[Federal Register Volume 72, Number 107 (Tuesday, June 5, 2007)]
[Proposed Rules]
[Pages 31005-31008]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-10788]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 744 and 772

[Docket No. 0612243150-63150-01]
RIN 0694-AD82


Authorization To Impose License Requirements for Exports or 
Reexports to Entities Acting Contrary to the National Security or 
Foreign Policy Interests of the United States

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Proposed rule.

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SUMMARY: The Entity List (Supplement No. 4 to part 744 of the Export 
Administration Regulations) provides notice to the public that certain 
exports and reexports to parties identified on the Entity List require 
a license from the Bureau of Industry and Security (BIS) and that 
availability of License Exceptions in such transactions is limited. 
This proposed rule would expand the scope of reasons for which BIS may 
add parties to the Entity List. This proposed rule would also amend the 
Export Administration Regulations (EAR) to state explicitly that a 
party listed on the Entity List has a right to request that its listing 
be removed or modified and would set procedures for addressing such 
requests.

DATES: Comments concerning this rule must be received by BIS no later 
than August 6, 2007.

ADDRESSES: Comments on this rule may be submitted to the Federal 
eRulemaking Portal at http://www.regulations.gov (follow the 
instructions for submitting comments) by e-mail directly to BIS at 
[email protected] (refer to regulatory identification number 
0694-AD82 in the subject line), by fax at (202) 482-3355, or on paper 
to Regulatory Policy Division, Office of Exporter Services, Bureau of 
Industry and Security, Room H2705, U.S. Department of Commerce, 14th 
Street and Pennsylvania Avenue, NW., Washington, DC 20230. Refer to 
Regulatory Identification Number (RIN) 0694-AD82 in all comments.

FOR FURTHER INFORMATION CONTACT: Mike Rithmire, Office of the Assistant 
Secretary for Export Administration, Bureau of Industry and Security, 
e-mail [email protected], tel. ( 202) 482-6105.

SUPPLEMENTARY INFORMATION:

Background

    The Entity List (Supplement No. 4 to part 744 of the EAR) provides 
notice to the public of the identity of certain parties whose presence 
as a recipient of items subject to the Export Administration 
Regulations (EAR) can impose a license requirement in an export or 
reexport transaction. The reasons for which BIS may place an entity on 
the Entity List are stated in Sec. Sec.  744.2, 744.3, 744.4, 744.6, 
744.10 and 744.20 of the EAR.
    In addition to those reasons, this proposed rule would create a new 
Sec.  744.11 to authorize BIS to add to the Entity List entities that 
BIS has reasonable cause to believe, based on specific and articulable 
facts, have been, are or pose a risk of being involved in activities 
that are contrary to the national security or foreign policy interests 
of the United States or those acting on behalf of such entities. This 
new section would not be used to add to the Entity List entities that 
are U.S. persons (as defined in Sec.  772.1 of the EAR). This new 
section also would not be used to add to the Entity List entities for 
which the EAR already impose a license requirement because those 
entities are already listed on the List of Specially Designated 
Nationals and Blocked Persons published by the Treasury Department, 
Office of Foreign Assets Control.

Reason for the Changes Proposed by This Rule

    BIS is proposing to take this action to focus its export control 
efforts more closely on problematic potential recipients of items that 
are subject to the EAR, but who do not meet the criteria currently set 
forth in Sec. Sec.  744.2, 744.3, 744.4, 744.6, 744.10 or 744.20. With 
this rule, the United States government would be able to conduct prior 
review and make appropriate licensing decisions regarding proposed 
exports and reexports to such recipients to the degree necessary to 
protect its interests. BIS would be able to tailor license requirements 
and availability of license exceptions for exports and reexports to 
parties who have taken, are taking, or will take actions that are 
contrary to United States national security or foreign policy interests 
without imposing additional license requirements that apply broadly to 
entire destinations or items. BIS believes that such targeted 
application of license requirements would provide the flexibility to 
deter use of items that are subject to the EAR in ways that are 
inimical to the interests of the United States with minimal costs to 
and

[[Page 31006]]

disruption of legitimate trade. As export controls continue to focus 
not just on countries, but also on individual customers or entities, 
BIS believes it is important to provide more information to the public 
about entities of concern. Implementation of this rule will provide 
additional information to the public to enhance the ability to screen 
potential recipients of items subject to the EAR.
    In addition, this proposed rule would simplify the EAR by reducing 
the need to issue general orders to impose license requirements on 
specific parties. License requirements currently imposed on specific 
entities through general orders would, under this rule, be imposed by 
adding such entities to the Entity List. Such an action would reduce 
the number of EAR provisions that the public would have to review to 
determine license requirements under the EAR.

Summary of the Changes Proposed by This Rule

    This proposed rule would authorize BIS to impose foreign policy 
export and reexport license requirements, limit the availability of 
License Exceptions, and set license application review policy for 
exports and reexports of items subject to the EAR to entities that BIS 
has reasonable cause to believe, based on specific and articulable 
facts, have been, are or pose a risk of being involved in activities 
that are contrary to the national security or foreign policy interests 
of the United States or those acting on behalf of such entities. This 
proposed rule would not require that such activities involve items or 
activities that are subject to the EAR.
    This proposed rule lists five types of conduct, in addition to the 
grounds set forth in Sec. Sec. 744.2, 744.3, 744.4, 744.6 or 744.20, 
that BIS could determine are contrary to U.S. national security or 
foreign policy interests. They are: (i) Supporting persons engaged in 
acts of terror; (ii) Actions that could enhance the military capability 
of, or the ability to support terrorism of governments that have been 
designated by the Secretary of State as having repeatedly provided 
support for acts of international terrorism; (iii) Transferring, 
developing, servicing, repairing, or producing conventional weapons in 
a manner that is contrary to United States national security or foreign 
policy interests or enabling such transfer, development, service, 
repair or production by supplying parts, components, technology, or 
financing for such activity; (iv) Deliberately failing or refusing to 
comply with an end use check conducted by or on behalf of BIS or the 
Department of State, Directorate of Defense Trade Controls by denying 
access, by refusing to provide information about parties to a 
transaction, or by providing information about such parties that is 
false or that cannot be verified or authenticated; and (v) Engaging in 
conduct that poses a risk of violating the EAR and raises sufficient 
concern that prior review of exports or reexports involving the party 
and the possible imposition of license conditions or license denial 
enhances BIS's ability to prevent violations of the EAR.
    These criteria are illustrative of conduct that could be contrary 
to the national security or foreign policy interests of the United 
States. A party could be added to the Entity List if specific and 
articulable facts provided reasonable cause to believe that it is 
involved in, has been involved in, or poses a significant risk of being 
or becoming involved in one of the five listed illustrative activities 
or other activities that are contrary to U.S. national security or 
foreign policy interests.
    This proposed rule also would authorize BIS to modify the license 
requirements, license exception availability or license application 
review policy that applies to any entity placed on the Entity List 
pursuant to this rule.
    This proposed rule would not be used to add to the Entity List a 
party to which exports or reexports require a license pursuant to 
Sec. Sec.  744.12, 744.13, 744.14 or 744.18 of the EAR. Those sections 
impose license requirements because of the presence of certain parties 
on the List of Specially Designated Nationals and Blocked Persons 
published by the U.S. Department of the Treasury, Office of Foreign 
Assets Control. This proposed rule would not authorize placing U.S. 
persons, as defined in Sec.  772.1 of the EAR, on the Entity List.
    All impositions of license requirements or statements of license 
application review policy or any modification thereof made pursuant to 
this rule would be required to be made by publishing an amendment to 
the Entity List found at Supplement No. 4 to part 744 of the Export 
Administration Regulations. Under this proposed rule, license 
exceptions are not available for any entity added to the Entity List 
pursuant to this rule unless specifically authorized in the entry for 
the entity.
    This proposed rule would explicitly set forth the ability of a 
party who is listed on the Entity List to request that its listing be 
removed or modified. Such requests, including reasons therefor, would 
have to be made in writing, and BIS would be required to provide a 
written response that would be the final agency decision on the 
request. Such requests would be reviewed by the Departments of 
Commerce, State, Defense, and Energy and, if appropriate in a 
particular case, the Treasury. The interagency decision, as 
communicated to the requesting entity by BIS, would be the final agency 
action on such a request.
    This proposed rule would make a conforming change to the definition 
of U.S. person in Sec.  772.1 by adding Sec.  744.11 to the list of 
sections to which that definition applies.
    The license requirements proposed by this rule would be an 
expansion of foreign policy export controls that would require a report 
to Congress in accordance with section 6 of the Export Administration 
Act. BIS will submit the appropriate report to Congress before 
implementing any such expanded controls.

Request for Comments

    BIS is seeking public comments on this proposed rule and will 
consider all comments received on or before August 6, 2007 in 
developing any final rule. Comments received after that date will be 
considered if possible, but their consideration cannot be assured. 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 Office of Administration, Bureau of 
Industry and Security, U.S. Department of Commerce, displays these 
public comments on BIS's Freedom of Information Act (FOIA) Web site at 
http://www.bis.doc.gov/foia. This office 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) 482-0953 for assistance.

Rulemaking Requirements

    1. This rule has been determined to be a significant rule pursuant 
to Executive Order 12866.
    2. Notwithstanding any other provision of law, no person is 
required to respond to nor be subject to a penalty for failure to 
comply with a collection of information, subject to the requirements of 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), 
unless that collection of information displays a currently valid Office 
of Management and Budget (OMB) Control Number. This rule involves a 
collection of information that has been approved by the OMB under 
control number 0694-0088, ``Multi-

[[Page 31007]]

Purpose Application,'' which carries a burden hour estimate of 58 
minutes to prepare and submit form BIS-748. Miscellaneous and 
recordkeeping activities account for 12 minutes per submission. 
Additionally, this rule contains a new collection of information 
subject to review and approval by OMB under the Paperwork Reduction 
Act. This collection will be submitted to OMB for approval. This rule 
proposes a procedure for a listed party to request removal or 
modification of its listing, as set forth in proposed Sec.  744.16. BIS 
estimates that this new collection will involve an annual burden of 15 
hours.
    Send comments regarding these burden estimates or any other aspect 
of these collections of information, including suggestions for reducing 
the burden, to David Rostker, OMB Desk Officer, by e-mail at [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 rule does not contain policies with Federalism implications 
as this term is defined in Executive Order 13132.
    4. The provisions of the Administrative Procedure Act (5 U.S.C. 
553) requiring notice of proposed rulemaking, the opportunity for 
public participation, and a delay in effective date, are inapplicable 
because this regulation involves a military or foreign affairs function 
of the United States (see 5 U.S.C. 553(a)(1)). Further, no other law 
requires that a notice of proposed rulemaking and an opportunity for 
public comment be given for this rule. Because a notice of proposed 
rulemaking and an opportunity for public comment are not required to be 
given for this rule by 5 U.S.C. 553, or by any other law, the 
analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601 
et seq., are not applicable. However, to obtain the benefit of a 
variety of viewpoints before issuing any final rule, BIS is issuing 
this rule in proposed form with a request for comments.

List of Subjects

15 CFR Part 744

    Exports, Reporting and recordkeeping requirements, Terrorism.

15 CFR Part 772

    Exports.
    Accordingly, parts 744 and 772 of the Export Administration 
Regulations (15 CFR parts 730-774) are amended as follows:

PART 744--[AMENDED]

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

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
22 U.S.C. 3201 et seq.; 42 U.S.C. 2139a; Sec. 901-911, Pub. L. 106-
387; Sec. 221, Pub. L. 107-56; E.O. 12058, 43 FR 20947, 3 CFR, 1978 
Comp., p. 179; E.O. 12851, 58 FR 33181, 3 CFR, 1993 Comp., p. 608; 
E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 12947, 60 
FR 5079, 3 CFR, 1995 Comp., p. 356; E.O. 13026, 61 FR 58767, 3 CFR, 
1996 Comp., p. 228; E.O. 13099, 63 FR 45167, 3 CFR, 1998 Comp., p. 
208; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; E.O. 13224, 
66 FR 49079, 3 CFR, 2001 Comp., p. 786; Notice of August 3, 2006, 71 
FR 44551 (August 7, 2006); Notice of October 27, 2006, 71 FR 64109 
(October 31, 2006).

    2. In Sec.  744.1(a)(1), a new sentence immediately following the 
current sixth sentence and a new sentence immediately following the 
current tenth sentence are added, to read as follows:


Sec.  744.1  General provisions.

    (a)(1) * * * Section 744.11 imposes license requirements, to the 
extent specified in Supplement No. 4 of this part on entities listed in 
Supplement No. 4 of this part for activities contrary to the national 
security or foreign policy interests of the United States.* * * Section 
744.16 sets forth the right of a party listed in Supplement No. 4 of 
this part to request that its listing be removed or modified.

    3. Section Sec.  744.11 is added to read as follows:


Sec.  744.11  License requirements that apply to entities acting 
contrary to the national security or foreign policy interests of the 
United States.

    BIS may impose foreign policy export and reexport license 
requirements and limitations on availability of license exceptions and 
may set license application review policy based on the criteria in this 
section. Such requirements, limitations and policy are in addition to 
those set forth elsewhere in the EAR. License requirements, limitations 
on use of license exceptions and license application review policy will 
be imposed under this section by adding an entity to the Entity List 
with a reference to this section and by stating on the Entity List the 
license requirements and license application review policy that apply 
to that entity. BIS may remove an entity from the Entity List if it is 
no longer engaged in the activities described in paragraph (b) of this 
section and is unlikely to engage in such activities in the future. BIS 
may modify the license exception limitations and license application 
review policy that applies to a particular entity to implement the 
policies of this section. Any modification to the Entity List proposed 
to be made pursuant to this section will be reviewed by the Departments 
of Commerce, State, and Defense, and Energy and the Treasury as 
appropriate.
    (a) License Requirement, Availability of License Exceptions, and 
License Application Review Policy. A license is required, to the extent 
specified on the Entity List, to export or reexport any item subject to 
the EAR to an entity that is listed on the Entity List in an entry that 
contains a reference to this section. License Exceptions may not be 
used unless authorized in that entry. Applications for licenses 
required by this section will be evaluated as stated in that entry in 
addition to any other applicable review policy stated elsewhere in the 
EAR.
    (b) Criteria for revising the Entity List. Entities that BIS has 
reasonable cause to believe, based on specific and articulable facts, 
have been, are, or pose a significant risk of being or becoming 
involved in activities that are contrary to the national security or 
foreign policy interests of the United States and those acting on 
behalf of such entities may be added to the Entity List pursuant to 
this section. This section may not be used to place on the Entity List 
any party to which exports or reexports require a license pursuant to 
Sec. Sec.  744.12, 744.13, 744.14 or 744.18 of this part. This section 
may not be used to place on the Entity List any party if exports or 
reexports to that party of items that are subject to the EAR are 
prohibited by or require a license from another U.S. government agency. 
This section may not be used to place any U.S. person, as defined in 
Sec.  772.1, on the Entity List. Examples of activities that could be 
contrary to the national security or foreign policy interests of the 
United States include:
    (1) Supporting persons engaged in acts of terror;
    (2) Actions that could enhance the military capability of, or the 
ability to support terrorism of governments that have been designated 
by the Secretary of State as having repeatedly provided support for 
acts of international terrorism;
    (3) Transferring, developing, servicing, repairing or producing 
conventional weapons in a manner that is contrary to United States 
national security or foreign policy interests or enabling such 
transfer, service, repair, development, or production by supplying 
parts, components, technology, or financing for such activity;

[[Page 31008]]

    (4) Deliberately failing or refusing to comply with an end use 
check conducted by or on behalf of BIS or the Directorate of Defense 
Trade Controls of the Department of State, by denying access, by 
refusing to provide information about parties to a transaction, or by 
providing information about such parties that is false or that cannot 
be verified or authenticated; or
    (5) Engaging in conduct that poses a risk of violating the EAR and 
raises sufficient concern that BIS believes that prior review of 
exports or reexports involving the party and the possible imposition of 
license conditions or license denial enhances BIS's ability to prevent 
violations of the EAR.
    4. Section 744.16 is added to read as follows:


Sec.  744.16  Procedure for requesting removal or modification of an 
Entity List Entity.

    Any entity listed on the Entity List may request that its listing 
be removed or modified.
    (a) All such requests, including reasons therefor, must be in 
writing and sent to: (Address to be added in final rule).
    (b) BIS will review such requests in conjunction with the 
Departments of Defense, State and Energy, and if appropriate in a 
particular case, the Treasury.
    (c) The Chair of the End User Review Committee will convey the 
decision on the request to the requester in writing. That decision will 
be the final agency action on the request.

PART 772--[AMENDED]

    5. The authority citation for part 772 continues to read as 
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 
3, 2006, 71 FR 44551 (August 7, 2006).

    6. In Sec.  772.1 the definition of U.S. person is amended by 
revising paragraph (a) introductory text to read as follows:


Sec.  772.1  Definition of terms as used in the Export Administration 
Regulations (EAR).

    * * *
    U.S. Person. (a) For purposes of Sec. Sec.  744.6, 744.10, 744.11, 
744.12, 744.13, and 744.14 of the EAR, the term U.S. person includes:
* * * * *

    Dated: May 29, 2007.
Christopher A. Padilla,
Assistant Secretary for Export Administration.
 [FR Doc. E7-10788 Filed 6-4-07; 8:45 am]
BILLING CODE 3510-33-P