[Federal Register Volume 85, Number 148 (Friday, July 31, 2020)]
[Rules and Regulations]
[Pages 45998-46000]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16278]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 740

[Docket No. 200718-0196]
RIN 0694-AI14


Revision to the Export Administration Regulations: Suspension of 
License Exceptions for Hong Kong

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Final rule.

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SUMMARY: The Bureau of Industry and Security (BIS) amends the Export 
Administration Regulations (EAR) to suspend the availability of all 
License Exceptions for Hong Kong that provide differential treatment as 
compared to those available to the People's Republic of China (PRC). As 
announced on BIS's website on June 30, 2020, these License Exceptions 
are no longer available for exports and reexports to Hong Kong, and 
transfers within Hong Kong, of all items subject to the EAR. BIS is 
taking this action as part of revised U.S. policy toward Hong Kong in 
response to the newly imposed security measures on Hong Kong by the 
Chinese Communist Party. These new security measures undermine Hong 
Kong's autonomy and thereby increase the risk that sensitive U.S. 
technology and items will be illegally diverted to unauthorized end 
uses and end users in the PRC or to unauthorized destinations such as 
Iran or North Korea. This rule includes saving clauses for items, 
including for deemed exports.

DATES: This rule is effective July 31, 2020.

FOR FURTHER INFORMATION CONTACT: Patricia Muldonian, Office of National 
Security and Technology Transfer Controls, 
[email protected].

SUPPLEMENTARY INFORMATION: The Chinese Communist Party of the People's 
Republic of China (PRC) has imposed new measures that undermine Hong 
Kong's autonomy. As a result, the United States Government (USG) has 
revised its policy toward Hong Kong, including treatment of Hong Kong 
under the EAR. Undermining Hong Kong's autonomy increases the risk that 
sensitive U.S. technology and items will be illegally diverted to 
unauthorized end uses and end users in the PRC or to unauthorized 
destinations such as Iran or North Korea.
    As the USG finds that it can no longer distinguish between the 
export of controlled items to Hong Kong and the PRC, the United States 
is removing eligibility for License Exceptions for exports or reexports 
to, or transfers within, Hong Kong that are not available for exports 
and reexports to the PRC or transfers within the PRC. This action 
targets the PRC regime, not residents of Hong Kong. The Bureau of 
Industry and Security (BIS), in consultation with other executive 
branch agencies, continues to review the EAR to assess whether 
additional amendments are warranted.

Amendments to the EAR

    In this final rule, BIS amends the Export Administration 
Regulations, 15 CFR parts 730-774 (EAR), to suspend the availability of 
the License Exceptions for exports and reexports to Hong Kong, and 
transfers within Hong Kong of all items subject to the EAR that provide 
differential treatment from the license exceptions available to the 
PRC.
    BIS is taking this action pursuant to Sec.  740.2(b) of the EAR (15 
CFR 740.2(b)), which provides that all License Exceptions are subject 
to revision, suspension, or revocation, in whole or in part, without 
notice. The following License Exceptions are suspended to the extent 
they allow exports or reexports to or from Hong Kong, or transfers 
within Hong Kong, when they may not be used for exports or reexports to 
the PRC, or transfers within the PRC:

[[Page 45999]]

    (1) Shipments of Limited Value (LVS) (Sec.  740.3);
    (2) Shipments to Group B Countries (GBS) (Sec.  740.4);
    (3) Technology and Software under Restriction (TSR) (Sec.  740.6);
    (4) Computers, Tier 1 only (APP) (Sec.  740.7(c));
    (5) Temporary Imports, Exports, Reexports, and Transfers (in-
country) (TMP) (Sec.  740.9(a)(11), (b)(2)(ii)(C, and (b)(5));
    (6) Servicing and Replacement Parts and Equipment (RPL) (Sec.  
740.10(a)(3)(viii), (a)(4), (b)(1) except as permitted to Country Group 
D:5, and (b)(3)(i)(F) and (ii)(C));
    (7) Governments (GOV) (Sec.  740.11(c)(1)--Cooperating Governments 
only));
    (8) Gift Parcels and Humanitarian Donations (GFT) (Sec.  740.12);
    (9) Technology and Software Unrestricted (TSU) (Sec.  740.13);
    (10) Baggage (BAG) (Sec.  740.14) (except as permitted by Sec.  
740.14(d));
    (11) Aircraft, Vessels, and Spacecraft (AVS) (Sec.  740.15(b)(1), 
(b)(2), (c));
    (12) Additional Permissive Reexports (APR) (Sec.  740.16(a) and 
(j)); and
    (13) Strategic Trade Authorization (STA) (Sec.  740.20(c)(2)).
    Reexports of items subject to the EAR from Hong Kong under License 
Exception APR Sec.  740.16(a) are also restricted.
    In this final rule, BIS also amends paragraph (a) of Sec.  740.2--
Restrictions on all License Exceptions--by adding a new paragraph 
(a)(23) to identify the suspension of the availability of these License 
Exceptions for exports to Hong Kong, reexports to and from Hong Kong, 
and transfers within Hong Kong of all items subject to the EAR.
    A License Exception is an authorization contained in Part 740 of 
the EAR that allows exports, reexports, or transfers (in-country) under 
stated conditions of items subject to the EAR that would otherwise 
require a license. This includes License Exception APR which was 
previously also available for reexports from Hong Kong.

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. 
Sections 4801-4852. ECRA provides the legal basis for BIS's principal 
authorities and serves as the authority under which BIS issues this 
rule.

Rulemaking Requirements

    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, distribute 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 final rule has been designated significant under 
Executive Order 12866. This final rule will protect the national 
security and foreign policy objectives of the United States by 
addressing the increased risk of illegal diversion of sensitive U.S. 
technology and other items to unauthorized end uses and end users in 
China or to unauthorized destinations such as Iran or North Korea.
    This final rule is not subject to the requirements of Executive 
Order 13771 (82 FR 9339; February 3, 2017) because it is issued with 
respect to a national security function of the United States. The cost-
benefit analysis required pursuant to Executive Orders 12866 and 13563 
indicates that this rule is intended to improve national security as 
its primary direct benefit. Specifically, suspending license exceptions 
for Hong Kong serves U.S. national security interests and foreign 
policy objectives. 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 is, therefore, 
exempt from the requirements of Executive Order 13771.
    This rule does not contain policies with federalism implications as 
that term is defined under Executive Order 13132.

Paperwork Reduction Act Requirements

    Notwithstanding any other provision of law, no person may be 
required to respond to or 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 currently approved by OMB under control numbers 0694-0088, 
Simplified Network Application Processing System, and 0694-0137, 
License Exceptions and Exclusions. These collections include, among 
other things, license applications, which carries a burden estimate of 
42.5 minutes for a manual or electronic submission for a total burden 
estimate of 31,878 hours. This rule is expected to increase the number 
of licenses required as license exception availability is suspended, 
including for deemed exports and reexports, but this increase is not 
expected to exceed the existing estimates currently associated with OMB 
control number 0694-0088. A minimal decrease in burden is expected for 
0694-0137.

Administrative Procedure Act and Regulatory Flexibility Act 
Requirements

    Pursuant to section 1762 of the Export Control Reform Act of 2018 
(50 U.S.C. 4801-4852), 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 (5 U.S.C. 553) 
requirements for notice of proposed rulemaking, opportunity for public 
participation, and delay in effective date. 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.

Savings Clauses

    Shipments of items that are removed from eligibility for a License 
Exception as a result of this action and were on dock for loading, on 
lighter, laden aboard an exporting or transferring carrier, or en route 
aboard a carrier to a port of export or reexport on June 30, 2020, 
pursuant to actual orders for export to Hong Kong, reexport to or from 
Hong Kong, or transfer within Hong Kong, may proceed to their 
destination under the previous License Exception eligibility.
    Similarly, the deemed export/reexport transactions involving Hong 
Kong persons authorized under License Exception eligibility prior to 
June 30, 2020, may continue to be authorized under such provision until 
August 28, 2020, after which such transactions will require a license. 
Exporters, re-exporters, or transferors (in-country) availing 
themselves of this 60-day savings clause must maintain documentation 
demonstrating that the Hong Kong national was hired and provided access 
to technology eligible for Hong Kong under part 740 prior to June 30, 
2020.

[[Page 46000]]

List of Subjects

15 CFR Part 740

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

    Accordingly, part 740 of the Export Administration Regulations (15 
CFR parts 730-774) is amended as follows:

PART 740--LICENSE EXCEPTIONS

0
1. The authority citation for part 740 continues 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. Section 740.2 is amended by revising paragraphs (a)(12) and (13) 
introductory text and by adding new paragraph (a)(23) to read as 
follows:


Sec.  740.2   Restrictions on all License Exceptions.

    (a) * * *
    (12) The item is described in a 9x515 or ``600 series'' ECCN and is 
destined to, shipped from, or was manufactured in a destination listed 
in Country Group D:5 or Hong Kong (see Supplement No. 1 to part 740 of 
the EAR), except that:
* * * * *
    (13) ``600 series'' items that are controlled for missile 
technology (MT) reasons may not be exported, reexported, or transferred 
(in-country) under License Exception STA (Sec.  740.20 of the EAR). 
Items controlled under ECCNs 9D610.b, 9D619.b, 9E610.b, or 9E619.b or 
.c are not eligible for license exceptions except for License Exception 
GOV (Sec.  740.11(b)(2) of the EAR). Only the following license 
exceptions may be used to export ``600 series'' items to destinations 
other than those identified in Country Group D:5 or Hong Kong (see 
Supplement No. 1 to part 740 of the EAR):
* * * * *
    (23) The item is subject to the EAR and is for export to Hong Kong, 
reexport to Hong Kong or transfer (in-country) within Hong Kong under 
License Exceptions LVS--Shipments of Limited Value (Sec.  740.3); GBS--
Shipments to Group B Countries (Sec.  740.4); TSR--Technology and 
Software under Restriction (Sec.  740.6); APP--Computers, Tier 1 only 
(Sec.  740.7(c)); TMP Temporary Imports, Exports, Reexports, and 
Transfers (in-country)--(Sec.  740.9(a)(11) and (b)(2)(ii)(C) and 
(b)(5) only); RPL--Servicing and Replacement Parts and Equipment (Sec.  
740.10(a)(3)(viii), (a)(4), (b)(1) except as permitted to Country Group 
D:5, and (b)(3)(i)(F) and (ii)(C) only); GOV--Cooperating Governments 
only (Sec.  740.11(c)(1)); GFT--Gift Parcels (except as permitted by 
Sec.  740.12(a)(3)); TSU Technology and Software Unrestricted--only 
Sec.  740.13(f); BAG--Baggage (except as permitted by Sec.  740.14(d)); 
AVS Aircraft, Vessels, and Spacecraft--(Sec.  740.15(b)(1), (b)(2), 
(c), and (f) only); APR--Additional Permissive Reexports (Sec.  
740.16(a) and (j)); and STA--Strategic Trade Authorization (Sec.  
740.20). Reexports of items subject to the EAR from Hong Kong under 
License Exception APR Sec.  740.16(a) are also restricted.
* * * * *

Matthew S. Borman,
Deputy Assistant Secretary for Export Administration.
[FR Doc. 2020-16278 Filed 7-30-20; 8:45 am]
BILLING CODE 3510-33-P