
capability of the PRC. Consistent with this policy, the Bureau of
Industry and Security (BIS) is amending the Export Administration
Regulations (EAR) by revising and clarifying United States licensing
requirements and licensing policy on exports and reexports of goods and
technology to the PRC.
As the PRC has increased its participation in the global economy,
bilateral trade has grown rapidly, and the PRC has emerged as a major
market for U.S. exports and investment. This greatly expanded economic
relationship is beneficial for both nations, and has increased the
prosperity of both the American and Chinese people. The United States
therefore seeks to encourage and facilitate exports to legitimate civil
end-users in the PRC. At the same time, the United States has a
longstanding policy of not permitting exports that would make a direct
and significant contribution to the PRC's military capability.
Moreover, the United States has an interest in restricting exports of
certain dual-use products and technologies that would not otherwise
need an export license, if those items are destined for a ``military
end-use'' in the PRC.
BIS is therefore amending the EAR to revise and clarify U.S.
licensing requirements and licensing policy on exports and reexports of
items to the PRC, and to establish a new authorization that is intended
to facilitate exports to validated civilian end-users in the PRC. On
July 6, 2006, BIS published a proposed rule and requested public
comments (71 FR 38313). On October 19, 2006, the original comment
period deadline of November 3, 2006 was extended until December 4, 2006
(71 FR 61692). The detailed rationale for the proposed rule's
provisions is provided in the preamble to the proposed rule and is not
repeated here. In general, however, this rule proposes certain
revisions and clarifications to licensing requirements and policies
with regard to the PRC to more precisely reflect U.S. foreign policy
and national security interests.
Revision of Licensing Review Policy and License Requirements
To strengthen efforts to prevent U.S. exports to the PRC that would
enhance the PRC's military capabilities, this rule revises the
licensing review policy for items controlled on the Commerce Control
List for reasons of national security. Specifically, this rule amends
section 742.4(b)(7) to make clear that the overall policy of the United
States for exports to the PRC of these items is to approve exports for
civil end-uses but generally to deny exports that will make a direct
and significant contribution to Chinese military capabilities. BIS
makes further revisions to the EAR to clarify that it will review
license applications to export or reexport to the PRC items controlled
for chemical and biological weapons proliferation, nuclear
nonproliferation, and missile technology under sections 742.2, 742.3
and 742.5, respectively, of the EAR, in accordance with the licensing
policies in both paragraph (b) of the applicable section and with the
revised licensing policy in paragraph 742.4(b)(7) of the EAR, which
provides a presumption of denial for license applications to export,
reexport, or transfer items that would make a direct and significant
[[Page 33647]]
contribution to the PRC's military capabilities such as, but not
limited to, the major weapons systems described in new Supplement No. 7
to Part 742 of the EAR.
This rule also implements a new control on exports to the PRC of
certain CCL items that otherwise do not require a license to the PRC
when the exporter has knowledge, as defined in section 772.1 of the
EAR, that such items are destined for ``military end-use'' in the PRC
or is informed that such items are destined for such an end-use. The
list of items subject to this ``military end-use'' restriction covers
approximately 20 products and associated technologies, as described in
the entries of 31 full or partial Export Control Classification Numbers
(ECCNs). The list was based on a review of public comments and a
careful interagency review of items listed on the CCL that currently do
not require a license for export to the PRC but have the potential to
advance the military capabilities of the PRC. Applications to export,
reexport, or transfer items controlled pursuant to the ``military end-
use'' control will be reviewed on a case-by-case basis to determine
whether the export, reexport, or transfer will make a material
contribution to the military capabilities of the PRC and would result
in advancing the country's military activities contrary to the national
security interests of the United States. Other end-use controls in part
744 of the EAR continue to apply.
New Authorization Validated End-User (VEU)
To facilitate legitimate exports to civilian end-users, BIS
establishes in this rule a new authorization Validated End-User. The
authorization will allow the export, reexport, and transfer of eligible
items to specified end-users in an eligible destination, initially the
PRC. Validated end-users will be those entities that meet a number of
criteria, including a demonstrated record of engaging only in civil
end-use activities. This rule outlines clear procedures to request
Validated End-User authorization, the procedures and timelines to be
used by an interagency committee established to consider such requests,
and the criteria for evaluating requests.
Revision of End-User Statement Requirements
To strengthen implementation of the April 2004 end-use visit
understanding between the Vice Minister of Commerce of the PRC and the
U.S. Under Secretary of Commerce for Industry and Security, this rule
requires exporters to obtain PRC End-User Statements from the Ministry
of Commerce of the PRC for all exports of items on the CCL requiring a
license to the PRC over a specific value, which for most exports will
be a new, higher threshold of $50,000. BIS anticipates that this change
will facilitate BIS's ability to conduct end-use checks on exports or
reexports of controlled goods and technologies to the PRC, consistent
with the existing end-use visit understanding with the Government of
the PRC, without resulting in an overall annual increase in the number
of such statements required from U.S. exporters. The facilitation of
end-use checks should, in turn, facilitate increased U.S. exports to
the PRC.
Comments and Responses
BIS received 57 public comments, amounting to more than 1000 pages
of comments on the proposed rule. Summaries of those comments and BIS
responses appear below by topic. Similar comments are consolidated.
Revised License Review Policy for Items Controlled for National
Security Reasons to the PRC
Comment 1: A number of commenters asserted that the ``material
contribution to military capability'' standard used in the proposed
rule with respect to BIS's review of license applications involving
items controlled for national security is too broad. In addition,
certain commenters stated that the concept of ``material contribution
to military capability'' is largely subjective, and best left to
military experts in the Government. Moreover, they asserted that the
proposed definition of ``military end-use'' goes far beyond even the
broad scope of the ``material contribution to military capability''
standard used elsewhere in the proposed rule and that it is unlikely
that this problem can be resolved by revising that definition.
Response: BIS has considered the public comments received regarding
the appropriate license review standard to apply to license
applications involving items controlled for national security (NS)
reasons. BIS had proposed revising section 742.4(b)(7) of the EAR to
establish a policy of reviewing applications involving items controlled
for NS reasons to determine if the items would make a ``material
contribution'' to the PRC's military capabilities. This proposal would
have changed the review standard in the EAR, in place since 1983, which
provided that BIS would conduct an extended review or deny applications
to export or reexport items that would make a ``direct and significant
contribution'' to a series of listed PRC military activities. Having
reviewed public comments, BIS and its interagency partners have decided
to maintain the ``direct and significant'' standard and not to adopt a
new ``material contribution'' standard. BIS agreed with commenters that
the ``material contribution'' standard was too broad for a review of
NS-controlled items. Although the ``direct and significant'' standard
is being retained, BIS has decided to apply it to PRC military
capabilities as a whole, rather than a limited list of military
activities. To update and better inform exporters of this license
application review policy, and to add clarity to the term ``military
capabilities,'' BIS is adding new Supplement No. 7 to Part 742 of the
EAR, which provides an illustrative list of weapons systems that could
constitute PRC military capabilities. BIS developed this illustrative
list in conjunction with its interagency partners.
Military End-Use License Requirement for Certain Exports and Reexports
to the PRC
Comment 2: Many commenters claimed that, due to widespread foreign
availability, including production of such items in the PRC, the
export, reexport, or transfer to the PRC of the listed items to which
the proposed ``military end-use'' license requirement for the PRC would
apply (set forth in Supplement No. 2 to Part 744) would not make an
impact on the military capability of the PRC. Some of those commenters
claimed that many of the items subject to the new ``military end-use''
license requirement have been exempted from most export restrictions
and national security controls because they were deemed not useful for
``military end-use'' purposes.
Response: BIS reviewed each comment received regarding the list of
ECCNs proposed for the new ``military end-use'' control. In response to
these comments, BIS conducted a thorough review and analysis of each
proposed ECCN, considering the following factors: (1) The military
applicability of each item; (2) the relative foreign availability of
each item; and (3) the level of U.S. commercial exports of each item to
the PRC. Each ECCN was evaluated individually against all three
criteria, with no one criterion being solely determinative. Greatest
weight was given to the military applicability of each item, based on
an evaluation of the contribution the items covered by the ECCN could
make to a military capability if used in a ``military end-use,'' as
defined in this final rule. With regard to foreign availability,
indigenous
[[Page 33648]]
availability within the PRC was given greater weight than evidence of
foreign availability from countries that cooperate with the United
States in multilateral export control regimes, though all evidence of
foreign availability was considered. When BIS found significant
evidence of foreign availability and a high level of commercial
exports, but limited military applicability, the ECCN was removed from
the proposed list. When BIS found limited evidence of foreign
availability and significant military applicability, the item remained
on the proposed list, even if it was a major commercial export. As a
result of this analysis, BIS determined that it was appropriate to
reduce the number of ECCNs subject to the ``military end-use''
licensing requirement from 47 to 31 full and partial ECCNs. For certain
items, the list in Supplement No. 2 to part 744 includes particular
commodities, as well as the software and technology associated with
such commodities. Thus, the resulting list of full and partial ECCNs
covers approximately 20 distinct product areas, including items such as
aircraft and aircraft engines, underwater systems, lasers, depleted
uranium, certain composite materials, airborne communications systems
and inertial navigation systems, and certain highly specialized
telecommunications equipment useful for electronic warfare, space
communications, or air defense. The final list published with this rule
clearly identifies those items that have the potential to contribute to
the military end-uses that this final rule is intended to control,
consistent with overall U.S. policy toward the PRC.
Comment 3: A number of commenters asserted that imposing the
``military end-use'' control on 47 ECCNs would have a commercial impact
that extended beyond these items. Several commenters noted that, as
proposed, the ``military end-use'' control extended to items classified
under ECCNs 5A992 and 5D992, items that have never been controlled for
export or reexport to the PRC. At the same time, items with higher-
level encryption functionality would be eligible for export to the PRC
under License Exception ENC. The commenters asserted that this would
create an incentive for exporters to add cryptography to their items in
order to be exempt from the ``military end-use'' licensing requirement.
Response: As noted in response to Comment 2, this final rule has
been amended such that ECCNs 5A992 and 5D992 are no longer subject to
the ``military end-use'' control. As a result, any such incentive that
might have been present is no longer present.
Comment 4: A number of commenters asserted that the ``military end-
use'' license requirement will be unilateral because some European
members of the Wassenaar Arrangement have stated that they do not plan
to implement the Wassenaar Arrangement Statement of Understanding on
Control of Non-Listed Dual-Use Items to the PRC.
Response: The United States is committed to maintaining and
implementing trade controls decided on a multilateral basis with like
minded countries, such as other member countries of the Wassenaar
Arrangement. To that end, this rule is consistent with U.S. commitments
as a Participating State in the Wassenaar Arrangement. At the December
2003 Wassenaar Arrangement Plenary, Wassenaar Arrangement members
agreed in a Statement of Understanding on Control of Non-Listed Dual-
Use Items to adopt and implement measures controlling exports of dual-
use items destined for ``military end-use'' in a country subject to a
United Nations or relevant regional arms embargo. Commenters are
correct that some Wassenaar Arrangement members have stated that they
would not implement similar ``military end-use'' controls on dual-use
exports to the PRC. However, other Wassenaar Arrangement members have
said that they would consider such controls. The revisions made by this
final rule are intended to align U.S. export controls with overall U.S.
national security and foreign policy interests, consistent with our
multilateral commitments but also recognizing the unique nature of U.S.
military and security interests in the Asia-Pacific region.
Comment 5: Some commenters asserted that the ``military end-use''
license requirement will be burdensome to U.S. exporters and would be
difficult to comply with, as proposed, because the definition of
``military end-use'' was overly broad and vague. They argued that the
breadth of the definition would result in encompassing more items and
transactions than those that potentially could enhance the military
capabilities of the PRC. Some commenters argued that terms such as
``deployment'' and ``support'' were too vague to be readily understood
by exporters screening their transactions, while other commenters noted
that the definition of ``military end-use'' did not use well-understood
terms from the EAR.
Response: To address the commenters' argument that the definition
of ``military end-use,'' as proposed, may have been insufficiently
precise, BIS, in conjunction with its interagency partners, has revised
the definition of ``military end-use'' in section 744.21(f) of the EAR
to add additional clarity and specificity. The revised definition draws
extensively on the definition of military end-use already contained in
section 744.17 of the EAR, which restricts certain exports and
reexports of general purpose microprocessors for ``military end-use''
and to ``military end-users.'' Like the proposed rule, this final rule
continues to define ``military end-use'' as including incorporation
into a military item described on the U.S. Munitions List,
International Munitions List, and items listed under ECCNs ending in
``A018'' on the CCL. However, it clarifies that ``military end-use''
also means for the ``use'', ``development,'' or ``production'' (each as
defined in part 772 of the EAR) of such items, and that it means for
the ``deployment'' only of those items covered under ECCN 9A991 as
described in Supplement No. 2 to Part 744. In addition, for purposes of
this ``military end-use'' control, in a new note to section 744.21(f),
BIS has provided definitions for ``operation,'' ``installation,''
``maintenance,'' and ``deployment.'' These are terms not previously
defined in the EAR, and BIS intends such definitions to clarify the
scope of the military end-use control.
Comment 6: Some commenters asserted that the license application
review standard related to the ``military end-use'' control also was
overly broad and vague. They argued that this, too, would result in the
rule encompassing more items and transactions than those that
potentially could enhance the military capabilities of the PRC. They
pointed out that the ``military end-use'' control would apply to items
previously removed from control by agreement of various multilateral
regimes, and commented that the concept of ``material contribution''
was imprecise.
Response: In response to comments received, BIS reviewed the
breadth and clarity of the license review standard set forth in
proposed section 744.21(e). This section provided that license
applications involving the ``military end-use'' control would be
reviewed on a case-by-case basis to determine whether they would make a
``material contribution'' to the military capabilities of the PRC and
would result in advancing the country's military activities contrary to
U.S. national security interests. This final rule reflects BIS's
continued belief that this standard is the appropriate basis through
which it will review such license applications. Items subject to the
``military end-use'' control were determined to be more sensitive when
destined for a ``military end-use'' than when they are simply
[[Page 33649]]
controlled for national security reasons, and therefore BIS determined
that they are more appropriately subject to a different licensing
review standard, consistent with U.S. foreign and related export
control policies for the PRC. (BIS's consideration of ``material
contribution'' is also discussed in response to Comment 1.) In
addition, in reviewing public comments, BIS determined that the license
review standard set forth in the proposed rule did not specify how BIS
would treat a license application if it were determined that the
criteria set forth in the standard were satisfied. In this final rule,
BIS is revising the proposed license review standard to specify that
when it is determined that these criteria are met, the license
application will be denied.
Comment 7: A number of commenters stated that U.S. exporters,
especially those exporting to distributors, would experience an undue
burden and an increase in liability because they do not always have
accurate information on the specific end-use of their products.
Commenters further stated that it is difficult to know about customers'
intentions with respect to resale, especially after reincorporation
into a new product. They argued that the lack of clarity as to the
expected degree of due diligence for complying with the ``military end-
use'' control would exacerbate this problem, particularly because
knowledge of a ``military end-use'' is determined using the existing
standard of knowledge in the EAR instead of an actual and positive
knowledge standard. In this context, some commenters also argued that
the high costs of compliance U.S. exporters would experience would
place them at a competitive disadvantage in the PRC market.
Response: BIS has reviewed the comments received regarding the
knowledge standard set forth in the proposed ``military end-use''
control. Applying the EAR's existing knowledge standard provides
exporters and reexporters with a familiar standard for screening or
evaluating intended exports, reexports or transfers of items subject to
the ``military end-use'' control. Under the EAR, exporters and
reexporters already are responsible for ensuring that they do not,
without a license, knowingly export or reexport any item subject to the
EAR to an end-user or end-use that is restricted by part 744 of the
EAR. The term ``knowledge'' used throughout part 744 (as defined in
section 772.1 of the EAR) encompasses both actual knowledge and reason
to know. Therefore, BIS believes that most exporters and reexporters
already have screening procedures or internal controls in place to
address the ramifications of having or gaining knowledge of an
unauthorized end-use. The comments received did not provide evidence to
support assertions that exporters will incur high costs of compliance
related to the new ``military end-use'' control, nor was evidence
provided to demonstrate that compliance burdens would be any greater
than those currently required by provisions in part 744 of the EAR,
which require exporters to apply for licenses based on their
``knowledge'' of the intended end-user or end-use of an item. Moreover,
because this final rule reduces the number of ECCNs subject to the
``military end-use'' licensing requirement and further clarifies the
definition of ``military end-use,'' BIS believes that the overall scope
of the control has narrowed in a way that will minimize any additional
burden of complying with these requirements.
Comment 8: Some commenters recommended that a better approach to
the ``military end-use'' control would be for BIS to publish a list,
similar to the Unverified List or Entity List in the EAR, which would
name specific prohibited military end-users in the PRC. Commenters
argued that such a publication would shift the burden from the U.S.
exporters to the U.S. Government.
Response: BIS agrees that the EAR should provide exporters with as
much clarity as possible regarding specific end-users of concern and
end-users that merit greater scrutiny, as well as end-users that have
been validated as legitimate civilian customers. As a result of this
rule, BIS anticipates publishing the names of validated end-users.
Another proposed rule, published on June 5, 2007 (72 FR 31005), would
expand the criteria by which BIS could place end-users on the Entity
List to include military end-users, thereby alerting exporters to the
need for licenses. Yet even as BIS takes steps to identify for
exporters customers of concern as well as legitimate civilian
customers, BIS believes it remains critical for exporters to know their
customers and perform due diligence to ensure that certain items
destined for a ``military end-use'' in the PRC are reviewed by BIS.
With regard to the suggestion that BIS publish a list of military end-
users, it is important to recall that this rule controls certain items
based on their end-use, not on the end-user. The control depends on the
circumstances of how the item will be used, not necessarily by whom it
will be used. Therefore, BIS does not believe that a special list of
military end-users in the PRC is appropriate for this rule. BIS has
other end-user controls and other lists to identify end-users of
concern.
Comment 9: One commenter suggested that BIS clarify the
relationship between existing License Exceptions available for the PRC
and the proposed military end-use control.
Response: BIS has revised section 744.21(c) to state more clearly
that certain provisions of License Exception GOV are available for
items requiring a license as a result of the military end-use control.
Absent such a license requirement or another relevant license
requirement set forth elsewhere in the EAR (e.g., for a proliferation
end-use restricted under part 744), items listed in Supplement No. 2 to
Part 744 would be exported to the PRC without a license.
Comment 10: Some commenters stated that because the ``military end-
use'' control will have a significant impact, it should have been
determined to be a ``major rule'' for purposes related to requirements
of the Congressional Review Act (CRA) and that BIS's analysis of the
projected impact of the rule should be made public.
Response: Under the CRA, the OMB determines whether a rule is a
``major rule.'' OMB has determined, without regard to whether the
proposed rule may have been major, that this final rule is not major
because its annual effect on the economy is well below the $100 million
threshold provided in the CRA.
BIS's analysis for this final rule demonstrates that the changes to
the EAR (End-User Statement (EUS) requirement; Validated End-User (VEU)
authorization; and ``military end-use'' control) that have the
potential to have an annual effect on the economy will actually have
little overall effect.
The EUS requirement will result in little, if any additional cost
to U.S. exporters. EUSs are now required for all license exports
exceeding $50,000 in value (except for computers subject to the
provisions of section 748.10(b)(3) or to items classified under ECCN
6A003). While this changes the distribution of license applications
requiring EUSs, the higher dollar threshold triggering the need for an
EUS will keep the overall number of license applications that require
EUSs about the same as it was before this revision. The VEU
authorization will actually reduce costs of U.S. exporters because it
will eliminate the need for individual export licenses to specified
customers in the PRC. Eliminating export license applications could
save U.S. exporters as much as several million dollars annually. While
the rule does establish reporting requirements on U.S.
[[Page 33650]]
companies that export without a license under the VEU authorization,
these requirements are not appreciably more than existing recordkeeping
requirements and should be far less than the cost of license
applications avoided by the U.S. exporters.
Finally, the ``military end-use'' control established by this rule
covers a small set of items. U.S. exporters should already be screening
these exports, as well as all items subject to the EAR (items numbering
in the thousands) for reasons of control that are set forth in part 744
of the EAR (including weapons of mass destruction end-uses and
involvement of persons denied export privileges). The most direct
potential cost of the ``military end-use'' control would be export
license applications now required when previously they were not. Based
on existing data, this control could result in additional export
licenses for approximately $5,000,000 worth of goods annually, with a
cost, using a very high estimate, of $500,000. Commenters did not
provide data to allow BIS to evaluate what increased compliance costs,
if any, entities would incur with this additional screening
requirement.
Thus, the overall annual effect on the economy of this rulemaking,
using a very high estimate, will not be more than about several million
dollars, which is well below the $100 million threshold required for a
major rule.
Comment 11: Two commenters asserted that BIS does not have the
statutory authority to promulgate this regulation. In particular, one
commenter asserted that BIS does not have authority to amend the EAR to
impose unilateral national security controls on exports to China.
Response: Although the EAA has been in lapse since August 21, 2001,
BIS amends the EAR under the authority conferred by Executive Order
13222 of August 17, 2001, as extended most recently by the Notice of
August 3, 2006 (71 FR 44551 (Aug. 7, 2006)). Therein, the President, by
reason of the expiration of the EAA, invoked his authority, including
authority under the International Emergency Economic Powers Act, to
continue in effect the system of controls that had been maintained
under the EAA. In addition, as noted in response to Comment 4, BIS is
imposing this ``military end-use'' control consistent with U.S.
commitments as a Participating State in the Wassenaar Arrangement,
under the Arrangement's policy of national discretion in
implementation. Moreover, other Participating States are considering
their own measures to implement those commitments.
Comment 12: Two commenters asserted that, in drafting the final
version of this rule, BIS should include a provision for contract
sanctity in order to avoid adverse effects on existing business
contracts. In particular, one commenter stated that BIS should allow
exports under open, unshipped orders or contracts and allow companies
to continue to satisfy warranty obligations for spare parts, service
and maintenance, as well as non-warranty obligations for machines that
are already installed.
Response: BIS recognizes that exporters and reexporters may have
ongoing contractual obligations to service items previously shipped to
the PRC. This is the case whenever BIS issues a rule that imposes a new
license requirement. Accordingly, BIS has a practice of including
contract sanctity language in the Saving Clause section of such rules,
and has included such language in this rule. This language provides
that there is a thirty-day delay between publication of this rule and
the rule's effective date.
Expansion of End-User Statement Requirement for the PRC
Comment 13: Many commenters stated that an expansion of the End-
User Certificate (EUC) requirement to encompass items that require a
license for any reason to the PRC and exceed $5,000 would pose a
substantial burden for exporters and reexporters because it would
increase the number of EUCs required for exports of items to the PRC.
Currently, they argued, U.S. exporters experience delays in obtaining
EUCs from the PRC's Ministry of Commerce (MOFCOM). They further argued
that having to obtain additional EUCs from MOFCOM would protract these
delays because MOFCOM does not have sufficient resources to accommodate
such an increase in requests. In this context, some commenters also
asserted that BIS should not implement the expanded EUC requirement
until the government of the PRC agrees to provide the certificates in a
timely manner.
Response: As an initial matter, BIS notes that to conform with
nomenclature that is recognized by MOFCOM, BIS is amending the EAR to
label documents previously described as PRC End-User Certificates as
End-User Statements (EUSs). This change was implemented in response to
commenters' requests that BIS increase its coordination and cooperation
with MOFCOM regarding EUSs. In this rule, this amendment to the EAR is
being made in sections 748.9, 748.10 and 748.12.
Like the proposed rule, this final rule continues to provide in
section 748.10(a) that it applies to transactions involving items
controlled for reasons of national security that are destined for any
country identified in section 748.9(b)(2) of the EAR and that, in the
case of the PRC, it applies to transactions involving all items that
require a license to the PRC for any reason. Based on public comments,
however, BIS has reassessed the value threshold at which an EUS will be
required for the PRC. As compared to the proposed rule, this final
rule, in section 748.10(b)(4), increases the threshold at which an EUS
will be required for most items from $5,000 to $50,000. In recent
years, exporters and reexporters to the PRC have obtained between 500
and 600 EUSs each year. BIS selected the $50,000 threshold so that the
number of EUSs obtained would remain approximately the same, thereby
addressing commenters' concerns regarding the burden of obtaining an
increased number of EUSs and the burden on MOFCOM of processing an
increased number of requests for EUSs. While some exporters (those that
export items controlled for reasons other than national security,
especially in the chemical sector) will face a new requirement to
obtain EUSs, other exporters (those exporting items controlled for
reasons of national security valued under $50,000) will have a reduced
burden. In raising this threshold, BIS has acted to provide some relief
from burdens commenters state that exporters experience with paperwork
and the EUS requirement for applicable transactions above $5,000. The
new $50,000 threshold will not apply to items classified under ECCN
6A003 (cameras) or to exports to the PRC of computers subject to
section 748.10(b)(3). BIS's analysis of licensing data revealed that
nearly all transactions for items controlled under ECCN 6A003 are
valued at below $50,000. Because BIS believes there is a continued
national security need to require EUSs to conduct end-use checks on the
sensitive commodities covered by ECCN 6A003, BIS left the $5,000
threshold in place for these commodities. Items classified under ECCN
6A003 are controlled for national security reasons; as a result, this
action does not result in imposing a new requirement but simply
maintains an existing one. Excluding computers subject to section
748.10(b)(3) from the $50,000 threshold also maintains an existing
requirement. As to any delay in the PRC's implementation of this new
EUS requirement, as noted above, the U.S.
[[Page 33651]]
Government and the Government of the PRC continue a dialogue to address
obstacles that may impede the timely processing of requests for EUSs.
Comment 14: Some commenters argued that the $5,000 threshold for
the EUC requirement is too low.
Response: As noted in response to Comment 13, above, BIS is raising
the EUC threshold for most items to $50,000. The response to Comment 13
provides BIS's rationale for raising this threshold.
Comment 15: Commenters also argued that the expansion of the EUC
requirement would protract delays in export licensing because of the
lack of sufficient U.S. Government personnel in the PRC to conduct end-
use visits and because the Department of Commerce would use the
expanded EUC requirement as a basis to increase the number of end-use
visits in the PRC.
Response: As noted in the response to Comment 13, BIS does not
expect this final rule to result in any significant increase in the
number of EUSs required per year. The application of the EUS
requirement to items other than those controlled for NS reasons is
intended to broaden the variety of situations in which end-use visits
may be performed (to include end-use visits concerning items controlled
for chemical or biological weapons proliferation reasons, for example).
The increased dollar threshold is intended to substantially minimize
any increase in the overall number of such visits.
Comment 16: Some commenters stated that the issuance of EUCs
depends on the cooperation of senior officials of the government of the
PRC. These commenters contend that expanding this requirement would
harm the bilateral economic relationship, as well as significant
political, military, and foreign policy relationships, between the
United States and the PRC, thereby disrupting the necessary
cooperation.
Response: As noted in the response to Comment 13, this final rule
will require EUSs in circumstances where they were not previously
required, but because of the higher dollar threshold this amendment to
the EAR is not expected to result in an overall increase in the number
of EUSs required. The fact that the Governments of the United States
and the PRC are currently engaged in productive dialogue to facilitate
end-use visits counters the notion that the changes to the EUS
requirement would harm the bilateral relationship.
Comment 17: Some commenters stated that the consequence of the
expanded EUC requirement would be a decrease in the volume of U.S.
exports to the PRC because customers in the PRC would look to non-U.S.
suppliers that do not maintain a similar requirement. They argue that
this outcome would be contrary to the purpose of facilitating end-use
visits and increased U.S. exports to the PRC, which was explained in
the proposed rule.
Response: As explained in the response to Comment 13, the effect of
the change to the EUS requirement is not expected to result in a great
impact either in terms of costs to the exporter or reexporter or in
terms of compliance burden. As a result, BIS does not anticipate that
this amendment to the EAR would cause customers in the PRC to turn to
non-U.S. suppliers.
Comment 18: Some commenters argued that BIS should exempt companies
that are granted Validated End-User status from the EUC requirement.
Response: Section 748.10 of the EAR requires that EUSs be obtained
in situations in which a license is required. As Validated End-User
authorization eliminates a license requirement, eligible items
exported, reexported or transferred under that authorization will not
need EUSs.
Comment 19: One commenter stated that the proposed rule should be
clarified to indicate whether the expanded EUC requirement covered
exports of technology.
Response: Section 748.9(a)(7) provides that exports and reexports
of software and technology are exempt from support documentation
requirements; BIS proposed no change to this exemption and has made
none in this final rule.
Comment 20: One commenter asserted that the EUC requirement
constitutes a non-tariff barrier to trade with the PRC. Another
commenter asserted that, given the difficulty of obtaining EUCs and the
inconsistent information and lack of transparency of MOFCOM in issuing
EUCs, U.S. exporters may be required to increase their Foreign Corrupt
Practices Act (FCPA) compliance costs to ensure that no prohibited
payments are made.
Response: The need for an EUS has been a long standing requirement
in the Export Administration Regulations. As noted in response to
Comment 13, this final rule merely widens the scope of circumstances in
which an EUS is required without increasing the number of EUSs that
must be obtained. In addition, BIS notes that the requirement for U.S.
exporters to obtain an EUS stems from the Chinese determination that
EUSs are required for end-use checks. BIS does not agree that EUSs pose
a non-tariff barrier to trade, and without concrete information has no
basis to assess possible FCPA-compliance issues raised by this
commenter.
Comment 21: Some commenters asserted that the expansion of the EUS
requirement implicates requirements of the Paperwork Reduction Act of
1955 (44 U.S.C. 3501 et seq.) (PRA).
Response: The impact of the revision of the EUS requirement has
been addressed above in the response to Comment 13. BIS prepared a PRA
package in connection with the EUS element of this rule.
Authorization Validated End-User (VEU)
Comment 22: Several commenters claimed that the VEU authorization
may benefit exporters that have a small customer base, but would not
benefit exporters that sell to a large number of customers in the PRC
that will in turn act as resellers, distributors, or retailers of those
products in the Chinese market to a wide variety of customers.
Response: VEU authorization is intended to facilitate exports by
removing the requirement for an individual license for end-users that
meet the criteria for VEU authorization. BIS has set no limit on how
many customers may apply to receive exports under VEU authorization,
and has not precluded resellers from receiving VEU status.
Comment 23: Some commenters asserted that the VEU authorization
presents an additional administrative burden because of the associated
VEU certification, recordkeeping and reporting requirements, which are
similar to the requirements associated with Special Comprehensive
Licenses (SCLs).
Response: Authorization VEU is voluntary and therefore does not
present an additional administrative burden for any entity that does
not choose to avail itself of the authorization. Exporters or customers
who believe the VEU requirements are too burdensome may continue to
apply for individual licenses if they so choose. Nevertheless,
following our review of comments, in this final rule, BIS has
established procedures for applying for VEU status that were designed
to be as straightforward and present as little burden as possible,
consistent with the requirements of national security. VEU status would
provide significant benefits for end-users, as well as entities that
export or reexport to validated end-users. In addition, BIS believes
that the requirements for recordkeeping and reporting associated with
VEU status are
[[Page 33652]]
less burdensome than those currently in effect for other authorizations
such as special licenses that are available under the EAR to companies
that meet specified criteria.
Comment 24: Several commenters claimed that the VEU authorization
would be burdensome because it would require a complex internal control
commitment from Chinese customers or end-users. Those end-users would
require assistance from exporters or reexporters in order to request
the authorization.
Response: End-users will wish to evaluate the benefit of holding a
VEU authorization, and exporters, similarly, will want to consider for
themselves the benefits of working with their customers to apply for
such authorization. As noted in response to Comment 23, VEU
authorization is entirely voluntary, but those that meet its criteria
will be afforded the significant benefit of receiving certain items
without the need for an individual license for each transaction. Also
as noted in response to Comment 23, BIS has established procedures for
applying for VEU status that were designed to be as straightforward and
present as little burden as possible, consistent with the requirements
of national security. BIS offers assistance for exporters and end-users
in complying with the EAR, and anticipates conducting additional
outreach to clarify the procedures and benefits of the VEU
authorization.
Comment 25: Several commenters questioned whether the VEU
authorization offers a benefit. They asserted that U.S. exporters would
go through an administratively burdensome and costly process of
preparing and submitting a request for VEU authorization only to have
their Chinese customers made public on the BIS Web site. This would
result in the exporters losing competitive advantage as their
competitors would have access to their customers.
Response: See responses to Comments 23 and 24. In developing the
VEU authorization, BIS reviewed an extensive amount of licensing data,
which indicated that many Chinese end-users are served by multiple U.S.
exporters, all of whom would benefit if the end-user were to be granted
VEU status. BIS believes that identifying Chinese customers as
validated end-users will help to expand high-technology trade and U.S.
exports by making clear to all potential U.S. exporters that there is a
universe of end-users in the PRC that may receive certain items on the
CCL without the administrative burden of receiving an individual
license.
Comment 26: Several commenters stated that BIS should ensure that
no violations of Section 12(c) of the Export Administration Act of
1979, as amended (EAA), occur when BIS publishes information related to
the VEU authorization or information about end-users who are granted
VEU authorization.
Response: BIS agrees that it is critical to protect information
covered by Section 12(c) of the EAA. BIS conscientiously protects all
proprietary information, and will continue to ensure that the
requirements of Section 12(c) are met in its administration of VEU
authorization.
Comment 27: Some commenters asserted that VEU authorization would
present problems for companies in the PRC unwilling to submit to U.S.
legal jurisdiction because of possible penalties under the laws of the
PRC. They argued that the Government of the PRC might discourage
companies from applying for VEU authorization, and further claimed that
MOFCOM would refuse to allow end-use checks to be conducted on such
companies.
Response: BIS designed the VEU authorization program to correspond
to existing requirements of the EAR and to impose as little additional
burden as possible on exporters, reexporters and Chinese end-users that
currently use individual licenses or SCLs. BIS notes that Chinese end-
users currently receiving items under individual licenses or SCLs are
already (and have long been) required by the EAR to maintain certain
records and to comply with certain license conditions. These activities
are similar to the activities required of validated end-users in
section 748.15 of the EAR. Hence, the VEU program will not
substantially add compliance responsibilities for companies in China
whose activities are subject to the EAR. BIS will continue to explain
the VEU authorization to the Government of the PRC, and to encourage
that Government's cooperation with the program. However, it is
important to note that decisions regarding export licenses and export
authorizations for items subject to the EAR are made solely by the
United States Government.
Comment 28: Some commenters asserted that the potential benefit or
usefulness of VEU authorization is reduced because vetted end-users
would not be allowed to receive all products and technology under all
ECCNs under the EAR.
Response: Authorization VEU is not intended to eliminate the
requirement that exporters or others comply with applicable provisions
of law or the EAR. By statute, BIS must require a license for items
controlled for missile technology or crime control reasons that will be
exported or reexported to the PRC. While BIS recognizes that entities
designated as validated end-users would like to be exempt from all EAR
licensing requirements, BIS has designed the VEU authorization to
ensure that exports under VEU are relevant to the validated end-user's
business. It would not be appropriate, for example, to permit exports
under authorization VEU of semiconductor manufacturing equipment to a
chemical factory, or of aircraft parts to a plant producing computers.
For that reason, BIS will require applicants for VEU authorization to
identify those ECCNs that they wish to receive under the authorization,
and will decide whether those items are appropriate based on the
circumstances of the case.
Comment 29: Many commenters asserted that there would be negative
consequences for companies who apply for and do not receive VEU
authorization, implicitly creating a ``black list,'' thus posing a risk
of application that most U.S. exporters would be unwilling to take.
Commenters further stated that BIS should make clear that applying for
and not obtaining VEU authorization would not be considered a ``red
flag'' for a transaction. In addition, one commenter stated that BIS
should delete language regarding possible ``other actions,'' in
addition to removal from the VEU list, as a penalty for non-compliance
with VEU requirements.
Response: Based on these comments, BIS has specifically noted in
the chapeau to section 748.15 that if an application for VEU
authorization for a particular end-user is not granted, no new license
requirement is triggered and the end-user is not rendered ineligible
for license approvals from BIS. Moreover, VEU status is pertinent only
to transactions in which licenses would otherwise be required.
Accordingly, lack of approval of a VEU request would neither add to nor
take away from the licensing requirements applicable to exports or
reexports to an end-user that is not validated. Actions taken in the
context of VEU authorization, including non-compliance with VEU
requirements, that violate the EAA, the EAR, or any order, license, or
authorization issued thereunder may form the basis for enforcement
action.
Comment 30: Many commenters claimed that the selection process for
granting VEU authorization is unclear and the evaluation factors are
too extensive and ill-defined. The
[[Page 33653]]
commenters further stated that providing illustrative examples of
evaluation factors, such as an example of the factor ``party's
relationships with U.S. and foreign companies,'' might increase
exporters' understanding of the VEU process. Several commenters further
asserted that a published model VEU request would provide U.S.
exporters and potential VEUs guidance on BIS's expectations.
Response: BIS agrees that it is important to be explicit about the
type of criteria that BIS and its interagency partners will consider in
evaluating VEU candidates, as well as the process that BIS and its
interagency partners will use in making such determinations. As a
result, in this final rule, BIS has attempted to explain in great
detail how VEU authorizations will be administered by the U.S.
Government. Section 748.15(a)(1) provides that BIS will accept
applications from exporters, reexporters, or end-users and identifies
the address to which such applications must be submitted. Section
748.15(a)(2) of this rule specifies that, in determining which end-
users will be approved for VEU status, BIS will consider a range of
information, including such factors as: the entity's record of
exclusive engagement in civil end-use activities; the entity's
compliance with U.S. export controls; the need for an on-site review
prior to approval; the entity's capability of complying with the
requirements of authorization VEU; the entity's agreement to on-site
reviews to ensure adherence to the conditions of the VEU authorization
by representatives of the U. S. Government; and the entity's
relationships with United States and foreign companies. Section
748.15(a)(2) also specifies that when evaluating the eligibility of an
end-user, agencies will consider the status of export controls and the
support and adherence to multilateral export control regimes of the
government of the eligible destination. In addition, new Supplement No.
8 to Part 748 provides details as to the specific information that must
be submitted to BIS in a VEU authorization request. Finally, new
Supplement No. 9 to Part 748 provides details as to the decision-making
process of the End-User Review Committee (ERC), including timeframes
for decision-making. The ERC is composed of representatives of the
Departments State, Defense, Energy, and Commerce and other agencies, as
appropriate. All of these changes are intended to address public
comments encouraging BIS to explain the VEU authorization process in as
much detail as possible. In addition, BIS plans to conduct extensive
outreach to explain to exporters and potential VEU candidates the
procedures and requirements for applying for this authorization, and
will consider sample or model requests as part of this outreach and
education.
Comment 31: Some commenters stated that BIS should identify a time
limit for approving or rejecting VEU requests.
Response: BIS agrees that it is important to establish specific
time deadlines for approving or rejecting VEU applications. Supplement
No. 9 to Part 748, paragraph 4, provides that the ERC will make
determinations whether to grant VEU authorization to each VEU candidate
no later than 30 calendar days after the candidate's complete
application is circulated to all ERC agencies. Prior to or during its
review of an application, BIS or the Committee may determine that it is
appropriate to request additional information from the applicant or
potential validated end-user. When BIS or the ERC requests such
information, the 30-day clock is put on hold while the ERC is waiting
for additional information.
Comment 32: One commenter stated that BIS should: expressly limit
audits associated with VEU authorization to activities that occur under
the authorization; not extend such audits to other areas of compliance;
identify which U.S. Government agency would conduct VEU visits; and
specify how frequently such visits will occur. In this context, the
commenter stated that visits should occur no more than three times per
year, and that advance notice should be provided--preferably 14 days in
advance of the visit.
Response: In this rule, based on public comments, BIS clarifies
that reviews for purposes of administering and enforcing the provisions
of authorization VEU are not financial audits, as the term may have
been interpreted. As BIS implements the VEU authorization, BIS will
continue to consider the recommendation that reviews should occur no
more than three times per year and with 14 days advance notice. Visits
will be conducted and led by personnel of the Commerce Department, in
coordination with the U.S. Embassy, and may include representatives of
other U.S. Government agencies, as appropriate.
Comment 33: Some commenters stated that BIS should clarify whether
BIS's reference to ``items'' in the VEU authorization includes
technology and hardware.
Response: As stated in section 772.1 of the EAR, ``item'' means
``commodities, software, and technology.'' As such, commodities,
software, and technology are eligible items under authorization VEU.
Comment 34: Some commenters stated that BIS should clarify whether
the knowledge standard set forth in the EAR applies to exporters'
actions under the VEU authorization.
Response: As provided in section 764.2(e) of the EAR, no person may
take certain actions with respect to any item subject to the EAR with
knowledge that a violation of the EAA, EAR, or any order, license or
authorization issued thereunder, has occurred, is about to occur, or is
intended to occur in connection with the item. The term ``knowledge''
is defined in section 772.1. Authorization VEU is an authorization
covered by section 764.2(e), and the knowledge standard set forth in
section 772.1 applies to actions under the VEU authorization.
Comment 35: Some commenters recommended that BIS extend the VEU
authorization program to other destinations such as India and Taiwan.
Response: The United States Government believes that authorization
VEU could be a valuable tool to facilitate exports to civilian end-
users in other destinations, and is actively considering making
additional destinations eligible for authorization VEU.
Comment 36: Some commenters advised that the VEU authorization
should apply to subsidiaries, subcontractors, and multiple facilities
of the same end-user.
Response: BIS agrees that it may be appropriate for VEU
authorization to cover multiple facilities of the same end-user. Such
entities are free to request authorization for multiple locations or
facilities. If so, pursuant to the requirements of Supplement No. 9 to
Part 748, paragraph 1, they must provide with their applications the
physical addresses of each location in the eligible destination. BIS
will consider requests to cover multiple facilities according to the
criteria and procedures listed in new Supplements 8 and 9 to Part 748.
In particular, as described in Supplement No. 8 to Part 748, BIS
requires that VEU applications provide an overview of the structure,
ownership and business of the prospective validated end-user, which
should include subsidiaries and joint-venture projects. Applicants must
also provide the physical address(es) of the location(s) where the
item(s) will be used, if this address is different from the address of
the prospective validated end-user.
Comment 37: Some commenters requested that BIS allow a more
[[Page 33654]]
permissive VEU certification process for subsidiaries of U.S.
companies.
Response: BIS believes that it is important to maintain the same
procedure for all applicants for VEU authorization. Subsidiaries of
U.S. companies are certainly eligible to apply for VEU authorization;
their applications will be reviewed against the criteria listed in
section 748.15(a)(2).
Comment 38: One commenter suggested that the U.S. Government, on
its own, identify companies to be granted VEU status.
Response: BIS agrees that it is important for the U.S. Government
to be able to identify possible VEU candidates. As such, Supplement No.
9 to Part 748, paragraph 3, specifies that the ERC will consider
candidates for VEU authorization that are identified by the U.S.
Government.
Comment 39: Some commenters suggested that end-users under the
Special Comprehensive License (SCL) program should be given special
consideration in obtaining VEU authorization and that the SCL approval
process for end-users should warrant ``de facto'' authorization for VEU
status.
Response: BIS will consider all applicants for VEU status, and
status as an SCL consignee or end-user will be taken into account if
such consignees or end-users are VEU candidates. The SCL approval
process will not, however, be ``de facto'' VEU authorization because
SCL status and VEU authorization are materially different from one
another, and consequently the criteria BIS uses to evaluate applicants
for SCL status (set forth in Part 752 of the EAR) and VEU authorization
(set forth in section 748.15 of the EAR and in Supplement No. 8 to Part
748) are different. Because these differing sets of criteria are
tailored toward the distinct and differing features of SCL and VEU
status, respectively, BIS has made the decision not to grant special
consideration to VEU applications from SCL end-users or consignees.
Such applications will be evaluated on the basis of the criteria set
forth in section 748.15 and Supplement No. 8 to Part 748 of the EAR.
Comment 40: One commenter argued that there is a significant
disconnect between the VEU authorization and BIS's deemed exports
licensing policy. This commenter urged that BIS allow authorization VEU
to cover exports of technology to foreign national employees of
authorized companies normally employed inside the United States, if the
employees are nationals of a country eligible for VEU status.
Similarly, another commenter argued that BIS should confirm in this
final rule that authorization VEU will allow the release of technology
to PRC nationals in the United States if the PRC national is a full-
time employee of an entity with approved VEU status.
Response: If a validated end-user is approved to receive specific
eligible technology, part of that VEU authorization is the
authorization for Chinese employees of that validated end-user to
receive the same technology, including through a transfer inside the
United States.
Comment 41: One commenter argued that BIS should clarify the impact
of this rule on deemed exports. In particular, this commenter stated
that this rule should not apply to technical information that flows
between affiliated entities, particularly with respect to Chinese
subsidiaries of U.S. parent corporations.
Response: Under the new ``military end-use'' control, a license is
now required for any deemed export covered by section 744.21 of the
EAR. In addition, the revised licensing policy for items controlled for
national security reasons will apply to license applications involving
deemed exports. The intersection between the VEU authorization and
transfers of technology inside the United States is discussed above in
response to Comment 39. Under the current regulations, the deemed
export rule does not regulate the flow of information between exporters
in the U.S. and affiliated entities overseas that the commenter
describes as a deemed export transaction. The deemed export rule
regulates the transfer of controlled technology to foreign nationals
working in the United States. Under the EAR, unless a License Exception
applies, an export license is required if technology that requires a
license is to be released to an affiliated entity overseas.
Comment 42: Some commenters stated that BIS should publish in
Chinese the names of entities that receive VEU authorization. These
commenters also recommended that the Entity List and Unverified Parties
List be published in Chinese.
Response: BIS agrees that it is important to provide as much
information as possible to exporters and reexporters regarding U.S.
export controls. However, the Federal Register, which officially
publishes all U.S. Government regulations, only publishes documents in
the English language. In addition, BIS's limited resources do not allow
such information to be published on the BIS Web site at this time. BIS
will continue to consider this recommendation as part of its outreach
effort to educate exporters and customers in the United States and the
PRC.
Comment 43: One commenter argued that instead of the VEU
authorization, BIS should consider a ``gold card'' license for certain
exporters that would allow those exporters to export a pre-identified
range of products to any qualified customer in the PRC.
Response: The VEU accomplishes the same goal as that proposed by
the commenter. It allows U.S. exporters to export a pre-identified
range of products to qualified customers. For national security
reasons, however, the U.S. Government must retain the ability to
determine who is a ``qualified customer'' for controlled items exported
by any exporter, no matter how ``gold.'' The VEU program facilitates
civilian high-technology trade, in a way that will be neither overly
burdensome nor intrusive. The VEU program creates positive, market-
based incentives and rewards for companies that act responsibly with
sensitive products. Firms with established civilian credentials and a
good record of handling such products will enjoy better access to
controlled technology than their competitors, and U.S. exporters will
be able to sell more efficiently to their best civilian customers.
Comment 44: Some commenters argued that instead of the VEU
authorization, companies in the PRC should be allowed to provide
certificates to BIS in which they agree to end-use checks.
Response: A VEU authorization will take the place of individual
licenses. Consequently, there are a number of factors to be considered,
in addition to willingness to host on-site reviews, in determining
whether a customer in the PRC will be approved as a VEU. As set forth
in section 748.15, these factors include the entity's record of
exclusive engagement in civil end-use activities, the entity's
compliance with U.S. export controls, the need for an on-site review
prior to approval, and the entity's capability of complying with the
requirements of authorization VEU, as well as an agreement to accept
on-site reviews. Moreover, on-site reviews by U.S. Government officials
are to verify the end-user's compliance with the conditions of the VEU
authorization. Thus, VEU on-site reviews are separate and distinct from
End-Use Visits as defined in the End-Use Visit Understanding
established between the Governments of the U.S. and the PRC.
Comment 45: Some commenters argued that BIS should provide another
opportunity for industry to comment on the VEU authorization before it
becomes effective.
[[Page 33655]]
Response: BIS has considered the 57 public comments received, many
of which included statements regarding the VEU authorization. Having
thoroughly reviewed these comments, BIS believes it has a basis to move
forward with the VEU authorization program. However, BIS accepts
comments on an ongoing basis, as noted in the ADDRESSES section of this
Action. BIS is always considering how to improve the EAR, and will
consider any such comments received as it goes forward with the VEU
program.
Changes from the Proposed Rule
After considering the public comments and consulting with its
interagency partners, BIS is implementing the proposed rule, with the
modifications described below.
1. Amendments To License Review Policy and License Requirements With
Respect to the PRC
With respect to the license review policy for items controlled for
national security reasons destined for the PRC, the proposed rule
provided that there would be a presumption of denial for items that
would make a ``material contribution'' to the military capabilities of
the PRC. This amendment would have modified Section 742.4(b)(7) of the
EAR, which previously provided that applications involving items
destined for the PRC that are controlled for national security reasons
received extended review or denial if they would make a ``direct and
significant contribution'' to certain specified aspects of PRC military
development. BIS is retaining its ``direct and significant
contribution'' standard in this final rule, but has amended the list of
PRC military capabilities. An illustrative list of PRC military
capabilities is presented in new Supplement No. 7 to Part 742 of the
EAR (Description of Major Weapons Systems).
BIS also is implementing the ``military end-use'' control set forth
in the proposed rule. BIS has reviewed the proposed list of items
covered by this new control, which are set forth in Supplement No. 2 to
Part 744 of the EAR, and determined that rather than the 47 ECCNs
identified in the proposed rule, this final rule will apply the
``military end-use'' control to items covered under 31 ECCNs, entirely
or in part, covering commodities, software, and technology for
approximately 20 distinct product groups. All of the 31 full or partial
ECCNs included in this final rule were also included in the proposed
rule.
With respect to the ``military end-use'' control, BIS is also
changing the definition of ``military end-use'' that was set forth in
Section 744.21(f) of the proposed rule. In this final rule ``military
end-use'' means: incorporation into a military item described on the
U.S. Munitions List (USML) (22 CFR part 121, International Traffic in
Arms Regulations); incorporation into a military item described on the
International Munitions List (IML) (as set out on the Wassenaar
Arrangement Web site at http://www.wassenaar.org); incorporation into
items listed under ECCNs ending in ``A018'' on the CCL in Supplement
No. 1 to part 774 of the EAR; or for the ``use'', ``development'',
``production'', or deployment of military items described on the USML
or the IML, or items listed under ECCNs ending in ``A018'' on the CCL.
For purposes of section 744.21, deployment applies only to commodities
covered under ECCN 9A991 as described in Supplement No. 2 to Part 744
of the EAR. In connection with the definition of ``military end-use,''
BIS is also amending the EAR to include a note to section 744.21(f)
that defines, for purposes of the ``military end-use'' control, the
terms, ``operation,'' ``installation,'' ``maintenance,'' and
``deployment.''
2. Revision of End-User Statement Requirements
BIS is amending the EAR to provide that what were previously
described as ``End-User Certificates'' are now properly termed ``End-
User Statements'' (EUSs) with respect to the PRC. This amendment
affects sections 748.9, 748.10 and 748.12. In the proposed rule, BIS
originally stated that it planned to expand the requirement for EUSs to
items that require a license for any reason to the PRC and exceed a
total value of $5,000. In this final rule, BIS has raised the threshold
dollar amount for required EUSs for the PRC in section 748.10 of the
EAR to $50,000 for most items. The raised threshold will not apply to
items classified under ECCN 6A003 (cameras) and exports to the PRC of
computers subject to section 748.10(b)(3). The threshold amount for
items classified under ECCN 6A003 remains $5,000, as set forth in the
proposed rule. Also in this final rule, BIS has raised the threshold
dollar amount for required Import Certificates for items controlled for
national security reasons to any destination listed in section
748.9(b)(2) from the $5,000 specified in the proposed rule to $50,000.
Finally, BIS is amending Supplement No. 4 to Part 748 to provide the
correct name of the branch of the Government of the PRC that issues
EUSs.
3. Authorization Validated End-User (VEU)
BIS is adding Authorization Validated End-User (VEU) to the EAR, in
new section 748.15. With this final rule, BIS amends the EAR to provide
detailed information to the exporting community regarding the VEU
authorization. Information required to be submitted with VEU
authorization applications is set forth in new Supplement No. 8 to Part
748 of the EAR (Information Required for Requests for Validated End-
User Authorization). In addition, section 748.15 establishes the End-
User Review Committee, which is responsible for making determinations
on VEU candidates. New Supplement No. 9 to Part 748 sets forth the
membership of the Committee and the procedures that the Committee will
follow.
In connection with these amendments to the EAR regarding VEU
authorization, BIS is also making conforming changes. BIS is adding new
paragraph (3) to section 743.1 (Wassenaar Arrangement), which informs
exporters of the Wassenaar Arrangement of reporting requirements
related to VEU authorization; new paragraph (b) to section 750.2
(Processing of Classification Requests and Advisory Opinions), which
informs exporters of the timeframe in which VEU applications will be
considered; and new paragraph (b)(5) to section 758.1 (The Shipper's
Export Declaration (SED) or Automated Export System (AES) record),
which informs exporters that shipping documentation must be filed with
the U.S. Government for all exports under VEU authorization.
Saving Clause
Shipments of items removed from eligibility for a License Exception
or for export or reexport without a license (NLR) as a result of this
regulatory action that were on dock for loading, on lighter, laden
aboard an exporting or reexporting carrier, or en route aboard a
carrier to a port of export or reexport on June 19, 2007, pursuant to
actual orders for export or reexport to a foreign destination, may
proceed to that destination under the previous eligibility for a
License Exception or export or reexport without a license (NLR) so long
as they are exported or reexported before July 19, 2007. Any such items
not actually exported or reexported before midnight on July 19, 2007
require a license in accordance with this rule.
[[Page 33656]]
Rulemaking Requirements
1. This final rule has been determined to be significant for
purposes of Executive Order 12866.
2. Notwithstanding any other provision of law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et
seq.) (PRA), unless that collection of information displays a currently
valid Office of Management and Budget (OMB) Control Number. This rule
contains collections of information subject to the requirements of the
PRA. These collections have been approved by OMB under Control Numbers
0694-0088 (Multi-Purpose Application), which carries a burden hour
estimate of 58 minutes to prepare and submit form BIS-748, and 0694-
0093, ``Import Certificates and End-User Certificates (End-User
Statements when referring to the PRC),'' which carries a burden of 15
minutes per submission. This rule also contains a revision to the
existing collection under Control Number 0694-0088 for recordkeeping,
reporting and review requirements, which would be required in
connection with authorization Validated End-User and would carry an
estimated burden of 30 minutes per submission. An amendment to the
existing collection under Control Number 0694-0088 reflecting this
revision has been submitted to OMB for approval. This rule is not
expected to result in a significant increase in license applications or
other documentation submitted to BIS. Send comments regarding this
burden estimate or any other aspect of this collection of information,
including suggestions for reducing the burden, to David Rostker, Office
of Management and Budget (OMB), and to the Regulatory Policy Division,
Bureau of Industry and Security, Department of Commerce, as indicated
in the ADDRESSES section of this rule.
3. This rule does not contain policies with Federalism implications
as that term is defined under Executive Order 13132.
4. The provisions of the Administrative Procedure Act (5 U.S.C.
553) requiring notice of proposed rulemaking and the opportunity for
public participation are inapplicable because this regulation involves
a military or foreign affairs function of the United States (5 U.S.C.
553(a)(1)). Further, no other law requires that a notice of proposed
rulemaking and an opportunity for public comment be given for this
rule. Because a notice of proposed rulemaking and an opportunity for
public comment are not required to be given for this rule by 5 U.S.C.
553, or by any other law, the analytical requirements of the Regulatory
Flexibility Act, 5 U.S.C. 601 et seq., are not applicable. This
regulation is issued in final form. Although the formal comment period
closed on December 4, 2006, public comments on this regulation are
welcome on a continuing basis. Comments should be submitted to Sheila
Quarterman, Office of Exporter Services, Bureau of Industry and
Security, Department of Commerce, P.O. Box 273, Washington, DC 20044.
List of Subjects
15 CFR Part 742
Exports, Terrorism.
15 CFR Part 743
Administrative practice and procedure, Reporting and recordkeeping
requirements.
15 CFR Part 744
Exports, Reporting and recordkeeping requirements, Terrorism.
15 CFR Parts 748, 750 and 758
Administrative practice and procedure, Exports, Reporting and
recordkeeping requirements.
0
Accordingly, parts 742, 743, 744, 748, 750 and 758 of the Export
Administration Regulations (15 CFR Parts 730-774) are amended as
follows:
PART 742--[AMENDED]
0
1. The authority citation for 15 CFR part 742 continues to read as
follows:
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
18 U.S.C. 2510 et seq.; 22 U.S.C. 3201 et seq.; 42 U.S.C. 2139a;
Sec. 901-911, Pub. L. 106-387; Sec. 221, Pub. L. 107-56; Sec. 1503,
Pub. L. 108-11,117 Stat. 559; E.O. 12058, 43 FR 20947, 3 CFR, 1978
Comp., p. 179; E.O. 12851, 58 FR 33181, 3 CFR, 1993 Comp., p. 608;
E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 13026, 61
FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR,
2001 Comp., p. 783; Presidential Determination 2003-23 of May 7,
2003, 68 FR 26459, May 16, 2003; Notice of August 3, 2006, 71 FR
44551 (August 7, 2006); Notice of October 25, 2005, 71 FR 64109
(October 31, 2006).
0
2. Amend Sec. 742.2 by adding paragraph (b)(4) to read as follows:
Sec. 742.2 Proliferation of chemical and biological weapons.
* * * * *
(b) * * *
(4) License applications for items described in paragraph (a) of
this section, when destined for the People's Republic of China, will be
reviewed in accordance with the licensing policies in both paragraph
(b) of this section and Sec. 742.4(b)(7).
* * * * *
0
3. Amend Sec. 742.3 by adding paragraph (b)(4) to read as follows:
Sec. 742.3 Nuclear nonproliferation.
* * * * *
(b) * * *
(4) License applications for items described in paragraph (a) of
this section, when destined to the People's Republic of China, will be
reviewed in accordance with the licensing policies in both paragraph
(b) of this section and Sec. 742.4(b)(7).
* * * * *
0
4. Amend Sec. 742.4 by revising paragraph (b)(7) to read as follows:
Sec. 742.4 National security.
* * * * *
(b) * * *
(7) For the People's Republic of China (PRC), there is a general
policy of approval for license applications to export, reexport, or
transfer items to civil end-uses. There is a presumption of denial for
license applications to export, reexport, or transfer items that would
make a direct and significant contribution to the PRC's military
capabilities such as, but not limited to, the major weapons systems
described in Supplement No. 7 to Part 742 of the EAR.
* * * * *
0
5. Amend Sec. 742.5 by adding paragraph (b)(4) to read as follows:
Sec. 742.5 Missile technology.
* * * * *
(b) * * *
(4) License applications for items described in paragraph (a) of
this section, when destined for the People's Republic of China, will be
reviewed in accordance with the licensing policies in both paragraph
(b) of this section and Sec. 742.4(b)(7).
* * * * *
0
6. Supplement No. 7 to Part 742 is added to read as follows:
SUPPLEMENT NO. 7 TO PART 742--DESCRIPTION OF MAJOR WEAPONS SYSTEMS
(1) Battle Tanks: Tracked or wheeled self-propelled armored
fighting vehicles with high cross-country mobility and a high-level
of self protection, weighing at least 16.5 metric tons unladen
weight, with a high muzzle velocity direct fire main gun of at least
75 millimeters caliber.
(2) Armored Combat Vehicles: Tracked, semi-tracked, or wheeled
self-propelled vehicles, with armored protection and cross-country
capability, either designed and
[[Page 33657]]
equipped to transport a squad of four or more infantrymen, or armed
with an integral or organic weapon of a least 12.5 millimeters
caliber or a missile launcher.
(3) Large-Caliber Artillery Systems: Guns, howitzers, artillery
pieces combining the characteristics of a gun or a howitzer, mortars
or multiple-launch rocket systems, capable of engaging surface
targets by delivering primarily indirect fire, with a caliber of 75
millimeters and above.
(4) Combat Aircraft: Fixed-wing or variable-geometry wing
aircraft designed, equipped, or modified to engage targets by
employing guided missiles, unguided rockets, bombs, guns, cannons,
or other weapons of destruction, including versions of these
aircraft which perform specialized electronic warfare, suppression
of air defense or reconnaissance missions. The term ``combat
aircraft'' does not include primary trainer aircraft, unless
designed, equipped, or modified as described above.
(5) Attack Helicopters: Rotary-wing aircraft designed, equipped
or modified to engage targets by employing guided or unguided anti-
armor, air-to-surface, air-to-subsurface, or air-to-air weapons and
equipped with an integrated fire control and aiming system for these
weapons, including versions of these aircraft that perform
specialized reconnaissance or electronic warfare missions.
(6) Warships: Vessels or submarines armed and equipped for
military use with a standard displacement of 750 metric tons or
above, and those with a standard displacement of less than 750
metric tons that are equipped for launching missiles with a range of
at least 25 kilometers or torpedoes with a similar range.
(7) Missiles and Missile Launchers:
(a) Guided or unguided rockets, or ballistic, or cruise missiles
capable of delivering a warhead or weapon of destruction to a range
of at least 25 kilometers, and those items that are designed or
modified specifically for launching such missiles or rockets, if not
covered by systems identified in paragraphs (1) through (6) of this
Supplement. For purposes of this rule, systems in this paragraph
include remotely piloted vehicles with the characteristics for
missiles as defined in this paragraph but do not include ground-to-
air missiles;
(b) Man-Portable Air-Defense Systems (MANPADS); or
(c) Unmanned Aerial Vehicles (UAVs) of any type, including
sensors for guidance and control of these systems.
(8) Offensive Space Weapons: Systems or capabilities that can
deny freedom of action in space for the United States and its allies
or hinder the United States and its allies from denying an adversary
the ability to take action in space. This includes systems such as
anti-satellite missiles, or other systems designed to defeat or
destroy assets in space.
(9) Command, Control, Communications, Computer, Intelligence,
Surveillance, and Reconnaissance (C4ISR): Systems that support
military commanders in the exercise of authority and direction over
assigned forces across the range of military operations; collect,
process, integrate, analyze, evaluate, or interpret information
concerning foreign countries or areas; systematically observe
aerospace, surface or subsurface areas, places, persons, or things
by visual, aural, electronic, photographic, or other means; and
obtain, by visual observation or other detection methods,
information about the activities and resources of an enemy or
potential enemy, or secure data concerning the meteorological,
hydrographic, or geographic characteristics of a particular area,
including Undersea communications. Also includes sensor
technologies.
(10) Precision Guided Munitions (PGMs), including ``smart
bombs'': Weapons used in precision bombing missions such as
specially designed weapons, or bombs fitted with kits to allow them
to be guided to their target.
(11) Night vision equipment: Any electro-optical device that is
used to detect visible and infrared energy and to provide an image.
This includes night vision goggles, forward-looking infrared
systems, thermal sights, and low-light level systems that are night
vision devices, as well as infrared focal plane array detectors and
cameras specifically designed, developed, modified, or configured
for military use; image intensification and other night sighting
equipment or systems specifically designed, modified or configured
for military use; second generation and above military image
intensification tubes specifically designed, developed, modified, or
configured for military use, and infrared, visible and ultraviolet
devices specifically designed, developed, modified, or configured
for military application.
PART 743--[AMENDED]
0
7. The authority citation for 15 CFR part 743 continues to read as
follows:
Authority: 50 U.S.C. app. 2401 et seq. Pub. L. 106-508; 50
U.S.C. 1701 et seq. Notice of August 3, 2006, 71 FR 44551 (August 7,
2006).
0
8. Paragraph (b)(3) is added to Sec. 743.1 to read as follows:
Sec. 743.1 Wassenaar Arrangement.
* * * * *
(b) * * *
(3) Exports authorized under the Validated End-User authorization
(see Sec. 748.15 of the EAR).
* * * * *
PART 744--[AMENDED]
0
9. The authority citation for 15 CFR part 744 continues to read as
follows:
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
22 U.S.C. 3201 et seq.; 42 U.S.C. 2139a; Sec. 901-911, Pub. L. 106-
387; Sec. 221, Pub. L. 107-56; E.O. 12058, 43 FR 20947, 3 CFR, 1978
Comp., p. 179; E.O. 12851, 58 FR 33181, 3 CFR, 1993 Comp., p. 608;
E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 12947, 60
FR 5079, 3 CFR, 1995 Comp., p. 356; E.O. 13026, 61 FR 58767, 3 CFR,
1996 Comp., p. 228; E.O. 13099, 63 FR 45167, 3 CFR, 1998 Comp., p.
208; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; E.O. 13224,
66 FR 49079, 3 CFR, 2001 Comp., p. 786; Notice of August 3, 2006, 71
FR 44551 (August 7, 2006); Notice of October 27, 2006, 71 FR 64109
(October 31, 2006).
0
10. Section 744.21 is added to read as follows:
Sec. 744.21 Restrictions on certain military end-uses in the People's
Republic of China (PRC).
(a) General prohibition. In addition to the license requirements
for items specified on the Commerce Control List (CCL), you may not
export, reexport, or transfer any item listed in Supplement No. 2 to
Part 744 to the PRC without a license if, at the time of the export,
reexport, or transfer, you know, meaning either:
(1) You have knowledge, as defined in Sec. 772.1 of the EAR, that
the item is intended, entirely or in part, for a ``military end-use,''
as defined in paragraph (f) of this section, in the PRC; or
(2) You have been informed by BIS, as described in paragraph (b) of
this section, that the item is or may be intended, entirely or in part,
for a ``military end-use'' in the PRC.
(b) Additional prohibition on those informed by BIS. BIS may inform
you either individually by specific notice, through amendment to the
EAR published in the Federal Register, or through a separate notice
published in the Federal Register, that a license is required for
specific exports, reexports, or transfers of any item because there is
an unacceptable risk of use in or diversion to ``military end-use''
activities in the PRC. Specific notice will be given only by, or at the
direction of, the Deputy Assistant Secretary for Export Administration.
When such notice is provided orally, it will be followed by written
notice within two working days signed by the Deputy Assistant Secretary
for Export Administration or the Deputy Assistant Secretary's designee.
The absence of BIS notification does not excuse the exporter from
compliance with the license requirements of paragraph (a) of this
section.
(c) License exception. Despite the prohibitions described in
paragraphs (a) and (b) of this section, you may export items subject to
the EAR under the provisions of License Exception GOV set forth in
Sec. Sec. 740.11(b)(2)(i) and (ii) of the EAR.
(d) License application procedure. When submitting a license
application pursuant to this section, you must state in the
``additional information'' section of the BIS-748P ``Multipurpose
Application'' or its electronic equivalent that ``this application is
submitted because of the license requirement in
[[Page 33658]]
Sec. 744.21 of the EAR (Restrictions on Certain Military End-uses in
the People's Republic of China).'' In addition, either in the
additional information section of the application or in an attachment
to the application, you must include all known information concerning
the military end-use of the item(s). If you submit an attachment with
your license application, you must reference the attachment in the
``additional information'' section of the application.
(e) License review standards. (1) Applications to export, reexport,
or transfer items described in paragraph (a) of this section will be
reviewed on a case-by-case basis to determine whether the export,
reexport, or transfer would make a material contribution to the
military capabilities of the PRC and would result in advancing the
country's military activities contrary to the national security
interests of the United States. When it is determined that an export,
reexport, or transfer would make such a contribution, the license will
be denied.
(2) Applications may be reviewed under chemical and biological
weapons, nuclear nonproliferation, or missile technology review
policies, as set forth in Sec. Sec. 742.2(b)(4), 742.3(b)(4) and
742.5(b)(4) of the EAR, if the end-use may involve certain
proliferation activities.
(3) Applications for items requiring a license for other reasons
that are destined to the PRC for a military end-use also will be
subject to the review policy stated in paragraph (e)(1) of this
section.
(f) In this section, ``military end-use'' means: incorporation into
a military item described on the U.S. Munitions List (USML) (22 CFR
part 121, International Traffic in Arms Regulations); incorporation
into a military item described on the International Munitions List
(IML) (as set out on the Wassenaar Arrangement Web site at http://www.wassenaar.org
); incorporation into items listed under ECCNs ending
in ``A018'' on the CCL in Supplement No. 1 to part 774 of the EAR; or
for the ``use'', ``development'', or ``production'' of military items
described on the USML or the IML, or items listed under ECCNs ending in
``A018'' on the CCL. ``Military end-use'' also means ``deployment'' of
items classified under ECCN 9A991 as set forth in Supplement No. 2 to
Part 744.
Note to paragraph (f) of this section: As defined in Part 772 of
the EAR, ``use'' means operation, installation (including on-site
installation), maintenance (checking), repair, overhaul and
refurbishing; ``development'' is related to all stages prior to
serial production, such as: design, design research, design
analyses, design concepts, assembly and testing of prototypes, pilot
production schemes, design data, process of transforming design data
into a product, configuration design, integration design, layouts;
and ``production'' means all production stages, such as: product
engineering, manufacturing, integration, assembly (mounting),
inspection, testing, quality assurance.
For purposes of this section, operation means to cause to
function as intended; installation means to make ready for use, and
includes connecting, integrating, incorporating, loading software,
and testing; maintenance means performing work to bring an item to
its original or designed capacity and efficiency for its intended
purpose, and includes testing, measuring, adjusting, inspecting,
replacing parts, restoring, calibrating, overhauling; and deployment
means placing in battle formation or appropriate strategic position.
0
11. Supplement No. 2 to Part 744 is added to read as follows:
SUPPLEMENT NO. 2 TO PART 744--LIST OF ITEMS SUBJECT TO THE MILITARY
END-USE LICENSE REQUIREMENT OF Sec. 744.21
The following items, as described, are subject to the military
end-use license requirement in Sec. 744.21.
(1) Category 1--Materials, Chemicals, Microorganisms, and Toxins
(i) 1A290 Depleted uranium (any uranium containing less than
0.711% of the isotope U-235) in shipments of more than 1,000
kilograms in the form of shielding contained in X-ray units,
radiographic exposure or teletherapy devices, radioactive
thermoelectric generators, or packaging for the transportation of
radioactive materials.
(ii) 1C990 Limited to fibrous and filamentary materials other
than glass, aramid or polyethylene not controlled by 1C010 or 1C210,
for use in ``composite'' structures and with a specific modulus of
3.18x106m or greater and a specific tensile strength of 7.62x104m or
greater.
(iii) 1C996 Hydraulic fluids containing synthetic hydrocarbon
oils, having all the characteristics in the List of Items
Controlled.
(iv) 1D993 ``Software'' specially designed for the
``development'', ``production'', or ``use'' of equipment or
materials controlled by 1C210.b, or 1C990.
(v) 1D999 Limited to specific software controlled by 1D999.b for
equipment controlled by 1B999.e that is specially designed for the
production of prepregs controlled in Category 1, n.e.s.
(vi) 1E994 Limited to ``technology'' for the ``development'',
``production'', or ``use'' of fibrous and filamentary materials
other than glass, aramid or polyethylene controlled by 1C990.
(2) Category 2--Materials Processing
(i) 2A991 Limited to bearings and bearing systems not controlled
by 2A001 and with operating temperatures above 573K (300 [deg]C).
(ii) 2B991 Limited to ``numerically-controlled'' machine tools
having ``positioning accuracies'', with all compensations available,
less (better) than 9[mu] along any linear axis; and machine tools
controlled under 2B991.d.1.a.
(iii) 2B992 Non-``numerically controlled'' machine tools for
generating optical quality surfaces, and specially designed
components therefor.
(iv) 2B996 Limited to dimensional inspection or measuring
systems or equipment not controlled by 2B006 with measurement
uncertainty equal to or less (better) than (1.7 + L/1000)
micrometers in any axes (L measured Length in mm).
(3) Category 3--Electronics Design, Development and Production
(i) 3A292.d Limited to digital oscilloscopes and transient
recorders, using analog-to-digital conversion techniques, capable of
storing transients by sequentially sampling single-shot inputs at
greater than 2.5 giga-samples per second.
(iii) 3A999.c All flash x-ray machines, and components of pulsed
power systems designed thereof, including Marx generators, high
power pulse shaping networks, high voltage capacitors, and triggers.
(ii) 3E292 Limited to ``technology'' according to the General
Technology Note for the ``development'', ``production'', or ``use''
of digital oscilloscopes and transient recorders with sampling rates
greater that 2.5 giga-samples per second, which are controlled by
3A292.d.
(4) Category 4--Computers
(i) 4A994 Limited to computers not controlled by 4A001 or 4A003,
with an Adjusted Peak Performance (``APP'') exceeding 0.5 Weighted
TeraFLOPS (WT).
(ii) 4D993 ``Program'' proof and validation ``software'',
``software'' allowing the automatic generation of ``source codes'',
and operating system ``software'' not controlled by 4D003 that are
specially designed for real time processing equipment.
(iii) 4D994 Limited to ``software'' specially designed or
modified for the ``development'', ``production'', or ``use'' of
equipment controlled by 4A101.
(5) Category 5--(Part 1) Telecommunications
(i) 5A991 Limited to telecommunications equipment designed to
operate outside the temperature range from 219K (-54 [deg]C) to 397K
(124 [deg]C), which is controlled by 5A991.a., radio equipment using
Quadrature-amplitude-modulation (QAM) techniques, which is
controlled by 5A991.b.7., and phased array antennae, operating above
10.5 Ghz, except landing systems meeting ICAO standards (MLS), which
are controlled by 5A991.f.
(ii) 5D991 Limited to ``software'' specially designed or
modified for the ``development'', ``production, or ``use'' of
equipment controlled by 5A991.a., 5A991.b.7., and 5A991.f., or of
``software'' specially designed or modified for the ``development'',
``production'', or ``use'' of equipment controlled by 5A991.a.,
5A991.b.7., and 5A991.f.
(v) 5E991 Limited to ``technology'' for the ``development'',
``production'' or ``use'' of equipment controlled by 5A991.a.,
5A991.b.7., or 5A991.f., or of ``software'' specially designed or
modified for the
[[Page 33659]]
``development'', ``production'', or ``use'' of equipment controlled
by 5A991.a., 5A991.b.7., and 5A991.f.
(6) Category 6--Sensors and Lasers
(i) 6A995 ``Lasers'', not controlled by 6A005 or 6A205.
(ii) 6C992 Optical sensing fibers not controlled by 6A002.d.3
which are modified structurally to have a ``beat length'' of less
than 500 mm (high birefringence) or optical sensor materials not
described in 6C002.b and having a zinc content of equal to or more
than 6% by ``mole fraction.''
(7) Category 7--Navigation and Avionics
(i) 7A994 Other navigation direction finding equipment, airborne
communication equipment, all aircraft inertial navigation systems
not controlled under 7A003 or 7A103, and other avionic equipment,
including parts and components, n.e.s.
(ii) 7B994 Other equipment for the test, inspection, or
``production'' of navigation and avionics equipment.
(iii) 7D994 ``Software'', n.e.s., for the ``development'',
``production'', or ``use'' of navigation, airborne communication and
other avionics.
(iv) 7E994 ``Technology'', n.e.s., for the ``development'',
``production'', or ``use'' of navigation, airborne communication,
and other avionics equipment.
(8) Category 8--Marine
(i) 8A992 Limited to underwater systems or equipment, not
controlled by 8A001, 8A002, or 8A018, and specially designed parts
therefor.
(ii) 8D992 ``Software'' specially designed or modified for the
``development'', ``production'' or ``use'' of equipment controlled
by 8A992.
(iii) 8E992 ``Technology'' for the ``development'',
``production'' or ``use'' of equipment controlled by 8A992.
(9) Category 9--Propulsion Systems, Space Vehicles and Related
Equipment
(i) 9A991 Limited to ``aircraft'', n.e.s., and gas turbine
engines not controlled by 9A001 or 9A101.
(ii) 9D991 ``Software'', for the ``development'' or
``production'' of equipment controlled by 9A991 or 9B991.
(iii) 9E991 ``Technology'', for the ``development'',
``production'' or ``use'' of equipment controlled by 9A991 or 9B991.
PART 748--[AMENDED]
0
12. The authority citation for 15 CFR part 748 continues to read as
follows:
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66
FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 3, 2006, 71 FR
44551 (August 7, 2006).
0
13. Section 748.3 is amended by adding paragraph (c)(3) to read as
follows:
Sec. 748.3 Classification requests, advisory opinions, and encryption
review requests.
* * * * *
(c) * * *
(3) Requests for Validated End-User authorization should be
submitted in accordance with the provisions set forth in Sec. 748.15
and Supplement Nos. 8 and 9 to this part.
* * * * *
0
14. Section 748.9 is amended:
0
a. By revising paragraph (b)(1) introductory text;
0
b. By revising paragraph (b)(2) introductory text before the list of
countries;
0
c. By revising paragraph (b)(2)(i);
0
d. By revising paragraph (c) introductory text; and
0
e. By revising paragraph (c)(1).
The revisions read as follows:
Sec. 748.9 Support documents for license applications.
* * * * *
(b) * * *
(1) Does your transaction involve items controlled for national
security reasons? Does your transaction involve items destined for the
People's Republic of China (PRC)?
* * * * *
(2) Does your transaction involve items controlled for national
security reasons destined for one of the following countries? (This
applies only to those overseas destinations specifically listed.) If
your item is destined for the PRC, does your transaction involve items
that require a license to the PRC for any reason?
* * * * *
(i) If yes, your transaction may require an Import Certificate or
End-User Statement. If your transaction involves items destined for the
PRC that are controlled to the PRC for any reason, your transaction may
require a PRC End-User Statement. Note that if the destination is the
PRC, a Statement of Ultimate Consignee and Purchaser may be substituted
for a PRC End-User Statement when the item to be exported (i.e.,
replacement parts and sub-assemblies) is for servicing previously
exported items and is valued at $75,000 or less.
* * * * *
(c) License applications requiring support documents. License
applications requiring support by either a Statement by the Ultimate
Consignee and Purchaser or an Import Certificate or End-User Statement
must indicate the type of support document obtained in Block 6 or 7 on
your application with an ``X'' in the appropriate box. If the support
document is an Import Certificate or End User Statement, you must also
identify the originating country and number of the Certificate or
Statement in Block 13 on your application. If a license application is
submitted without either the correct Block or Box marked on the
application or the required support document, the license application
will be immediately returned without action unless the satisfactory
reasons for failing to obtain the document are supplied in Block 24 or
in an attachment to your license application.
(1) License applications supported by an Import Certificate or End-
User Statement. You may submit your license application upon receipt of
a facsimile or other legible copy of the Import Certificate or End-User
Statement, provided that no shipment is made against any license issued
based upon the Import Certificate or End-User Statement prior to
receipt and retention of the original statement by the applicant.
* * * * *
0
15. Section 748.10 is amended:
0
a. By revising the section heading;
0
b. By revising paragraph (a);
0
c. By revising the heading and introductory text for paragraph (b);
0
d. By revising paragraph (b)(4);
0
e. By revising paragraph (c); and
0
f. By revising paragraph (g).
The revisions read as follows:
Sec. 748.10 Import Certificates and End-User Statements.
(a) Scope. There are a variety of Import Certificates and End-User
Statements currently in use by various governments. The control
exercised by the government issuing the Import Certificate or End-User
Statement is in addition to the conditions and restrictions placed on
the transaction by BIS. The laws and regulations of the United States
are in no way modified, changed, or superseded by the issuance of an
Import Certificate or End-User Statement. This section describes
exceptions and relationships true for both Import Certificates and End-
User Statements, and applies only to transactions involving national
security controlled items destined for one of the countries identified
in Sec. 748.9(b)(2) of this part. In the case of the PRC, this section
applies to transactions involving all items that require a license to
the PRC for any reason.
(b) Import Certificate or End-User Statement. An Import Certificate
or End-User Statement must be obtained, unless your transaction meets
one of the exemptions stated in Sec. 748.9(a) of this part, if:
* * * * *
(4) Your license application involves the export of commodities and
software
[[Page 33660]]
classified in a single entry on the CCL, and your ultimate consignee is
in any destination listed in Sec. 748.9(b)(2), and the total value of
your transaction exceeds $50,000. Note that this $50,000 threshold does
not apply to exports to the PRC of computers subject to the provisions
of Sec. 748.10(b)(3) or to items classified under ECCN 6A003.
(i) Your license application may list several separate CCL entries.
If any individual entry including an item that is controlled for
national security reasons exceeds $50,000, then an Import Certificate
must be obtained covering all items controlled for national security
reasons on your license application. If the total value of entries on a
license application that require a license to the PRC for any reason
listed on the CCL exceeds $50,000, then a PRC End-User Statement
covering all such controlled items that require a license to the PRC on
your license application must be obtained;
(ii) If your license application involves a lesser transaction that
is part of a larger order for items controlled for national security
reasons (or, for the PRC, for any reason) in a single ECCN exceeding
$50,000, an Import Certificate, or a PRC End-User Statement, as
appropriate, must be obtained.
(iii) You may be specifically requested by BIS to obtain an Import
Certificate for a transaction valued under $50,000. You also may be
specifically requested by BIS to obtain an End-User Statement for a
transaction valued under $50,000 or for a transaction that requires a
license to the PRC for reasons in the EAR other than those listed on
the CCL.
(c) How to obtain an Import Certificate or End-User Statement. (1)
Applicants must request that the importer (e.g., ultimate consignee or
purchaser) obtain the Import Certificate and that it be issued covering
only those items that are controlled for national security reasons.
Exporters should not request that importers obtain Import Certificates
for items that are controlled for reasons other than national security.
Note that in the case of the PRC, applicants must request that the
importer obtain an End-User Statement for all items on a license
application that require a license to the PRC for any reason listed on
the CCL. Applicants must obtain original Import Certificate or End-User
Statements from importers.
(2) The applicant's name must appear on the Import Certificate or
End-User Statement submitted to BIS as either the applicant, supplier,
or order party. The Import Certificate may be made out to either the
ultimate consignee or the purchaser, even though they are different
parties, as long as both are located in the same country.
(3) If your transaction requires the support of a PRC End-User
Statement, you must ensure that the following information is included
on the PRC End-User Statement signed by an official of the Department
of Mechanic, Electronic and High Technology Industries, Export Control
Division I, of the PRC Ministry of Commerce (MOFCOM), with MOFCOM's
seal affixed to it:
(i) Title of contract and contract number (optional);
(ii) Names of importer and exporter;
(iii) End-User and end-use;
(iv) Description of the item, quantity and dollar value; and
(v) Signature of the importer and date.
Note to paragraph (c) of this section: You should furnish the
consignee with the item description contained in the CCL to be used
in applying for the Import or End-User Statement. It is also
advisable to furnish a manufacturer's catalog, brochure, or
technical specifications if the item is new.
* * * * *
(g) Submission of Import Certificates and End-User Statements.
Certificates and Statements must be retained on file by the applicant
in accordance with the recordkeeping provisions of part 762 of the EAR,
and should not be submitted with the license application. For more
information on what Import Certificate and End-User Statement
information must be included in license applications, refer to Sec.
748.9(c) of the EAR. In addition, as set forth in Sec. 748.12(e), to
assist in license reviews, BIS will require applicants, on a random
basis, to submit specific original Import Certificate and End-User
Statements.
Sec. 748.12 [Amended]
0
16. Section 748.12 is amended by removing and reserving paragraph (a).
0
17. Section 748.15 is added to read as follows:
Sec. 748.15 Authorization Validated End-User (VEU).
Authorization Validated End-User (VEU) permits the export,
reexport, and transfer to validated end-users of any eligible items
that will be used in a specific eligible destination. Validated end-
users are those who have been approved in advance pursuant to the
requirements of this section. To be eligible for authorization VEU,
exporters, reexporters, and potential validated end-users must adhere
to the conditions and restrictions set forth in paragraphs (a) through
(f) of this section. If a request for VEU authorization for a
particular end-user is not granted, no new license requirement is
triggered. In addition, such a result does not render the end-user
ineligible for license approvals from BIS.
(a) Eligible end-users. The only end-users to whom eligible items
may be exported, reexported, or transferred under VEU are those
validated end-users identified in Supplement No. 7 to Part 748,
according to the provisions in this section and those set forth in
Supplement Nos. 8 and 9 to this part that have been granted VEU status
by the End-User Review Committee (ERC) according to the process set
forth in Supplement No. 9 to this part.
(1) Requests for authorization must be submitted in the form of an
advisory opinion request, as described in Sec. 748.3(c)(2), and should
include a list of items (items for purposes of authorization VEU
include commodities, software and technology, except as excluded by
paragraph (c) of this section), identified by ECCN, that exporters or
reexporters intend to export, reexport or transfer to an eligible end-
user, once approved. To ensure a thorough review, requests for VEU
authorization must include the information described in Supplement No.
8 to this part. Requests for authorization will be accepted from
exporters, reexporters or end-users. Submit the request to: The Office
of Exporter Services, Bureau of Industry and Security, U.S. Department
of Commerce, 14th Street and Pennsylvania Avenue, NW., Room 2705,
Washington, DC 20230; or to The Office of Exporter Services, Bureau of
Industry and Security, U.S. Department of Commerce, P.O. Box 273,
Washington, DC 20044. Mark the package sent to either address ``Request
for Authorization Validated End-User.''
(2) In evaluating an end-user for eligibility under authorization
VEU, the ERC will consider a range of information, including such
factors as: the entity's record of exclusive engagement in civil end-
use activities; the entity's compliance with U.S. export controls; the
need for an on-site review prior to approval; the entity's capability
of complying with the requirements of authorization VEU; the entity's
agreement to on-site reviews to ensure adherence to the conditions of
the VEU authorization by representatives of the U.S. Government; and
the entity's relationships with U.S. and foreign companies. In
addition, when evaluating the eligibility of an end-user, the ERC will
consider the status of export controls and the support and adherence to
multilateral export control regimes of the government of the eligible
destination.
[[Page 33661]]
(3) The VEU authorization is subject to revision, suspension or
revocation entirely or in part.
(4) Information submitted in a VEU request is deemed to constitute
continuing representations of existing facts or circumstances. Any
material or substantive change relating to the authorization must be
promptly reported to BIS, whether VEU authorization has been granted or
is still under consideration.
(b) Eligible destinations. Authorization VEU may be used for the
following destinations:
(1) The People's Republic of China.
(2) [Reserved]
(c) Item restrictions. Items controlled under the EAR for missile
technology (MT) and crime control (CC) reasons may not be exported or
reexported under this authorization.
(d) End-use restrictions. Items obtained under authorization VEU
may be used only for civil end-uses and may not be used for any
activities described in part 744 of the EAR. Exports, reexports, or
transfers made under authorization VEU may only be made to an end-user
listed in Supplement No. 7 to this part if the items will be consigned
to and for use by the validated end-user. Eligible end-users who obtain
items under VEU may only:
(1) Use such items at the end-user's own facility located in an
eligible destination or at a facility located in an eligible
destination over which the end-user demonstrates effective control;
(2) Consume such items during use; or
(3) Transfer or reexport such items only as authorized by BIS.
Note to paragraph (d): Authorizations set forth in Supplement
No. 7 to this part are country-specific. Authorization as a
validated end-user for one country specified in paragraph (b) of
this section does not constitute authorization as a validated end-
user for any other country specified in that paragraph.
(e) Certification and recordkeeping. Prior to an initial export or
reexport to a validated end-user under authorization VEU, exporters or
reexporters must obtain certifications from the validated end-user
regarding end-use and compliance with VEU requirements. Such
certifications must include the contents set forth in Supplement No. 8
to this part. Certifications and all records relating to VEU must be
retained by exporters or reexporters in accordance with the
recordkeeping requirements set forth in part 762 of the EAR.
(f) Reporting and review requirements. --(1)(i) Reports. Exporters
and reexporters who make use of authorization VEU are required to
submit annual reports to BIS. These reports must include, for each
validated end-user to whom the exporter or reexporter exported or
reexported eligible items:
(A) The name and address of each validated end-user to whom
eligible items were exported or reexported;
(B) The eligible destination to which the items were exported or
reexported;
(C) The quantity of such items;
(D) The value of such items; and
(E) The ECCN(s) of such items.
(ii) Reports are due by February 15 of each year, and must cover
the period of January 1 through December 31 of the prior year. Reports
must be sent to: Office of Exporter Services, Bureau of Industry and
Security, U.S. Department of Commerce, 14th Street and Constitution
Avenue, NW., Room 2705, Washington, DC 20230. Mark the package
``Authorization Validated End-User Reports''.
(2) Reviews. Records related to activities covered by authorization
VEU that are maintained by exporters, reexporters, and validated end-
users who make use of authorization VEU will be reviewed on a periodic
basis. Upon request by BIS, exporters, reexporters, and validated end-
users must allow review of records, including on-site reviews covering
the information set forth in paragraphs (e) and (f)(1) of this section.
0
18. Supplement No. 4 to Part 748, is amended by revising the heading
and the entry for ``China, People's Republic of'', to read as follows:
Supplement No. 4 to Part 748--Authorities Administering Import
Certificate/Delivery Verification (IC/DV) and End-User Statement
Systems in Foreign Countries.
------------------------------------------------------------------------
System
Country IC/DV authorities administered
------------------------------------------------------------------------
* * * * * * *
China, People's Republic of... Export Control PRC, End-User
Division I, Statement.
Department of M, E &
HT I, No. 2 Dong
Chang An Street,
Beijing Phone: 8610-
6519-7366, Fax: 8610-
6519-7926.
* * * * * * *
------------------------------------------------------------------------
0
19. Supplement No. 7 to Part 748 is added and reserved to read as
follows:
SUPPLEMENT NO. 7 TO PART 748--AUTHORIZATION VALIDATED END-USER (VEU):
LIST OF VALIDATED END-USERS, RESPECTIVE ELIGIBLE ITEMS AND ELIGIBLE
DESTINATIONS [RESERVED]
0
20. Supplement No. 8 to Part 748 is added to read as follows:
SUPPLEMENT NO. 8 TO PART 748--INFORMATION REQUIRED IN REQUESTS FOR
VALIDATED END-USER (VEU) AUTHORIZATION
VEU authorization applicants must provide to BIS certain
information about the prospective validated end-user. This
information must be included in requests for authorization submitted
by prospective validated end-users, or exporters or reexporters who
seek to have certain entities approved as validated end-users. BIS
may, in the course of its evaluation, request additional
information.
Required Information for Validated End-User Authorization Requests
(1) Name of proposed VEU candidates, including all names under
which the candidate conducts business; complete company physical
address (simply listing a post office box is insufficient);
telephone number; fax number; e-mail address; company Web site (if
available); and name of individual who should be contacted if BIS
has any questions. If the entity submitting the application is
different from the prospective validated end-user identified in the
application, this information must be submitted for both entities.
If the candidate has multiple locations, all physical addresses
located in the eligible destination must be listed.
(2) Provide an overview of the structure, ownership and business
of the prospective validated end-user. Include a description of the
entity, including type of business activity, ownership,
subsidiaries, and joint-venture projects, as well as an overview of
any business activity or corporate relationship that the entity has
with either government or military organizations.
(3) List the items proposed for VEU authorization approval and
their intended end-uses. Include a description of the items; the
ECCN for all items, classified to the subparagraph level, as
appropriate; technical parameters for the items including
performance specifications; and end-use description for the items.
If BIS has previously classified the item, the
[[Page 33662]]
Commodity Classification Automated Tracking System (CCATS) number
may be provided in lieu of the information listed in the foregoing
provisions of this paragraph.
(4) Provide the physical address(es) of the location(s) where
the item(s) will be used, if this address is different from the
address of the prospective validated end-user provided in paragraph
(1) of this supplement.
(5) If the prospective validated end-user plans to reexport or
transfer the item, specify the destination to which the items will
be reexported or transferred.
(6) Specify how the prospective validated end-user's record
keeping system will allow compliance with the recordkeeping
requirements set forth in Sec. 748.15(e) of the EAR. Describe the
system that is in place to ensure compliance with VEU requirements.
(7) Include an original statement on letterhead of the
prospective validated end-user, signed and dated by a person who has
authority to legally bind the prospective validated end-user,
certifying that the end-user will comply with all VEU requirements.
This statement must include acknowledgement that the prospective
end-user:
(i) Has been informed of and understands that the item(s) it may
receive as a validated end-user will have been exported in
accordance with the EAR and that use or diversion of such items
contrary to the EAR is prohibited;
(ii) Understands and will abide by all authorization VEU end-use
restrictions, including the requirement that items received under
authorization VEU will only be used for civil end-uses and may not
be used for any activities described in part 744 of the EAR;
(iii) Will comply with VEU recordkeeping requirements; and
(iv) Agrees to allow on-site reviews by U.S. Government
officials to verify the end-user's compliance with the conditions of
the VEU authorization.
0
21. Supplement No. 9 to Part 748 is added to read as follows:
SUPPLEMENT NO. 9 TO PART 748--END-USER REVIEW COMMITTEE PROCEDURES
(1) The End-User Review Committee (ERC), composed of
representatives of the Departments of State, Defense, Energy, and
Commerce, and other agencies, as appropriate, is responsible for
determining whether to add to, to remove from, or otherwise amend
the list of validated end-users and associated eligible items set
forth in Supplement No. 7 to this part. The Department of Commerce
chairs the ERC.
(2) Unanimous vote of the Committee is required to authorize VEU
status for a candidate or to add any eligible items to a pre-
existing authorization. Majority vote of the Committee is required
to remove VEU authorization or to remove eligible items from a pre-
existing authorization.
(3) In addition to requests submitted pursuant to Sec. 748.15,
the ERC will also consider candidates for VEU authorization that are
identified by the U.S. Government. When the U.S. Government
identifies a candidate for VEU authorization, relevant parties
(i.e., end-users and exporters or reexporters, when they can be
identified) will be notified, before the ERC determines whether VEU
authorization is appropriate, as to which end-users have been
identified as potential VEU authorization candidates. End-users are
not obligated to accept the Government's nomination.
(4) The ERC will make determinations whether to grant VEU
authorization to each VEU candidate no later than 30 calendar days
after the candidate's complete application is circulated to all ERC
agencies. The Committee may request additional information from an
applicant or potential validated end-user related to a particular
VEU candidate's application. The period during which the ERC is
waiting for additional information from an applicant or potential
validated end-user is not included in calculating the 30 calendar
day deadline for the ERC's determination.
(5) If an ERC agency is not satisfied with the decision of the
ERC, that agency may escalate the matter to the Advisory Committee
on Export Policy (ACEP). The procedures and time frame for
escalating any such matters are the same as those specified for
license applications in Executive Order 12981, as amended by
Executive Orders 13020, 13026 and 13117 and referenced in Sec.
750.4 of the EAR.
(6) A final determination at the appropriate decision-making
level to amend the VEU authorization list set forth in Supplement
No. 7 to this part operates as clearance by all member agencies to
publish the amendment in the Federal Register.
(7) The Deputy Assistant Secretary of Commerce for Export
Administration will communicate the determination on each VEU
request to the requesting party and the end-user.
PART 750--[AMENDED]
0
22. The authority citation for 15 CFR part 750 continues to read as
follows:
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
Sec. 1503, Pub. L. 108-11,117 Stat. 559; E.O. 13026, 61 FR 58767, 3
CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp.,
p. 783; Presidential Determination 2003-23 of May 7, 2003, 68 FR
26459, May 16, 2003; Notice of August 3, 2006, 71 FR 44551 (August
7, 2006).
0
23. Paragraph (b) of Sec. 750.2 is revised to read as follows:
Sec. 750.2 Processing of Classification Requests and Advisory
Opinions.
* * * * *
(b) Advisory Opinion requests. All advisory opinions submitted in
accordance with procedures described in Sec. 748.3(a) and (c) of the
EAR will be answered within 30 calendar days after receipt. Requests to
obtain Validated End-User authorization will be resolved within 30
calendar days as described in Supplement No. 9 to Part 748 of the EAR.
PART 758--[AMENDED]
0
24. The authority citation for 15 CFR to part 758 continues to read as
follows:
Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;
E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August
3, 2006, 71 FR 44551 (August 7, 2006).
0
25. Section 758.1 is amended:
0
a. By removing the conjunction ``or'' from the end of paragraph (b)(3)
and placing ``or'' and a semicolon at the end of paragraph (b)(4); and
0
b. By adding paragraph (b)(5) to read as follows:
Sec. 758.1 The Shipper's Export Declaration (SED) or Automated Export
System (AES) record.
* * * * *
(b) * * *
(5) For all items exported under authorization Validated End-User
(VEU).
Dated: June 12, 2007.
Christopher A. Padilla,
Assistant Secretary for Export Administration.
[FR Doc. E7-11588 Filed 6-18-07; 8:45 am]
BILLING CODE 3510-33-P