[Federal Register Volume 70, Number 99 (Tuesday, May 24, 2005)]
[Proposed Rules]
[Pages 29660-29662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-10356]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 738 and 742

[Docket No. 011019257-5107-02]
RIN 0694-AC48


Proposed Rule: Imposition of License Requirement for Exports and 
Reexports of Missile Technology-Controlled Items Destined to Canada

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Proposed rule with request for comments.

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SUMMARY: The Bureau of Industry and Security (BIS) is proposing to 
amend the Export Administration Regulations (EAR) by imposing a license 
requirement for exports and reexports of items controlled for missile 
technology (MT) reasons to Canada. To date, the EAR have required a 
license for MT-controlled items to all destinations except Canada, and 
generally no license exceptions are available for MT-controlled items.
    This rule is consistent with a recommendation made by the General 
Accounting Office (GAO (renamed the Government Accountability Office)) 
in a 2001 report that BIS either impose a license requirement for 
exports and reexports of MT-controlled items to Canada, based on 
section 6(l) of the Export Administration Act of 1979, as amended, or 
seek a statutory change. The effect of this rule is that all exports 
and reexports of MT-controlled items to any destination require a 
license, and generally no license exceptions are available, so that all 
exports and reexports of MT-controlled items subject to the EAR are 
subject to prior review.

DATES: Comments must be received on or before June 23, 2005.

ADDRESSES: You may submit comments, identified by RIN 0694-AC48, to BIS 
by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
(Follow the instructions for submitting comments.)
     E-mail: [email protected]. Include ``RIN 0694-AC48'' in 
the subject line of the message.
     Fax: (202) 482-3355.
     Mail or Hand Delivery/Courier: U.S. Department of 
Commerce, Bureau of Industry and Security, Regulatory Policy Division, 
14th & Pennsylvania Avenue, NW., Room 2705, Washington, DC 20230, Attn: 
RIN 0694-AC48.
    Send comments regarding the collection of information to David 
Rostker, Office of Management and Budget (OMB), by e-mail to [email protected], or by fax to (202) 395-7285.
    Comments received on this rulemaking will be available at: http://www.bis.doc.gov/foia.

FOR FURTHER INFORMATION CONTACT: Steven Goldman, Director, Office of 
Nonproliferation Controls and Treaty Compliance, Bureau of Industry and 
Security, Telephone: (202) 482-3825.

SUPPLEMENTARY INFORMATION:

Background

    Consistent with a recommendation contained in a report of the 
General Accounting Office (GAO), the Bureau of Industry and Security 
(BIS) proposes to amend the Export Administration Regulations (EAR) to 
impose a licensing requirement on exports to Canada of dual-use items 
listed on the Missile Technology Control Regime (MTCR) Annex.
    The Export Administration Act (EAA) of 1979 was amended in 1991 to 
require a license for the export of dual-use MTCR controlled goods or 
technology to any country. However, when the Commerce Control List was 
revised and renumbered in August 1991 (56 FR 42824), the Canadian 
exemption from license requirements for MT-controlled items was not 
changed. The continuation of the exemption from the licensing 
requirements for exports to Canada was consistent with U.S. policy that 
had, since 1941, permitted the export without license of nearly all 
dual-use goods and technologies intended for consumption or use in 
Canada.
    On May 31, 2001, the United States General Accounting Office (GAO 
(since renamed the Government Accountability Office)) issued a report 
entitled: ``Export Controls: Regulatory Change Needed to Comply with 
Missile Technology Licensing Requirements'' (GAO-01-530). That report 
recommended that BIS either amend the EAR to require a license for 
exports of dual-use MTCR items to Canada or seek a statutory change 
from Congress.
    In the course of commenting on GAO's report, the Department of 
Commerce informed GAO that legislation that would replace the Export 
Administration Act of 1979 (EAA) was pending in the Congress and that 
the legislation did not contain a provision that would mandate 
licensing requirements for the export of MT-controlled items to Canada. 
At various times in the years 2000 to 2002, S. 149 and H.R. 2581, 
proposed legislation that would have reauthorized the EAA, were under 
consideration by the Congress. While S. 149 was approved by the Senate, 
the legislation to replace the Export Administration Act was not 
enacted. The Department of Commerce also noted in its comments that it 
had notified Congress of the Canadian exemption for MT-controlled items 
every year since 1991.
    In light of GAO's recommendation, BIS published an ``Advance notice 
of proposed rulemaking'' on December 20, 2001 (66 FR 65666), soliciting 
public comments on the removal of the licensing exemption for export of 
MT items to Canada. BIS received seventeen comments in response, from 
Canadian and U.S.-based trade associations, Canadian and U.S.-based 
companies, a foreign airline, and the Government of Canada. All of the 
substantive

[[Page 29661]]

comments voiced opposition to the licensing requirement.

Summary of Comments

    Trade association commenters stated that the license requirement is 
expected to force Canadian companies to seek business relationships and 
equipment sources outside of the United States, cause interruptions and 
delays in binational defense supply lines, negatively impact the intent 
and spirit of many of the bilateral agreement on defense issues, and 
negatively impact the integration and interoperability of Canadian and 
U.S. security forces. One trade association commenter noted that six of 
the ten largest aerospace companies operating in Canada are 
subsidiaries of U.S. firms, and stated that imposing a license 
requirement on MT-controlled items to Canada could lead to loss of 
significant market share by the aerospace industries of both countries. 
This Canadian commenter also recommended that the license requirement 
not be imposed until the Missile Technology Control List Regime (MTCR) 
control list is completely reviewed. A U.S. industry association 
commented that the requirement that all MT-controlled items be licensed 
to Canada would cause considerable dislocation without yielding any 
corresponding benefit in terms of control or security, and urged that, 
absent an enactment by Congress that expressly extends the MT license 
requirement to Canada, the existing rules not be altered.
    Canadian and U.S.-based companies commented that trade between the 
United States and Canada in MT-controlled items will be adversely 
affected, and that companies will incur added expenses and delays in 
obtaining licenses for software and technology exports as well as for 
equipment exports. One company commented that the added expenses 
incurred by companies to comply with a licensing requirement will 
trickle down to the flying public.
    Finally, the Government of Canada's comments agreed with those of 
the trade associations and companies on the adverse effect a license 
requirement will have on U.S.-Canada trade in MT-controlled items and, 
because of the close relationship between the Canadian and U.S. 
industries, on the provision of key equipment to U.S. industry and 
government, including the military. The Government of Canada also 
commented that several U.S. trade partners maintain provisions to 
exempt from individual licensing the export of MT-controlled items to 
other MTCR member countries, and cited the European Union, Japan, 
Switzerland, and a Canadian exemption for exports to the United States.
    Comments may be viewed at: http://efoia.bis.doc.gov/pubcomm/MTCR-Canada/MTCR-Canada.pdf.

Response to Comments and Request for Further Comments

    Although the comments received in response to the Advance Notice of 
Proposed Rulemaking generally were opposed to the license requirement 
for several reasons, in this proposed rule, BIS requests more specific 
comments as to the effect that the rule will have in terms of numbers 
of license applications that the industry and/or individual companies 
would expect to submit under such a requirement, and, if possible, 
estimated additional costs of complying with a license requirement. 
Comments addressing these specific issues will enable BIS to evaluate 
better the impact that a license requirement will have in measurable 
terms on industry sectors and individual companies.
    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 6, 2004, 
3 CFR, 69 FR 48763 (August 10, 2004), has continued the Export 
Administration Regulations in effect under the International Emergency 
Economic Powers Act.

Rulemaking Requirements

    1. This proposed 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 (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 proposed 
rule contains a collection of information subject to the requirements 
of the PRA. This collection has been approved by OMB under Control 
Number 0694-0088 (Multi-Purpose Application), which carries a burden 
hour estimate of 58 minutes to prepare and submit form BIS-748. This 
proposed rule is expected to result in an increase in the number of 
license applications submitted to BIS. Send comments regarding this 
burden estimate or any other aspect of this collection of information, 
including suggestions for reducing the burden, to David Rostker, Office 
of Management and Budget (OMB), by e-mail to [email protected], or by fax to (202) 395-7285; and to the Regulatory 
Policy Division, Bureau of Industry and Security, Department of 
Commerce, P.O. Box 273, Washington, DC 20044.
    3. This proposed rule does not contain policies with Federalism 
implications as that term is defined under E.O. 13132.
    4. The provisions of the Administrative Procedure Act (5 U.S.C. 
553) requiring a notice of proposed rulemaking and the opportunity for 
public comment are inapplicable because this regulation involves a 
military and foreign affairs function of the United States (5 U.S.C. 
553(a)(1)). 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 under the Administrative 
Procedure Act or by any other law, the analytical requirements of the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) are not applicable.
    However, in view of the importance of this proposed rule, BIS is 
seeking public comments before these revisions take effect. The period 
for submission of comments will close June 23, 2005. BIS will consider 
all comments received before the close of the comment period in 
developing a final rule. Comments received after the end of the comment 
period will be considered if possible, but their consideration cannot 
be assured. BIS 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. BIS 
will return such comments and materials to the persons submitting the 
comments and will not consider them in the development of the final 
rule. All public comments on this proposed rule must be in writing 
(including fax or e-mail) and will be a matter of public record, 
available for public inspection and copying. The Bureau of Industry and 
Security displays these public comments on its Freedom of Information 
Act (FOIA) Web site at http://www.bis.doc.gov/foia. BIS does not 
maintain a separate public inspection facility. If you have technical 
difficulties accessing this Web site, please call BIS's Office of 
Administration at (202) 482-0500 for assistance.

[[Page 29662]]

List of Subjects

15 CFR Part 738

    Administrative practice and procedure, Exports, Foreign trade.

15 CFR Part 742

    Exports, Foreign trade.

    Accordingly, parts 738 and 742 of the Export Administration 
Regulations (15 CFR parts 730-799) are amended, as follows:

PART 738--[AMENDED]

    1. The authority citation for part 738 continues to read as 
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
10 U.S.C. 7420; 10 U.S.C. 7430(e); 18 U.S.C. 2510 et seq.; 22 U.S.C. 
287c; 22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; 30 U.S.C. 185(s), 
185(u); 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C. 
app. 466c; 50 U.S.C. app. 5; Sec. 901-911, Pub. L. 106-387; Sec. 
221, Pub. L. 107-56; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 
228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of 
August 6, 2004, 69 FR 48763 (August 10, 2004).

    2. Supplement No. 1 to part 738 is amended by adding an ``X'' under 
``MT 1'' in the ``Missile Tech'' column for ``Canada.''

PART 742--[AMENDED]

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

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
18 U.S.C. 2510 et seq.; 22 U.S.C. 3201 et seq.; 42 U.S.C. 2139a; 
Sec. 901-911, Pub. L. 106-387; Sec. 221, Pub. L. 107-56; 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 of May 7, 
2003, 68 FR 26459, May 16, 2003; Notice of October 29, 2003, 68 FR 
62209, 3 CFR, 2003 Comp., p. 347; Notice of August 6, 2004, 69 FR 
48763 (August 10, 2004).


Sec.  742.5  [Amended]

    4. Section 742.5 is amended by revising the phrase ``to all 
destinations, except Canada, as indicated by MT Column 1 of the Country 
Chart'' to read ``to all destinations, as indicated by MT Column 1 of 
the Country Chart'' in the third sentence of paragraph (a)(1).

    Dated: May 19, 2005.
Matthew S. Borman,
Deputy Assistant Secretary for Export Administration.
[FR Doc. 05-10356 Filed 5-23-05; 8:45 am]
BILLING CODE 3510-33-P