Defense Priorities and Allocations System

DEPARTMENT OF COMMERCE

Bureau of Export Administration

15 CFR Part 700

[Docket No. 970827205-7205-01]

RIN 0694-AA02

Defense Priorities and Allocations System

AGENCY: Bureau of Export Administration, Commerce.

ACTION: Notice of proposed rulemaking and request for comments.

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SUMMARY: The Department of Commerce proposes to revise the Defense

Priorities and Allocations System (DPAS) regulation by updating,

modifying or clarifying a number of its provisions. The DPAS implements

the priorities and allocations authority of Title I of the Defense

Production Act of 1950, as amended, and the priorities authority of

Section 18 of the Selective Service Act of 1948 and related

authorities, as these authorities pertain to industrial resources.

[[Page 51390]]

Provisions to be modified include the time period within which a

supplier must accept or reject a rated order, the order of precedence

to be given to conflicting rated orders which have equal priority

status, and the combining of defense rated requirements with commercial

(unrated) requirements.

The Department also proposes to remove all controlled materials

provisions and references from the DPAS because the controlled

materials program (essentially an emergency preparedness measure) is

obsolete and has been deactivated.

These revisions, including a number of other changes to update and

clarify the text, are intended to improve the administration of the

DPAS and make it more effective and efficient in the post-Cold War era.

The Department will consider public comment on these proposed

revisions and on any other provision that may be hindering effective

and efficient DPAS administration or implementation.

DATES: Comments must be received no later than October 31, 1997.

ADDRESSES: Address written comments (six copies) to Richard V. Meyers,

DPAS Program Manager, Office of Strategic Industries and Economic

Security, Room 3876, U.S. Department of Commerce, Washington, D.C.

20230. The public record of this proposed rule will be available at the

Bureau of Export Administration Freedom of Information Records

Inspection Facility, Room 4525, U.S. Department of Commerce, 14th

Street and Pennsylvania Avenue, N.W., Washington, D.C. 20230.

FOR FURTHER INFORMATION CONTACT: Richard V. Meyers, DPAS Program

Manager, Office of Strategic Industries and Economic Security, Room

3876, U.S. Department of Commerce, 14th Street and Pennsylvania Avenue,

N.W., Washington, D.C. 20230; telephone (202) 482-3634, FAX (202) 482-

5650, and E-Mail [email protected].

SUPPLEMENTARY INFORMATION:

Background

The current Defense Priorities and Allocations System (DPAS)

regulation (15 CFR part 700; formerly 15 CFR part 350) was published by

the Department of Commerce as a final rule on July 30, 1984 (49 FR

30412), superseding the regulations of the Defense Materials System and

Defense Priorities System. The DPAS regulation implements the

priorities and allocations authority of Title I of the Defense

Production Act of 1950, as amended (50 U.S.C. app. 2061, et seq.), and

the priorities authority of Section 18 of the Selective Service Act of

1948 (50 U.S.C. app. 468), 10 U.S.C. 2538 and 2539, and 50 U.S.C. 82,

as these authorities pertain to industrial resources.

The Department has received a number of oral and written comments

suggesting the need to modify or clarify several provisions of the DPAS

which relate to: (1) The time period within which a supplier must

accept or reject a rated order [section 700.13(d)(1)]; (2) the order of

precedence to be given by contractors and suppliers to conflicting

rated orders of equal priority status (section 700.14); and (3) the

combining by a contractor of defense rated requirements with commercial

(unrated) requirements on one purchase order to a supplier [section

700.17(d)]. Accordingly, for the reasons discussed in the PROPOSED

REVISIONS section below, the Department proposes to revise these DPAS

rules.

The Department also proposes to remove the controlled materials

provisions from the DPAS (sections 700.30-700.31) and delete all other

references to the program from throughout the regulation for the

following reasons.

During World War II and the Korean War, the production and

distribution of certain critical materials called ``controlled

materials''--steel, copper, and aluminum--were managed under Controlled

Materials Plans. From 1953 to 1988, these materials, with nickel alloys

added in 1958, continued to be subject to government allocations

regulations.

A 1987 Department of Commerce study of the controlled materials

program found that the program had little relevance to current defense

requirements for the controlled materials or to the current ability of

industry to supply the controlled materials to meet these requirements.

The study recommended that the controlled materials procedures be

deactivated. An interagency committee, comprised of Commerce and three

of the DPAS Delegate Agencies (Federal Emergency Management Agency and

the Departments of Defense and Energy), concurred with this

recommendation. Action was subsequently taken by these agencies to

deactivate the program, including action by Commerce to discontinue the

information collection burden imposed upon controlled materials

producers, distributors, and users to supply information about

controlled materials requirements and shipments. This information was

used to support administration of the controlled materials program.

Finally, the Department proposes to make various jurisdictional,

technical, administrative, and miscellaneous revisions to a number of

DPAS provisions to address changes to delegated authority, to

incorporate the delegation of additional authority, to update and

clarify the text, and to improve generally the administration,

effectiveness, and efficiency of the DPAS in support of our nation's

post-Cold War defense requirements and its ability to respond fully to

a national security or major disaster emergency situation.

Proposed Revisions

Proposed revisions to the DPAS regulation are described in the

following section-by-section analysis.

1. Customer Notification of Acceptance or Rejection of Rated Orders

Section 700.13(d) (Customer notification requirements) of the

current DPAS requires a supplier to accept or reject a rated order in

writing within ten (10) working days after receipt of a DO rated order

and within five (5) working days after receipt of a DX rated order.

Subcontractors and suppliers have complained that it is very difficult

to comply with this requirement due to production scheduling

complexities and other administrative factors.

The proposed rule would revise subparagraph (1) of section

700.13(d) by extending the time within which a person must accept or

reject a rated order by five (5) working days. Accordingly, a person

must accept or reject a rated order within fifteen (15) working days

after receipt of a DO rated order, and within ten (10) working days

after receipt of a DX rated order. The Department believes that this

change will not significantly impact upon the timely delivery of items

against these orders.

The revised subparagraph would also specifically reference

electronic data interchange of the acceptance or rejection of rated

orders. Electronic placement of rated orders is acceptable provided

that the transmission complies in substance with section 700.12

(Elements of a rated order). This section would also be revised to

reference the electronic placement of rated orders.

2. Precedence of Rated Orders of Equal Priority Status

A number of companies have requested clarification of the

preference to be given to rated orders which have equal priority status

(DX or DO) when production scheduling conflicts or other problems arise

following acceptance of the rated orders.

The proposed rule would revise paragraph (c) of section 700.14

(Preferential scheduling) of the current

[[Page 51391]]

DPAS to provide that if a person finds that production, delivery, or

performance against any accepted rated orders conflicts with

production, delivery, or performance against any other accepted rated

orders of equal priority status, preference shall be given to the

conflicting rated orders in the sequence in which they were received

(not to the required delivery dates). However, if the conflicting rated

orders were received on the same day, the person shall give preference

to those orders which have the earliest delivery dates. If under these

rules, the production, delivery, or performance conflicts cannot be

resolved, or if the customer objects to the rescheduling of the

customer's rated order, the proposed rule provides that special

priorities assistance should be requested promptly under sections

700.50-700.54 of the DPAS.

Some of the confusion over preferential scheduling appears to have

been caused by including paragraph (c) in section 700.14 (Preferential

scheduling) of the current DPAS. This paragraph covers acceptance or

rejection of rated orders of equal priority status received on the same

day. The proposed rule would incorporate this paragraph into section

700.13 (Acceptance and rejection of rated orders).

3. Combining Defense Rated Requirements With Commercial (Unrated)

Requirements

Paragraph (d) of section 700.17 (Use of rated orders) of the

current DPAS permits a contractor to combine rated and unrated order

quantities on a purchase order to a supplier provided that the rated

quantities are clearly and separately identified. These quantities must

also be contained in a separate rated order which conforms to the

requirements of section 700.12 (Elements of a rated order). A special

statement and the physical attachment of the separate rated order to

the combined order are also required. A number of companies have

complained that the requirement for a separate rated order is expensive

to implement, an administrative burden, and incompatible with their

automated procurement systems.

The proposed rule would eliminate the requirement for a separate

rated order but would retain the requirement for clear and separate

identification of rated order quantities. It also would require a

special statement on the combined purchase order to notify the supplier

that the order contains rated quantities certified for national defense

use and that the provisions of the DPAS apply only to the rated

quantities. This change should contribute to contractor efficiency and

cost savings while minimizing the possibility of supplier confusion.

The growing commercialization of defense procurement and the

development of dual-use products and technology further underscores the

need for this change.

4. National Security Emergency Preparedness and Removal of the

Controlled Materials Provisions

The proposed rule would remove from the DPAS all provisions and

references pertaining to the controlled materials, including the

controlled materials information in section 700.4 of Subpart B

(Overview), the definitions relating to controlled materials in section

700.8, the special rules for controlled materials in Subpart F

(sections 700.30-700.31), and the authorized programs for controlled

materials (C8 and H2-H4) listed in Schedule 1 to Part 700. Also removed

would be Schedule II to Part 700, which lists the controlled materials,

Schedule III to Part 700, which defines the controlled materials, and

Schedules IV and V to Part 700, which establish the set-aside base and

percentages for copper and nickel alloys producers.

The heading of Subpart F would be renamed ``National Security

Emergency Preparedness and Critical Items.'', and the heading of

section 700.30 would be retitled ``Priorities and Allocations in a

National Security Emergency.'' The text of section 700.30 would be

revised to provide a statement as to how the DPAS may be expanded in a

national security emergency to ensure rapid industrial response and the

timely availability of critical industrial items and facilities to meet

the urgent defense or major disaster emergency requirements of approved

programs.

Included is a discussion of emergency official actions, the

allocation of critical and scarce items and facilities to meet

emergency requirements, and the delegation of authority under the DPAS

to the Regional Emergency Coordinators in the ten Standard Federal

Region Council cities in the event that communications with Commerce

headquarters in Washington, D.C. is severed as a result of the

emergency.

Section 700.4 in Subpart B (Overview) would also be revised to

summarize the revised Subpart F, with the section heading retitled

``Priorities and Allocations in a National Security Emergency.''

In Subpart G, section 700.40 (General provisions) would be removed

and section 700.41 (Metalworking machines) would be moved into Subpart

F and redesignated as section 700.31. Subpart G would be ``Reserved''

for future use.

The removal of the controlled materials provisions would

necessitate amendment of DPAS Delegation 1 to the Secretary of Defense

(Appendix I to Part 700) and the Memorandum of Understanding on

Priorities and Allocations Support Between the U.S. Department of

Commerce and the Canadian Public Works and Government Services Canada

(formerly Department of Supply and Services) (Appendix IV to Part 700)

to delete references to the controlled materials program within these

documents.

5. New Approved Programs

The proposed rule would revise Schedule 1 to the current DPAS to

retitle it ``Approved Programs and Delegate Agencies'', to include two

new programs, ``Special Projects'' and ``Food Resources (combat

rations)'', and to change the ``N1'' Federal Emergency Management

Agency program name to ``Emergency Preparedness Activities''.

The ``Special Projects'' program would be assigned to the

Department of Commerce as Delegate Agency and identified by the Program

Identification Symbol ``H8''. It would provide the Department with

greater administrative flexibility in authorizing the use of priority

ratings, as needed on a case-by-case basis by non-Delegate Agencies to

support defense related procurement, where use of a current approved

program identification would not be appropriate. Such priority rating

authority would be granted only after establishing the appropriate

national defense or civil emergency preparedness nexus for the project

in consultation with the Department of Defense (DOD), Department of

Energy, or Federal Emergency Management Agency, as provided under

section 202 of E.O. 12919.

The ``Food Resources (combat rations)'' program would be assigned

to DOD as Delegate Agency and identified by the Program Identification

Symbol ``C1''. This would enable DOD to place rated orders under the

DPAS for food resources to meet troop support requirements for combat

rations under the authority delegated to DOD by Commerce in DPAS

Delegation 1 (see Appendix I to Part 700). This program was established

by agreement between the Departments of Commerce and Agriculture, dated

January 28, 1991, and approved by FEMA on February 1, 1991 (see

Attachment A to DPAS Delegation 1). It is consistent with the

Memorandum of Understanding between the Departments of Agriculture and

Commerce Concerning Priorities

[[Page 51392]]

and Allocations Jurisdiction and Responsibilities for Foods Which Have

Industrial Uses and the Domestic Distribution of Farm Equipment (see

Appendix II to Part 700).

The ``N1'' program name change would reflect the expansion of

Defense Production Act (Title I) priorities and allocations authority

to cover emergency preparedness activities as provided under Title VI

of the Robert T. Stafford Disaster Relief and Emergency Assistance Act,

as amended (Stafford Act) (42 U.S.C. 5195, et seq.).

6. Other Revisions

Because of recent amendments to the Defense Production Act, the

Stafford Act, and the issuance and subsequent amendment of Executive

Order 12919 (revision of Executive Order 10480), technical revisions to

several sections of the DPAS, including section 700.18(b)(1)

(Jurisdictional limitations), are required. The proposed rule sets

forth these changes.

Also, on January 8, 1991, priorities authority with respect to

industrial resources was delegated to the Department of Commerce under

the Selective Service Act of 1948 (50 U.S.C. app. 468), 10 U.S.C. 2538

and 2539, and 50 U.S.C. 82 by Executive Order 12742 (56 FR 1079). The

proposed rule would incorporate a reference to these authorities where

appropriate, throughout the regulation.

Finally, the proposed rule would make various other technical,

administrative, and miscellaneous changes to the current DPAS rules.

Among these revisions are improvements to the clarity of the text in

section 700.2(b) (Introduction) and subparagraph (2) of section

700.13(d) (Customer notification requirements), and increasing the

minimum rated order amount from $5000 to $100,000 in paragraph (f) of

section 700.17 (Use of rated orders) to conform with the current

simplified Federal Acquisition Regulation small order acquisition

threshold. Revision of section 700.21 (Application for priority rating

authority) in Subpart E (Industrial Priorities for Energy Programs),

section 700.72 (Compulsory process), section 700.80 (Adjustments or

exceptions), section 700.81 (Appeals), and section 700.93

(Communications), is necessary to reflect office name, address,

telephone number, and Departmental organization changes.

7. Appendices to Part 700

All DPAS Appendices (Appendix I--DPAS Delegations of Authority to

the Departments of Defense and Energy, the General Services

Administration, and the Federal Emergency Management Agency; Appendix

II--Interagency Memoranda of Understanding with the Departments of

Agriculture, Energy, and the Interior; Appendix III--Form ITA-999--

Request for Special Priorities Assistance; and Appendix IV--Memorandum

of Understanding on Priorities and Allocations Support Between the U.S.

Department of Commerce and the Canadian Department of Supply and

Services) require updating and revision to address various substantive

and technical changes, including changes in statutory and delegated

authority and removal of obsolete provisions. Of special note is an

expanded restriction in each of the DPAS Delegations of Authority on

the use of rated orders by the Delegate Agencies to support procurement

of any items which are commonly available in commercial markets for

general consumption, do not require major modification when purchased

for approved program use, and are readily available in sufficient

quantity so as to cause no delay in meeting approved program

requirements.

A new Appendix V (DPAS Emergency Documents) will be added,

containing, for information purposes only, DPAS Emergency Delegation 1.

This document will delegate authority to the Regional Emergency

Coodinators in the ten Federal Regional Council cities to administer

the DPAS if a catastrophic national security emergency situation severs

communications with Department of Commerce headquarters in Washington,

D.C.

Because the documents in these Appendices are of limited public

interest, they will not be published in draft for public comment. They

will, however, be reviewed by all involved departments and agencies and

copies of the executed originals will be published with the Notice of

Final Rulemaking.

Public Comment Requested

Public comment on the sufficiency and reasonableness of these

proposed revisions is solicited. In addition, comments are solicited

concerning any other DPAS provision. The Department's objective is to

ensure that the DPAS is effective, efficient, easy to understand and

use, and properly designed not only to ensure the timely delivery of

industrial resources in support of current national defense programs

with minimal disruption to normal commercial activities, but also to

support future emergency requirements.

Section 709 of the Defense Production Act exempts the promulgation

of rules and regulations from the rulemaking procedures of the

Administrative Procedure Act (5 U.S.C. 551-559). However, the Defense

Production Act does require Federal Register publication of these

proposed revisions and opportunity for public comment, consistent with

the requirements 5 U.S.C. 553(b). Therefore, all persons who desire to

comment are encouraged to do so at the earliest possible time to

receive the fullest consideration of their views. Only those comments

received on or before October 31, 1997 will be considered.

In the interest of accuracy and completeness, the Department

requires written comments (six copies) which should be sent to the

address indicated in the address section above. Oral comments should be

directed to Richard V. Meyers, DPAS Program Manager [tel.: (202) 482-

3634], and must be followed by written memorandum to Mr. Meyers. All

such written comments and memoranda will be placed in the public

rulemaking docket and will be available for public review and copying.

However, communications from agencies of the U.S. Government or foreign

governments will not be made available for public inspection. Written

comments accompanied by a request that part or all of the material

contained be treated confidentially will not be considered in

developing the final rule. Such comments and materials will be returned

to the submitter.

The public rulemaking docket concerning this regulation will be

maintained in the Bureau of Export Administration Freedom of

Information Records Inspection Facility, at the address indicated in

the address section above. Records in this facility may be inspected

and copied in accordance with regulations published in 15 CFR part 4.

Information pertaining to the inspection and copying of records may be

obtained from Ms. Margaret Cornejo, Freedom of Information Officer, at

the Records Inspection Facility, or by calling (202) 482-5653.

Rulemaking Requirements

The Department has made certain determinations with respect to the

following rulemaking requirements:

1. Classification Under E.O. 12866

This proposed revision of the current DPAS regulation (15 CFR part

700) has been determined to be ``not significant'' for the purpose of

Executive Order 12866.

2. Regulatory Flexibility Act

The Assistant General Counsel for Legislation and Regulation

certified to the Chief Counsel for Advocacy, Small

[[Page 51393]]

Business Administration, that this proposed rule to revise the DPAS, if

adopted, will not have a significant economic impact on a substantial

number of small entities. These revisions would merely update, modify,

or clarify a number of provisions to make the current DPAS more

effective and efficient in the post Cold War era. Many of the proposed

changes are being made in response to comments and recommendations

received from the business community, thus ensuring that the updated

DPAS will conform to current business practices and enable all business

entities subject to its requirements to increase the efficiency of

their operations and realize certain cost savings. In addition, some

DPAS provisions must be revised to conform the regulation to recent

statutory and organizational changes while other provisions must be

deleted because they are obsolete.

Because of the self-administered nature of the DPAS, there is no

way to accurately estimate the number of business entities throughout

the U.S. industrial base to whom the DPAS is applicable. However, it

has been roughly estimated that there are at least 18,000 business

entities during any one year that on at least one or more occasions

must respond to its requirements. It is also estimated that given the

nature of defense production, relatively few of these entities are

small entities.

The DPAS regulation has been in effect since 1984 and is the

successor to priorities and allocations regulations that were first

promulgated in the mid-1950s. Thus, most business entities engaged in

defense production under the DPAS, including small entities, can and do

respond to applicable DPAS requirements in the ordinary course of their

business with very little, if any, economic impact. The DPAS revisions,

in and of themselves, would impose no economic impact on any business

entity, including small entities, and if adopted, will further reduce

whatever minimal economic impact is associated with DPAS compliance.

3. Paperwork Reduction Act

The information collection requirements imposed by the DPAS

regulation have been submitted to the Office of Management and Budget

(OMB) for review under the provisions of Section 3507 of the Paperwork

Reduction Act of 1980 (44 U.S.C. 3501, et seq.) (OMB Control Number

0694-0053). Notwithstanding any other provision of law, no person is

required to respond to nor shall a person be subject to a penalty for

failure to comply with these information collection requirements unless

the information collection displays a currently valid OMB Control

Number.

The collection of information requirements in the DPAS apply to all

persons who receive priority rated orders under the DPAS. These

requirements are necessary to support proper administration of the DPAS

and ensure its effectiveness and efficiency. The total annual public

burden per respondent for this collection of information is estimated

at 14,476.5 hours. This estimate includes (a) 11,667 total extra record

keeping hours to create a record of the receipt of a priority rated

order (700,000 priority rated orders annually x 1 minute per order);

(b) 972 total hours to provide notice of acceptance of a priority rated

order (699,650 priority rated orders accepted annually x 5 seconds

per order); (c) 87.5 total hours to provide notice of rejection of a

priority rated order (350 total priority rated orders rejected annually

x 15 minutes per order); and (d) 1,750 total hours to provide notice

of delayed delivery against a priority rated order (7000 total priority

rated orders annually against which delivery will be delayed x 15

minutes per order).

Comments are requested concerning: (a) Whether the proposed

collection of information is necessary for the proper performance of

agency functions, which includes proper administration of the DPAS and

ensuring its effectiveness and efficiency; (b) the accuracy of the

public burden estimate; (c) ways to enhance the quality, utility, and

clarity of the information collected; and (d) ways to further minimize

the public information collection burden, including the use of

automated collection techniques or other forms of information

technology. Written comments should be sent within 30 days of

publication of this Notice in the Federal Register to Ms. Victoria

Baecher-Wassmer, OMB Desk Officer, Room 10202, New Executive Office

Building, Office of Management and Budget, Washington, D.C. 20230; and

to Mr. Stephen Baker, BXA Information Collection Officer, Room 6877,

U.S. Department of Commerce, Washington, D.C. 20230.

4. Executive Order 12612

This proposed rule does not contain policies with Federalism

implications sufficient to warrant preparation of a Federalism

assessment under E.O. 12612.

List of Subjects in 15 CFR Part 700

Administrative practice and procedure, Business and industry,

Government contracts, National defense, Reporting and recordkeeping

requirements, Strategic and critical materials.

For the reasons stated in the preamble, part 700 of Subchapter A,

National Security Industrial Base Regulations (15 CFR part 700), is

proposed to be amended as follows:

1. The authority citation for 15 CFR part 700 is revised to read as

follows:

Authority: Titles I and VII of the Defense Production Act of

1950, as amended (50 U.S.C. app. 2061, et seq.), Title VI of the

Robert T. Stafford Disaster Relief and Emergency Assistance Act (42

U.S.C. 5195, et seq.), and Executive Order 12919 of June 3, 1994 (59

FR 29525), as amended; Section 18 of the Selective Service Act of

1948 (50 U.S.C. app. 468), 10 U.S.C. 2538 and 2539, 50 U.S.C. 82,

and Executive Order 12742 of January 8, 1991 (56 FR 1079), as

amended; and Executive Order 12656 of November 18, 1988 (53 FR 226),

as amended.

PART 700--[AMENDED]

2. Section 700.1 is amended:

a. By revising the phrase ``materials and facilities'' to read

``materials, services, and facilities'', and revising the phrase

``materials and equipment'' to read ``materials, equipment, and

services'', in paragraph (a);

b. By revising paragraph (b);

c. By redesignating paragraph (c) as paragraph (e); and

d. By adding new paragraphs (c) and (d); as follows:

Sec. 700.1 Purpose of this regulation.1

* * * * *

(b) Section 18 of the Selective Service Act of 1948 (50 U.S.C. app.

468) (Selective Service Act) authorizes the President to place an order

with a supplier for any articles or materials required for the

exclusive use of the U.S. armed forces whenever the President

determines that in the interest of national security, prompt delivery

of the articles and materials is required. The supplier must give

precedence to the order so as to deliver the articles or materials in a

required time period. 10 U.S.C. 2538 and 2539, and 50 U.S.C. 82,

provide similar authority specifically for Department of Defense

procurement, but only in time of war or when war is imminent.

(c) Section 602(b) of the Robert T. Stafford Disaster Relief and

Emergency Assistance Act (42 U.S.C. 5195a(b)) provides that the terms

``national defense'' and ``defense'' as used in the Defense Production

Act includes ``emergency preparedness activities'' conducted pursuant

to Title VI of the Stafford Act. The definition of ``national defense''

in Section 702(13) of the

[[Page 51394]]

Defense Production Act provides that this term includes ``emergency

preparedness activities'' conducted pursuant to Title VI of the

Stafford Act.

(d) The Defense Priorities and Allocations System (DPAS) regulation

implements the priorities and allocations authority of the Defense

Production Act and as this authority pertains to Title VI of the

Stafford Act, and the priorities authority of the Selective Service Act

and related statutes, all with respect to industrial resources. The

DPAS ensures the timely availability of industrial resources for

approved programs and provides a regulatory framework to support rapid

industrial response to a national security or major disaster emergency.

* * * * *

3. Section 700.2 is amended by revising paragraphs (a) and (b) to

read as follows:

Sec. 700.2 Introduction.

(a) Certain national defense and energy programs (including

emergency preparedness activities) are approved for priorities and

allocations support. For example, military aircraft production,

ammunition, and certain programs which maximize domestic energy

supplies are ``approved programs.'' A complete list of currently

approved programs is provided at Schedule 1 to this regulation.

(b) The Department of Commerce administers the DPAS to ensure the

timely delivery of industrial items to meet approved program

requirements.

* * * * *

Sec. 700.3 [Amended]

4. Section 700.3(a) is amended by revising the term ``authorized

program'' to read ``approved program''.

5. Section 700.4 is amended:

a. By revising the section heading;

b. By revising paragraphs (a) and (b); and

c. By removing paragraphs (c), (d), and (e); as follows:

Sec. 700.4 Priorities and allocations in a national security

emergency.

(a) In the event of a national security emergency, special rules

may be established as needed to supplement this regulation, thus

ensuring rapid industrial response and the timely availability of

critical industrial items and facilities to meet the urgent defense or

major disaster emergency requirements of approved programs.

(b) The special rules established in response to the emergency may

include provisions for the taking of certain emergency official actions

and the allocation of critical and scarce materials and facilities.

6. Section 700.7(a) is amended by adding the phrase ``and the

Selective Service Act and related statutes'' following the phrase ``the

Defense Production Act''.

7. Section 700.8 is amended:

a. By removing the following definitions: ``Authorized program'',

``Controlled materials'', ``Controlled materials suppliers'',

``Distributors of controlled materials'', ``Further conversion'',

``Lead time'', ``Minimum mill quantity'', and ``Person'';

b. By amending the definition of ``Delegate Agency'', revising the

term ``authorized programs'' to read ``approved programs'';

c. By amending the definition of ``Official action'', adding a

comma followed by the phrase ``the Selective Service Act and related

statutes,'' following the phrase ``the Defense Production Act,'';

d. By amending the definition of ``Rated order'', revising the term

``authorized program'' to read ``approved program''; and

e. By revising the introductory sentence after the section heading,

and adding new definitions in alphabetical order; as follows:

Sec. 700.8 Definitions.

In addition to the definitions provided in Section 702 of the

Defense Production Act, the following definitions pertain to all

sections of the regulation:

Approved program. A program determined as necessary or appropriate

for priorities and allocations support to promote the national defense

by the Secretary of Defense, the Secretary of Energy, or the Director,

Federal Emergency Management Agency, under the authority of the Defense

Production Act, the Stafford Act, and Executive Order 12919, or the

Selective Service Act and related statutes and Executive Order 12742.

* * * * *

Person. Any individual, corporation, partnership, association, or

any other organized group of persons, or legal successor or

representative thereof; or any State or local government or agency

thereof; and for purposes of administration of this regulation,

includes the United States Government and any foreign government or

agency thereof, delegated authority under this regulation.

* * * * *

Selective Service Act and related statutes. Section 18 of the

Selective Service Act of 1948 (50 U.S.C. app. 468), 10 U.S.C. 2538 and

2539, and 50 U.S.C. 82.

* * * * *

Stafford Act. Title VI (Emergency Preparedness) of the Robert T.

Stafford Disaster Relief and Emergency Assistance Act, as amended (42

U.S.C. 5195, et seq.).

8. Section 700.10 is amended:

a. By revising paragraph (a); and

b. By revising the phrase ``Office of Industrial Resource

Administration'' to read ``Office of Strategic Industries and Economic

Security'', and revising the phrase ``authorized programs'' to read

``approved programs'', in paragraph (b); as follows:

Sec. 700.10 Delegation of authority.

(a) The priorities and allocations authorities given to the

President in Title I of the Defense Production Act with respect to

industrial resources, have been delegated to the Secretary of Commerce

under Executive Order 12919 of June 3, 1994 (59 FR 29525), as amended.

The priorities authorities given to the President in the Selective

Service Act and related statutes with respect to industrial resources,

have also been given delegated to the Secretary of Commerce under

Executive Order 12742 of January 8, 1991 (56 FR 1079), as amended.

* * * * *

Sec. 700.11 [Amended]

9. Section 700.11(b) is amended by revising the term ``authorized

programs'' to read ``approved programs''.

10. Section 700.12 is amended by revising paragraph (c) to read as

follows:

Sec. 700.12 Elements of a rated order.

* * * * *

(c) The written signature on a manually placed order, or the

digital signature or name on an electronically placed order, of an

individual authorized to sign rated orders for the person placing the

order. The signature or use of the name certifies that the rated order

is authorized under this regulation and that the requirements of this

regulation are being followed; and

* * * * *

11. Section 700.13 is amended:

a. By adding a new paragraph (b)(4);

b. By removing paragraphs (c)(5), (c)(6), and (c)(7);

c. By redesignating paragraph (c)(8) as paragraph (c)(5) and

amending redesignated paragraph (c)(5) by adding the phrase ``or the

Selective Service Act and related statutes'' following the phrase ``the

Defense Production Act'';

d. By revising paragraph (d); and

e. By adding an OMB control number; as follows:

[[Page 51395]]

Sec. 700.13 Acceptance and rejection of rated orders.

* * * * *

(b) Mandatory rejection. * * *

(4) If a person is unable to fill all the rated orders of equal

priority status received on the same day, the person must accept, based

upon the earliest delivery dates, only those orders which can be

filled, and reject the other orders. For example, a person must accept

order A requiring delivery on December 15 before accepting order B

requiring delivery on December 31. However, the person must offer to

accept the rejected orders based on the earliest delivery dates

otherwise possible.

* * * * *

(d) Customer notification requirements. (1) A person must accept or

reject a rated order in writing or electronically within fifteen (15)

working days after receipt of a DO rated order and within ten (10)

working days after receipt of a DX rated order. If the order is

rejected, the person must give reasons in writing (not electronically)

for the rejection.

(2) If a person has accepted a rated order and subsequently finds

that shipment or performance will be delayed, the person must notify

the customer immediately, give the reasons for the delay, and advise of

a new shipment or performance date. If notification is given verbally,

written or electronic confirmation must be provided within five (5)

working days.

[The information collection requirements in paragraphs (d)(1) and

(d)(2) are approved by the Office of Management and Budget under

control number 0694-0053.]

12. Section 700.14 is amended by revising paragraph (c) to read as

follows:

Sec. 700.14 Preferential scheduling.

* * * * *

(c) Conflicting rated orders. (1) If a person finds that

production, delivery, or performance against any accepted rated orders

conflicts with production, delivery, or performance against other

accepted rated orders of equal priority status, the person shall give

preference to the conflicting orders in the sequence in which they were

received (not to the required delivery dates). If the conflicting rated

orders were received on the same day, the person shall give preference

to those orders which have the earliest delivery dates.

(2) If a person is unable to resolve rated order production,

delivery, or performance conflicts under these rules, the person should

promptly seek special priorities assistance as provided in Secs. 700.50

through 700.54. If the person's customer objects to the rescheduling of

a rated order, the customer should promptly seek special priorities

assistance as provided in Secs. 700.50 through 700.54. For any rated

order against which delivery or performance will be delayed, the person

must notify the customer as provided in Sec. 700.13(d)(2).

* * * * *

13. Section 700.17 is amended:

a. By removing the parenthetical phrase ``(except as provided in

Sec. 700.31(d)--Controlled materials program identification symbols)''

in paragraph (b)(2);

b. By removing the parenthetical phrase ``(not applicable to

controlled materials producers)'' in paragraph (b)(3);

c. By removing the phrase found at the end of the paragraph,

``except as provided in Sec. 700.31(d) (Controlled materials program

identification symbols)'', in paragraph (c).

d. By revising paragraph (d)(1);

e. By redesignating paragraph (d)(2) as (d)(3);

f. By adding a new paragraph (d)(2); and

g. By revising paragraph (f); as follows:

Sec. 700.17 Use of rated orders.

* * * * *

(d) Combining rated and unrated orders. (1) A person may combine

rated and unrated order quantities on one purchase order provided that:

(i) The rated quantities are separately and clearly identified; and

(ii) The four elements of a rated order, as required by

Sec. 700.12, are included on the order with the statement required in

Sec. 700.12(d) modified to read in substance:

This purchase order contains rated order quantities certified

for national defense use, and you are required to follow all the

provisions of the Defense Priorities and Allocations System

regulation (15 CFR part 700) only as it pertains to the rated

quantities.

(2) A supplier must accept or reject the rated portion of the

purchase order as provided in Sec. 700.13 and give preferential

treatment only to the rated quantities as required by this regulation.

This regulation may not be used to give preferential treatment to the

unrated portion of the order.

* * * * *

(f) A person is not required to place a priority rating on an order

for less than $100,000 provided that delivery can be obtained in a

timely fashion without the use of the priority rating.

14. Section 700.18 is amended:

a. By adding a new paragraph (a)(2)(v);

b. By revising paragraph (b)(1); and

c. By removing the first item listed, ``communication services'',

and the parenthetical phrase, ``(as defined in Schedule III)'' which

follows the item, ``Copper raw materials'', in paragraph (b)(3); as

follows:

Sec. 700.18 Limitations on placing rated orders.

(a) * * *

(2) * * *

(v) Any items related to the development of chemical or biological

warfare capabilities or the production of chemical or biological

weapons.

(b) Jurisdictional limitations. (1) The priorities and allocations

authority for certain items has been delegated under Executive Orders

12919 and 12742, other executive order, or Interagency Memoranda of

Understanding to other agencies. Unless otherwise agreed to by the

concerned agencies, the provisions of this regulation are not

applicable to these items which include:

(i) Food resources, food resource facilities, and the domestic

distribution of farm equipment and commercial fertilizer (Department of

Agriculture--see Attachment A to DPAS Delegation 1 in Appendix I to

Part 700 concerning combat rations);

(ii) All forms of energy, including radioisotopes, stable isotopes,

source material, and special nuclear material produced in Government-

owned plants or facilities operated by or for the Department of Energy

(Department of Energy);

(iii) Health resources (Department of Health and Human Services);

(iv) All forms of civil transportation (Department of

Transportation);

(v) Water resources (Department of Defense/U.S. Army Corps of

Engineers);

(vi) Communications services (National Communications System under

Executive Order 12472 of April 3, 1984); and

(vii) Mineral resources and mineral processing facilities

(Department of the Interior/U.S. Geological Survey--see Memorandum of

Understanding Between Interior and Commerce in DPAS Appendix II to Part

700).

* * * * *

15. Section 700.21 is amended:

a. By revising paragraph (a);

b. By revising the phrase ``materials or equipment'' to read

``materials, equipment, or services'' in paragraphs (b)(2), (c)

introductory text, (c)(1) introductory text, and (d); and

c. By revising the term ``authorized programs'' to read ``approved

programs'' in paragraph (f); as follows:

[[Page 51396]]

Sec. 700.21 Application for priority rating authority.

(a) For projects believed to maximize domestic energy supplies, a

person may request priority rating authority for scarce, critical, and

essential supplies of materials, equipment, and services (related to

the production of materials or equipment, or the installation, repair,

or maintenance of equipment) by submitting DOE Form PR 437 to the

Department of Energy. Blank applications and further information may be

obtained from the U.S. Department of Energy, Office of Clearance and

Support, Field/Headquarters Support Division, Forrestal Building, 1000

Independence Avenue, S.W., Washington, D.C. 20585; Attn.: PR-132.

* * * * *

16. Subpart F is amended:

a. By revising the Subpart heading;

b. By revising Sec. 700.30; and

c. By removing Sec. 700.31; as follows:

Subpart F--National Security Emergency Preparedness and Critical

Items

Sec. 700.30 Priorities and allocations in a national security

emergency.

(a) In the event of a national security emergency, special rules

may be established as needed to supplement this regulation, thus

ensuring rapid industrial response and the timely availability of

critical industrial items and facilities to meet the urgent defense or

major disaster emergency requirements of approved programs.

(1) National security emergency. A ``national security emergency''

is defined in section 101(a) of E.O. 12656 (November 18, 1988), as

amended, as any occurrence, including a natural disaster or an

accidental or man-caused major disaster event such as military attack,

technological emergency, or other emergency, that seriously degrades or

seriously threatens the national or economic security of the United

States.

(2) Emergency official actions. (i) As needed, this regulation may

be supplemented to include additional definitions to cover civilian

emergency preparedness industrial items, support for essential civilian

programs, and provisions for the taking of certain emergency official

actions under sections 700.60 through 700.63.

(ii) Emergency official actions may include:

(A) Controlling inventories of critical and scarce defense and/or

emergency preparedness items;

(B) Restricting the purchase, use, or distribution of critical and

scarce defense and/or emergency preparedness items, or the use of

production or distribution facilities, for non-essential purposes; and

(C) Converting the production or distribution of non-essential

items to the production or distribution of critical and scarce defense

and/or emergency preparedness items.

(3) Allocation of critical and scarce items and facilities. (i) As

needed, this regulation may be supplemented to establish special rules

for the allocation of scarce and critical items and facilities to

ensure the timely availability of these items and facilities for

approved programs, and to provide for an equitable and orderly

distribution of requirements for such items among all suppliers of the

items. These rules may provide for the allocation of individual items

or they may be broad enough to direct general industrial activity as

required in support of emergency requirements.

(ii) Allocation rules (i.e., controlled materials programs) were

established in response to previous periods of national security

emergency such as World War II and the Korean Conflict. The basic

elements of the controlled materials programs were the set-aside (the

amount of an item for which a producer or supplier must reserve order

book space in anticipation of the receipt of rated orders), the

production directive (requires a producer to supply a specific

quantity, size, shape, and type of an item within a specific time

period), and the allotment (the maximum quantity of an item authorized

for use in a specific program or application). These elements can be

used to assure the availability of any scarce and critical item for

approved programs. Currently, a set-aside applies only to metalworking

machines (see Sec. 700.31).

(4) In the event that certain critical items become scarce, and

approved program requirements for these items cannot be met without

creating a significant dislocation in the civilian market place so as

to create appreciable hardship, Commerce may establish special rules

under section 101(b) of the Defense Production Act to control the

general distribution of such items in the civilian market.

(b) Regional Emergency Coordinators. (1) If due to a catastrophic

national security emergency event, communications with Commerce

headquarters in Washington, D.C. are severed, DPAS Emergency Delegation

1 will provide authority to the Regional Emergency Coordinators (REC)

located in the Standard Federal Region Council cities (Boston, New

York, Philadelphia, Atlanta, Dallas, Kansas City, Chicago, Denver, San

Francisco, and Seattle) to represent the Secretary of Commerce, and as

necessary, act for the Secretary to carry out the emergency industrial

production and distribution control functions of Commerce as set forth

in this regulation, in any supplement thereto, or other applicable

authority. See DPAS Emergency Delegation 1 (Appendix V to Part 700) for

further information about the authority and duties of the RECs, and the

effective date of the Delegation.

(2) If DPAS Delegation 1 is implemented due to a catastrophic

national security emergency event, requests for special priorities

assistance under sections 700.50-55 of this regulation should be filed

with the nearest Regional Emergency Coordinator located in one of the

Standard Federal Region Council cities as provided in DPAS Delegation 1

(Appendix V to Part 700).

17. Subpart G is amended:

a. By removing Sec. 700.40;

b. By redesignating Sec. 700.41 as Sec. 700.31 in Subpart F; and

c. By removing the subpart heading and reserving Subpart G for

future use; as follows:

Subpart G--[Reserved]

18. Section 700.50(c) is amended by revising the term ``ITA-999''

to read ``BXA-999'' each of the three times it appears in the

paragraph; by revising the term ``(OMB #0625-0015)'' to read ``(OMB

#0694-0057)''; and by removing the comma followed by the phrase ``any

Commerce District Office''.

19. Section 700.54 is amended by revising the section heading and

the second sentence of the introductory text, as follows:

Sec. 700.54 Instances where assistance may not be provided.

* * * * *

Examples where assistance may not be provided include situations

when a person is attempting to:

* * * * *

Sec. 700.55 [Amended]

20. Section 700.55 is amended:

a. By revising the term ``authorized programs'' to read ``approved

programs'' in paragraph (a);

b. By revising the term ``Canadian Department of Supply and

Services'' to read ``Canadian Public Works and Government Services

Canada'' in paragraphs (b)(2), (b)(3), (b)(4), (b)(5), and (b)(6); and

c. By revising the term ``ITA-999'' to read ``BXA-999'' in

paragraph (b)(6).

[[Page 51397]]

Secs. 700.70, 700.71, 700.72, 700.23, 700.75, 700.80, 700.91 [Amended]

21. The phrase ``the Selective Service Act and related statutes,''

is added following the phrase ``the Defense Production Act,'' wherever

it appears in the following places:

Sec.

700.70(a)

700.71(a)

700.71(c)(1)

700.71(c)(2)

700.71(c)(3)

700.72(a)

700.73(a)

700.73(b)

700.75

700.80(a)(2)

700.91(d)

22. Section 700.72(b) is amended by revising the term ``Assistant

General Counsel for International Trade'' to read ``Chief Counsel for

Export Administration''.

23. Section 700.74 is amended:

a. By revising paragraph (a);

b. By removing paragraph (b);

c. By redesignating paragraph (c) as paragraph (b), and paragraph

(d) as paragraph (c); as follows:

Sec. 700.74 Violations, penalties, and remedies.

(a) Willful violation of the provisions of Title I or Sections 705

or 707 of the Defense Production Act, the priorities provisions of the

Selective Service Act and related statutes, this regulation, or an

official action, is a crime and upon conviction, a person may be

punished by fine or imprisonment, or both. The maximum penalty provided

by the Defense Production Act is a $10,000 fine, or one year in prison,

or both. The maximum penalty provided by the Selective Service Act and

related statutes is a $50,000 fine, or three years in prison, or both.

* * * * *

24. The term ``Office of Industrial Resource Administration'' is

revised to read ``Office of Strategic Industries and Economic

Security'' in the following places:

Secs. 700.80, 700.81, 700.93 [Amended]

Sec.

700.80(a)

700.80(c)

700.80(d)

700.81(a)

700.81(b)

700.93

25. The phrase ``Assistant Secretary for Trade Administration'' is

revised to read ``Assistant Secretary for Export Administration'' in

the following places:

Sec.

700.80(d)

700.81(a)

700.81(b)

700.81(d)

700.81(e)

700.81(f)

700.81(g)

700.81(h)

26. Section 700.81(b) is amended by revising the term

``International Trade Administration'' to read ``Bureau of Export

Administration''.

27. Section 700.91(a) is amended by revising the term ``(OMB #0625-

0107)'' to read ``(OMB #0694-0053)''.

28. Section 700.93 is amended by revising the phrase ``telephone:

(202) 377-4506'' to read ``telephone: (202) 482-3634, or FAX: (202)

482-5650''.

Schedule 1 to Part 700--[Amended]

29. Schedule 1 to Part 700 is amended:

a. By revising the column heading ``Authorized Program'' to read:

``Approved Program''; and by revising the title of the Schedule and the

first paragraph of the two paragraph explanation of the Schedule;

b. By removing the following program identification symbols and

associated authorized program names from the Schedule: ``C8--Controlled

materials for Defense Industrial Supply Center (DISC)'', ``H2--

Controlled materials producers'', ``H3--Further converters (controlled

materials)'', and ``H4--Distributors of controlled materials'';

c. By removing the term ``Federal Aviation Administration'' from

the list of Associated Agencies of the Department of Defense contained

in footnote 1;

d. By adding the following program identification symbols and

associated approved program names to the Schedule: ``C1--Food resources

(combat rations)'' under the ``Defense Programs'' heading; and ``H8--

Special projects'', under the ``Other Defense, Energy and Related

Programs'' heading;

e. By revising the ``Other Energy Programs'' heading to read:

``Domestic Energy Programs''; and revising the ``F3'' program name

``Construction and Maintenance'' to read: ``Construction, repair, and

maintenance''; and

f. By revising the ``N1'' program name ``Approved civil defense

programs'' to read ``Emergency Preparedness Activities''; as follows:

Defense Priorities and Allocations System

Schedule 1 to Part 700--Approved Programs and Delegate Agencies

The programs listed in this schedule have been approved for

priorities and allocations support under this regulation. They have

equal preferential status.

* * * * *

Schedule II to Part 700--[Amended]

30. Schedule II to part 700 (Controlled Materials), Schedule III to

part 700 (Technical Definitions of Controlled Materials Products),

Schedule IV to part 700 (Copper Controlled Materials Producers' Set-

aside Base and Percentages), and Schedule V to part 700 (Nickel Alloys

Controlled Materials Producers' Set-aside Base and Percentages) are

removed.

Issued: September 29, 1997.

William V. Skidmore,

Assistant Secretary (Acting) for Export Administration.

[FR Doc. 97-26109 Filed 9-30-97; 8:45 am]

BILLING CODE 3510-DT-P