[Federal Register Volume 60, Number 181 (Tuesday, September 19, 1995)]
[Rules and Regulations]
[Pages 48369-48374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23179]



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NUCLEAR REGULATORY COMMISSION

10 CFR Part 21

RIN 3150-AF01


Procurement of Commercial Grade Items by Nuclear Power Plant 
Licensees

AGENCY: Nuclear Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Nuclear Regulatory Commission (NRC) is amending its 
regulations to provide added flexibility in procuring commercial grade 
items for safety-related service by nuclear power plant licensees. This 
action provides the requirements for the procurement of basic 
components, which will be procured initially as commercial grade items 
with subsequent dedication for safety-related service, in a manner that 
avoids unnecessary delay and expense while maintaining an adequate 
level of plant safety.

EFFECTIVE DATE: October 19, 1995.

ADDRESSES: Copies of the public record, including the final regulatory 
analysis and any public comments received on the proposed rule, may be 
examined and copied for a fee in the Commission's Public Document Room 
at 2120 L Street, NW, Washington, DC.

FOR FURTHER INFORMATION CONTACT: M. L. Au, P.E., Office of Nuclear 
Regulatory Research, U.S. Nuclear Regulatory Commission, Washington, DC 
20555, telephone (301) 415-6181; E-mail [email protected].

SUPPLEMENTARY INFORMATION:

Background

    On October 24, 1994 (59 FR 53372), the NRC published a proposed 
rule in the Federal Register that would clarify and add flexibility to 
10 CFR Part 21 requirements for the procurement of commercial grade 
items for safety-related service by nuclear power plant licensees. This 
action was in response to a petition for rulemaking (PRM-21-2) from the 
Nuclear Management and Resources Council (NUMARC), which has been 
incorporated into the Nuclear Energy Institute (NEI). The notice of 
receipt of the petition for rulemaking was published on October 14, 
1993 (58 FR 53159). The petitioner contended that many of the 
manufacturers and suppliers of original equipment no longer maintain 
programs that meet the requirements of Appendix B, ``Quality Assurance 
Criteria for Nuclear Power Plants and Fuel Reprocessing Plants,'' to 10 
CFR Part 50, ``Domestic Licensing of Production and Utilization 
Facilities,'' because of the high cost of maintaining and implementing 
these programs relative to the diminishing demand for plant parts. 
Thus, according to NEI, an increasing number of safety-related items 
are being purchased as commercial grade items from manufacturers and 
suppliers who no longer maintain quality assurance programs required by 
Appendix B to 10 CFR Part 50. Because this is a relatively small 
market, the petitioner stated that many vendors are unwilling to 
develop and maintain evaluation and notification procedures that meet 
the reporting requirements in 10 CFR Part 21. With fewer vendors 
agreeing to comply with these requirements, the petitioner claimed that 
it is becoming increasingly difficult for nuclear power plant licensees 
to procure items for safety-related applications.
    The petitioner believed that the sections in 10 CFR Part 21 that 
relate to procurement of commercial grade items, the dedication of 
these items for use in safety-related applications, and the reporting 
requirements associated with these items are unworkable and ineffective 
and consequently may adversely affect safety. Furthermore, the 
petitioner believed that the effect of these provisions has been to 
discourage vendors from maintaining programs that meet NRC requirements 
and to even refuse to provide parts to licensees. To alleviate these 
problems, the petitioner proposed the following three changes to 10 CFR 
Part 21:
    First, the petitioner suggested that the NRC broaden the definition 
of ``commercial grade item'' in 10 CFR 21.3 to read as follows: 
``Commercial grade item means any item that has not been dedicated for 
use as a basic component.'' Essentially this definition would cover any 
item obtained on the open market. The petitioner believed that allowing 
commercially available items to qualify as commercial grade items would 
result in more reasonable prices and delivery times with no adverse 
impacts on safe plant operations.
    Second, the petitioner suggested a more flexible generic definition 
of ``dedication'' in 10 CFR 21.3 to read as follows: ``Dedication is 
the evaluation process undertaken to provide reasonable assurance that 
a commercial grade item to be used as a basic component will perform 
its intended function.'' According to the petitioner, dedication 
methods could include testing, inspection, surveying the commercial 
grade supplier to determine that the appropriate quality control is in 
place, observing the manufacturing process, and analyzing the 
historical record of the item for acceptable performance. The 
petitioner also proposed that the dedicating entity maintain 
documentation of the dedication process for an audit or inspection.
    The petitioner believed that the benefits of establishing this 
approach would be that the licensee or third-party performing the 
dedication:
    (1) Understands the safety significance and function of the 
proposed component;
    (2) Is able to identify the characteristics necessary to perform 
its intended function better than the manufacturer; and
    (3) Is responsible for the quality of the commercial grade item.
    This would require the party performing the dedication to determine 
the suitability of the component by analyzing its ability to perform 
successfully in a safety-related application.
    Third, the petitioner suggested that the responsibility for 
reporting defects and failures to comply for commercial grade items 
that have been dedicated should reside with the entity responsible for 
performing the dedication process. The petitioner suggested that the 
following language be added to 10 CFR 21.21(b): ``The entity that 
performs the dedication is responsible for identifying, evaluating and 
reporting the deviations and failures to comply associated with 
substantial safety hazards of a commercial grade item.'' Since the 
manufacturers, suppliers, and sub-tier suppliers of commercial grade 
items do 

[[Page 48370]]
not necessarily know whether the item is destined for a safety-related 
application, the petitioner believes it is appropriate to clarify that 
the responsibility for reporting defects and failures to comply found 
in commercial grade items falls on the entity performing the dedication 
process.
    To sum up, the petitioner requested that 10 CFR Part 21 be amended 
to:
    (1) Replace the existing definition of commercial grade item with a 
more inclusive definition;
    (2) Include a flexible generic process for dedication of commercial 
grade items for safety-related use; and
    (3) Clarify that the entity performing the dedication of a 
commercial grade item is responsible for discovering and evaluating 
deviations and for reporting defects and failures to comply as required 
by 10 CFR Part 21.
    The rule grants in part and denies in part the petition for 
rulemaking (PRM-21-2) from the NEI and completes action on the 
petition.

Public Comment

    The NRC received 23 letters of public comments in response to the 
Federal Register notice announcing the receipt of the petition for 
rulemaking. All but one letter supported the petition and called for a 
revision of the NRC's regulations consistent with the proposal set 
forth in the petition. The NRC considered these comments in the 
development of the proposed rule that was published in October 1994.
    The NRC received 19 letters of comment in response to the proposed 
rule. The NRC considered these comments in developing the final rule, 
the objective of which is to provide requirements for the procurement 
of basic components, initially procured as commercial grade items and 
subsequently dedicated for safety-related service, in a timely and cost 
effective manner that avoids unnecessary delay and expense to the 
licensee while maintaining an adequate level of plant safety.
    The 19 letters of comment received in response to the proposed rule 
can be categorized as follows: 1 from an interested individual, 1 from 
an individual in a citizen's group, 1 from the Nuclear Energy Institute 
(NEI) with a supplemental letter re-emphasizing comments important to 
NEI, 1 from a law firm, 14 from nuclear power plant licensees, and 1 
from a nuclear power plant supplier. Many of the letters contained 
comments that were similar in nature. The majority of the commenters 
were supportive of the proposed rule. Only one commenter, an individual 
from a citizens group, objected to the proposed rule. The following 
section summarizes the public comments received and provides NRC's 
responses to the concerns expressed.
    Comment. The proposed rule contains changes developed by NRC staff 
which differ from the proposal originally submitted by NEI (formerly 
NUMARC), and in addition, codifies new prescriptive requirements for 
the dedication process.
    Response. Part 21 currently does not contain a regulatory 
definition of ``dedication,'' indicating only the time when dedication 
occurs; however, the NEI petition sought, among other matters, to 
define and establish by rulemaking a standard for the dedication 
process. As such, it was appropriate for the Commission to consider the 
elements of a dedication process for commercial grade items which 
assure the protection of the health and safety of the public rather 
than limit this standard to the industry's proposal. Therefore, it is 
not inappropriate for the NRC to consider ``provisions not sought by 
the petitioner.'' The NRC has never interpreted, nor has it 
implemented, the 10 CFR 2.802 rulemaking petition process in a manner 
which requires either the wholesale acceptance or rejection of specific 
rulemaking proposals contained in a 10 CFR 2.802 petition.
    Comment. Amendments to the definitions are ambiguous and do not 
provide a clear demarcation between basic components and commercial 
grade items. The definition of ``basic component'' raises two problems 
involving wording. The definition states that it ``includes'' two 
categories of items, i.e., those designed ``or'' manufactured under 
Appendix B to 10 CFR Part 50 quality assurance programs, and commercial 
grade items successfully dedicated as basic components. The first 
problem is the use of the term ``includes'' in the definition of basic 
component. This opens the possibility that other categories of items 
could also exist which is not the intent. The second problem is the use 
of the word ``or'' between ``design'' and ``manufactured.'' An item 
designed under an Appendix B quality assurance program, but 
manufactured commercial grade should not be categorized as a basic 
component. It requires dedication to be categorized as a basic 
component.
    Response. The NRC agrees with the commenter's observation that the 
Commission's intent was for the definition of basic component to be 
limited to only two categories of items: (1) those designed and 
manufactured under 10 CFR Part 50, Appendix B quality assurance 
programs, and (2) those commercial grade items successfully dedicated 
as basic components. The definition of ``basic component'' has been 
revised to address the commenter's concern.
    Comment. The proposed definition of ``Commercial Grade Items'' 
appears to be unnecessarily restrictive and could give rise to 
interpretational difficulties that could limit or preclude options 
available to the licensee, rather than enhance the flexibility of 
licensees or utilities in dedicating commercial grade items for safety-
related applications. The difficulty with the proposed definition of 
commercial grade item is that it would force utilities to always 
purchase a product as nuclear grade if a manufacturer with an Appendix 
B to 10 CFR Part 50 quality assurance program exists, which would 
result in a monopoly or a ``captive market.''
    Response. The new definition is not intended to restrict the 
licensee from purchasing commercial grade items for subsequent 
dedication for safety-related applications even though a basic 
component designed and manufactured under an Appendix B to 10 CFR Part 
50 quality assurance program is currently available. The commercial 
grade item, when properly and successfully dedicated, is deemed by the 
NRC to be equivalent in its safety function performance to the same or 
a similar item designed and manufactured under an Appendix B to Part 50 
quality assurance program.
    Comment. The phrase ``or part of a basic component'' should be 
deleted from the definition of commercial grade items because it could 
be interpreted to mean that all commercial grade items used in basic 
components are required to be dedicated for safety-related use.
    Response. To address this comment, the NRC has modified the 
definition of ``commercial grade item'' to clarify that a commercial 
grade item that is part of a basic component but does not affect a 
safety-related function need not be dedicated. Therefore, a commercial 
grade item which is part of a basic component is considered to be a 
basic component after it has been dedicated prior to installation only 
if it affects a safety function.
    Comment. The proposed new definition of ``commercial grade item'' 
and other changes to Part 21 should not be limited to only nuclear 
power plant licensees under Part 50, and their vendors, since these 
entities hold other licenses and would benefit from changes to Part 21.
    Response. Proposed changes to Part 21 regulatory requirements for 

[[Page 48371]]
    nonreactor licensees are currently being considered.
    Comment. The definition of the term ``dedication'' needs to be 
clarified as it lacks flexibility for dedication of a commercial grade 
item for safety-related applications. The graded approach should be 
used for applying Appendix B to 10 CFR Part 50.
    Response. The dedication process must be performed using the 
applicable quality assurance criteria of Appendix B to 10 CFR Part 50. 
Appendix B already allows the level of quality assurance implemented to 
be consistent with the item's importance to safety (i.e., the graded 
approach).
    Comment. The complexity of an item's design or manufacturing 
process should not be a criterion for excluding commercial grade items 
from eligibility to undergo a dedication process.
    Response. To the extent the term ``complexity'' has caused 
confusion, the language of the rule has been modified to remove that 
term. The NRC maintains that if the design of an item and its 
manufacturing process are such that the dedication process cannot 
reasonably ensure the absence of a defect or failure to comply that 
affects one or more critical characteristics of the item, then the item 
cannot be dedicated, and must be designed and manufactured as a basic 
component. Included are items for which the manufacturing process 
requires in-process inspections and verifications to ensure that 
defects are identified and corrected. Typical examples include, but are 
not limited to, fuel assemblies, control rod assemblies, and reactor 
coolant pressure boundary components.
    Comment. In the definition of term ``dedication,'' the example of 
``pressure vessels'' does not meet the specific nuclear-unique 
requirement since pressure vessels are used widely outside the nuclear 
industry and should be considered a potential candidate for dedication.
    Response. The example is no longer included in the definition. In 
the Statement of Considerations, ``pressure vessel'' has been replaced 
with ``reactor coolant pressure boundary components'' since the NRC 
believes such components, due to their importance to safety, should 
continue to be designed and manufactured as basic components under an 
Appendix B quality assurance program.
    Comment. In the definition of ``dedicating entity,'' the word 
``qualify'' should be replaced with the word ``accept'' to ensure that 
the dedication process is differentiated from equipment qualification.
    Response. The NRC agrees that the word ``qualify'' could lead to 
misinterpretation. The definition of ``dedicating entity'' has been 
revised.
    Comment. The proposed definition of ``critical characteristics'' 
should not be codified for two reasons. First, it is not necessary or 
beneficial to codify the processes. Second, the term was originally 
developed by industry to support improved dedication and procurement 
programs under NUMARC procurement initiatives. There are fundamental 
differences in the interpretation of the term ``critical 
characteristics'' between the NRC and much of the nuclear industry.
    Response. The NRC believes it is important to define and codify 
``critical characteristics'' because this term represents a subject of 
importance in the dedication process for commercial grade items. The 
Commission is aware that in the Electric Power Research Institute's 
(EPRI) ``Guideline for the Utilization of Commercial Grade Items in 
Nuclear Safety Related Applications,'' EPRI NP-5652, ``critical 
characteristics'' is defined primarily in procurement terms, i.e., that 
the item received is the item specified as verified by part number. 
However, in the Commission's view, this is an appropriate term by which 
to convey the intent of this rulemaking that the dedication process 
specify those characteristics important to the design, material, and 
performance of an item so that the verification of those 
characteristics will provide reasonable assurance that the item will 
perform its intended safety function.
    Comment. One utility commented that a backfit analysis should be 
required because new requirements for dedication are being specified.
    Response: The current Part 21 regulation already provides for the 
dedication of commercial grade items to be used in safety-related 
applications. The final rule provides for a broadening of the 
definition of commercial grade items and their subsequent dedication 
for safety-related service. The rule does not impose a more restrictive 
requirement upon any licensee or dedicating entity; therefore, it does 
not constitute a backfit as defined in 10 CFR 50.109(a)(1), and no 
backfit analysis is necessary.
    Comment. Part 21 does not clearly address the responsibilities for 
reporting defects and failures to comply associated with the purchase 
and subsequent transfer of a basic component by one utility to another. 
A provision should be included in the rulemaking allowing one utility 
to accept an item as a basic component when the utility supplying the 
item is unwilling to accept the Part 21 responsibilities associated 
with this kind of transaction. The utility purchasing the item should 
document the qualification of the vendor during the time of original 
manufacture and sale of the item.
    Response: The NRC does not agree with the position set forth in 
this comment. The Part 21 regulation specifies the responsibilities of 
any individual or corporation and each director and responsible officer 
of such organization that supplies basic components. Those 
responsibilities are also applicable to utilities which supply basic 
components to other utilities. Nothing in the regulation prevents a 
utility from contacting the original supplier or manufacturer for the 
direct transfer of information regarding the item.

Basis for Commission's Decision

    The NRC has reviewed the public comments that were submitted on the 
proposed rule. The final rule has taken into consideration many of the 
suggested changes as indicated in this Statement of Considerations.
    When Part 21 was first issued in 1977, the suppliers of all parts 
making up a basic component were subject to the reporting requirements 
under Part 21. However, recognizing that the Commission lacked 
experience in implementing a reporting program of this scope, the 
Commission also pointed out in the Statement of Considerations 
accompanying this part that it would examine closely the implementation 
of Part 21 as the Commission gained experience. Following the issuance 
of Part 21, the NRC received many requests for clarification of the 
regulations. The NRC examined the issue of how far down the procurement 
chain Part 21 should be applicable and on October 19, 1978 (43 FR 
4862), amended Part 21 to exempt commercial grade items from the 
reporting requirements of Part 21 until the items were dedicated for 
use as a basic component. The NRC held that the October 1978 rule was 
needed for safety reasons. Problems such as the inability to obtain 
needed parts and services were all cited as detriments to safety. The 
NRC was challenged on this amendment and the court of appeals upheld 
the Commission's interpretation of section 206 of the ERA requiring the 
Commission to ``draw a line somewhere to demarcate the outer boundaries 
of the duty to report'' (Natural Resources Council v. NRC, 666 F.2d 595 
(D.C. Cir. 1981)).
    Problems such as the inability to obtain parts and services from 
the most qualified suppliers and excessive delays 

[[Page 48372]]
in procurements were all cited as detriments to safety. With the 
development of increased confidence in licensee implementation of 
dedication activities through NRC inspection and experience, and 
because the availability of basic components has further declined, the 
NRC believes that the current definition of commercial grade items has 
become unnecessarily restrictive.
    The petitioner proposed that a commercial grade item be defined as 
any item that has not been dedicated for use as a basic component. 
Thus, any commercial grade item could be subject to a dedication 
process to verify its qualification as a basic component. The 
Commission maintains that not all commercial grade items can be 
properly dedicated for safety-related use after the manufacturing 
process is completed. In fact several commenters agreed that there is a 
limited category of components for which quality assurance is an 
integral part of the manufacturing process and that their critical 
characteristics cannot be attested to after-the-fact. The Commission 
believes that if the design or manufacturing process of an item is such 
that dedication cannot reasonably assure the absence of a defect that 
could affect one or more critical characteristics of the item, the item 
must be designed and manufactured as a basic component in accordance 
with 10 CFR Part 50, Appendix B requirements. There are components in 
this limited category that generally have requirements and applications 
in which the design and manufacturing processes require in-process 
inspections and verifications to ensure that defects and failures to 
comply are identified and corrected. Thus, the NRC believes that 
commercial grade items cannot encompass the full spectrum of items 
envisioned by the petitioner.
    Part 21 currently defines a commercial grade item as an item that 
is (1) Not subject to nuclear-unique design or specification 
requirements; (2) used in applications outside the nuclear industry; 
and (3) ordered on the basis of specifications set forth in the 
manufacturer's published product description. This set of conditions 
resulted in very limited use of the commercial grade item designation. 
To provide added flexibility in using commercial grade items for 
safety-related service by nuclear power plant licensees, the NRC is 
replacing the set of conditions and adopted a new definition for 
commercial grade item. Under this new definition, a ``commercial grade 
item,'' when applied to nuclear power plants, means a structure, 
system, or component, or part thereof that affects its safety function, 
that was not designed and manufactured as a basic component. The 
definition makes clear that a commercial grade item that is part of a 
basic component but does not affect a safety-related function need not 
be dedicated and that item is not considered a basic component. 
Commercial grade items do not include items in which their design and 
manufacturing process require in-process inspections and verifications 
to ensure that defects or failures to comply are identified and 
corrected (i.e., one or more critical characteristics of the item 
cannot be verified). Typical examples include, but are not limited to, 
fuel assemblies, control rod assemblies, and reactor coolant pressure 
boundary components. Thus the definition of ``commercial grade item'' 
does not include items whose quality assurance is an integral part of 
the manufacturing process and whose acceptance is based primarily on 
the vendor's certification of compliance with specific design 
requirements. For facilities and activities licensed pursuant to 10 CFR 
Parts 30, 40, 50 (other than nuclear power plants), 60, 61, 70, 71, or 
72, the existing definition is retained, although proposed revisions to 
Part 21 for application to these facilities and activities (including 
those certified under 10 CFR Part 76) are under consideration in a 
separate rulemaking.
    The new definition is not intended to restrict the licensee from 
purchasing commercial grade items for subsequent dedication for safety-
related applications even though a basic component designed and 
manufactured under an Appendix B to 10 CFR Part 50 quality assurance 
program is currently available. The commercial grade item, when 
properly and successfully dedicated, is deemed by the NRC to be 
equivalent in its safety function performance to the same or a similar 
item designed and manufactured under an Appendix B to Part 50 quality 
assurance program.
    Sections 21.6, 21.21, 21.31, 21.41, and 21.51 contain the NRC's 
requirements for posting, notification, inspection, records, and 
maintenance and inspection of records, respectively. The NRC is 
clarifying these sections to point out that dedicating entities are 
subject to the regulations in these sections. In addition, minor 
editorial changes have been made in Sec. 21.51(b).
    Section 21.61 has been amended to clarify the scope of this 
section. NRC licensees and their employees subject to Part 21 are also 
subject to the normal enforcement process and sanctions. In addition, 
Section 206 of the Energy Reorganization Act of 1974, as amended, and 
implemented by 10 CFR Part 21, imposes an obligation on firms and 
organizations that are involved in the nuclear industry, and further, 
imposes these obligations as a direct liability on certain individuals 
in these firms and organizations. The ``knowingly and consciously'' 
standard specified in Sec. 21.61 applies only to non-licensees.

Environmental Impact: Categorical Exclusion

    The NRC has determined that this regulation is the type of action 
described in the categorical exclusion in 10 CFR 51.22(c)(1). 
Therefore, neither an environmental impact statement nor an 
environmental assessment has been prepared for this regulation.

Paperwork Reduction Act Statement

    This rule does not contain a new information collection requirement 
subject to the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et 
seq.). Existing requirements were approved by the Office of Management 
and Budget approval number 3150-0035.

Regulatory Analysis

    The Commission has prepared a regulatory analysis on this 
regulation. The analysis examines the costs and benefits of the 
alternatives considered by the Commission. The analysis is available 
for inspection in the NRC Public Document Room, 2120 L Street NW. 
(Lower Level), Washington, DC. Single copies may be obtained from (See 
For Further Information Contact.)

Regulatory Flexibility Certification

    In accordance with the Regulatory Flexibility Act of 1980 (5 U.S.C. 
605(b)), the Commission certifies that this rule, if promulgated, will 
not have a significant economic impact on a substantial number of small 
entities. The rule primarily impacts nuclear power plant licensees 
because they are expected to assume a greater role in the dedication 
process. The companies that own these plants do not fall within the 
scope of the definition of ``small entities'' set forth in the 
Regulatory Flexibility Act or the size standards established by the NRC 
(10 CFR 2.810). In addition, the rule, when promulgated, will allow 
small entities to more effectively compete in providing components and 
services to nuclear power plants, and to the extent this occurs, the 
rule is advantageous to them. 

[[Page 48373]]


Backfit Analysis

    The Commission has determined that the backfit rule, 10 CFR 50.109, 
does not apply to this rule. These amendments do not involve any 
provision that would impose additional requirements requiring a backfit 
analysis as defined in 10 CFR 50.109(a)(1).

List of Subjects in 10 CFR Part 21

    Nuclear power plants and reactors, Penalties, Radiation protection, 
Reporting and recordkeeping requirements.

    For the reasons set out in the preamble and under the authority of 
the Atomic Energy Act of 1954, as amended, the Energy Reorganization 
Act of 1974 as amended, and 5 U.S.C. 552 and 553, the NRC is adopting 
the following amendments to 10 CFR Part 21.

PART 21--REPORTING OF DEFECTS AND NONCOMPLIANCE

    1. The authority citation for Part 21 continues to read as follows:

    Authority: Sec. 161, 68 Stat. 948, as amended; sec. 234, 83 
Stat. 444, as amended; sec. 1701, 106 Stat. 2951, 2953 (42 U.S.C. 
2201, 2282, 2297f); secs. 201, as amended, 206, 88 Stat. 1242, as 
amended, 1246 (42 U.S.C. 5841, 5846).
    Section 21.2 also issued under secs. 135, 141, Pub. L. 97-425, 
96 Stat. 2232, 2241 (42 U.S.C. 10155, 10161).


Sec. 21.2  [Amended]

    2. Section 21.2 (d) is amended by revising the reference reading 
``(see Sec. 21.3(a-1)'' to read ``(as defined in Sec. 21.3),'' and in 
the third sentence of this section, change the word ``five'' to 
``four.''
    3. Section 21.3 is amended by removing the paragraph designations 
from each of the defined terms and arranging the definitions in 
alphabetical order, removing the words ``paragraph (d)(1) of'' in 
paragraph (2) of the term Defect, removing the parenthetical references 
in the terms Defect and Deviation, revising the terms Basic component, 
Commercial grade item, and Dedication, and adding the terms Critical 
characteristics and Dedication entity to read as follows:


Sec. 21.3  Definitions.

    Basic component. (1)(i) When applied to nuclear power plants 
licensed pursuant to 10 CFR Part 50 of this chapter, basic component 
means a structure, system, or component, or part thereof that affects 
its safety function necessary to assure:
    (A) The integrity of the reactor coolant pressure boundary;
    (B) The capability to shut down the reactor and maintain it in a 
safe shutdown condition; or
    (C) The capability to prevent or mitigate the consequences of 
accidents which could result in potential offsite exposures comparable 
to those referred to in Sec. 100.11 of this chapter.
    (ii) Basic components are items designed and manufactured under a 
quality assurance program complying with 10 CFR Part 50, Appendix B, or 
commercial grade items which have successfully completed the dedication 
process.
    (2) When applied to other facilities and when applied to other 
activities licensed pursuant to 10 CFR Parts 30, 40, 50 (other than 
nuclear power plants), 60, 61, 70, 71, or 72 of this chapter, basic 
component means a structure, system, or component, or part thereof that 
affects their safety function, that is directly procured by the 
licensee of a facility or activity subject to the regulations in this 
part and in which a defect or failure to comply with any applicable 
regulation in this chapter, order, or license issued by the Commission 
could create a substantial safety hazard.
    (3) In all cases, basic component includes safety-related design, 
analysis, inspection, testing, fabrication, replacement of parts, or 
consulting services that are associated with the component hardware 
whether these services are performed by the component supplier or 
others.
    Commercial grade item. (1) When applied to nuclear power plants 
licensed pursuant to 10 CFR Part 50, commercial grade item means a 
structure, system, or component, or part thereof that affects its 
safety function, that was not designed and manufactured as a basic 
component. Commercial grade items do not include items where the design 
and manufacturing process require in-process inspections and 
verifications to ensure that defects or failures to comply are 
identified and corrected (i.e., one or more critical characteristics of 
the item cannot be verified).
    (2) When applied to facilities and activities licensed pursuant to 
10 CFR Parts 30, 40, 50 (other than nuclear power plants), 60, 61, 70, 
71, or 72, commercial grade item means an item that is:
    (i) Not subject to design or specification requirements that are 
unique to those facilities or activities;
    (ii) Used in applications other than those facilities or 
activities; and
    (iii) To be ordered from the manufacturer/supplier on the basis of 
specifications set forth in the manufacturer's published product 
description (for example, a catalog).
* * * * *
    Critical characteristics. When applied to nuclear power plants 
licensed pursuant to 10 CFR Part 50, critical characteristics are those 
important design, material, and performance characteristics of a 
commercial grade item that, once verified, will provide reasonable 
assurance that the item will perform its intended safety function.
    Dedication. (1) When applied to nuclear power plants licensed 
pursuant to 10 CFR Part 50, dedication is an acceptance process 
undertaken to provide reasonable assurance that a commercial grade item 
to be used as a basic component will perform its intended safety 
function and, in this respect, is deemed equivalent to an item designed 
and manufactured under a 10 CFR Part 50, Appendix B, quality assurance 
program. This assurance is achieved by identifying the critical 
characteristics of the item and verifying their acceptability by 
inspections, tests, or analyses performed by the purchaser or third-
party dedicating entity after delivery, supplemented as necessary by 
one or more of the following: commercial grade surveys; product 
inspections or witness at holdpoints at the manufacturer's facility, 
and analysis of historical records for acceptable performance. In all 
cases, the dedication process must be conducted in accordance with the 
applicable provisions of 10 CFR Part 50, Appendix B. The process is 
considered complete when the item is designated for use as a basic 
component.
    (2) When applied to facilities and activities licensed pursuant to 
10 CFR Parts 30, 40, 50 (other than nuclear power plants), 60, 61, 70, 
71, or 72, dedication occurs after receipt when that item is designated 
for use as a basic component.
    Dedicating entity. When applied to nuclear power plants licensed 
pursuant to 10 CFR Part 50, dedicating entity means the organization 
that performs the dedication process. Dedication may be performed by 
the manufacturer of the item, a third-party dedicating entity, or the 
licensee itself. The dedicating entity, pursuant to Sec. 21.21(c) of 
this part, is responsible for identifying and evaluating deviations, 
reporting defects and failures to comply for the dedicated item, and 
maintaining auditable records of the dedication process.
* * * * *
    3. In Sec. 21.6, paragraph (a) is revised to read as follows: 

[[Page 48374]]



Sec. 21.6  Posting requirements.

    (a) (1) Each individual, partnership, corporation, dedicating 
entity, or other entity subject to the regulations in this part shall 
post current copies of--
    (i) The regulations in this part;
    (ii) Section 206 of the Energy Reorganization Act of 1974; and
    (iii) Procedures adopted pursuant to the regulations in this part.
    (2) These documents must be posted in a conspicuous position on any 
premises within the United States where the activities subject to this 
part are conducted.
* * * * *
    4. In Sec. 21.21, the introductory text of paragraph (a) is 
revised, paragraphs (c) and (d) are redesignated as paragraphs (d) and 
(e), and a new paragraph (c) is added to read as follows:


Sec. 21.21  Notification of failure to comply or existence of a defect 
and its evaluation.

    (a) Each individual, corporation, partnership, dedicating entity, 
or other entity subject to the regulations in this part shall adopt 
appropriate procedures to--
* * * * *
    (c) A dedicating entity is responsible for--
    (1) Identifying and evaluating deviations and reporting defects and 
failures to comply associated with substantial safety hazards for 
dedicated items; and
    (2) Maintaining auditable records for the dedication process.
* * * * *
    5. Section 21.31 is revised to read as follows:


Sec. 21.31  Procurement documents.

    Each individual, corporation, partnership, dedicating entity, or 
other entity subject to the regulations in this part shall ensure that 
each procurement document for a facility, or a basic component issued 
by him, her or it on or after January 6, 1978, specifies, when 
applicable, that the provisions of 10 CFR Part 21 apply.
    6. Section 21.41 is revised to read as follows:


Sec. 21.41  Inspections.

    Each individual, corporation, partnership, dedicating entity, or 
other entity subject to the regulations in this part shall permit the 
Commission to inspect records, premises, activities, and basic 
components as necessary to accomplish the purposes of this part.
    7. In Sec. 21.51 the introductory text of paragraph (a) and 
paragraph (b) are revised to read as follows:


Sec. 21.51  Maintenance and inspection of records.

    (a) Each individual, corporation, partnership, dedicating entity, 
or other entity subject to the regulations in this part shall prepare 
and maintain records necessary to accomplish the purposes of this part, 
specifically--
* * * * *
    (b) Each individual, corporation, partnership, dedicating entity, 
or other entity subject to the regulations in this part shall permit 
the Commission the opportunity to inspect records pertaining to basic 
components that relate to the identification and evaluation of 
deviations, and the reporting of defects and failures to comply, 
including any advice given to purchasers or licensees on the placement, 
erection, installation, operation, maintenance, modification, or 
inspection of a basic component.
    8. Section 21.61 is revised to read as follows:


Sec. 21.61  Failure to notify.

    (a) Any director or responsible officer of an entity (including 
dedicating entity) that is not otherwise subject to the deliberate 
misconduct provisions of this chapter but is subject to the regulations 
in this part who knowingly and consciously fails to provide the notice 
required as by Sec. 21.21 shall be subject to a civil penalty equal to 
the amount provided by section 234 of the Atomic Energy Act of 1954, as 
amended.
    (b) Any NRC licensee subject to the regulations in this part who 
fails to provide the notice required by Sec. 21.21 or otherwise fails 
to comply with the applicable requirements of this part shall be 
subject to a civil penalty as provided by section 234 of the Atomic 
Energy Act of 1954, as amended.
    (c) The dedicating entity, pursuant to Sec. 21.21(c) of this part, 
is responsible for identifying and evaluating deviations, reporting 
defects and failures to comply for the dedicated item, and maintaining 
auditable records of the dedication process. NRC enforcement action can 
be taken for failure to identify and evaluate deviations, failure to 
report defects and failures to comply, or failure to maintain auditable 
records.

    Dated at Rockville, Maryland, this 8th day of September 1995.

    For the Nuclear Regulatory Commission.
James M. Taylor,
Executive Director for Operations.
[FR Doc. 95-23179 Filed 9-18-95; 8:45 am]
BILLING CODE 7590-01-P