03-26788. Computer Technology and Software, and Microprocessor Technology Eligible for Export or Reexport Under License Exception

AGENCY:

Bureau of Industry and Security, Commerce.

ACTION:

Proposed rule.

SUMMARY:

The Bureau of Industry and Security (BIS) proposes to expand the availability of license exceptions for exports and reexports of computer technology and software, and microprocessor technology on the Commerce Control List (CCL) of the Export Administration Regulations (EAR) under Export Classification Control Numbers (ECCNs) 3E002, 4D001 and 4E001. These ECCNs control technology and software that can be used for the development, production, or use of computers, and development and production of microprocessors. The goal of this proposed rule is to solicit public comments to assist BIS in evaluating the effect of the proposed amendments. In addition, this proposed rule requests industry to suggest alternatives for a different method or parameter for controlling exports of computers and microprocessors, and the technology and software therefore.

DATES:

Comments must be received by November 24, 2003.

ADDRESSES:

Written comments (four copies) should be sent to Sharron Cook, Regulatory Policy Division, Office of Exporter Services, Bureau of Industry and Security, Department of Commerce, 14th and Pennsylvania Avenue, NW., P.O. Box 273, Room 2705, Washington, DC 20230; or one copy e-mailed to: [e-mail]; or faxed to 202-482-3355.

FOR FURTHER INFORMATION CONTACT:

Sharron Cook, Senior Export Policy Analyst, Office of Exporter Services, Regulatory Policy Division, Bureau of Industry and Security, Telephone: [phone].

SUPPLEMENTARY INFORMATION:

Background

The Bureau of Industry and Security (BIS) proposes to expand license exception availability under the Export Administration Regulations (EAR) for certain exports of computer technology and software and microprocessor technology. Industry has requested that BIS raise the Composite Theoretical Performance (CTP) eligibility level for computer and microprocessor technology and software to correspond with that for equipment, in order to enable companies to provide access to this technology and software to foreign nationals working in their U.S. and foreign facilities.

Computer Technology and Software

The EAR control the export and reexport of technology and software for the development, production, or use of computers with a CTP greater than 28,000 Millions of Theoretical Operations per Second (MTOPS) under Export Control Classification Numbers (ECCNs) 4D001 and 4E001 of the Commerce Control List (CCL). Such technology and software requires a license, for national security (NS) reasons, to all destinations except Canada. However, ECCNs 4D001 and 4E001 provide that License Exception TSR (section 740.6 of the EAR) is available for exports and reexports of such technology and software: (1) For computers of unlimited CTP to 22 countries; and (2) for computers with a CTP less than or equal to 33,000 MTOPS to countries listed in Country Group B (Supplement No. 1 to part 740). License Exception TSR availability for computer software and technology is inconsistent with License Exception CTP availability for computer hardware in two ways: (1) The countries eligible; and (2) the MTOPS level.

On June 4, 2002, BIS published a notice of inquiry (67 FR 39675), requesting information from industry to assist BIS in evaluating the license exception eligibility level of 33,000 MTOPS for exports and reexports of computer technology and software controlled under ECCNs 4D001 and 4E001. BIS received four comments in response to the notice of inquiry, all stating that the license exception threshold should be adjusted.

This proposed rule would remove License Exception TSR eligibility for certain computer technology and software under ECCNs 4D001 and 4E001, but would make this computer technology and software eligible for License Exception CTP (section 740.7 of the EAR). License Exception CTP currently only applies to computer hardware classified under ECCN 4A003. The 22 countries that are currently eligible to receive technology and software for computers with unlimited CTP under License Exception TSR would continue to be eligible for the same, unlimited level of technology and software under License Exception CTP. All of these 22 countries are in “Computer Tier 1” for purposes of License Exception CTP. Technology and software for computers with a CTP equal to or less than 150,000 MTOPS for export or reexport to Computer Tier 1 destinations other than these 22 countries would be eligible for License Exception CTP. Technology and software for computers with a CTP equal to or less than 75,000 MTOPS would be eligible for License Exception CTP to “Computer Tier 3” destinations. Exports and reexports to countries in Country Group E:1 (terrorist supporting countries) will continue to be ineligible for License Exception CTP. The following chart shows the proposed eligibility thresholds under License Exception CTP.

Proposed Computer Technology and Software Eligibility Thresholds Under License Exception CTP

Unlimited CTP	22 “Tier 1” countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.
150,000 MTOPS	All other “Tier 1” countries: Antigua and Barbuda, Argentina, Bahamas, Bangladesh, Barbados, Belize, Benin, Bhutan, Bolivia, Botswana, Brazil, Brunei, Burkina Faso, Burma, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Chile, Colombia, Congo, Costa Rica, Cote d'Ivoire, Cyprus, Czech Republic, Dominica, Dominican Republic, Ecuador, El Salvador, Equatorial Guinea, Eritrea, Estonia, Ethiopia, Fiji, Gabon, Gambia (The), Ghana, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Hong Kong, Hungary, Iceland, Indonesia, Jamaica, Kenya, Kiribati, Korea (Republic of), Latvia, Lesotho, Liberia, Liechtenstein, Lithuania, Madagascar, Malawi, Malaysia, Maldives, Mali, Malta, Marshall Islands, Mauritius, Mexico, Micronesia (Federated States of), Monaco, Mozambique, Namibia, Nauru, Nepal, Nicaragua, Niger, Nigeria, Palau, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Romania, Rwanda, St. Kitts & Nevis, St. Lucia, St. Vincent and Grenadines, Sao Tome & Principe, San Marino, Senegal, Seychelles, Sierra Leone, Singapore, Slovakia, Slovenia, Solomon Islands, Somalia, South Africa, Sri Lanka, Surinam, Swaziland, Taiwan, Tanzania, Togo, Tonga, Thailand, Trinidad and Tobago, Tuvalu, Uganda, Uruguay, Vatican City, Venezuela, Western Sahara, Western Samoa, Zaire, Zambia, and Zimbabwe.
75,000 MTOPS	All “Tier 3” countries: Afghanistan, Albania, Algeria, Andorra, Angola, Armenia, Azerbaijan, Bahrain, Belarus, Bosnia & Herzegovina, Bulgaria, Cambodia, China (People's Republic of), Comoros, Croatia, Djibouti, Egypt, Georgia, India, Israel, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Laos, Lebanon, Macau, Macedonia (The Former Yugoslav Republic of), Mauritania, Moldova, Mongolia, Morocco, Oman, Pakistan, Qatar, Russia, Saudi Arabia, Tajikistan, Tunisia, Turkmenistan, Ukraine, United Arab Emirates, Uzbekistan, Vanuatu, Vietnam, Yemen, and Federal Republic of Yugoslavia (Serbia and Montenegro).
Not eligible	Cuba, Iran, Iraq, Libya, North Korea, Sudan, and Syria.

Microprocessor Technology

Technology for the development and production of microprocessors that have a CTP exceeding 530 MTOPS and an arithmetic logic unit with an access width of 32 bits or more are controlled by ECCN 3E002. License Exception TSR is available for the export and reexport of technology for microprocessors of unlimited CTP to occur to all Country Group B countries (see Supplement No. 1 to part 740 of the EAR), if all the criteria of License Exception TSR are met (see section 740.6 of the EAR for License Exception TSR requirements).

This rule proposes to make technology for the development and production of microprocessors also eligible for License Exception CIV. The threshold for eligibility would be limited by CTP at a level that is yet to be determined. License Exception CIV is available for exports and reexports of items that require a license for national security reasons only that are destined to civil end-users for civil end-uses in Country Group D:1, except North Korea. CIV may not be used for exports and reexports to military end-users or to known military uses. In addition to conventional military activities, military uses include any proliferation activities described in part 744 of the EAR. It should be noted that a license is also required for transfer of items exported under License Exception CIV to military end-users or end-uses within Country Group D:1 countries.

Request for Comments

The goals of this proposed rule are to solicit public comments to assist BIS in evaluating the effect the proposed amendments to expand license exception availability would have on industry, and to discover whether industry would suggest a different method or parameter for controlling exports of computers and microprocessors, and the technology and software therefor. To ensure maximum public participation in the review process, comments are solicited for the next 30 days. In particular, BIS is interested in comments relating to the following:

1. What impact would the proposed revision of computer technology and software controls have on your company?

2. Is there another proposal regarding computer technology and software, and microprocessor technology controls that you would like Commerce to consider? If so, describe your proposal in detail and please give technical and other justifications for your proposal.

3. What is the highest CTP level for microprocessors currently being manufactured by your company?

4. What should be the CTP MTOPS limitation for microprocessor technology under the proposed License Exception CIV? Please provide detailed technical and other justification for your proposal.

5. How do other countries license the transfer of computer technology and software, and microprocessor technology? Have there been instances where your company has been placed at a competitive disadvantage based on current U.S. license requirements?

6. What are your predictions for the CTP level of microprocessors that will be in production 3 and 5 years from now? On what basis did you make your predictions?

7. What percentage of your research and development is accomplished: (1) Outside of the United States; and (2) with the assistance of foreign nationals within the United States?

8. Is there an alternative method or parameter for controlling exports of computers and microprocessors and the technology and software therefore that industry believes would be more in-line with the way industry produces, develops, or measures these items?

Parties submitting comments are asked to be as specific as possible. The Department encourages interested persons who wish to comment to do so at the earliest possible time.

The period for submission of comments will close November 24, 2003. The Department will consider all comments received before the close of the comment period in developing final regulations. Comments received after the end of the comment period will be considered if possible, but their consideration cannot be assured. The Department will not accept comments accompanied by a request that a part or all of the material be treated confidentially because of its business proprietary nature or for any other reason. The Department will return such comments and materials to the persons submitting the comments and will not consider them in the development of final regulations. All comments on these regulations will be a matter of public record and will be available for public inspection and copying. The Department requires comments be submitted in written form.

The public record concerning these comments will be maintained in the Bureau of Industry and Security, Office of Administration, U.S. Department of Commerce, Room 6883, 14th and Constitution Avenue, NW., Washington, DC 20230; [phone]. This component does not maintain a separate public inspection facility. Requesters should first view BIS's FOIA Web site (which can be reached through http://www.bis.doc.gov/​foia). If the records sought cannot be located at this site, or if the requester does not have access to a computer, please call the phone number above for assistance.

Although the Export Administration Act expired on August 20, 2001, Executive Order 13222 of August 17, 2001 (3 CFR, 2001 Comp., p. 783 (2002)), as extended by the Notice of August 14, 2002 (3 CFR, 2002 Comp., p. 306 (2003)), continues the 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 (PRA), unless that collection of information displays a currently valid OMB Control Number. This regulation involves collections previously approved by the Office of Management and Budget under control numbers 0694-0088, “Multi-Purpose Application,” which carries a burden hour estimate of 45 minutes per manual submission and 40 minutes per electronic submission. Miscellaneous and recordkeeping activities account for 12 minutes per submission.

3. This rule does not contain policies with federalism implications as this term is defined in Executive Order 13132.

4. Pursuant to 5 U.S.C. 553(b)(A), the provisions of the Administrative Procedure Act requiring a notice of proposed rulemaking and the opportunity for public comment are waived, because this regulation involves a general statement of policy and rule of agency procedure. 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 under the Administrative Procedure Act 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 view of the importance of this proposed rule, which represents the first comprehensive statement of BIS's approach toward these issues, BIS is seeking public comments before these revisions take effect. The period for submission of comments will close November 24, 2003. BIS will consider all comments received before the close of the comment period in developing a final rule. 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. The Office of Administration, Bureau of Industry and Security, U.S. Department of Commerce, displays these public comments on BIS's Freedom of Information Act (FOIA) Web site at http://www.bis.doc.gov/​foia. This office 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 [phone] for assistance.

List of Subjects

15 CFR Part 740

• Administrative practice and procedure
• Exports
• Foreign trade
• Reporting and recordkeeping requirements

15 CFR Part 774

• Exports
• Foreign trade
• Reporting and recordkeeping requirements

Accordingly, parts 740 and 774 of the Export Administration Regulations (15 CFR parts 730-799) are proposed to be amended as follows:

PART 740—[AMENDED]

1. The authority citation for part 740 continues to read as follows:

Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; Sec. 901-911, Pub. L. 106-387; 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 7, 2003, 68 FR 47833, August 11, 2003.

2. Section 740.7 is revised to read as follows:

§ 740.7

Computers (CTP).

(a) Scope. (1) Commodities. License Exception CTP authorizes exports and reexports of computers, including “electronic assemblies” and specially designed components therefor controlled by ECCN 4A003, exported or reexported separately or as part of a system for consumption in Computer Tier countries as provided by this section. When evaluating your computer to determine License Exception CTP eligibility, use the CTP parameter to the exclusion of other technical parameters for computers classified under ECCN 4A003.a or .b, and “electronic assemblies” under ECCN 4A003.c, except for parameters specified as Missile Technology (MT) concerns or 4A003.e (equipment performing analog-to-digital conversions exceeding the limits in ECCN 3A001.a.5.a).

(2) Technology and software. License Exception CTP authorizes exports and reexports of software and technology controlled by ECCNs 4D001 and 4E001 specially designed or modified for the “development”, “production”, or “use” of computers, including “electronic assemblies” and specially designed components therefor classified in ECCN 4A003 or 4A994 to Computer Tier countries as provided by this section.

(b) Restrictions. (1) Related equipment controlled under 4A003.d and .g may not be exported or reexported under this License Exception when exported or reexported separately from eligible computers authorized under this License Exception.

(2) Access and release restrictions. (i) Computers. Computers eligible for License Exception CTP may not be accessed either physically or computationally by nationals of Cuba, Iran, Iraq, Libya, North Korea, Sudan, or Syria, except that commercial consignees described in Supplement No. 3 to part 742 of the EAR are prohibited only from giving such nationals user-accessible programmability.

(ii) Technology and software. Technology and software eligible for License Exception CTP may not be released to nationals of Cuba, Iran, Iraq, Libya, North Korea, Sudan, or Syria.

(3) Computers, software and technology eligible for License Exception CTP may not be reexported or retransferred without prior authorization from BIS, i.e., a license, a permissive reexport, another License Exception, or “No License Required”. This restriction must be conveyed to the consignee, via the Destination Control Statement, see § 758.6 of the EAR. Additionally, the end-use and end-user restrictions in paragraph (d)(3) of this section must be conveyed to any consignee in Computer Tier 3.

(4) You may not use this License Exception to export or reexport items that you know will be used to enhance the CTP beyond the eligibility limit allowed to your country of destination.

(c) Computer Tier 1. (1) Eligible countries. The countries that are eligible to receive exports under this License Exception include Antigua and Barbuda, Argentina, Australia, Austria, Bahamas, Bangladesh, Barbados, Belgium, Belize, Benin, Bhutan, Bolivia, Botswana, Brazil, Brunei, Burkina Faso, Burma, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Chile, Colombia, Congo, Costa Rica, Cote d'Ivoire, Cyprus, Czech Republic, Denmark, Dominica, Dominican Republic, Ecuador, El Salvador, Equatorial Guinea, Eritrea, Estonia, Ethiopia, Fiji, Finland, France, Gabon, Gambia (The), Germany, Ghana, Greece, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Hong Kong, Hungary, Iceland, Indonesia, Ireland, Italy, Jamaica, Japan, Kenya, Kiribati, Korea (Republic of), Latvia, Lesotho, Liberia, Liechtenstein, Lithuania, Luxembourg, Madagascar, Malawi, Malaysia, Maldives, Mali, Malta, Marshall Islands, Mauritius, Mexico, Micronesia (Federated States of), Monaco, Mozambique, Namibia, Nauru, Nepal, Netherlands, New Zealand, Nicaragua, Niger, Nigeria, Norway, Palau, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Portugal, Romania, Rwanda, St. Kitts & Nevis, St. Lucia, St. Vincent and Grenadines, Sao Tome & Principe, San Marino, Senegal, Seychelles, Sierra Leone, Singapore, Slovakia, Slovenia, Solomon Islands, Somalia, South Africa, Spain, Sri Lanka, Surinam, Swaziland, Sweden, Switzerland, Taiwan, Tanzania, Togo, Tonga, Thailand, Trinidad and Tobago, Turkey, Tuvalu, Uganda, United Kingdom, Uruguay, Vatican City, Venezuela, Western Sahara, Western Samoa, Zaire, Zambia, and Zimbabwe.

(2) Eligible commodities. All computers, including electronic assemblies and specially designed components therefor are eligible for License Exception CTP to Tier 1 destinations, subject to the restrictions in paragraph (b) of this section.

(3) Eligible software and technology. (i) Software and technology described in paragraph (a)(2) of this section are eligible for License Exception CTP to: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, or the United Kingdom; and.

(ii) Software and technology described in paragraph (a)(2) of this section for computers with a CTP less than or equal to 150,000 MTOPS are eligible for License Exception CTP to Tier 1 destinations, other than the destinations that are listed in paragraph (c)(3)(i) of this section, subject to the restrictions in paragraph (b) of this section.

(d) Computer Tier 3. (1) Eligible countries. The countries that are eligible to receive exports and reexports under this License Exception are Afghanistan, Albania, Algeria, Andorra, Angola, Armenia, Azerbaijan, Bahrain, Belarus, Bosnia & Herzegovina, Bulgaria, Cambodia, China (People's Republic of), Comoros, Croatia, Djibouti, Egypt, Georgia, India, Israel, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Laos, Lebanon, Macau, Macedonia (The Former Yugoslav Republic of), Mauritania, Moldova, Mongolia, Morocco, Oman, Pakistan, Qatar, Russia, Saudi Arabia, Tajikistan, Tunisia, Turkmenistan, Ukraine, United Arab Emirates, Uzbekistan, Vanuatu, Vietnam, Yemen, and Federal Republic of Yugoslavia (Serbia and Montenegro).

(2) Eligible commodities. All computers, including electronic assemblies and specially designed components therefor having a CTP less than or equal to 190,000 MTOPS are eligible for License Exception CTP to Tier 3 destinations, subject to the restrictions in paragraphs (b) and (d)(4) of this section.

(3) Eligible software and technology. Software and technology described in paragraph (a)(2) of this section for computers with a CTP less than or equal to 75,000 MTOPS are eligible for License Exception CTP to Tier 3 destinations, subject to the restrictions in paragraphs (b) and (d)(4) of this section.

(4) Eligible exports. Only exports and reexports to permitted end-users and end-uses located in countries in Computer Tier 3 are permitted under License Exception CTP; however, License Exception CTP does not authorize exports and reexports to Computer Tier 3 for nuclear, chemical, biological, or missile end-users and end-uses subject to license requirements under § 744.2, § 744.3, § 744.4, and § 744.5 of the EAR. Such exports and reexports will continue to require a license and will be considered on a case-by-case basis. Retransfers to these end-users and end-uses in eligible countries are strictly prohibited without prior authorization.

(e) Reporting requirements. See § 743.1 of the EAR for reporting requirements of certain items under License Exception CTP.

PART 774—[AMENDED]

3. The authority citation for part 774 continues to read as follows:

Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 10 U.S.C. 7420; 10 U.S.C. 7430(e); 18 U.S.C. 2510 et seq.; 22 U.S.C. 287c, 22 U.S.C. 3201 et seq., 22 U.S.C. 6004; 30 U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C. app. 466c; 50 U.S.C. app. 5; Sec. 901-911, Pub. L. 106-387; Sec. 221, Pub. L. 107-56; 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 7, 2003, 68 FR 47833, August 11, 2003.

4. In Supplement No. 1 to part 774 (the Commerce Control List), Category 3—Electronics, Export Control Classification Number (ECCN) 3E002 is amended by revising the “CIV” paragraph in the License Exceptions section, to read as follows:

3E002 “Technology” according to the General Technology Note other than that controlled in 3E001 for the “development” or “production” of “microprocessor microcircuits”, “micro-computer microcircuits” and microcontroller microcircuits having a “composite theoretical performance” (“CTP”) of 530 million theoretical operations per second (MTOPS) or more and an arithmetic logic unit with an access width of 32 bits or more.

* * * * *

License Exceptions

CIV: Yes, for general purpose microprocessors with a CTP equal to or less than [NUMBER YET TO BE DETERMINED].

TSR: * * *

* * * * *

5. In Supplement No. 1 to part 774 (the Commerce Control List), Category 4—Computers, Export Control Classification Number (ECCN) 4D001 is amended by revising the License Exception section, to read as follows:

4D001 “Software” specially designed or modified for the “development”, “production” or “use” of equipment or “software” controlled by 4A001 to 4A004, or 4D (except 4D980, 4D993 or 4D994), and other specified software, see List of Items Controlled.

* * * * *

License Exceptions

CIV: N/A

TSR: Yes, for all other “software” not eligible for License Exception CTP.

CTP: Yes (see 740.7 of the EAR for eligibility criteria).

* * * * *

6. In Supplement No. 1 to part 774 (the Commerce Control List), Category 4—Computers, Export Control Classification Number (ECCN) 4E001 is amended by revising the License Exception section, to read as follows:

4E001 “Technology” according to the General Technology Note, for the “development”, “production” or “use” of equipment or “software” controlled by 4A (except 4A980, 4A993 or 4A994) or 4D (except 4D980, 4D993, 4D994), and other specified technology, see List of Items Controlled.

* * * * *

License Exceptions

CIV: N/A.

TSR: Yes, for all other “technology” not eligible for License Exception CTP.

CTP: Yes (see 740.7 of the EAR for eligibility criteria).

* * * * *

Dated: October 20, 2003.

Matthew S. Borman,

Acting Assistant Secretary for Export Administration.