[Federal Register Volume 71, Number 129 (Thursday, July 6, 2006)]
[Proposed Rules]
[Pages 38313-38321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-10504]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
Bureau of Industry and Security
15 CFR Parts 740, 742, 744 and 748
[Docket No. 060622180-6180-01]
RIN 0694-AD75
Revisions and Clarification of Export and Reexport Controls for
the People's Republic of China (PRC); New Authorization Validated End-
User
AGENCY: Bureau of Industry and Security, Commerce.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: It is the policy of the United States Government to prevent
exports that would make a material contribution to the military
capability of the People's Republic of China (PRC), while facilitating
U.S. exports to legitimate civil end-users in the PRC. Consistent with
this policy, the Bureau of Industry and Security (BIS) proposes to
amend 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.
The proposed amendments include a revision to the licensing review
policy for items controlled on the Commerce Control List (CCL) for
reasons of national security, including a new control based on
knowledge of a military end-use on exports to the PRC of certain CCL
items that otherwise do not require a license to the PRC. The items
subject to this license requirement will be set forth in a list. This
rule further proposes to revise the licensing review policy for items
controlled for reasons of chemical and biological 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 proposes the creation of a new authorization for
validated end-users in certain destinations, including the PRC, to whom
certain, specified items may be exported or reexported. Such validated
end-users would be placed on a list in the EAR after review
[[Page 38314]]
and approval by the United States Government.
Finally, this rule proposes to require exporters to obtain an End-
User Certificate, issued by the PRC Ministry of Commerce, for all items
that both require a license to the PRC for any reason and exceed a
total value of $5,000. The current PRC End-Use Certificate applies only
to items controlled for national security reasons. This rule also
proposes to eliminate the current requirement that exporters submit PRC
End-User Certificates to BIS with their license applications but
provides that they must retain them for five years.
DATES: Comments must be received by November 3, 2006.
ADDRESSES: Written comments on this rule may be sent to the Federal
eRulemaking Portal: http://www.regulations.gov, or by e-mail to
[email protected]. . Include RIN 0694-AD75 in the subject line
of the message. Comments may be submitted by mail or hand delivery to
Sheila Quarterman, Office of Exporter Services, Regulatory Policy
Division, Bureau of Industry and Security, Department of Commerce, 14th
St. & Pennsylvania Avenue, NW., Room 2705, Washington, D.C. 20230,
ATTN: RIN 0694-AD75; or by fax to (202) 482-3355.
Send comments regarding the collection of information to David
Rostker, Office of Management and Budget (OMB), by e-mail to [email protected], or by fax to (202) 395-7285; and to the Regulatory
Policy Division, Bureau of Industry and Security, Department of
Commerce, P.O. Box 273, Washington, DC 20044.
FOR FURTHER INFORMATION 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; telephone: (202) 482-0092, or e-mail: [email protected].
SUPPLEMENTARY INFORMATION
Background
This rule proposes revisions and clarifications to United States
policy on exports to the People's Republic of China (PRC) of goods and
technologies controlled for national security and foreign policy
reasons. As the PRC has increased its participation in the global
economy, bilateral trade between the PRC and the United States has
grown rapidly, and the PRC has emerged as a major market for U.S.
exports. In addition, as the PRC also increasingly has allowed foreign
investment, many U.S. companies have established significant business
operations there. This greatly expanded economic relationship is
beneficial for both nations. The United States and China share an
interest in expanding free and fair trade, which has increased the
prosperity of both the American and Chinese people. At the same time,
the United States has a long standing policy of not permitting exports
that would make a material contribution to the PRC's military
capability. Thus, the United States seeks to facilitate trade for
confirmed civil end-uses and end-users in the PRC, while preventing
trade that would serve military end-uses.
In 2005, U.S. companies exported approximately $41 billion worth of
items to the PRC. During the same period, approximately $2.4 billion
worth of exports were licensed for export to the PRC, while $12.5
million worth of exports were denied. In order to strengthen U.S.
Government confidence that these U.S. exports conform to U.S. policy
and to determine the bona fides of potential and actual end-users, the
U.S. Government conducts end-use visits, consisting of Pre-License
Checks (PLCs) and Post-Shipment Verifications (PSVs). In April 2004,
the Vice Minister of Commerce of the PRC and the U.S. Under Secretary
of Commerce for Industry and Security exchanged letters transmitting an
understanding on strengthened procedures for conducting such end-use
visits. This end-use visit understanding has facilitated exports of
items on the Commerce Control List (CCL) in Supplement No. 1 to Part
774 of the Export Administration Regulations (EAR) by providing greater
assurance that U.S. exports of controlled dual-use items are being used
by their intended recipients for their intended purposes.
This rule proposes certain revisions and clarifications to
licensing requirements and policies with regard to the PRC to more
precisely reflect U.S. export control policy.
Revision of Licensing Review Policy and License Requirements
To strengthen U.S. efforts to prevent U.S. exports to the PRC that
would make a material contribution to the PRC's military capabilities,
this rule proposes revisions to the licensing review policy for items
controlled on the CCL for reasons of national security (i.e.,
controlled pursuant to the Wassenaar Arrangement), set forth in section
742.4(b)(7) of the EAR. Specifically, this rule amends section
742.4(b)(7) to reaffirm that the overall policy of the United States
for exports to the PRC of these items is to approve exports for civil
applications but generally to deny exports that will contribute to the
advancement of Chinese military capabilities.
Consistent with this revised policy and U.S. commitments as a
Participating State in the Wassenaar Arrangement regarding review of
items not on that regime's dual use list that are destined for military
end-use in a country subject to an arms embargo, this rule proposes to
implement 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 additional items that would be
subject to this military end-use restriction are based on 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. For purposes of serving
this revised policy and U.S. commitments as a Participating State in
the Wassenaar Arrangement, this rule proposes to define ``military end-
use'' as: incorporation into, or use for the production , design,
development, maintenance, operation, installation, or deployment,
repair, overhaul, or refurbishing of items (1) described on the U.S.
Munitions List (USML) (22 CFR Part 121, International Traffic in Arms
Regulations); (2) described on the Munitions List (IML) (as set out on
the Wassenaar Arrangement Web site at http://www.wassenaar.org); or (3)
listed under Export Control Classification Numbers (ECCNs) ending in
``A018'' on the CCL in Supplement No. 1 to Part 774 of the EAR. This
new control would be set forth in new section 744.21 of the EAR.
Applications to export, reexport, or transfer items controlled
pursuant to proposed section 744.21 would 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. Other end-use
controls in part 744 of the EAR will continue to apply. In addition,
BIS proposes to also review license applications for items controlled
for chemical and biological 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 particular
[[Page 38315]]
proliferation section and section 742.4(b)(7) of the EAR when those
items are destined to the PRC.
Items primarily affected by the revisions discussed in this section
are items controlled for anti-terrorism reasons under the EAR. The
specific items that are subject to the military end-use license
requirement will be set forth, by ECCN, including specific parameters,
in a list in Supplement No. 2 to Part 744 of the EAR.
See sections 744.6 (Restrictions on certain activities of U.S.
persons), 744.21 (Restrictions on Certain Military End-uses in the
People's Republic of China (PRC)), and Supplement No. 2 to Part 744
(Supplement No. 2 to Part 744--List of Items Subject to the Military
End-Use License Requirement of Section 744.21) of the EAR.
Revision of End-User Certificate 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
proposes that the requirement for exporters to obtain PRC End-User
Certificates from the Ministry of Commerce of the PRC be expanded to
apply to all exports of controlled goods and technologies over a
specific value threshold (and not merely to those exports controlled
for national security reasons, as currently set forth in section 748.10
of the EAR). Specifically, exporters would be required to obtain an
End-User Certificate, issued by the PRC Ministry of Commerce, for all
items that require a license to the PRC for any reason and exceed a
total value of $5,000 per single ECCN entry. Consistent with the
existing Regulations, BIS will continue to require End-User
Certificates for all computer exports to the PRC that require license
applications, regardless of the dollar value of the export. BIS
anticipates that this expansion of the End-Use Certificate requirement
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. Facilitation of end-use checks should facilitate increased
U.S. exports to the PRC. This revised requirement would be set forth in
revised section 748.10 of the EAR.
To minimize the impact that this expanded support documentation
requirement will have on exporters, this rule also proposes to
eliminate the requirement that exporters submit PRC End-User
Certificates to BIS as required support documentation provided with the
license application. Instead, this rule would require exporters to
include the serial number of the PRC End-User Certificate in an
appropriate field of the license application, and to retain the PRC
End-User Certificate in accordance with the recordkeeping provisions of
the EAR. See section 762.3 (Records exempt from recordkeeping
requirements) of the EAR. These changes would be set forth in sections
748.9 (Support Documents for License Applications), 748.10 (Import and
End-User Certificates), and 748.12 (Special Provisions for Support
Documents) of the EAR.
New Authorization Validated End-User (VEU)
To facilitate legitimate exports to civilian end-users, BIS
proposes to establish a new authorization for validated end-users in
section 748.15 of the EAR. This proposed authorization would allow the
export, reexport, and transfer of eligible items to specified end-users
in an eligible destination, including the PRC. These validated end-
users would be those who meet a number of criteria, including a
demonstrated record of engaging only in civil end-use activities and
not contributing to the proliferation of weapons of mass destruction or
otherwise engaged in activity contrary to U.S. national security or
foreign policy interests.
In conjunction with other relevant agencies, BIS proposes to
evaluate prospective validated end-users on the basis of a range of
specific factors, which include the party's record of exclusive
engagement in civil end-use activities; the party's compliance with
U.S. export controls; the party's capability to comply with the
requirements for VEU; the party's agreement to on-site compliance
reviews by representatives of the United States Government; and the
party's relationships with U.S and foreign companies. In addition, when
evaluating the eligibility of an end-user, agencies would consider the
status of export controls in the eligible destination and the support
and adherence to multilateral export control regimes of the government
of the eligible destination. The proposed rule states that requests to
be listed as a validated end-user should be submitted in the form of an
advisory opinion request as set forth in new section 748.15(a)(2)
(Eligible end-users) of the EAR. In addition, requests would have to
include a list of items identified by ECCN that would be exported,
reexported or transferred to an eligible end-user. Those items would
have to be specified to the extent of the applicable subparagraph of
the ECCN entry. The request also should include a description of how
each item would be used by the eligible end-user in an eligible
destination. Such requests would be accepted from exporters,
reexporters and end-users. A list of validated end-users, respective
eligible items, and eligible destinations would appear in proposed
Supplement No. 7 to Part 748 (Supplement No. 7 to Part 748--
Authorization Validated End-User (VEU): List of Validated End-Users,
Respective Eligible Items and Eligible Destinations) of the EAR.
The proposed rule also provides, as set forth in proposed section
748.15(c) (Item restrictions), that some items would not be eligible
for export, reexport, or transfer under this authorization. Ineligible
items are those restricted by statute.
Finally, under new section 748.15, exporters, reexporters and end-
users who use authorization VEU would be required to comply with
recordkeeping and reporting requirements, as described in sections
748.15(e) (Certification and recordkeeping) and (f) (Reporting and
auditing requirements) of the EAR. As required in proposed section
748.15(e), prior to the initial export or reexport under authorization
VEU, exporters or reexporters would be required to receive and retain
certifications from eligible end-users that state that they are
informed of and will abide by all VEU end-use restrictions; they have
procedures in place to ensure compliance with the terms and conditions
of VEU; they will not use items obtained under VEU in any of the
prohibited activities described in part 744 of the EAR; and they agree
to allow on-site visits by U.S. Government officials to verify their
compliance with the conditions of VEU. Validated end-users found to be
not in compliance with the requirements of VEU as set forth in section
748.15 will be subject to removal from the list of validated end-users
and other action, as appropriate.
In addition, as described in proposed section 748.15(f)(1),
exporters and reexporters who use authorization VEU would be required
to submit annual reports to BIS. These reports must include specific
information regarding the export or reexport of eligible items to each
validated end-user. Exporters, reexporters, and end-users who avail
themselves of VEU also would be audited on a routine basis, as
described in proposed section 748.15(f)(2) (Audits). Upon request by
BIS, exporters, reexporters, and validated end-users would be required
to allow
[[Page 38316]]
inspection of records or on-site compliance review. For audit purposes,
this rule would require records and information identified in proposed
section 748.15 to be retained in accordance with the recordkeeping
requirements set forth in part 762 of the EAR.
Although the Export Administration Act expired on August 20, 2001,
the President, through Executive Order 13222 of August 17, 2001 (3 CFR,
2001 Comp., p. 783 (2002)), as extended by the Notice of August 2,
2005, 70 FR 45273 (August 5, 2005), has continued the Export
Administration Regulations in effect under the International Emergency
Economic Powers Act. BIS proposes to amend the EAR in this rule under
the provisions of the EAA as continued in effect under IEEPA and
Executive Order 13222.
Expansion of Foreign Policy-Based Controls
[The following language will apply at the point the rule passes the
proposed stage: This action is taken after consultation with the
Secretary of State. This rule imposes new export controls for foreign
policy reasons. As required by section 6 of the Export Administration
Act of 1979, as amended (the Act), a report on the imposition of these
controls was delivered to the Congress on [INSERT DATE OF DELIVERY TO
THE CONGRESS.]]. Although the Act expired on August 20, 2001, Executive
Order 1322 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as
extended by the Notice of August 2, 2005, 70 FR 45273 (August 5, 2005),
has continued the Export Administration Regulations in effect under the
International Emergency Economic Powers Act.]
Rulemaking Requirements
1. This proposed rule has been determined to be not significant for
purposes of E.O. 12866.
2. Notwithstanding any other provision of law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the Paperwork Reduction Act 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
proposed 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,'' which carries a burden of 15 minutes per submission.
This proposed rule also contains a proposed revision to the existing
collection under Control Number 0694-0088 for recordkeeping, reporting
and auditing requirements, which would be submitted in connection with
proposed 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 will be submitted to OMB for
approval. Public comment will be sought regarding the burden of the
collection of information associated with preparation and submission of
these proposed requirements. This proposed 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. However, in
order to obtain the benefit of a variety of viewpoints before
publishing any final rule, BIS is issuing this proposed rule with a
request for comments. The period for submission of comments will close
on November 3, 2006. In developing a final rule, BIS will consider all
comments on all aspects of this proposed rule that are received before
the close of the comment period. Comments received after the end of the
comment period will be considered if possible, but their consideration
cannot be assured. BIS will not accept public comments accompanied by a
request that a part or all of the material be treated confidentially
because of its business proprietary nature or for any other reason. BIS
will return such comments and materials to the persons submitting the
comments and will not consider them in the development of the final
rule. All public comments on this proposed rule must be in writing
(including fax or e-mail) and will be a matter of public record,
available for public inspection and copying at the Federal eRulemaking
Portal at http://www.regulations.gov and on the BIS Freedom of
Information Act (FOIA) web site at http://www.bis.doc..gov/foia. BIS
does not maintain a separate public inspection facility. If you have
technical difficulties accessing this web site, please call BIS's
Office of Administration at (202) 482-0500 for assistance.
List of Subjects
15 CFR Parts 740 and 748
Administrative practice and procedure, Exports, Foreign trade,
Reporting and recordkeeping requirements.
15 CFR Part 742
Exports, Terrorism.
15 CFR Part 744
Exports, Foreign trade, Reporting and recordkeeping requirements.
Accordingly, parts 740, 742, 744 and 748 of the Export
Administration Regulations (15 CFR parts 730-799) are proposed to be
amended as follows:
PART 742--[AMENDED]
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 2, 2005, 70 FR
45273 (August 5, 2005); Notice of October 25, 2005, 70 FR 62027
(October 27, 2005).
2. Amend Sec. 742.2 by adding paragraph (b)(4) to read as follows:
Sec. 742.2 Proliferation of Chemical and Biological Weapons.
* * * * *
[[Page 38317]]
(b) * * *
(4) BIS will review license applications for items described in
paragraph (a) of this section in accordance with the licensing policies
described in paragraph (b) of this section and the licensing policies
in both paragraph (b) of this section and Sec. 742.4(b)(7) when those
items are destined to the People's Republic of China.
* * * * *
3. Amend Sec. 742.3 by adding paragraph (b)(4) to read as follows:
Sec. 742.3 Nuclear nonproliferation.
* * * * *
(b) * * *
(4) BIS will also review license applications for items described
in paragraph (a) of this section in accordance with the licensing
policies described in paragraph (b) of this section and the licensing
policies in both paragraph (b) of this section and Sec. 742.4(b)(7)
when those items are destined to the People's Republic of China.
* * * * *
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, 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 items
that would make a material contribution to the military capabilities of
the People's Republic of China. Thus, all license applications for
exports, reexports, and transfers to the People's Republic of China
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 People's Republic of China. In addition,
license applications may be reviewed under missile technology, nuclear
nonproliferation, or chemical and biological weapons review policies,
to determine if the end-user may be involved in proliferation
activities.
* * * * *
5. Amend Sec. 742.5 by adding paragraph (b)(4) to read as follows:
Sec. 742.5 Missile Technology.
* * * * *
(b) * * *
(4) BIS will also review license applications for items described
in paragraph (a) of this section in accordance with the licensing
policies described in paragraph (b) of this section and the licensing
policies in both paragraph (b) of this section and section 742.4(b)(7)
of the EAR when those items are destined to the People's Republic of
China.
* * * * *
PART 744--[AMENDED]
6. The authority citation for 15 CFR part 744 is revised 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 2, 2005, 70
FR 45273 (August 5, 2005); Notice of October 25, 2005, 70 FR 62027
(October 27, 2005).
7. Amend Sec. 744.6 by revising paragraph (a)(1)(ii) to read as
follows:
Sec. 744.6 Restrictions on certain activities of U.S. persons.
(a) * * *
(1) * * *
(ii) No U.S. person, as defined in paragraph (c) of this section,
shall, without a license from BIS, knowingly support an export or
reexport, or transfer that does not have a license as required by this
section or by Sec. 744.21. Support means any action, including
financing, transportation, and freight forwarding, by which a person
facilitates an export, reexport, or transfer without being the actual
exporter or reexporter.
* * * * *
8. 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 or under a license exception
described in paragraph (c) of this section if, at the time of the
export, reexport, or transfer, you know, meaning either:
(1) You have knowledge 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 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. The only License Exception that may apply to
the prohibitions described in paragraphs (a) and (b) of this section
are the provisions of License Exception GOV set forth in Sec.
740.11(b)(2)(i) or (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 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.
(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.
(2) Applications may be reviewed under missile technology, nuclear
[[Page 38318]]
nonproliferation, or chemical and biological weapons review policies if
the end-user may be involved in 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) of this section.
(f) In this section, ``military end-use'' means: incorporation
into, or use for the production, design, development, maintenance,
operation, installation, or deployment, repair, overhaul, or
refurbishing of items:
(1) Described on the U.S. Munitions List (USML) (22 CFR Part 121,
International Traffic in Arms Regulations);
(2) Described on the International Munitions List (IML) (as set out
on the Wassenaar Arrangement Web site at http://www.wassenaar.org); or
(3) Listed under ECCNs ending in ``A018'' on the Commerce Control
List (CCL) in Supplement No. 1 to Part 774 of the EAR.
Note to paragraph (f) of this section: For purposes of this
section: ``production'' means integration, assembling, inspection,
or testing; ``development'' means design, and includes testing and
building of prototypes; ``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; ``operation'' means to cause to function as intended;
``installation'' means to make ready for use, and includes
connecting, integrating, incorporating, loading software, and
testing; ``deployment'' means placing in battle formation or
appropriate strategic position.
9. 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 Requirment of Sec. 744.21
The following items 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) 1B999 Equipment controlled by 1B999.e specially designed
for the production of structural composites, fibers, prepregs and
preforms controlled in Category 1, n.e.s.
(iii) 1C990 Fibrous and filamentary materials, not controlled by
1C010 or 1C210, for use in ``composite'' structures and with a
specific modulus of 3.18 x 106m or greater and a specific
tensile strength of 7.62 x 104m or greater.
(iv) 1C995 Mixtures not controlled by 1C350, 1C355 or 1C395 that
contain chemicals controlled by 1C350 or 1C355 and medical,
analytical, diagnostic, and food testing kits not controlled by
1C350 or 1C395 that contain chemicals controlled by 1C350.d, as
follows (see List of Items Controlled), except 1C995.c ``Medical,
analytical, diagnostic, and food testing kits.''
(v) 1C996 Hydraulic fluids containing synthetic hydrocarbon
oils, having all the following characteristics (see List of Items
Controlled).
(vi) 1D999 Specific software controlled by 1D999.b for equipment
controlled by 1B999.e specially designed for the production of
structural composites, fibers, prepregs and preforms controlled in
Category 1, n.e.s.
(vii) 1D993 ``Software'' specifically designed for the
``development'', ``production'', or ``use'' of equipment or
materials controlled by 1C210.b, or 1C990.
(viii) 1E994 ``Technology'' for the ``development'',
``production'', or ``use'' of fibrous and filamentary materials
controlled by 1C990.
(2) Category 2--Materials Processing
(i) 2A991 Bearings and bearing systems not controlled by 2A001.
(ii) 2B991 Limited to machine tools controlled under 2B991
having ``positioning accuracies'', with all compensations available,
better than 0.010 mm along any linear axis; and machine tools having
the characteristic of one or more contouring ``tilting spindles''
controlled by 2B991.d.1.a.
(iii) 2B992 Non-''numerically controlled'' machine tools for
generating optical quality surfaces, and specially designed
components therefor.
(iv) 2B993 Limited to gear making and/or finishing machinery not
controlled by 2B003 capable of producing gears to a quality level of
better than AGMA 12.
(v) 2B996 Dimensional inspection or measuring systems or
equipment not controlled by 2B006.
(3) Category 3--Electronics Design, Development and Production
(i) 3A292 Oscilloscopes and transient recorders other than those
controlled by 3A002.a.5, and specially designed components therefor.
(ii) 3A999 Limited to items controlled by 3A999.c.
(iii) 3B991 Equipment not controlled by 3B001 for the
manufacture of electronic components and materials, and specially
designed components and accessories therefor.
(iv) 3B992 Equipment not controlled by 3B002 for the inspection
or testing of electronic components and materials, and specially
designed components and accessories therefor.
(v) 3D991 ``Software'' specially designed for the
``development'', ``production'', or ``use'' of electronic devices or
components controlled by 3A991, general purpose electronic equipment
controlled by 3A992, or manufacturing and test equipment controlled
by 3B991 and 3B992.
(vi) 3E292 ``Technology'' according to the General Technology
Note for the ``development', ``production'', or ``use'' of equipment
controlled by 3A292.
(vii) 3E991 ``Technology'' for the ``development'',
``production'', or ``use'' of electronic devices or components
controlled by 3A991, general purpose electronic equipment controlled
by 3A992, or manufacturing and test equipment controlled by 3B991 or
3B992.
(4) Category 4--Computers
(i) 4A994 Limited to computers not controlled by 4A003, with an
Adjusted Peak Performance (``APP'') exceeding 0.1 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 ``Software'' specially designed or modified for the
``development'', ``production'' or ``use'' of equipment controlled
by 4A101, 4A994 with an Adjusted Peak Performance (``APP'')
exceeding 0.1 Weighted TeraFLOPS (WT), 4B994 and materials
controlled by 4C994.
(iv) 4E992 ``Technology'' for the ``development'',
``production'', or ``use'' of equipment controlled by 4A994, as
described in this Supplement No. 2 to Part 744, and 4B994, materials
controlled by 4C994, or ``software'' controlled by 4D993 or 4D994.
(5) Category 5--(Part 1) Telecommunications
(i) 5A991 Limited to items controlled by 5A991.a., 5A991.b.5.,
5A991.b.7. and 5A991.f.
(ii) 5B991 Telecommunications test equipment, n.e.s.
(iii) 5C991 Preforms of glass or of any other material optimized
for the manufacture of optical fibers controlled by 5A991.
(iv) 5D991 ``Software'' specially designed or modified for the
``development'', ``production'', or ``use'' of equipment controlled
by 5A991 and 5B991.
(v) 5E991 ``Technology'' for the ``development'', ``production''
or ``use'' of equipment controlled by 5A991 or 5B991, or
``software'' controlled by 5D991, and other ``technologies'' as
follows (see List of Items Controlled).
(6) Category 5--(Part 2) Information Security
(i) 5A992 Equipment not controlled by 5A002, except mass market
encryption commodities and software described in Sec. Sec.
742.15(b)(1)(i) and 742.15(b)(2); certain ``short-range wireless''
commodities and software described in Sec. 742.15(b)(3)(ii); and
commodities and software with limited cryptographic functionally
described in Sec. 742.15(b)(3)(iii).
(ii) 5D992 ``Information Security'' ``software'' not controlled
by 5D002, except mass market encryption commodities and software
described in Sec. Sec. 742.15(b)(1)(i) and 742.15(b)(2); certain
``short-range wireless'' commodities and software described in Sec.
742.15(b)(3)(ii); and commodities and
[[Page 38319]]
software with limited cryptographic functionality described in Sec.
742.15(b)(3)(iii).
(iii) 5E992 ``Information Security'' ``technology'', not
controlled by 5E002.
(7) 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.
(8) 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.
(9) Category 8--Marine
(i) 8A992 Underwater systems or equipment, not controlled by
8A002, 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.
(10) Category 9--Propulsion Systems, Space Vehicles and Related
Equipment
(i) 9A991 ``Aircraft'', n.e.s., and gas turbine engines not
controlled by 9A001 or 9A101 and parts and components, n.e.s.
(ii) 9B990 Vibration test equipment and specially designed parts
and components, n.e.s.
(iii) 9D990 ``Software'', n.e.s., for the ``development'' or
``production'' of equipment controlled by 9A990 or 9B990.
(iv) 9D991 ``Software'', for the ``development'' or
``production'' of equipment controlled by 9A991 or 9B991.
(v) 9E990 ``Technology'', n.e.s., for the ``development'' or
``production'' or ``use'' of equipment controlled by 9A990 or 9B990.
(vi) 9E991 ``Technology'', for the ``development'',
``production'' or ``use'' of equipment controlled by 9A991 or 9B991.
PART 748--[AMENDED]
10. 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 2, 2005, 70 FR
45273 (August 5, 2005).
11. Section 748.9 is amended:
a. By revising paragraph (b)(1) introductory text;
b. By revising paragraph (b)(2) introductory text before the list
of countries;
c. By revising paragraphs (b)(2)(i) and (b)(2)(ii); and
d. 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 or End-User
Certificate. 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 Certificate. Note that if the destination is the
PRC, a Statement of Ultimate Consignee and Purchaser may be substituted
for a PRC End-User Certificate 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.
(ii) If no, your transaction may require a Statement by Ultimate
Consignee and Purchaser. Read the remainder of this section, then
proceed to Sec. 748.11 of the EAR.
(c) License Applications Requiring Support Documents. * * *
(1) License applications supported by an Import or End-User
Certificate. You may submit your license application upon receipt of a
facsimile or other legible copy of the Import or End-User Certificate,
provided that no shipment is made against any license issued based upon
the Import or End-User Certificate prior to receipt and retention of
the original statement by the applicant.
* * * * *
12. Section 748.10 is amended:
a. By revising the fourth sentence in paragraph (a);
b. By redesignating paragraph (b)(4) as paragraph (b)(5) and by
adding a new paragraph (b)(4) and revising newly designated paragraph
(b)(5);
c. By revising paragraph (c)(1);
d. By revising paragraph (c) (3) introductory text; and
e. By revising paragraph (g).
The additions and revisions read as follows:
Sec. 748.10 Import and End-User Certificates.
(a) Scope. * * * This section describes exceptions and
relationships true for both Import and End-User Certificates, 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, or, in the case of the PRC, for all items that require a
license to the PRC for any reason.
(b) * * *
(4) Your transaction involves an export to the People's Republic of
China (PRC) of commodities and software classified in a single entry on
the CCL, the total value of which exceeds $5,000. Note that this $5,000
threshold does not apply to exports to the PRC of computers, which are
subject to the provisions of Sec. 748.10(b)(3).
(i) Your license application may list several separate CCL entries.
If the total value of entries that require a license to the PRC for any
reason on the CCL on a license application exceeds $5,000, then a PRC
End-User Certificate covering all controlled items on your license
application must be obtained;
(ii) You may be specifically requested by BIS to obtain an End-User
Certificate for a transaction valued under $5,000 or for a transaction
that requires a license to the PRC for reasons in the EAR other than
those listed on the CCL.
(5) Your transaction involves a destination other than the PRC and
your license application involves the export of commodities and
software classified in a single entry on the CCL, the total value of
which exceeds $5,000.
(i) Your license application may list several separate CCL entries.
If any entry controlled for national security reasons exceeds $5,000,
then an Import Certificate must be obtained covering all items
controlled for national security reasons on your license application;
(ii) If your license application involves a lesser transaction that
is part of a larger order for items controlled for national security
reasons in a single ECCN exceeding $5,000, an Import Certificate must
be obtained.
(iii) You may be specifically requested by BIS to obtain an Import
Certificate for a transaction valued under $5,000.
(c) How to obtain an Import or End-User Certificate. (1) Applicants
must
[[Page 38320]]
request that the importer (e.g., ultimate consignee or purchaser)
obtain the Import or End-User Certificate, and that it be issued
covering only those items that are controlled for national security
reasons. Note that in the case of the PRC, applicants must request that
the importer obtain an End-User Certificate for all items on a license
application that are controlled to the PRC for any reason on the CCL.
Importers should not be requested, except in the case of the PRC, to
obtain an Import or End-User Certificate for items that are controlled
for reasons other than national security. Applicants must obtain
original Import or End-User Certificates from importers.
* * * * *
(3) If your transaction requires the support of a PRC End-User
Certificate, you must ensure that the following information is included
on the PRC End-User Certificate signed by an official of the Department
of Scientific and Technological Development and Trade in Technology of
the PRC Ministry of Commerce (MOFCOM), with MOFCOM's seal affixed to
it:
* * * * *
(g) Submission of Import and End-User Certificates. Certificates
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 and End-user Certificate 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 and End-user Certificates.
* * * * *
Sec. 748.12 [Amended]
13. Section 748.12 is amended by removing and reserving paragraph
(a).
14. Supplement No. 4 to Part 748, is amended by revising 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-Use Certificate
Systems in Foreign Countries
------------------------------------------------------------------------
Country IC/DV authorities System administered
------------------------------------------------------------------------
* * * * * * *
China, People's Republic of. Export Control PRC End-User
Division I Certificate.
Department of S&T
No. 2 Dong Chang An
Street Beijing
Phone: 8610-6519-
7366 Fax: 8610-6519-
7926.
* * * * * * *
------------------------------------------------------------------------
15. 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 an 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.
(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.
(1) In evaluating an end-user for eligibility under this
authorization, BIS, in consultation with the Departments of State,
Energy, and Defense and other agencies, as appropriate, will consider a
range of information, including such factors as: The party's record of
exclusive engagement in civil end-use activities; the party's
compliance with U.S. export controls; the party's capability to comply
with the requirements of authorization VEU; the party's agreement to
on-site compliance reviews by representatives of the United States
Government; and the party's relationships with U.S and foreign
companies. In addition, 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.
(2) Requests for authorization must be submitted in the form of an
advisory opinion request, as described in Sec. 748.3(c), and should
include a list of items, identified by Export Control Classification
Number (ECCN), that exporters or reexporters intend to export, reexport
or transfer to an eligible end-user. In addition to the information
described in Sec. 748.3, the items identified by ECCN should be
specified to the extent of the applicable subparagraph of the ECCN
entry. The request also should include a description of how each item
would be used by the eligible end-user in an eligible destination.
Requests for authorization will be accepted from exporters, reexporters
and 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
2075, 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''.
(3) Exports, reexports, or transfers made under authorization VEU
may only be made to an end-user listed in Supplement No. 7 to Part 748
if the items will be consigned to and for use by the validated end-
user.
(b) Eligible destinations. Authorization VEU may be used for the
following destinations:
(1) The People's Republic of China.
(2) [Reserved].
(c) Item restrictions. (1) 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 not be used for any activities described in part 744. 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.
[[Page 38321]]
(e) Certification and recordkeeping. Prior to the initial export or
reexport under authorization VEU, exporters or reexporters must receive
and retain end-use certifications from eligible end-users stating that:
(1) They are informed of and will abide by all authorization VEU
end-use restrictions;
(2) They have procedures in place to ensure compliance with
authorization VEU destination and end-use restrictions;
(3) They will not use items obtained under authorization VEU in any
of the prohibited activities described in part 744 of the EAR; and
(4) They agree to allow on-site visits by U.S. Government officials
to verify the end-users' compliance with the conditions of
authorization VEU.
Note to paragraph (e) of this section: These certifications must
be retained by exporters or reexporters in accordance with the
recordkeeping requirements set forth in part 762 of the EAR.
(f) Reporting and auditing requirements--(1)(i) Reports. Exporters
and reexporters who use 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 any validated end-users to whom the
exporters or reexporters exported or reexported eligible items;
(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. Packages
containing such reports should be marked ``Authorization Validated End-
User Reports.'' Reports should be sent to: Office of Export
Enforcement, Bureau of Industry and Security, U.S. Department of
Commerce, 14th Street and Constitution Avenue, NW., Room H-4520,
Washington, DC 20230.
(2) Audits. Users of authorization VEU will be audited on a routine
basis. Upon request by BIS, exporters, reexporters, and validated end-
users must allow inspection of records or on-site compliance reviews.
For audit purposes, records, including information identified in
paragraphs (e), (f)(1) and the note to paragraph (c) of this section,
should be retained in accordance with the recordkeeping requirements
set forth in part 762 of the EAR.
12. Supplement No. 7 to Part 748 is added 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
Validated End-Users, Respective Eligible Items and Eligible
Destinations for Exports and Reexports Under Authorization VEU:
Certified End-User
Eligible Items
Eligible Destination
Dated: June 29, 2006.
Matthew S. Borman,
Deputy Assistant Secretary for Export Administration.
[FR Doc. E6-10504 Filed 7-5-06; 8:45 am]
BILLING CODE 3510-33-P