E9-21367. Revisions to Certain End-User Controls Under the Export Administration Regulations; Clarification Regarding License Requirements for Transfers (in-country) to Persons Listed on the Entity List

AGENCY:

Bureau of Industry and Security, Commerce.

ACTION:

Final rule.

SUMMARY:

The Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR) to make revisions to three sections that are used by the United States Government as the basis for placing persons onto the Entity List. These three sections specified license requirements for exports and reexports to persons listed on the Entity List, however; the sections were silent regarding whether or not the scope of the licensing requirements included transfers (in-country). This rule adds transfers (in-country) to the scope of the license requirements under each of the three sections. As a result of adding transfers (in-country) to these three end-user controls, all of the end-use and end-user controls that are used as a regulatory basis for placing persons on the Entity List now specify that the scope of the license requirements includes exports, reexports, and transfers (in-country).

The Entity List provides notice to the public that certain exports, reexports, and transfers (in-country) to parties identified on the Entity List require a license from the Bureau of Industry and Security (BIS) and that availability of License Exceptions in such transactions is limited.

DATES:

Effective Date: This rule is effective September 8, 2009. Although there is no formal comment period, public comments on this regulation are welcome on a continuing basis.

ADDRESSES:

You may submit comments, identified by RIN 0694-AE54, by any of the following methods:

E-mail: [e-mail]. Include “RIN 0694-AE54” in the subject line of the message.

Fax: [phone]. Please alert the Regulatory Policy Division, by calling [phone], if you are faxing comments.

Mail or Hand Delivery/Courier: Timothy Mooney, U.S. Department of Commerce, Bureau of Industry and Security, Regulatory Policy Division, 14th St. & Pennsylvania Avenue, NW., Room 2705, Washington, DC 20230, Attn: RIN 0694-AE54.

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 e-mail to [e-mail] or by fax to [phone]; and to the Regulatory Policy Division, Bureau of Industry and Security, Department of Commerce, 14th St. & Pennsylvania Avenue, NW., Room 2705, Washington, DC 20230. Comments on this collection of information should be submitted separately from comments on the final rule (i.e., RIN 0694-AE54)—all comments on the latter should be submitted by one of the three methods outlined above.

FOR FURTHER INFORMATION CONTACT:

Elizabeth Scott Sangine, End-User Review Committee, Office of the Assistant Secretary, Export Administration, Bureau of Industry and Security, Department of Commerce, Phone: [phone], Fax: [phone], E-mail: [e-mail].

SUPPLEMENTARY INFORMATION:

Background

The Entity List provides notice to the public that certain exports, reexports, and transfers (in-country) to parties identified on the Entity List require a license from the Bureau of Industry and Security (BIS) and that availability of license exceptions in such transactions is limited. Persons are placed on the Entity List on the basis of 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 changes 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.

There are six sections in part 744 of the EAR that provide the regulatory basis for putting persons on the Entity List: §§ 744.2, 744.3, 744.4, 744.10, 744.11, and 744.20. Sections 744.2, 744.3, and 744.4 are foreign policy end-use controls under the EAR that prohibit transactions destined for certain nuclear, missile or chemical and biological end-uses. Sections 744.10, 744.11, and 744.20 are foreign policy end-user controls that prohibit transactions destined for certain individuals. Prior to the publication of this rule, the three end-user controls each specified that they applied to exports and reexports, but were silent on whether these end-user controls also applied to transfers (in-country). The United States Government intends the license requirements for §§ 744.10, 744.11, and 744.20 to apply to transfers (in-country) as well as to exports and reexports. Therefore, this rule extends the scope of these three sections to include transfers (in-country).

The rationale for the extension of this license requirement to include transfers (in-country) is that the United States Government's objective in placing a person on the Entity List on the basis of one of the end-user controls in part 744 of the EAR is to have an opportunity to review any transaction involving items subject to the EAR prior to shipment or transfer (in-country) to a listed person. Regardless of the form of the transaction (export, reexport, or transfer (in-country)), the United States Government believes it is important to review all transactions involving persons listed on the Entity List prior to the initiation of a transaction with a listed person and/or receipt by the listed person of an item in a transaction.

In publishing this rule, the United States Government is achieving the export control objective of allowing the United States Government to have prior review of any transaction involving items subject to the EAR and persons included on the Entity List. This prior review is important because the United States Government does not want these end-users of concern (i.e., persons listed on the Entity List) to receive items subject to the EAR that might allow them to continue their activities of concern without specific United States Government authorization.

This rule also clarifies that prior to the publication of this rule, persons added to the Entity List on the basis of their involvement in the activities described in sections 744.2, 744.3 and 744.4, as described above, were subject to licensing requirements applicable to exports, reexports, and transfers (in-country).

This rule makes the following revisions to the Export Administration Regulations:

In Section 744.10 (Restrictions on Certain Entities in Russia), this rule expands the scope of this end-user control by adding transfer (in-country) to the license requirements of this end-user control. With the publication of this rule, the license requirements for this end-user control apply to exports, reexports, and transfers (in-country). Specifically, this rule revises the second sentence of paragraph (a) to specify that a license is required, to the extent specified on the Entity List, to transfer (in-country) any item subject to the EAR to such entities (i.e., persons added to the Entity List on the basis of § 744.10). This rule also revises paragraph (c) to specify that license applications to transfer (in-country) items subject to the EAR to these entities will be reviewed with a presumption of denial.

In Section 744.11 (License Requirements that Apply to Entities Acting Contrary to the National Security or Foreign Policy Interests of the United States), this rule expands the scope of this end-user control by adding transfer (in-country) to the license requirements of this end-user control. With the publication of this rule, the license requirements for this end-user control apply to exports, reexports, and transfers (in-country). To broaden the scope of this end-user control, this rule makes three changes to this section. First, this rule revises the first sentence of the introductory text of this section to specify that transfers (in-country) are within the scope of the foreign policy controls that BIS may impose under this section. Second, this rule revises the first sentence of paragraph (a) to specify that for the license requirements of this section, a license is required, to the extent specified on the Entity List, to transfer (in-country) any item subject to the EAR to an entity that is listed on the Entity List in an entry that contains a reference to this section (i.e., persons added to the Entity List on the basis of § 744.11). Third, under paragraph (b)(5), this rule adds transfer (in-country) to the scope of this illustrative example provided for the criteria used for revising the Entity List in paragraph (b) of this section.

In Section 744.20 (License Requirements that Apply to Certain Sanctioned Entities), this rule expands the scope of this end-user control by adding transfer (in-country) to the license requirements of this end-user control. With the publication of this rule, the license requirements for this end-user control apply to exports, reexports and transfers (in-country). Specifically, this rule revises the introductory text of paragraph (a) to specify that a license is required, to the extent specified on the Entity List, to transfer (in-country) any item subject to the EAR to such entities (i.e., persons added to the Entity List on the basis of § 744.20). This rule also revises paragraph (b) to add transfer (in-country) to the general restriction on using license exceptions in paragraph (b) of this section. Lastly, this rule revises paragraph (c) to specify that license applications to transfer (in-country) items subject to the EAR to these entities will be reviewed with a presumption of denial.

In Supplement No. 4 to part 744 (The Entity List) of the EAR, this rule revises the introductory text of the Entity List to specify that the license requirements for these entities includes exports, reexports and transfers (in-country), unless otherwise stated. This clarification is needed because now all of the sections of part 744 that provide the regulatory basis for adding a person to the Entity List include license requirements for exports, reexports and transfers (in-country), unless otherwise specifically stated in an entry on the Entity List for a listed person.

Consistent with the provisions of section 6 of the Export Administration Act of 1979, as amended (EAA), a foreign policy report was submitted to Congress on August 11, 2009, notifying Congress of the imposition of foreign policy-based licensing requirements reflected in this rule.

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 13, 2009, 74 FR 41325 (August 14, 2009), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act.

Rulemaking Requirements

1. 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 the 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. Miscellaneous and recordkeeping activities account for 12 minutes per submission. Total burden hours associated with the Paperwork Reduction Act and Office of Management and Budget control number 0694-0088 are expected to increase slightly as a result of this rule.

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

4. The provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, the opportunity for public participation, 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)). 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.

List of Subjects 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 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; 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 13, 2009, 74 FR 41325 (August 14, 2009); Notice of November 10, 2008, 73 FR 67097 (November 12, 2008).

2. Section 744.10 is amended:

a. By revising the second sentence of paragraph (a); and

b. By revising paragraph (c), to read as follows:

§ 744.10

Restrictions on certain entities in Russia.

(a) * * * A license is required, to the extent specified on the Entity List, to export, reexport, or transfer (in-country) any item subject to the EAR to such entities.

* * * * *

(c) License review standard. Applications to export, reexport, or transfer (in-country) items subject to the EAR to these entities will be reviewed with a presumption of denial.

3. Section 744.11 is amended:

a. By revising the first sentence of the introductory text of the section;

b. By revising the first sentence of paragraph (a); and

c. By revising paragraph (b)(5), to read as follows:

§ 744.11

License requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States.

BIS may impose foreign policy export, reexport, and transfer (in-country) license requirements, limitations on availability of license exceptions, and set license application review policy based on the criteria in this section. * * *

(a) * * *A license is required, to the extent specified on the Entity List, to export, reexport, or transfer (in-country) any item subject to the EAR to an entity that is listed on the Entity List in an entry that contains a reference to this section. * * *

(b) * * *

(5) Engaging in conduct that poses a risk of violating the EAR when such conduct raises sufficient concern that the End-User Review committee believes that prior review of exports, reexports, or transfers (in-country) involving the party and the possible imposition of license conditions or license denial enhances BIS's ability to prevent violations of the EAR.

4. Section 744.20 is amended:

a. By revising the first sentence of the introductory text of the section;

b. By revising the second sentence of paragraph (a); and

c. By revising paragraphs (b) and (c), to read as follows:

§ 744.20

License requirements that apply to certain sanctioned entities.

BIS may impose, as foreign policy controls, export, reexport, and transfer (in-country) license requirements and set licensing policy with respect to certain entities that have been sanctioned by the State Department. * * *

(a) * * * A license is required, to the extent specified on the Entity List, to export, reexport, or transfer (in-country) any item to such entities.

(b) License Exceptions. No license exception may be used to export, reexport, or transfer (in-country) to such entities unless specifically authorized on the Entity List.

(c) Licensing policy. Applications to export, reexport, or transfer (in-country) to such entities will be reviewed according to the licensing policy set forth on the Entity List.

5. Supplement No. 4 to part 744 is amended by revising the introductory text, to read as follows:

Supplement No. 4 to Part 744—Entity List

Country	Entity	License requirement	License review policy	Federal Register citation
This Supplement lists certain entities subject to license requirements for specified items under this part 744 of the EAR. License requirements for these entities include exports, reexports, and transfers (in-country) unless otherwise stated. This list of entities is revised and updated on a periodic basis in this Supplement by adding new or amended notifications and deleting notifications no longer in effect.
	*         *         *         *         *         *         *

Dated: August 31, 2009.

Matthew S. Borman,

Acting Assistant Secretary for Export Administration.