Defense Priorities and Allocations System

DEPARTMENT OF COMMERCE

Bureau of Export Administration

15 CFR Part 700

[Docket No. 970827205-8126-02]

RIN 0694-AA02

Defense Priorities and Allocations System

AGENCY: Bureau of Export Administration, Commerce.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Department of Commerce is issuing this rule to amend the

Defense Priorities and Allocations System (DPAS) regulation by

updating, modifying and clarifying a number of its provisions.

In reviewing the current DPAS and in issuing this rule, the

objective has been to improve DPAS administration and implementation

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

EFFECTIVE DATE: This rule is effective July 13, 1998.

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 Constitution Avenue,

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

482-5650, and E-Mail: [email protected].

SUPPLEMENTARY INFORMATION:

Background

On October 1, 1997, the Department of Commerce published in the

Federal Register (62 FR 51389) a request for comments on a proposed

rule that would amend the Defense Priorities and Allocations System

(DPAS) regulation by updating, modifying, and clarifying a number of

its provisions.

Interested parties were requested to submit comments on the

proposed rule by October 31, 1997. Interested parties were also

requested to provide comments on any other provision of the DPAS that

may be hindering effective and efficient administration or

implementation. Of the seven comments received, only two were from

private sector firms. Based on these comments and an editorial review

of the proposed rule, several provisions of the proposed rule are

further revised and clarified, and various editorial changes are made.

Analysis of Comments

No commenters objected to the proposed rule. Accordingly, the

Department is proceeding with publication of this final rule with the

changes discussed below.

Public comments were particularly sought concerning the proposed

revision of three provisions that directly affect industry operations

under the DPAS. These provisions pertain to: (1) the time period within

which a supplier must accept or reject a rated order

[Sec. 700.13(d)(1)]; (2) the order of precedence to be given by

contractors and suppliers to conflicting rated orders of equal priority

status (Sec. 700.14); and (3) the combining by a contractor of defense

rated requirements with commercial (unrated) requirements on one

purchase order to a supplier [Sec. 700.17(d)].

Comments were also sought concerning (1) a proposal to remove the

controlled materials provisions from Secs. 700.30-700.31 and all other

provisions, references, and supporting schedules to the program from

throughout the regulation; and (2) proposals to make various other

jurisdictional, technical, administrative, and miscellaneous revisions

to a number of DPAS provisions. These revisions are needed to address

changes to delegated 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 emergency or

domestic emergency preparedness situation.

1. Customer Notification of Acceptance or Rejection of Rated Orders

Industry has complained about the difficulty of complying with the

customer notification requirements of Sec. 700.13(d)(1). These rules

required 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. Accordingly,

Sec. 700.13(d)(1) is revised to extend the time within which a person

must accept or reject a rated order by five (5) working days to fifteen

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

working days after receipt of a DX rated order. No commenter on the

proposed rule objected to this change.

Also, because of the increasing use by industry of electronic data

interchange to place contracts and purchase orders, Sec. 700.13(d) is

revised to reference specifically the electronic placement, acceptance,

and rejection of rated orders. However, if the rated order is

[[Page 31919]]

rejected, the rule requires that the reasons for rejection be provided

in writing (not electronically).

One commenter objected to the requirement that a person must

acknowledge acceptance of a rated order. The primary goal of the DPAS

is to ensure timely delivery of defense items. Thus, it is most

important that customers receive written or electronic proof from their

suppliers that their rated orders were accepted for delivery as

required by the order. It should be noted that this requirement to

acknowledge acceptance of the receipt of a rated order is an obligation

placed on the recipient of the order, not on the person placing the

order.

2. Precedence of Rated Orders of Equal Priority Status

Many companies have requested clarification of the DPAS rules on

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

status (DX or DO) when production, delivery or performance scheduling

conflicts or other problems arise following acceptance of the rated

orders. Accordingly, Sec. 700.14(c) (Preferential scheduling) is

revised to provide that if a person finds that delivery or performance

against any accepted rated orders conflicts with the 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 are to be delivered or performed (not to the

receipt dates). However, if the conflicting rated orders are scheduled

to be delivered or performed on the same day, the person shall give

preference to those orders which have the earliest receipt dates. If

under these rules, the delivery or performance conflicts cannot be

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

order, special priorities assistance should be requested promptly under

Secs. 700.50-700.54.

It should be noted that the proposed rule specified the receipt

dates of the conflicting rated orders as the criteria for precedence.

Because Department of Defense (DOD) and an industry commenter

objections, and to emphasize the importance of timely delivery against

rated orders, the final rule establishes the delivery or performance

schedule as the criteria for precedence.

3. Combining Defense Rated Requirements With Commercial (Unrated)

Requirements

The final rule revises Sec. 700.17(d) (Use of rated orders) to

eliminate the requirement for a contractor who combines rated and

unrated order quantities on a purchase order to a supplier, to attach

to the combined order a separate rated order with the rated quantities.

Many companies have objected to this separate rated order requirement

and the industry commenters on the proposed rule expressed support for

its elimination.

The final rule also provides that the rated quantities in the

combined purchase order must be clearly and separately identified and

that a special statement must be included 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.

4. National Security Emergency Preparedness and Removal of the

Controlled Materials Provisions

No commenter objected to removal from the DPAS of all provisions

and references pertaining to the controlled materials program.

Therefore, the final rule removes all such provisions and references,

including Schedules II, III, and IV to part 700.

The final rule also further revises the text of Sec. 700.30 to

clearly state 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 national defense or domestic emergency preparedness requirements

of approved programs.

5. New Approved Programs

Except as discussed below, no commenter objected to the proposed

addition of two new approved programs, ``Designated Programs'' and

``Food Resources (combat rations)'', and changing the ``N1'' Federal

Emergency Management Agency program name to ``Emergency Preparedness

Activities''. Accordingly, the final rule revises Schedule 1 to part

700 to title the Schedule ``Approved Programs and Delegate Agencies'';

assign the ``Designated Programs'' program to the Department of

Commerce as Delegate Agency and identify the program with the ``H8''

Program Identification Symbol; and assign the ``Food Resources (combat

rations)'' program to the Department of Defense (DOD) as Delegate

Agency and identify the program with the ``C1'' Program Identification

Symbol. At the request of DOD, the program name ``Designated Programs''

is used in this final rule instead of the name ``Special Projects'' to

avoid confusion over use of this term for other purposes.

6. Minimum Rated Order Amount

Under the proposed rule, the minimum rated order amount in

Sec. 700.17(f) would have increased from $5000 to $100,000 to conform

to the current simplified Federal Acquisition Regulation (FAR) small

order threshold of $100,000 (see FAR Sec. 2.101). Although the private

sector commenters supported this change, DOD objected on the grounds

that too many lower cost critical defense orders, especially at the

lower-tier levels of the industrial base, would no longer be priority

rated, this impacting DPAS effectiveness.

However, recognizing the need to increase the minimum rated order

amount, DOD recommended that this amount be established at $50,000, or

one half of the FAR Simplified Acquisition Threshold, which ever amount

is larger, provided that delivery can be obtained in a timely fashion

without the use of a priority rating. We have decided to adopt the DOD

recommendation and increase the minimum rated order amount accordingly.

During the next several years, we will review the impact of this

revision on the timeliness of defense procurement and public comment is

invited. If warranted, a further adjustment of the minimum rated order

amount will be proposed.

7. Other Revisions and Non-Substantive and Editorial Changes

Several commenters provided comment on various technical issues

such as the correctness of citations and definitions; the use of terms

such as ``national security emergency'', ``domestic emergency

preparedness'', and ``requirements contract'' and ``calls''; and the

need for a definition of the term ``industrial resources''. To further

improve the clarity and effectiveness of the DPAS, this rule

incorporates these revisions. An editorial review of the proposed rule

also suggested the need for further editorial and technical corrections

and these revisions are made in this rule.

8. DPAS Schedule I and the Other DPAS Schedules

This rule revises DPAS Schedule 1 to part 700, which lists all

Approved Programs for DPAS support. All other DPAS Schedules (II

through V), which pertained to the controlled materials program, are

removed.

DPAS Schedule 1 is revised by changing the term ``Authorized

Program'' to ``Approved Program'' wherever it appears in the Schedule

and

[[Page 31920]]

by making appropriate changes to the first paragraph of the two

paragraph explanation of the Schedule. This rule also removes from the

Schedule (1) all program identification symbols and associated

authorized program names from the Schedule that pertained to the

controlled materials program [``C8--Controlled materials for Defense

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

producers'', ``H3--Further converters (controlled materials)'', and

``H4--Distributors of controlled materials'']; and (2) the term

``Federal Aviation Administration'' from the list of Associated

Agencies of the Department of Defense contained in footnote 1.

Added to Schedule 1 by this rule are two new program identification

symbols and associated approved program names, as follows: ``C1--Food

resources (combat rations)'' under the ``Defense Programs'' heading;

and ``H8--Designated Programs'', under the ``Other Defense, Energy and

Related Programs'' heading.

Finally, this rule revises (1) the ``Other Energy Programs''

heading in Schedule 1 to read: ``Domestic Energy Programs''; (2) the

``F3'' program name ``Construction and Maintenance'' to read:

``Construction, repair, and maintenance''; and (3) the ``N1'' program

name ``Approved civil defense programs'' to read ``Emergency

Preparedness Activities''.

9. Appendices

There are a number of documents required to support the effective

and efficient implementation and administration of the DPAS regulation.

These documents include (1) Delegations of Authority from the

Department of Commerce to the Departments of Defense and Energy,

General Services Administration, and the Federal Emergency Management

Agency (Delegate Agencies) who use the DPAS to support their national

defense related procurement; (2) Interagency Memoranda of Understanding

between the Department of Commerce and Departments of Agriculture,

Energy, and the Interior pertaining to resource jurisdiction issues and

delegated authority; (3) Form BXA-999 (formerly Form ITA-999), used to

request Special Priorities Assistance; (4) Memorandum of Understanding

on Priorities and Allocations Support Between the Department of

Commerce and the Canadian Public Works and Government Services Canada

(formerly the Canadian Department of Supply and Services); and (5) DPAS

Emergency Delegation 1. These documents, except for DPAS Emergency

Delegation 1, were previously included in the Code of Federal

Regulations (CFR) as Appendices I through IV. DPAS Emergency Delegation

1 would be implemented if in a catastrophic national security

emergency, communications with Department of Commerce headquarters in

Washington, D.C. are severed. All of these documents have been updated

and revised.

Because it is used by the public and therefore of significant

public interest, Form BXA-999 is redesignated as Appendix I to part 700

and published with this rule. Because they are of limited public

interest, the Delegations of Authority, Interagency Memoranda of

Understanding, Memorandum of Understanding on Priorities and

Allocations Support Between the Department of Commerce and the Canadian

Public Works and Government Services Canada, and DPAS Emergency

Delegation 1, will not be published with this rule. However, copies of

Appendix I and these other DPAS documents, designated as Appendices II

through V, respectively, may be obtained by contacting the DPAS Program

Manager at the Department of Commerce (see FOR FURTHER INFORMATION

CONTACT section above). Copies of Appendix I may also be obtained from

any Department of Defense, Defense Contract Management Command field

office.

Public Rulemaking Docket

The public rulemaking docket concerning this regulation is

maintained in 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. 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 made certain determinations with respect to the

following rulemaking requirements:

1. Classification under E.O. 12866: This amendment of the DPAS

regulation 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 Business Administration, that this amendment of the DPAS

regulation will not have a significant economic impact on a substantial

number of small entities. This amendment of the DPAS merely updates,

modifies, or clarifies a number of provisions to make the DPAS more

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

are made in response to comments and recommendations received from the

business community, thus ensuring that the updated DPAS conforms to

current business practices and enabling all business entities subject

to its requirements to increase the efficiency of their operations and

realize certain cost savings. In addition, some DPAS provisions are

revised to conform the regulation to recent statutory and

organizational changes while other provisions are 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. These DPAS

revisions, in and of themselves, impose no economic impact on any

business entity, including small entities, and 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 were approved by the Office of

Management and Budget (OMB) under the provisions of Section 3507 of the

Paperwork Reduction Act of 1980, amended (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 any DPAS information collection requirements unless the

information

[[Page 31921]]

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 14,477 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) 88 total hours to provide notice of rejection of a

priority rated order (350 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).

Send comments regarding this burden estimate or any other aspect of

the data requirements, including suggestions for reducing this burden,

to Richard V. Meyers at the address given in the FOR FURTHER

INFORMATION CONTACT section above, or to the Office of Information and

Regulatory Affairs, Office of Management and Budget, New Executive

Office Building, 725 17th Street, N.W., Room 10235, Washington, D.C.

20503; Attn.: Desk Officer for the Bureau of Export Administration

4. E.O. 12612: This amendment of the DPAS regulation 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

amended as follows:

PART 700--[AMENDED]

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, 59 FR 29525, 3 CFR,

1994 Comp., p. 901; Section 18 of the Selective Service Act of 1948

(50 U.S.C. App. 468), 10 U.S.C. 2538, 50 U.S.C. 82, and Executive

Order 12742, 56 FR 1079, 3 CFR, 1991 Comp., p. 309; and Executive

Order 12656, 53 FR 226, 3 CFR, 1988 Comp., p. 585.

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.

* * * * *

(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 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 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 an operating system to support rapid

industrial response to a national emergency.

* * * * *

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

by revising the phrase ``Appendix I'' to read ``Appendix II'' in

paragraph (c); 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 part.

(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 revised to read as follows:

Sec. 700.4 Priorities and allocations in a national emergency.

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

established as needed to supplement this part, thus ensuring rapid

industrial response and the timely availability of critical industrial

items and facilities to meet the urgent national defense requirements,

including domestic emergency preparedness 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.

Sec. 700.7 [Amended]

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'', and ``Minimum mill quantity'';

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

the term

[[Page 31922]]

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

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

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

the phrase ``the Defense Production Act'';

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

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

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

revising the definition of ``person'', and adding new definitions of

``approved program'', ``industrial resources'', and ``Selective Service

Act and related statutes'' to read as follows:

Sec. 700.8 Definitions.

In addition to the definitions provided in Section 702 of the

Defense Production Act (excepting the definition of ``industrial

resources'') and Section 602(a) of the Stafford Act, the following

definitions pertain to all sections of this part:

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.

* * * * *

Industrial resources--all materials, services, and facilities,

including construction materials, the authority for which has not been

delegated to other agencies under Executive Order 12919. This term also

includes the term ``item'' as defined and used in this part.

* * * * *

Person--any individual, corporation, partnership, association, or

any other organized group of persons, or legal successor or

representative thereof; or any authorized State or local government or

agency thereof; and for purposes of administration of this part,

includes the United States Government and any authorized foreign

government or agency thereof, delegated authority as provided in this

part.

* * * * *

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

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'', by revising the phrase ``authorized programs'' to read

``approved programs'', and by revising the phrase ``Appendix I'' to

read ``Appendix II'', in paragraph (b); as follows:

Sec. 700.10 Delegation of authority.

(a) The priorities and allocations authorities of the President

under 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). The priorities

authorities of the President under the Selective Service Act and

related statutes with respect to industrial resources have also been

delegated to the Secretary of Commerce under Executive Order 12742 of

January 8, 1991 (56 FR 1079).

* * * * *

Sec. 700.11 [Amended]

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

program'' to read ``approved program'', and revising the term

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

10. Section 700.12 is amended by revising paragraphs (b) and (c) to

read as follows:

Sec. 700.12 Elements of a rated order.

* * * * *

(b) A required delivery date or dates. The words ``immediately'' or

``as soon as possible'' do not constitute a delivery date. A

``requirements contract'', ``basic ordering agreement'', ``prime vendor

contract'', or similar procurement document bearing a priority rating

may contain no specific delivery date or dates and may provide for the

furnishing of items from time-to-time or within a stated period against

specific purchase orders, such as ``calls'', ``requisitions'', and

``delivery orders''. These purchase orders must specify a required

delivery date or dates and are to be considered as rated as of the date

of their receipt by the supplier and not as of the date of the original

procurement document;

(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 part and that the requirements of this part

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:

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 OMB

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 delivery

or performance against any accepted rated

[[Page 31923]]

orders conflicts with the 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 are

to be delivered or performed (not to the receipt dates). If the

conflicting rated orders are scheduled to be delivered or performed on

the same day, the person shall give preference to those orders which

have the earliest receipt dates.

(2) If a person is unable to resolve rated order delivery or

performance conflicts under this section, 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

delivery or performance 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 part. This

part 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 $50,000, or one half of the Federal Acquisition

Regulation (FAR) Simplified Acquisition Threshold (see FAR 2.101),

whichever amount is larger, 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);

c. By revising the phrase ``Appendix II'' to read ``Appendix III''

in paragraph (b)(2); and

d. 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, unless such development or production has been authorized by

the President or the Secretary of Defense.

(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 part 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 II 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 III to

part 700).

* * * * *

15. Section 700.21 is amended:

a. By revising paragraph (a);

b. By revising the phrases ``materials or equipment'' and

``material 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:

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 revisied to read as follows:

Subpart F--National Emergency Preparedness and Critical Items

Sec. 700.30 Priorities and allocations in a national emergency.

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

established as needed to supplement this part, thus ensuring rapid

industrial response and the timely availability of critical industrial

items and facilities to meet the urgent national defense requirements,

including domestic emergency preparedness requirements, of approved

programs.

(1) Emergency official actions. (i) As needed, this part may be

supplemented

[[Page 31924]]

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 Secs. 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.

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

needed, this part 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).

(3) 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 part, in any supplement thereto, or other applicable authority.

See DPAS Emergency Delegation 1 for further information about the

authority and duties of the RECs, and the effective date of the

Delegation.

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

catastrophic national security emergency event, requests for special

priorities assistance under Secs. 700.50 through 700.55 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.

Sec. 700.41 [Redesignated as Sec. 700.31]

Subpart G--[Removed and Reserved]

17. Section 700.41 is redesignated as Sec. 700.31 in Subpart F; and

Subpart G is removed and reserved.

Sec. 700.50 [Amended]

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 control number 0625-0015)'' to

read ``(OMB control number 0694-0057)''; by removing the phrase ``, any

Commerce District Office''; and by revising the phrase ``Appendix III''

to read ``Appendix I''.

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

by revising the phrase ``The Department of Supply and Services'' to

``Public Works and Government Services Canada'' in paragraph (b)(5).

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

paragraph (b)(6).

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)

Sec. 700.72 [Amended]

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 part, 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:

[[Page 31925]]

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)

Sec. 700.81 [Amended]

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

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

Administration''.

Sec. 700.91 [Amended]

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

control number 0625-0107)'' to read ``(OMB control number 0694-0053)''.

Sec. 700.93 [Amended]

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''.

29. Schedule 1 to part 700 is revised, 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 part. They have equal

preferential status. The Department of Commerce has authorized the

Delegate Agencies to use this part in support of those programs

assigned to them, as indicated below.

----------------------------------------------------------------------------------------------------------------

Program identification symbol Approved program Delegate agency

----------------------------------------------------------------------------------------------------------------

Defense programs:

A1.................................... Aircraft................ Department of Defense.\1\

A2.................................... Missiles................ Do.

A3.................................... Ships................... Do.

A4.................................... Tank--Automotive........ Do.

A5.................................... Weapons................. Do.

A6.................................... Ammunition.............. Do.

A7.................................... Electronic and Do.

communications

equipment.

B1.................................... Military building Do.

supplies.

B8.................................... Production equipment Do.

(for defense

contractor's account).

B9.................................... Production equipment Do.

(Government owned).

C1.................................... Food resources (combat Do.

rations).

C2.................................... Department of Defense Do.

construction.

C3.................................... Maintenance, repair, and Do.

operating supplies

(MRO) for Department of

Defense facilities.

C9.................................... Miscellaneous........... Do.

International defense programs:

Canada:

D1................................ Canadian military Department of Commerce.

programs.

D2................................ Canadian production and Do.

construction.

D3................................ Canadian atomic energy Do.

program.

Other Foreign Nations:

G1................................ Certain munitions items Department of Commerce.

purchased by foreign

governments through

domestic commercial

channels for export.

G2................................ Certain direct defense Do.

needs of foreign

governments other than

Canada.

G3................................ Foreign nations (other Do.

than Canada) production

and construction.

Co-Production:

J1................................ F-16 Co-Production Departments of Commerce and Defense.

Program.

Atomic energy programs:

E1.................................... Construction............ Department of Energy.

E2.................................... Operations--including Do.

maintenance, repair,

and operating supplies

(MRO).

E3.................................... Privately owned Do.

facilities.

Domestic energy programs:

F1.................................... Exploration, production, Department of Energy.

refining, and

transportation.

F2.................................... Conservation............ Do.

F3.................................... Construction, repair, Do.

and maintenance.

Other defense, energy, and related

programs:

H1.................................... Certain combined orders Department of Commerce.

(see section 700.17(c)).

H5.................................... Private domestic Do.

production.

H6.................................... Private domestic Do.

construction.

H7.................................... Maintenance, repair, and Do.

operating supplies

(MRO).

H8.................................... Designated Programs..... Do.

K1.................................... Federal supply items.... General Services Administration.

N1.................................... Emergency preparedness Federal Emergency Management Agency.

activities.

----------------------------------------------------------------------------------------------------------------

\1\ Department of Defense includes: Armed Services--Army, Navy (including Marines and Coast Guard), and Air

Force; Component Agencies, including Defense Logistics Agency, National Security Agency, Defense Advanced

Research Projects Agency, Defense Information Systems Agency, Defense Nuclear Agency, Defense Mapping Agency,

and On-Site Inspection Agency; and Associated Agencies, including Central Intelligence Agency and National

Aeronautics and Space Administration.

[[Page 31926]]

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.

31. Appendix I to part 700 is revised, as follows:

Defense Priorities and Allocations System

Appendix 1 to Part 700

Form BXA-999--Request for Special Priorities Assistance

BILLING CODE 3510-JT-P

[[Page 31927]]

[GRAPHIC] [TIFF OMITTED] TR11JN98.008

[[Page 31928]]

[GRAPHIC] [TIFF OMITTED] TR11JN98.009

[[Page 31929]]

[GRAPHIC] [TIFF OMITTED] TR11JN98.010

[[Page 31930]]

[GRAPHIC] [TIFF OMITTED] TR11JN98.011

BILLING CODE 3510-JT-C

32. Appendix II to part 700: Interagency Memoranda of

Understanding; Appendix III to part 700: Form ITA-999--Request for

[[Page 31931]]

Special Priorities Assistance; and Appendix IV to part 700: Memorandum

of Understanding on Priorities and Allocations Support Between the

Department of Commerce and the Canadian Department of Supply and

Services, are removed.

Issued: June 5, 1998.

Iain S. Baird,

Deputy Assistant Secretary for Export Administration.

[FR Doc. 98-15410 Filed 6-10-98; 8:45 am]

BILLING CODE 3510-JT-P