2024-05696. Revisions To Export, Reexport, and Transfer (In-Country) Controls for Nicaragua Under the Export Administration Regulations

AGENCY:

Bureau of Industry and Security (BIS), Commerce.

ACTION:

Final rule.

SUMMARY:

In this final rule, BIS amends the Export Administration Regulations (EAR) to apply more restrictive treatment to exports and reexports to, and transfers (in-country) within, Nicaragua of items subject to the EAR. This action is consistent with the State Department's addition of Nicaragua to the list of countries that are subject to a U.S. arms embargo under the International Traffic in Arms Regulations (ITAR). To reflect this changed status under the ITAR, BIS adds Nicaragua to Country Group D:5. BIS's amendments also address concerns regarding the Nicaraguan Government's commission of human rights abuses against citizens and civil society groups, as well as the regime's ongoing military and security cooperation with Russia. Specifically, BIS is moving Nicaragua from Country Group B to Country Group D, a more restrictive country grouping, applying a stringent licensing policy for items controlled for national security reasons, and making the country subject to `military end use' and `military end user' restrictions. This rule advances the U.S. Government's efforts to restrict the availability of items subject to the EAR to Nicaragua's military and security services. Additionally, consistent with BIS's authorities under the Export Control Reform Act of 2018, this rule demonstrates a commitment to using export controls to protect human rights and promote democracy.

DATES:

This rule is effective March 15, 2024.

FOR FURTHER INFORMATION CONTACT:

Anthony Christino III, Director, Foreign Policy Division, Office of Nonproliferation and Treaty Compliance, Bureau of Industry and Security, U.S. Department of Commerce, by email at [e-mail], or by phone at 202–482–4252.

SUPPLEMENTARY INFORMATION:

Background

To address ongoing foreign policy and national security concerns raised by the actions of the Nicaraguan Government under the leadership of President Daniel Ortega, including by Nicaraguan military and security services, BIS is issuing this final rule that would subject the country to more restrictive treatment under the Export Administration Regulations (EAR), 15 CFR parts 730 through 774.

In particular, this rule makes regulatory changes that reflect the U.S. Government's opposition to the trade of arms with Nicaragua and its government consistent with the State Department's March 15, 2024, addition of Nicaragua to § 126.1(p) of the International Traffic in Arms Regulations (ITAR), 22 CFR parts 120 through 130, thereby imposing restrictions (with limited exceptions) on the export of defense articles and defense services destined for or originating in the country.

Additionally, BIS's action addresses the Nicaraguan Government's ongoing dismantling of democratic institutions and attacks on civil society. Since 2018, President Ortega's regime has targeted democratic movements supported by students and middle-class professionals and sought to curb religious expression, including by the Roman Catholic church. In many instances, the government crackdowns have been aided and abetted by the Nicaragua National Police (NNP), the government's primary law enforcement entity, and the Nicaraguan judiciary. The NNP has been responsible for using live ammunition against peaceful protesters and participating in death squads, as well as carrying out extrajudicial killings, disappearances, and kidnappings. As documented by Amnesty International, during a period of several months starting in July 2018, the NNP and other pro-government forces conducted “Operation Clean Up,” an operation in which they deployed lethal force against protesters resulting in hundreds of deaths and injuries. On March 5, 2020, the U.S. Department of the Treasury's Office of Foreign Assets Control designated the NNP and three NNP commissioners, Juan Antonio Valle Valle, Luis Alberto Perez Olivas, and Justo Pastor Urbina, as Specially Designated Nationals. See https://home.treasury.gov/​news/​press-releases/​sm930. On March 28, 2023, BIS amended the EAR by adding the NNP to the Entity List (88 FR 18983; March 30, 2023).

BIS is also taking this regulatory action to address national security and foreign policy concerns arising out of Nicaragua's deepening military and security ties with Russia. Since 2016, Russia has supplied Nicaragua with military equipment and technology that provides surveillance capabilities, including satellite monitoring of telecommunications. In June 2022, the two countries renewed a decade-long training agreement for Russian forces. The Ortega regime has also formally supported Russia in connection with its February 2022 invasion of Ukraine in various international fora, including an October 2022 vote in support of Russia before the United Nations General Assembly.

Changes Made by This Rule

Consistent with the foreign policy and national security concerns detailed above, in this rule, BIS is making four sets of changes to the EAR that will subject Nicaragua to more stringent export, reexport, and transfer (in-country) controls involving items that are subject to the EAR. First, BIS is adding Nicaragua to Country Group D:5 (U.S. Arms Embargoed Countries) in supplement no. 1 to part 740 of the EAR. This amendment is made to conform with the State Department's amendment that added the country to § 126.1 (Prohibited exports, imports, and sales to or from certain countries) under paragraph (p). March 15, 2024.

Second, BIS is moving Nicaragua from Country Group B to Country Group D:1 ( see supp. no. 1 to part 740), a grouping of countries that raise national security concerns.

Third, Nicaragua is being added to the countries subject to a stringent licensing policy set forth in § 742.4 (national security controls) in connection with the risk of diversion to defined military end uses and end users. Finally, this rule makes the country subject to the `military end use' and `military end user' restrictions in § 744.21.

Existing licensing requirements and related review policies not revised by this rule continue to apply to items subject to the EAR that are destined for Nicaragua. For example, items controlled for reasons identified in supplement no. 1 to part 738 (Commerce Country Chart) by “Xs” in Columns CB1, CB2, NP1, NS1, NS2, MT1, RS1, RS2, FC1, CC1 and CC3 remain subject to the existing controls under the EAR. In particular, BIS will continue to review for national security and foreign policy (including human rights) concerns items controlled for regional stability to Nicaragua as set forth in the “RS1” column on the Commerce Country Chart ( see § 742.6(b)(1)(i)). It will also continue to review items controlled for Crime Control reasons pursuant to the human rights-related standard set forth in § 742.7(b)(1). Additionally, pursuant to § 742.7(b)(2), BIS will continue to review items destined for Nicaragua that are controlled for all reasons apart from short supply under the human rights-related standard set forth in paragraph (b)(1).

Impact of the EAR Amendments

Country Group Related Changes

Country Group D:5

As a result of its placement in Country Group D:5, Nicaragua will be subject to additional restrictions in the EAR, including on de minimis U.S. content, license exception availability, and licensing policy for certain items. For example, license applications for the export or reexport of items classified under 9x515 or “600 series” Export Control Classification Numbers (ECCNs) to countries in Country Group D:5 are reviewed consistent with the policies in § 126.1 of the ITAR, as provided in paragraph (b)(1)(ii) of § 742.4 of the EAR.

This rule also removes a reference to an outdated State Department website that is currently listed in the footnote to Country Group D:5 (Note to Country Group D:5). As amended, the note directs the public to § 126.1 of the ITAR and to Federal Register notices regarding U.S. arms embargoes.

Country Group D:1

As a result of its placement in Country Group D:1, Nicaragua will be subject to more restrictive treatment under certain part 744 end use controls ( see, e.g., § 744.3(a) (restrictions on exports, reexports, or in-country transfers of certain rocket systems and unmanned aerial vehicles). Additionally, pursuant to § 744.7, restrictions on certain exports and reexports to vessels and aircraft located in Nicaraguan ports or registered in Nicaragua will apply. The restrictions on the export, reexport, and transfer (in-country) of certain microprocessors and associated software and technology for defined military end uses and end users in Country Group D:1 pursuant to § 744.17 will now apply to Nicaragua. Additionally, consistent with its placement in Country Group D:1, Nicaragua will be subject to two foreign direct product (FDP) rules set forth in § 734.9 that apply to exports from abroad, reexports, and transfers (in-country) of foreign-produced direct products of U.S.-origin technology and software, specifically, a National Security FDP rule and a `600 series' FDP rule. See § 734.9(b)(2) and (d)(2).

Removing Nicaragua from Country Group B and placing it in Country Group D:1 also makes certain license exceptions unavailable. The license exceptions made unavailable in full are: Shipments of limited value (LVS) (§ 740.3); License Exception Shipments to Country Group B countries (GBS) (§ 740.4); and Technology and software under restriction (TSR) (§ 740.6). Certain provisions in additional license exceptions that are available to Country Group B countries are restricted to Country Group D:1.

Restrictive National Security-Related Review Policy

As a result of this rule, a restrictive licensing policy will apply to license applications involving the export, reexport, and transfer (in-country) to Nicaragua of items listed on the CCL and controlled for national security reasons (NS items). Specifically, such applications will now be subject to the licensing policy in § 742.4(b)(7), which specifies that applications involving NS items will be reviewed to determine whether there is a risk of diversion to a defined military end use or end user ( see § 744.21(f) and (g)). Applications determined to be for civil end users or for civil end uses will be subject to a general policy of approval. Applications to export, reexport, or transfer (in-country) items that would make a material contribution to the “development,” “production,” maintenance, repair, or operation of weapons systems, subsystems, and assemblies, such as those described in supplement no. 7 to part 742 (major weapons systems) will be subject to a presumption of denial.

New Military End Use and Military End User Controls

Finally, this rule adds Nicaragua to the countries that are subject to the `military end use' and `military end user' restrictions set forth in § 744.21. As amended by this rule, pursuant to § 744.21(a)(1), a license is required for the export, reexport, or transfer (in-country) of any item subject to the EAR that is listed in supplement no. 2 to part 744 to Burma, Cambodia, the People's Republic of China, Venezuela, or Nicaragua if there is “knowledge” ( see § 772.1 of the EAR) that such item is intended, entirely or in part, for a `military end use' or “military end user' as defined in § 744.21(f) or (g), respectively. As a conforming change, this rule adds a country heading for Nicaragua in supplement no. 7 to part 744 (`Military End-User' (MEU) List) but does not add any entities to the MEU List under this new country heading.

Saving Clause

Shipments of items removed from license exception eligibility or eligibility for export, reexport or transfer (in-country) without a license as a result of this regulatory action that were on dock for loading, on lighter, laden aboard an exporting carrier, or en route aboard a carrier to a port of export, on March 15, 2024, pursuant to actual orders for exports, reexports and transfers (in-country) to a foreign destination may proceed to that destination under the previous license exception eligibility or without a license so long as they have been exported, reexported or transferred (in-country) before April 15, 2024. Any such items not actually exported, reexported or transferred in-country) before midnight, on April 15, 2024, require a license in accordance with this final rule.

Export Administration Regulations

On August 13, 2018, the President signed into law the John S. McCain National Defense Authorization Act for Fiscal Year 2019, which included the Export Control Reform Act of 2018 (ECRA), 50 U.S.C. 4801–4852. ECRA provides the legal basis for BIS's principal authorities and serves as the authority under which BIS issues this rule.

Rulemaking Requirements

1. This final rule has been determined to be significant under Executive Order 12866.

2. Notwithstanding any other provision of law, no person may be required to respond to or 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 a collection currently approved by OMB under control number 0694–0088, Simple Network Application Process and Multipurpose Application Form. This collection includes, among other things, license applications, and carries a burden estimate of 29.4 minutes for a manual or electronic submission for a total burden estimate of 36,689 hours. BIS expects an increase of 588 burden hours for this collection. This collection is currently under a 60-day Federal Register notice for public comment (88 FR 85586) published on December 8, 2023. These additional burden hours will be added during this renewal process.

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

4. Pursuant to section 1762 of the Export Control Reform Act of 2018, this action is exempt from the Administrative Procedure Act (5 U.S.C. 553) requirements for notice of proposed rulemaking, opportunity for public participation, and delay in effective date. Because neither the Administrative Procedure Act nor any other law requires that notice of proposed rulemaking and an opportunity for public comment be given for this rule, the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) are not applicable. Accordingly, no Final Regulatory Flexibility Analysis is required and none was prepared.

List of Subjects

15 CFR Part 740

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

15 CFR Part 742

• Exports
• Terrorism

15 CFR Part 744

• Exports
• Reexports and recordkeeping requirements
• Terrorism

Accordingly, the Export Administration Regulations (15 CFR parts 740, 742, and 744) are amended as follows:

PART 740—LICENSE EXCEPTIONS

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

Authority: 50 U.S.C. 4801–4852; 50 U.S.C. 4601 et seq.;50 U.S.C. 1701 et seq.;22 U.S.C. 7201 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.

2. Supplement no. 1 to part 740 is amended by:

a. In the Country Group B table, removing “Nicaragua”; and

b. In the Country Group D table, adding an entry for “Nicaragua” in alphabetical order and revising footnote 1 to the table.

The addition and revision read as follows:

Supplement No. 1 to Part 740—Country Groups

* * * * *

Country Group D

Country	[D: 1] National security	[D: 2] Nuclear	[D: 3] Chemical & biological	[D: 4] Missile technology	[D: 5] U.S. arms embargoed countries 1
*         *         *         *         *         *         *
Nicaragua	X				X
*         *         *         *         *         *         *
1   Note to Country Group D:5: Countries subject to U.S. arms embargoes are identified by the State Department through notices published in the Federal Register . The list of arms embargoed destinations in this table is drawn from 22 CFR 126.1 and State Department Federal Register notices related to arms embargoes and will be amended when the State Department publishes subsequent notices. If there are any discrepancies between the list of countries in this table and the countries identified by the State Department as subject to a U.S. arms embargo (in the Federal Register ), the State Department's list of countries subject to U.S. arms embargoes shall be controlling.

* * * * *

PART 742—CONTROL POLICY—CCL BASED CONTROLS

3. The authority citation for part 742 continues to read as follows:

Authority: 50 U.S.C. 4801–4852; 50 U.S.C. 4601 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; 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, 68 FR 26459, 3 CFR, 2004 Comp., p. 320; Notice of November 8, 2022, 87 FR 68015 (November 10, 2022).

4. Amend § 742.4 by revising the first sentence of paragraph (b)(7)(i) to read as follows:

§ 742.4

National security.

* * * * *

(b) * * *

(7)(i) For Burma, Cambodia, the People's Republic of China (PRC), Nicaragua, and Venezuela, all applications will be reviewed to determine the risk of diversion to a military end user or military enduse. * * *

* * * * *

PART 744—CONTROL POLICY: END-USER AND END-USE BASED

5. The authority citation for part 744 continues to read as follows:

Authority: 50 U.S.C. 4801–4852; 50 U.S.C. 4601 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. 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 November 8, 2022, 87 FR 68015, 3 CFR, 2022 Comp., p. 563; Notice of September 7, 2023, 88 FR 62439 (September 11, 2023).

6. Amend § 744.21 by revising paragraphs (a), (b) introductory text, (b)(1), and (e)(3) to read as follows:

§ 744.21

Restrictions on certain ‘military end uses’ or ‘military end users’.

(a) General prohibition. In addition to the license requirements for items specified on the Commerce Control List (CCL) (supplement no. 1 to part 774 of the EAR), you may not export, reexport, or transfer (in-country):

(1) Any item subject to the EAR listed in supplement no. 2 to this part without a license if, at the time of the export, reexport, or transfer (in-country), you have “knowledge,” as defined in § 772.1 of the EAR, that the item is intended, entirely or in part, for a ‘military end use,’ as defined in paragraph (f) of this section, in Burma, Cambodia, the People's Republic of China (China), Nicaragua, or Venezuela, or a Burmese, Cambodian, Chinese, Nicaraguan, or Venezuelan ‘military end user,’ as defined in paragraph (g) of this section, wherever located. ‘Military end users’ located outside of Burma, Cambodia, China, Nicaragua, or Venezuela are limited to entities identified on the ‘Military End-User’ (MEU) List under supplement no. 7 to this part.

(2) Any item subject to the EAR without a license if, at the time of the export, reexport, or transfer (in-country), you have “knowledge,” as defined in § 772.1 of the EAR that the item is intended, entirely or in part, for a ‘military end use,’ as defined in paragraph (f) of this section, in Belarus or Russia, or a Belarusian or Russian ‘military end user,’ as defined in paragraph (g) of this section, wherever located. Belarusian or Russian ‘military end users’ located outside of Belarus or Russia are limited to entities identified on the Entity List under supplement no. 4 to this part with a footnote 3 designation.

Note 1 to paragraphs (a)(1) and (2):

An entity anywhere in the world, including in Burma, Cambodia, China, Nicaragua, or Venezuela, may be listed on the Entity List as a Belarusian or Russian ‘military end user’ with a footnote 3 designation. If the entity is not a Belarusian or Russian ‘military end user,’ but has otherwise been identified by the End User Review Committee (ERC) as a ‘military end user,’ that entity may be identified under the ‘Military End-User’ (MEU) List under supplement no. 7 to this part. As noted in paragraph (a)(1) of this section, exporters, reexporters, and transferors, even in the absence of any such notification, are not excused from compliance with the license requirements of this paragraph (a) for all entities in Burma, Cambodia, China, Nicaragua, or Venezuela to determine whether the entity is a ‘military end user’ for purposes of paragraph (g) of this section because supplement no. 7 is not an exhaustive listing of ‘military end users’ in those countries. As noted in paragraph (a)(2) of this section, exporters, reexporters, and transferors, even in the absence of any such notification, are not excused from compliance with the license requirements of this paragraph (a) for all entities in Belarus or Russia to determine whether the entity is a ‘military end user’ for purposes of paragraph (g) of this section because supplement no. 4 under this part is not an exhaustive listing of ‘military end users’ in those countries.

(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 notification published in the Federal Register , that a license is required for specific exports, reexports, or transfers (in-country) of any item because there is an unacceptable risk of use in or diversion to a ‘military end use’ in Belarus, Burma, Cambodia, China, Nicaragua, the Russian Federation, or Venezuela, or for a Belarusian, Burmese, Cambodian, Chinese, Nicaraguan, Russian, or Venezuelan ‘military end user,’ wherever located. 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.

(1) ‘Military End-User’ (MEU) List. BIS may inform and provide notice to the public that certain entities are subject to the additional prohibition described under this paragraph (b) following a determination by the End-User Review Committee (ERC) that a specific entity is a ‘military end user’ pursuant to this section and therefore any exports, reexports, or transfers (in-country) to that entity represent an unacceptable risk of use in or diversion to a ‘military end use’ in Belarus, Burma, Cambodia, China, Nicaragua, the Russian Federation, or Venezuela, or for a Belarusian, Burmese, Cambodian, Chinese, Nicaraguan, Russian, or Venezuelan ‘military end user,’ wherever located. Such Burmese, Cambodian, Chinese, Nicaraguan, or Venezuelan ‘military end users’ may be added to supplement no. 7 to this part (MEU List). Such Belarusian or Russian ‘military end users’ may also be added to supplement no. 4 to this part (Entity List) and will be listed with a footnote 3 designation. License requirements for listed MEU are described in paragraph (b)(1)(ii) of this section. The listing of entities under supplement no. 7 or 4 to this part is not an exhaustive listing of ‘military end users’ for purposes of this section, except for ‘military end users’ of a country identified in this section (Belarus, Burma, Cambodia, China, Nicaragua, the Russian Federation, or Venezuela) not located in that same country. As specified in paragraphs (a)(1) and (2) of this section, ‘military end users’ of a country identified in this section not located in that same country are exhaustively listed on either the Entity List with a footnote 3 designation or on the MEU List under supplement no. 7 this part. Exporters, reexporters, and transferors are responsible for determining whether transactions with entities not listed on supplement no. 7 or 4 to this part are subject to a license requirement under paragraph (a) of this section. The process in this paragraph (b)(1) for placing entities on the MEU List and Entity List is only one method BIS may use to inform exporters, reexporters, and transferors of license requirements under this section.

(i) End-User Review Committee (ERC). 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 MEU List and Entity List. Decisions by the ERC for purposes of the MEU List and Entity List will be made following the procedures identified in this section and in supplement no. 5 to this part (Procedures for End-User Review Committee Entity List and ‘Military End User’ (MEU) List Decisions).

(ii) License requirement for parties to the transaction. Consistent with paragraph (a) of this section, a license is required for the export, reexport, or transfer (in-country) of any item subject to the EAR listed in supplement no. 2 to this part when an entity that is listed on the MEU List as a Burmese, Cambodian, Chinese, Nicaraguan, or Venezuelan ‘military end user’ is a party to the transaction as described in § 748.5(c) through (f) of the EAR. Consistent with paragraph (a) of this section, a license is required for the export, reexport, or transfer (in-country) of any item subject to the EAR when a Belarusian or Russian ‘military end user’ that is listed on the Entity List pursuant to this section is a party to the transaction as described in § 748.5(c) through (f) of the EAR.

* * * * *

(e) * * *

(3) Applications for items requiring a license for any reason that are destined for a ‘military end use’ in Belarus, Burma, Cambodia, China, Nicaragua, the Russian Federation, or Venezuela or for a Belarusian, Burmese, Cambodian, Chinese, Nicaraguan, Russian, or Venezuelan ‘military end user,’ wherever located, also will be subject to the review policy stated in paragraph (e)(1) of this section.

* * * * *

7. Supplement no. 7 to part 744 is amended in the table by adding in alphabetical order an entry for “Nicaragua” to read as follows:

Supplement No. 7 to Part 744—‘Military End-User’ (Meu) List

* * * * *

Country	Entity	Federal Register citation
*    *    *    *    *
NICARAGUA	[Reserved]	[Reserved].
*    *    *    *    *

Thea D. Rozman Kendler,

Assistant Secretary for Export Administration.