[Federal Register Volume 85, Number 82 (Tuesday, April 28, 2020)]
[Proposed Rules]
[Pages 23496-23498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07239]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 740

[Docket No. 190524472-9472-01]
 RIN 0694-AH65


Modification of License Exception Additional Permissive Reexports 
(APR)

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Proposed rule.

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SUMMARY: In this rule, the Bureau of Industry and Security (BIS) 
proposes to amend the Export Administration Regulations (EAR) by 
modifying License Exception Additional Permissive Reexports (APR). 
Specifically, BIS is proposing to remove provisions which authorize 
reexports of certain national security-controlled items on the Commerce 
Control List (CCL) to gain better visibility into transactions of 
national security or foreign policy interest to the United States.

DATES: Comments must be received by BIS no later than June 29, 2020.

ADDRESSES: Comments on this rule may be submitted to the Federal 
rulemaking portal (www.regulations.gov). The regulations.gov ID for 
this rule is: BIS-2020-0010. All relevant comments (including any 
personally identifying information) will be made available for public 
inspection and copying.

FOR FURTHER INFORMATION CONTACT: Eileen Albanese, Director, Office of 
National Security and Technology Transfer Controls, Bureau of Industry 
and Security, Department of Commerce, Phone: (202) 482-0092 or Email: 
[email protected].

SUPPLEMENTARY INFORMATION: 

Background

    The Department of Commerce's Bureau of Industry and Security (BIS) 
is proposing to revise part 740 of the Export Administration 
Regulations (EAR) (15 CFR, Subchapter C, parts 730-774), which provides 
information on license exceptions. An export license exception is an 
authorization allowing the export, re-export, or transfer (in-country), 
under stated conditions, of items subject to the EAR that would 
otherwise require a license. Because there are a number of 
circumstances under which a license exception may replace the need for 
a license, there are several types of license exceptions described in 
part 740.
    With this rule, BIS is proposing to modify License Exception 
Additional Permissive Reexports (APR) (Sec.  740.16 of the EAR) which, 
among other things, authorizes certain reexports between and among 
certain countries. To advance the objectives discussed in the 
Administration's December 2017 National Security Strategy as well as 
address the challenges discussed in the Administration's January 2018 
National Defense Strategy available at https://dod.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy-Summary.pdf, BIS 
proposes to remove a provision of License Exception APR due to 
variations in how the United States and its partners, including 
partners located in Country Group A:1, perceive the threat caused by 
the increasing integration of civilian and military technology 
development in countries of concern. A current listing of country 
groups can be found at https://www.bis.doc.gov/index.php/documents/regulation-docs/2255-supplement-no-1-to-part-740-country-groups-1/file.
    Based on discussions with partner governments and U.S. companies, 
BIS has evidence of differences in licensing review standards for 
national-security controlled items destined to Country Group D:1, so 
that countries in Country Group A:1 or Hong Kong may approve a license 
for the reexport of a U.S.-origin item that would have been denied if 
exported directly from the United States.

Proposed Revision to License Exception APR (Sec.  740.16 Additional 
Permissive Reexports)

    Currently, paragraph (a) of License Exception APR authorizes the 
reexport

[[Page 23497]]

of certain items from a country in Country Group A:1 or Hong Kong to 
certain destinations, provided that the reexport is consistent with an 
export authorization from the country of reexport, and that the item is 
not subject to reasons for control described in Sec.  740.16(a)(2), 
which includes missile technology and nuclear nonproliferation 
controls. BIS is proposing to remove countries in Country Group D:1 as 
a category of eligible destination for national security-controlled 
items under paragraph (a) of License Exception APR by amending Sec.  
740.16(a)(3). BIS is considering this change because, as described 
above, the Department acknowledges there may be variations of national 
security or foreign policy concerns between other countries and the 
United States. Even Wassenaar participating states in Country Group A:1 
may have export authorization policies that do not align with the 
national security or foreign policy interests of the U.S. government.
    As such, BIS believes that reexports of national security-
controlled items currently permitted under Sec.  740.16(a)(3)(ii) 
should be reviewed by the U.S. government before proceeding. Removing 
the provision currently found in Sec.  740.16(a)(3)(ii) and requiring a 
reexport license for national security-controlled items to Country 
Group D:1 will allow the U.S. government prior review of these 
reexports to ensure that the reexports are authorized consistent with 
U.S. policy.

Request for Comment

    Overall, license exceptions can be of significant benefit to 
exporters and reexporters, although they can be complex and may require 
detailed analysis before use. BIS has historically encouraged exporters 
and reexporters to use license exceptions since they reflect U.S. 
policy, reduce the burden for both exporters/reexporters and BIS staff, 
and reduce obstacles and costs that can inhibit trade.
    The main advantage of using a license exception is that it provides 
relief from the requirement to apply for a license. The resources 
needed to apply for and administer a BIS license include those 
necessary to access the BIS electronic systems, complete the 
application and supporting documentation, and track license use if the 
license covers multiple transactions. Additionally, a licensing 
requirement can have a significant impact on the timing and 
predictability of order fulfilment due to license processing time, 
which involves interagency review and can vary according to the 
transaction. Recordkeeping requirements for license exceptions 
generally parallel those for licenses.
    BIS is requesting comment on how the proposed change would impact 
persons who currently use or plan to use License Exception APR. 
Currently, BIS does not have a way to readily account for how many 
items are being authorized for reexport or transfer (in-country) under 
the provisions of License Exception APR, so BIS is seeking information 
as to the volume of transactions affected by this proposed change, how 
the proposed change would affect the amount of time necessary to 
complete such transactions in the future, and how the proposed change 
would otherwise affect current business. Please also see the Paperwork 
Reduction Act section of the rulemaking requirements for additional 
areas available for comment.

Export Control Reform Act of 2018

    On August 13, 2018, the President signed into law the John S. 
McCain National Defense Authorization Act for Fiscal Year 2019, which 
included the Export Control Reform Act of 2018 (ECRA) (50 U.S.C. 4801-
4852). ECRA provides the legal basis for BIS's principal authorities 
and serves as the authority under which BIS issues this rule. As set 
forth in Sec.  1768 of ECRA, all delegations, rules, regulations, 
orders, determinations, licenses, or other forms of administrative 
action that have been made, issued, conducted, or allowed to become 
effective under the Export Administration Act of 1979 (previously, 50 
U.S.C. 4601 et seq.) (as in effect prior to August 13, 2018 and as 
continued in effect pursuant to the International Emergency Economic 
Powers Act (50 U.S.C. 1701 et seq.)) or the Export Administration 
Regulations, and are in effect as of August 13, 2018, shall continue in 
effect according to their terms until modified, superseded, set aside, 
or revoked under the authority of ECRA.

Rulemaking Requirements

    1. Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This proposed rule has been designated a ``significant 
regulatory action,'' although not economically significant, under 
section 3(f) of Executive Order 12866.
    2. This proposed rule is not subject to the requirements of 
Executive Order 13771 because it is issued with respect to a national 
security function of the United States. As described in this rule and 
consistent with the Administration's National Security Strategy and 
National Defense Strategy, modification of the license exception 
described herein would enhance the national security of the United 
States by reducing the risk that exports, reexports, and transfers (in-
country) of items subject to the EAR could take place contrary to U.S. 
national security or foreign policy interests. This proposed rule would 
allow the United States government to review transactions involving 
items and destinations of national security concern prior to their 
completion to mitigate this risk. The cost-benefit analysis required 
pursuant to Executive Orders 13563 and 12866 indicates that this rule 
is intended to improve national security as its primary direct benefit. 
Accordingly, this rule meets the requirements set forth in the April 5, 
2017, OMB guidance implementing Executive Order 13771, regarding what 
constitutes a regulation issued ``with respect to a national security 
function of the United States'' and it is, therefore, exempt from the 
requirements of Executive Order 13771.
    3. 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 regulation involves 
collections previously approved by OMB under control number 0694-0088, 
Simplified Network Application Processing System, which includes, among 
other things, license applications and carries a burden estimate of 
43.8 minutes for a manual or electronic submission.
    BIS is not able to estimate the increase in total burden hours 
associated with the PRA and OMB control number 0694-0088 as a result of 
this rule because, prior to publication of this proposed rule, BIS did 
not have a way to readily account for how many items were being 
authorized for reexport or transfer (in-country) under provisions of 
License Exception APR. BIS encourages public comments from reexporters 
to assist the agency in developing estimates for the impact on burden 
hours if the changes included in this

[[Page 23498]]

proposed rule were published in final form.
    4. This proposed rule does not contain policies with Federalism 
implications as that term is defined in Executive Order 13132.
    5. Pursuant to section 1762 of the Export Control Reform Act of 
2018 (Title XVII, Subtitle B of Pub. L. 115-232, 132 Stat. 2208), which 
was included in the John S. McCain National Defense Authorization Act 
for Fiscal Year 2019, this action is exempt from the Administrative 
Procedure Act (APA) (5 U.S.C. 553) requirements for notice of proposed 
rulemaking, opportunity for public participation, and delay in 
effective date. Nonetheless, BIS is providing the public with an 
opportunity to review and comment on this rule, despite its being 
exempted from that requirement of the APA.
    6. 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. 
Accordingly, no regulatory flexibility analysis is required and none 
has been prepared.

List of Subjects in 15 CFR Part 740

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

    Accordingly, 15 CFR part 740 of the EAR (15 CFR parts 730-774) is 
proposed to be amended as follows:

PART 740--[AMENDED]

0
1. The authority citation for 15 CFR part 740 is revised to read as 
follows:

    Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50 
U.S.C. 1701 et seq.; 22 U.S.C. 7201 et seq.; E.O. 13026, 61 FR 
58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 
2001 Comp., p. 783.

0
2. Amend Sec.  740.16 by revising paragraph (a)(3) to read as follows:


Sec.  740.16  Additional permissive reexports (APR).

* * * * *
    (a) * * *
    (3) The reexport is destined to a country in Country Group B that 
is not also included in Country Group D:2, D:3, or D:4; and the 
commodity being reexported is both controlled for national security 
reasons and not controlled for export to Country Group A:1.
* * * * *

Matthew S. Borman,
Deputy Assistant Secretary for Export Administration.
[FR Doc. 2020-07239 Filed 4-27-20; 8:45 am]
 BILLING CODE 3510-33-P