[Federal Register Volume 63, Number 198 (Wednesday, October 14, 1998)]
[Rules and Regulations]
[Pages 55017-55020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-27391]


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DEPARTMENT OF COMMERCE

Bureau of Export Administration

15 CFR Parts 740 and 743

[Docket No. 980814218-8218-01]
RIN 0694-AB724


Clarification of Reporting Requirements Under the Wassenaar 
Arrangement

AGENCY: Bureau of Export Administration, Commerce.

ACTION: Interim rule with request for comments.

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SUMMARY: On January 15, 1998, the Bureau of Export Administration (BXA) 
published an interim rule implementing the Wassenaar Arrangement list 
of dual-use items and reporting requirements under the Wassenaar 
Arrangement. On February 17, 1998, BXA published an interim final rule 
that conformed the savings clause date for shipments of items removed 
from eligibility for export or reexport under a particular License 
Exception authorization or the designator NLR until April 15, 1998. The 
February 17 rule did not affect the reporting requirement provisions 
and any item removed from License Exception or NLR eligibility as a 
result of the January 15 rule continues to be subject to the reporting 
requirements of the Wassenaar Arrangement. This interim rule provides 
further clarification on the savings clause provisions and the 
reporting requirements under the Wassenaar Arrangement. Specifically, 
this rule clarifies: the reporting requirement obligations of items 
described on the Wassenaar Arrangements Annex 1 (Sensitive List) and 
Annex 2 (Very Sensitive List) of the List of Dual-Use Goods and 
Technologies, including clarification on the timing of the first report 
in accordance with the savings clause provision; the reporting 
requirements for computers controlled under Export Control 
Classification Number (ECCN) 4A003.b; the reporting requirement 
procedures under License Exception TSR; and that the reporting 
requirement provisions do not apply to reexports, release of technology 
or source code to foreign nationals in the United States (i.e., 
``deemed exports'' to foreign nationals), or to items not controlled 
for National Security (NS) reasons.
    In addition, this rule revises the country scope for reporting 
requirements.

DATES: Effective Date: This rule is effective October 14, 1998.
    Comment Date: Comments on this rule must be received on or before 
December 14, 1998.

ADDRESSES: Written comments should be sent to Patricia Muldonian, 
Regulatory Policy Division, Bureau of Export Administration, Department 
of Commerce, P.O. Box 273, Washington, DC 20044.

FOR FURTHER INFORMATION CONTACT: Patricia Muldonian, Regulatory Policy 
Division, Bureau of Export Administration, telephone: (202) 482-2440.

SUPPLEMENTARY INFORMATION:

Background

    On January 15, 1998, the Bureau of Export Administration (BXA) 
published an interim rule (63 FR 2452) that made changes to the 
Commerce Control List necessary to implement the Wassenaar Arrangement 
List of Dual-Use Goods and Technologies. In addition, the January 15 
rule imposed new reporting requirements on persons that export certain 
items controlled under the Wassenaar Arrangement to countries outside 
of Country Group A:1 in order to fulfill the information exchange 
requirements of the Wassenaar Arrangement. The January 15 rule also 
removed License Exception availability for certain items controlled for 
missile technology reasons and for certain other items controlled for 
national security reasons for which the U.S. has agreed to license with 
extreme vigilance.
    BXA received many industry comments on the savings clause provision 
date of February 17, 1998, for submission of license applications for 
items removed from eligibility for export or reexport under a 
particular License Exception authorization or the designator NLR, 
stating that more time

[[Page 55018]]

was required to determine how the rule affected their products and to 
develop and revise their export compliance software necessary to 
implement the provisions of the Export Administration Regulations. In 
response to the industry issues raised, BXA published an interim rule 
on February 17, 1998 (63 FR 7699) that conformed the saving clause date 
for shipments of items removed from eligibility for export or reexport 
under a particular License Exception authorization or NLR until April 
15, 1998. The February 17 rule did not affect the reporting 
requirements of section 743.1 of the Export Administration Regulations, 
and any item removed from License Exception or NLR eligibility as a 
result of the January 15 rule continued to be subject to reporting 
requirements.
    This rule provides further clarification on the savings clause 
provision of the February 17 rule and on reporting requirements under 
the Wassenaar Arrangement.

Clarification of Reporting Requirements of Items on the Wassenaar 
Arrangement's Annex 1 and Annex 2

    Reporting obligations under the Wassenaar Arrangement are required 
for exports in accordance with the provisions of Sec. 743.1 of the 
Export Administration Regulations (items on the Wassenaar Arrangement's 
Annex 1--List of Dual-Use Goods and Technologies (Sensitive List)), 
effective from January 15, 1998 until April 15, 1998, and for the 
following items on the Wassenaar Arrangement's Annex 2--List of Dual-
Use Goods and Technologies (Very Sensitive List), in which License 
Exceptions or the designator NLR have been removed and export license 
requirements imposed in accordance with the savings clause provision. 
Reports for Annex 2 items are also effective from January 15, 1998 
until April 15, 1998. After April 15, 1998, these items require a 
license for export or reexport.
    License Exception eligibility has been removed and licensing 
requirements imposed for the following ECCNs on the Wassenaar 
Arrangement's Annex 2--List of Dual-Use Goods and Technologies: 
1A002.a, 1C001, 1E001, 4A003.b, 4A003.c, 4D001, 4E001, 5A001.b.9, 
5D001, 5E001.a, 6A001.a.2.a.1, 6A001.a.2.a.2, 6A001.a.2.a.7, 
6A001.a.2.b, 6A001.a.2.c, 6A001.a.2.e, 6A008.l.3, 6B008, 6D001, 
6D003.a, 6E001, 6E002, 8A001.b, 8A001.d, 8A002.o.3.b, 8D001, 8E001, and 
9A001. The Bureau of Export Administration will extract the necessary 
information from licenses to report these exports to the Arrangement.
    The Wassenaar reporting requirement provisions do not apply to:
    (1) Reexports;
    (2) Any release of technology or source code subject to the EAR to 
a foreign national in the United States; or
    (3) Items controlled solely for Missile Technology (MT), Nuclear 
Nonproliferation (NP), Chemical and Biological Weapons (CB), or Short 
Supply (SS) reasons.

Clarification of License Exception TSR

    BXA received comments from industry requesting guidance on how to 
comply with the Wassenaar reporting requirements for exports of 
technology under License Exception TSR. This rule clarifies that, for 
exports of technology under License Exception TSR for which reports are 
required under Sec. 743.1(c) of the EAR, exporters should report the 
number of units in the shipment as one (1) for the initial export of 
the technology to a single ultimate consignee. Additional exports of 
the technology must be reported only when the type or scope of 
technology changes or exports are made to other ultimate consignees. In 
addition, release of controlled technology or source code to foreign 
nationals in the U.S., should not be included in the reports.

Revisions to the Reporting Requirements for Computers

    In order to reduce duplicative reporting requirements on industry, 
this rule revises Sec. 743.1(c)(2) by eliminating the reporting 
requirement for computers controlled under 4A003.b for exports to 
destinations in Computer Tier 3. Reporting requirements for exports of 
such computers to destinations in Computer Tier 3 continue to be 
required under the post-shipment verification reporting requirements of 
Sec. 740.7(d)(4)(v) and Sec. 742.12(b)(3)(iv).

Clarification of Reporting Requirement for License Exception GOV

    This rule corrects an inadvertent error in the January 15 rule for 
License Exception GOV. This rule revises Sec. 740.11(b)(2)(iii)(A) and 
paragraph (a) to Supplement No. 1 to Sec. 740.11 by revising the phrase 
``Items for official use within a national territory by agencies of the 
U.S. Government'' to read ``Items for official use within a national 
territory by agencies of cooperating governments''.

Additions to the Commerce Control List and Clarification of the 
Savings Clause Provision

    BXA received comments from industry requesting that BXA clearly 
describe the new entries that were added in the January 15 rule and 
explain the impact of those entries in accordance with the February 17 
extension of the savings clause provision. This rule clarifies that, in 
addition to the modifications in some parameters of items controlled on 
the Commerce Control List, the following new entries have been added 
that control items previously (prior to January 15, 1998) eligible for 
export or reexport under the designator NLR. Items changed from NLR 
eligibility to requiring a license for export or reexport were 
authorized for export or reexport under the designator NLR in 
accordance with the February 17 rule until April 15, 1998. After April 
15, 1998, these items require a license for export or reexport. 
However, use of the designator NLR until April 15, 1998, does not 
relieve exporters of their responsibility to provide reports for items 
subject to the reporting requirements under the Wassenaar Arrangement 
retroactive from January 15, 1998 to April 15, 1998.

New ECCNs Added to the Commerce Control List by the January 15 Rule

    1A005: Body armor, and specially designed components therefor, not 
manufactured to military standards or specifications, not to their 
equivalents in performance.
    1C006.d: Certain fluorocarbon electronic cooling fluids.
    1C007.f: Certain ceramic-ceramic composite materials with oxide or 
glass matrix.
    1C009.b: Fluorinated polymides containing 10% by weight or more of 
combined fluorine. (Note that this control is a slight rollback, based 
on % by weight of combined fluorine.)
    1C011: Certain metals and compounds.
    2B007.d: Robots specially designed to operate at altitudes 
exceeding 30,000 m.
    2B009: Certain spin-forming/flow forming machines.
    5E001.b.10: Development technology for spread spectrum and 
frequency hopping techniques.
    6A001.a.2.e: Certain bottom or bay cable systems.
    6A005.a.4.c.1: Carbon dioxide lasers having a pulse energy 
exceeding 5 J per pulse. (Note that this control is a slight rollback, 
because ``peak power'' is no longer a controlling parameter.)
    6D003.a.3: Software for bottom or bay cable systems.
    7D003.e: Computer aided design software.
    7E004.a.5: Technology for the development or production of electric 
actuators specially designed for primary flight control.

[[Page 55019]]

    7E004.a.6: Technology for the development or production of flight 
control optical sensor arrays.
    8A002.j.4: Certain stirling cycle engine air independent power 
systems.
    9B004: Intermetallic airfoil-to-disk combinations.
    In addition, this rule revises the country scope for reports under 
the Wassenaar Arrangement. The January 15 rule stated that reporting 
requirements apply to all destinations, except Country Group A:1. This 
rule revises Sec. 743.1(d), Country Exceptions, to state that the 
reporting requirements apply to all destinations, except Wassenaar 
member countries, as identified in a new Supplement No. 1 to part 743.
    Although the Export Administration Act (EAA) expired on August 20, 
1994, the President invoked the International Emergency Economic Powers 
Act and continued in effect the EAR, and, to the extent permitted by 
law, the provisions of the EAA in Executive Order 12924 of August 19, 
1994, as extended by the President's notices of August 15, 1995 (60 FR 
42767), August 14, 1996 (61 FR 42527), August 13, 1997 (62 FR 43629), 
and August 13, 1998 (63 FR 44121).

Rulemaking Requirements

    1. This interim rule has been determined to be not significant for 
purposes of E.O. 12866.
    2. Notwithstanding any other provision of law, no person is 
required to respond to, nor shall any person be subject to a penalty 
for failure to comply with a collection of information, subject to the 
requirements of the Paperwork Reduction Act (PRA), unless that 
collection of information displays a currently valid OMB Control 
Number. This rule involves collections of information subject to the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) These 
collections has been approved by the Office of Management and Budget 
under control numbers 0694-0088 and 0694-0201.
    3. This rule does not contain policies with Federalism implications 
sufficient to warrant preparation of a Federalism assessment under 
Executive Order 12612.
    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 and foreign affairs 
function of the United States (Sec. 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 interim rule. Because 
a notice of proposed rulemaking and an opportunity for public comment 
are not required to be given for this rule under 5 U.S.C. or by any 
other law, the analytical requirements of the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq. ) are not applicable.
    However, because of the importance of the issues raised by these 
regulations, this rule is issued in interim form and comments will be 
considered in the development of final regulations.
    Accordingly, the Department encourages interested persons who wish 
to comment to do so at the earliest possible time to permit the fullest 
consideration of their views.
    The period for submission of comments will close December 14, 1998. 
The Department will consider all comments received before the close of 
the comment period in developing final regulations. Comments received 
after the end of the comment period will be considered if possible, but 
their consideration cannot be assured. The Department will not accept 
public comments accompanied by a request that a part or all of the 
material be treated confidentially because of its business proprietary 
nature or for any other reason. The Department will return such 
comments and materials to the person submitting the comments and will 
not consider them in the development of final regulations. All public 
comments on these regulations will be a matter of public record and 
will be available for public inspection and copying. In the interest of 
accuracy and completeness, the Department requires comments in written 
form.
    Oral comments must be followed by written memoranda, which will 
also be a matter of public record and will be available for public 
review and copying. Communications from agencies of the United States 
Government or foreign governments will not be made available for public 
inspection.
    The public record concerning these regulations will be maintained 
in the Bureau of Export Administration Freedom of Information Records 
Inspection Facility, Room 4525, Department of Commerce, 14th Street and 
Pennsylvania Avenue, NW., Washington, DC 20230. Records in this 
facility, including written public comments and memoranda summarizing 
the substance of oral communications, may be inspected and copied in 
accordance with regulations published in Part 4 of Title 15 of the Code 
of Federal Regulations. Information about the inspection and copying of 
records at the facility may be obtained from Margaret Cornejo, Bureau 
of Export Administration Freedom of Information Officer, at the above 
address or by calling (202) 482-5653.

List of Subjects in 15 CFR Parts 740 and 743

    Administrative practice and procedure, Exports, Foreign trade, 
Reporting and recordkeeping requirements.

    Accordingly, parts 740 and 743 of the Export Administration 
Regulations (15 CFR parts 730 through 799) are amended as follows:
    1. The authority citation for part 740 is revised to read as 
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
E.O. 12924, 59 FR 43437, 3 CFR, 1994 Comp., p. 917; Notice of August 
15, 1995, 3 CFR, 1995 Comp., p. 501; Notice of August 14, 1996, 3 
CFR, 1996 Comp., p. 289; Notice of August 13, 1997 (62 FR 43629, 
August 15, 1997); and Notice of August 13, 1998 (63 FR 44121).

    2. The authority citation for part 743 is revised to read as 
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
E.O. 12924, 59 FR 43437, 3 CFR, 1994 Comp., p. 917; Notice of August 
15, 1995, 3 CFR, 1995 Comp., p. 501; Notice of August 14, 1996, 3 
CFR, 1996 Comp., p. 289; Notice of August 13, 1997 (62 FR 43629, 
August 15, 1997); and Notice of August 13, 1998 (63 FR 44121).

PART 740--[AMENDED]

    3. Section 740.6 is amended by revising paragraph (b) to read as 
follows:


Sec. 740.6  Technology and software under restriction (TSR).

* * * * *
    (b) Reporting requirements. See Sec. 743.1 of the EAR for reporting 
requirements for exports of certain items under License Exception TSR. 
Note that reports are not required for release of technology or source 
code subject to the EAR to foreign nationals in the U.S. under the 
provisions of License Exception TSR.
    4. Section 740.11 is amended:
    a. By revising the heading of paragraph (b)(2)(iii)(A); and
    b. By revising the first sentence of paragraph (a) in Supplement 
No. 1, to read as follows:


Sec. 740.11  Governments and international organizations (GOV).

* * * * *
    (b) * * *
    (2) * * *
    (iii) * * *
    (A) Items for official use within national territory by agencies of 
cooperating governments. * * *
* * * * *

[[Page 55020]]

Supplement No. 1 to Sec. 740.11--Additional Restrictions on Use of 
License Exception GOV

    (a) Items for official use within the national territory by 
agencies of cooperating governments. * * *
* * * * *

PART 743--[AMENDED]

    5. Section 743.1 is amended:
    a. By revising paragraph (b);
    b. By adding a note immediately following paragraph (c)(2);
    c. By revising paragraph (d); and
    d. By adding a note immediately following paragraph (e)(1)(ii), to 
read as follows:


Sec. 743.1  Wassenaar Arrangement.

* * * * *
    (b) Requirements. You must submit two (2) copies of each report 
required under the provisions of this section and maintain accurate 
supporting records (see Sec. 762.2(b) of the EAR) for all exports of 
items specified in paragraph (c) of this section under any of the 
following License Exceptions authorized by part 740 of the EAR: License 
Exceptions GBS, CIV, TSR, LVS, CTP, GOV and KMI (under the provisions 
of Sec. 740.8(b)(2)(ii) and (iii) only). Exports of technology and 
source code under License Exception TSR to foreign nationals in the 
U.S. should not be reported. For purposes of this part 743, ``you'' has 
the same meaning as ``U.S. exporter'', as defined in part 772 of the 
EAR.
    (c) * * *
    (2) * * *

    Note to paragraph (c)(2): Exports of computers controlled under 
4A003.b to destinations in Computer Tier 3 (see Sec. 740.7(d)(1) of 
the EAR) should not be included in the reports required under 
paragraph (c) of this section. Reporting for computers under 4A003.b 
to Computer Tier 3 destinations should be reported under the post-
shipment verification reporting provisions of Sec. 740.7(d)(4)(v) or 
under Sec. 742.12(b)(3)(iv) of the EAR.

    (d) Country Exceptions. You must report each export subject to the 
provisions of this section, except for exports to Wassenaar member 
countries, as identified in Supplement No. 1 to part 743.
    (e) * * *
    (1) * * *
    (ii) * * *

    Note to paragraph (e)(1)(ii): For exports of technology for 
which reports are required under Sec. 743.1(c) of this section, the 
number of units in the shipment should be reported as one (1) for 
the initial export of the technology to a single ultimate consignee. 
Additional exports of the technology must be reported only when the 
type or scope of technology changes or exports are made to other 
ultimate consignees. Additionally, do not report the release of 
technology or source code subject to the EAR to foreign nationals in 
the U.S.
* * * * *
    6. Part 743 is amended by adding a new Supplement No. 1 to read as 
follows:

Supplement No. 1 to Part 743--Wassenaar Arrangement Member Countries

Argentina
Australia
Austria
Belgium
Bulgaria
Canada
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Japan
Luxembourg
Netherlands
New Zealand
Norway
Poland
Portugal
Romania
Russia
Slovakia
South Korea
Spain
Sweden
Switzerland
Turkey
Ukraine
United Kingdom
United States

    Dated: October 5, 1998.
R. Roger Majak,
Assistant Secretary for Export Administration.
[FR Doc. 98-27391 Filed 10-13-98; 8:45 am]
BILLING CODE 3510-33-P