2014-14935. Addition of Certain Persons to the Entity List; and Removal of Person From the Entity List Based on Removal Request

AGENCY:

Bureau of Industry and Security, Commerce.

ACTION:

Final rule.

SUMMARY:

This rule amends the Export Administration Regulations (EAR) by adding four persons under five entries to the Entity List. The persons who are added to the Entity List have been determined by the U.S. Government to be acting contrary to the national security or foreign policy interests of the United States. These persons will be listed on the Entity List under the destinations of China and Hong Kong. There are five entries for four persons because one person is listed under multiple countries, resulting in one additional entry. Specifically, the one additional entry covers one person in China who also has an address in Hong Kong.

In addition, this rule removes one person from the Entity List, as the result of a request for removal submitted by the person, a review of information provided in the removal request in accordance with the EAR, and further review conducted by the End-User Review Committee (ERC).

DATES:

Effective Date: This rule is effective June 26, 2014.

FOR FURTHER INFORMATION CONTACT:

Karen Nies-Vogel, Chair, End-User Review Committee, Office of the Assistant Secretary, Export Administration, Bureau of Industry and Security, Department of Commerce, Phone: [phone], Fax: [phone], Email: [e-mail].

SUPPLEMENTARY INFORMATION:

Background

The Entity List (Supplement No. 4 to Part 744) notifies the public about entities that have engaged in activities that could result in an increased risk of the diversion of exported, reexported or transferred (in-country) items to weapons of mass destruction (WMD) programs. Since its initial publication, grounds for inclusion on the Entity List have expanded to include activities sanctioned by the State Department and activities contrary to U.S. national security or foreign policy interests, including terrorism and export control violations involving abuse of human rights. Certain exports, reexports, and transfers (in-country) to entities identified on the Entity List require licenses from BIS and are usually subject to a policy of denial. The availability of license exceptions in such transactions is very limited. The license review policy for each entity is identified in the license review policy column on the Entity List and the availability of license exceptions is noted in the Federal Register notices adding persons to the Entity List. BIS places entities on the Entity List based on certain sections of part 744 (Control Policy: End-User and End-Use Based) of the EAR.

The End-user Review Committee (ERC), composed of representatives of the Departments of Commerce (Chair), State, Defense, Energy and, where appropriate, the Treasury, makes all decisions regarding additions to, removals from, or other modifications to the Entity List. The ERC makes all decisions to add an entry to the Entity List by majority vote and all decisions to remove or modify an entry by unanimous vote.

ERC Entity List Decisions

Additions to the Entity List

This rule implements the decision of the ERC to add four persons under five entries to the Entity List on the basis of § 744.11 (License requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States) of the EAR. The five entries added to the Entity List consist of four entries in China, and one entry in Hong Kong.

The ERC reviewed § 744.11(b) (Criteria for revising the Entity List) in making the determination to add these four persons to the Entity List. Under that paragraph, persons for whom there is reasonable cause to believe, based on specific and articulable facts, have been involved, are involved, or pose a significant risk of being or becoming involved in, activities that are contrary to the national security or foreign policy interests of the United States and those acting on behalf of such persons may be added to the Entity List. Paragraphs (b)(1) through (b)(5) of § 744.11 include an illustrative list of activities that could be contrary to the national security or foreign policy interests of the United States.

The four persons being added have been determined by the ERC to be involved in activities that are contrary to the national security or foreign policy interests of the United States, including the activities described under paragraph (b)(2) and (b)(5) of § 744.11.

The ERC determined that Poly Technologies Inc., Xinshidai Company (New Era Group), and Panda International Information Technology Company, all located in China, and HWA Create, located in China and Hong Kong, be added to the Entity List on the basis of their attempts to procure items, including U.S.-origin items, for activities contrary to the national security and foreign policy interests of the United States. The ERC determined that these persons' activities have included the activities described under paragraph (b)(2) and (b)(5) of § 744.11 of the EAR. Specifically, these companies have attempted to supply items to the People's Liberation Army and/or to export items to destinations sanctioned by the United States. The Department of State sanctioned Poly Technologies Inc. under the Iran, North Korea and Syria Nonproliferation Act (INKSNA) in February 2013. Xinshidai Company was sanctioned in 2004 by the Departments of State and the Treasury under Executive Order 12938, and again by the State Department under INKSNA in 2008.

Pursuant to § 744.11(b)(2) and (b)(5) of the EAR, the ERC determined that the conduct of these four persons raises sufficient concern that prior review of exports, reexports, or transfers (in-country) of items subject to the EAR involving these persons, and the possible imposition of license conditions or license denials on shipments to the persons, will enhance BIS's ability to prevent violations of the EAR.

For the four persons recommended for addition, the ERC specified a license requirement for all items subject to the EAR and a license review policy of presumption of denial. The license requirements apply to any transaction in which items are to be exported, reexported, or transferred (in-country) to any of the persons or in which such persons act as purchaser, intermediate consignee, ultimate consignee, or end-user. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to the persons being added to the Entity List in this rule.

This final rule adds the following four persons under five entries to the Entity List:

China

(1) China Xinshidai Company, a.k.a., the following one alias:

—China New Era Group, Xinshidai Plaza, Plaza No. 7 Huayuan Rd., Beijing, China;

(2) HWA Create, 5/F, Xinshidai Building/New Era Mansion, 7 Huayuan Rd., Beijing, China; and

No. B3 Huayuan Rd., Beijing, China (See alternate addresses under Hong Kong);

(3) Panda International Information Technology Company, Ltd., 7/F, B Tower, Yingwu Conference Center, No. 6. Huayuan Road, Haidian District, Beijing, China; and

Rm 606 Block B, Beijing Agricultural Science Building, Shugang Garden Haidian Middle Rd, Beijing, China; and

(4) Poly Technologies Inc., 11F Poly Plaza, 14 Dongzhimen Nandajie, Beijing China; and

27 Wanshoulu, Haidian district, Beijing, China.

Hong Kong

(1) HWA Create, Unit 1001-1002, 10F, Chinachem Building, 34-37 Connaught Rd., Hong Kong; and

Unit A 5th Floor, Cheong Commercial Building, 19-25 Jervois St, Hong Kong; and

Unit B, 6/F, Dah Sing Life Building, 99—1-5 Des Voeux Rd, Hong Kong (See alternate addresses under China).

Removal From the Entity List

This rule implements a decision of the ERC to remove one person, Masoud Est. for Medical and Scientific Supplies, located in Jordan, from the Entity List as a result of the person's request for removal from the Entity List. Based upon the review of the information provided in the removal request in accordance with § 744.16 (Procedure for requesting removal or modification of an Entity List entity), and after review by the ERC's member agencies, the ERC determined that this person should be removed from the Entity List.

The ERC decision to remove this person took into account this person's cooperation with the U.S. Government during the appeal process. In accordance with § 744.16(c), the Deputy Assistant Secretary for Export Administration has sent written notification to this person, informing this entity of the ERC's decision to remove it from the Entity List. This final rule implements the decision to remove the following person located in Jordan from the Entity List:

Jordan

(1) Masoud Est. for Medical and Scientific Supplies, 74 First Floor, Tla'a Al Ali Khali Al Salim Street, Amman, Jordan 11118.

The removal of the one entity referenced above, which was made on the basis of a § 744.16 removal request and was approved by the ERC, eliminates the existing license requirements in Supplement No. 4 to part 744 for exports, reexports and transfers (in-country) to the entity. However, the removal of this entity from the Entity List does not relieve persons of other obligations under part 744 of the EAR or under other parts of the EAR. Neither the removal of an entity from the Entity List nor the removal of Entity List-based license requirements relieves persons of their obligations under General Prohibition 5 in § 736.2(b)(5) of the EAR which provides that, “you may not, without a license, knowingly export or reexport any item subject to the EAR to an end-user or end-use that is prohibited by part 744 of the EAR.” Additionally this removal does not relieve persons of their obligation to apply for export, reexport or in-country transfer licenses required by other provisions of the EAR. BIS strongly urges the use of Supplement No. 3 to part 732 of the EAR, “BIS's `Know Your Customer' Guidance and Red Flags,” when persons are involved in transactions that are subject to the EAR.

Savings Clause

Shipments of items removed from eligibility for a License Exception or export or reexport without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export or reexport, on June 26, 2014, 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).

Export Administration Act

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 amended by Executive Order 13637 of March 8, 2013, 78 FR 16129 (March 13, 2013) and as extended by the Notice of August 8, 2013, 78, 2013, 78 FR 49107(August 12, 2013), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act. BIS continues to carry out the provisions of the Export Administration Act, as appropriate and to the extent permitted by law, pursuant to Executive Order 13222 as amended by Executive Order 13637.

Rulemaking Requirements

1. Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been determined to be not significant for purposes of Executive Order 12866.

2. Notwithstanding any other provision of law, no person is required to respond to nor 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 regulation involves collections previously approved by OMB under control number 0694-0088, Simplified Network Application Processing System, which includes, among other things, license applications and carries a burden estimate of 43.8 minutes for a manual or electronic submission. Total burden hours associated with the PRA and OMB control number 0694-0088 are not expected to increase as a result of this rule. You may send comments regarding the collection of information associated with this rule, including suggestions for reducing the burden, to Jasmeet K. Seehra, Office of Management and Budget (OMB), by email to [e-mail], or by fax to [phone].

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

4. For the four persons added under five entries to the Entity List in this final rule, the provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, the opportunity for public comment and a delay in effective date are inapplicable because this regulation involves a military or foreign affairs function of the United States. (See 5 U.S.C. 553(a)(1)). BIS implements this rule to protect U.S. national security or foreign policy interests by preventing items from being exported, reexported, or transferred (in country) to the persons being added to the Entity List. If this rule were delayed to allow for notice and comment and a delay in effective date, then entities being added to the Entity List by this action would continue to be able to receive items without a license and to conduct activities contrary to the national security or foreign policy interests of the United States. In addition, because these parties may receive notice of the U.S. Government's intention to place these entities on the Entity List if a proposed rule is published, doing so would create an incentive for these persons to either accelerate receiving items subject to the EAR to conduct activities that are contrary to the national security or foreign policy interests of the United States, or to take steps to set up additional aliases, change addresses, and other measures to try to limit the impact of the listing on the Entity List once a final rule was published. 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. Accordingly, no regulatory flexibility analysis is required and none has been prepared.

5. For the one removal from the Entity List in this final rule, pursuant to the Administrative Procedure Act (APA), 5 U.S.C. 553(b)(3)(B), BIS finds good cause to waive requirements that this rule be subject to notice and the opportunity for public comment because it would be contrary to the public interest.

In determining whether to grant removal requests from the Entity List, a committee of U.S. Government agencies (the End-user Review Committee (ERC)) evaluates information about and commitments made by listed persons requesting removal from the Entity List, the nature and terms of which are set forth in 15 CFR part 744, Supplement No. 5, as noted in 15 CFR 744.16(b). The information, commitments, and criteria for this extensive review were all established through the notice of proposed rulemaking and public comment process (72 FR 31005 (June 5, 2007) (proposed rule), and 73 FR 49311 (August 21, 2008) (final rule)). This removal has been made within the established regulatory framework of the Entity List. If the rule were to be delayed to allow for public comment, U.S. exporters may face unnecessary economic losses as they turn away potential sales because the customer remained a listed person on the Entity List even after the ERC approved the removal pursuant to the rule published at 73 FR 49311 on August 21, 2008. By publishing without prior notice and comment, BIS allows the applicant to receive U.S. exports immediately since the applicant already has received approval by the ERC pursuant to 15 CFR part 744, Supplement No. 5, as noted in 15 CFR 744.16(b).

The removals from the Entity List granted by the ERC involve interagency deliberation and result from review of public and non-public sources, including sensitive law enforcement information and classified information, and the measurement of such information against the Entity List removal criteria. This information is extensively reviewed according to the criteria for evaluating removal requests from the Entity List, as set out in 15 CFR part 744, Supplement No. 5 and 15 CFR 744.16(b). For reasons of national security, BIS is not at liberty to provide to the public the information on which the ERC relied to make the decision to remove this entity. In addition, the information included in the removal request is specific to information exchanged between the applicant and the ERC, which by law (section 12(c) of the Export Administration Act), BIS is restricted from sharing with the public. The removal requests from the Entity List contain confidential business information, which is necessary for the extensive review conducted by the U.S. Government in assessing such removal requests.

Section 553(d) of the APA generally provides that rules may not take effect earlier than thirty (30) days after they are published in the Federal Register. BIS finds good cause to waive the 30-day delay in effectiveness under 5 U.S.C. 553(d)(1) because this rule is a substantive rule which relieves a restriction. This rule removes a requirement (the Entity-List-based license requirement and limitation on use of license exceptions) on this one person being removed from the Entity List. The rule does not impose a requirement on any other person for this one removal from the Entity List.

No other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this final rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required under the APA or by any other law, the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) are not applicable. As a result, no final regulatory flexibility analysis is required and none has been prepared.

List of Subject in 15 CFR Part 744

• Exports
• Reporting and recordkeeping requirements
• Terrorism

Accordingly, part 744 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows:

PART 744—[AMENDED]

1. 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; 22 U.S.C. 7201 et seq.; 22 U.S.C. 7210; 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 8, 2013, 78 FR 49107 (August 12, 2013); Notice of September 18, 2013, 78 FR 58151 (September 20, 2013); Notice of November 7, 2013, 78 FR 67289 (November 12, 2013); Notice of January 21, 2014, 79 FR 3721 (January 22, 2014).

2. Supplement No. 4 to part 744 is amended:

a. By adding under China, in alphabetical order, four Chinese entities; and

b. By adding under Hong Kong, in alphabetical order, one Hong Kong entity.

c. By removing the heading “Jordan,” and one Jordanian entity, “Masoud Est. for Medical and Scientific Supplies, 74 First Floor, Tla'a Al Ali Khali Al Salim Street, Amman, Jordan 11118.”

The additions read as follows:

Supplement No. 4 to Part 744—Entity List

Country	Entity	License requirement	License review policy	Federal Register citation
*         *         *         *         *         *         *
CHINA, PEOPLE'S REPUBLIC OF
*         *         *         *         *         *         *
	China Xinshidai Company, a.k.a., the following one alias: -China New Era Group	For all items subject to the EAR. (See § 744.11 of the EAR)	Presumption of denial	79 FR [INSERT FR PAGE NUMBER 6-26-14].
	Xinshidai Plaza, Plaza No. 7 Huayuan Rd., Beijing, China
*         *         *         *         *         *         *
	HWA Create, 5/F, Xinshidai Building/New Era Mansion, 7 Huayuan Rd., Beijing, China; and No. B3 Huayuan Rd., Beijing, China (See alternate addresses under Hong Kong)	For all items subject to the EAR. (See § 744.11 of the EAR)	Presumption of denial	79 FR [INSERT FR PAGE NUMBER 6-26-14].
*         *         *         *         *         *         *
	Panda International Information Technology Company, Ltd., 7/F, B Tower, Yingwu Conference Center, No. 6. Huayuan Road, Haidian District, Beijing, China; and Rm 606 Block B, Beijing Agricultural Science Building, Shugang Garden Haidian Middle Rd, Beijing, China	For all items subject to the EAR. (See § 744.11 of the EAR)	Presumption of denial	79 FR [INSERT FR PAGE NUMBER 6-26-14].
	Poly Technologies Inc., 11F Poly Plaza, 14 Dongzhimen Nandajie, Beijing China; and 27 Wanshoulu, Haidian district, Beijing, China	For all items subject to the EAR. (See § 744.11 of the EAR)	Presumption of denial	79 FR [INSERT FR PAGE NUMBER 6-26-14].
*         *         *         *         *         *         *
HONG KONG
*         *         *         *         *         *         *
	HWA Create, Unit 1001—1002, 10F, Chinachem Building, 34-37 Connaught Rd., Hong Kong; and Unit A 5th Floor, Cheong Commercial Building, 19-25 Jervois St, Hong Kong; and Unit B, 6/F, Dah Sing Life Building, 99—1-5 Des Voeux Rd, Hong Kong (See alternate addresses under China)	For all items subject to the EAR. (See § 744.11 of the EAR)	Presumption of denial	79 FR [INSERT FR PAGE NUMBER 6-26-14].
*         *         *         *         *         *         *

Dated: June 20, 2014.

Kevin J. Wolf,

Assistant Secretary for Export Administration.