Exports of High Performance Computers Under License Exception CTP

DEPARTMENT OF COMMERCE

Bureau of Export Administration

15 CFR Parts 740 and 742

[Docket No. 980113010-8010-01]

RIN 0694-AB65

Exports of High Performance Computers Under License Exception CTP

AGENCY: Bureau of Export Administration, Commerce.

ACTION: Interim rule with request for comments.

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SUMMARY: The Bureau of Export Administration is amending the Export

Administration Regulations (15 CFR parts 730-799) by revising the

requirements for exports and reexports of high performance computers.

This revision implements Sections 1211-1215 of the National Defense

Authorization Act (NDAA) for fiscal year 1998 (P.L. 105-85, 111 Stat.

1629), signed by the President on November 18, 1997.

Although the Export Administration Act (EAA) expired on August 20,

1994, the President invoked the International Emergency Economic Powers

Act and continued in effect, to the extent permitted by law, the

provisions of the EAA and the EAR in Executive Order 12924 of August

19, 1994, as extended by the President's notices of August 15, 1995 (60

FR 42767), August 14, 1996 (61 FR 42527) and August 15, 1997 (62 FR

43629).

DATES: This rule is effective February 3, 1998.

Comments: Comments on this rule must be received on or before March 20,

1998.

ADDRESSES: Electronic submission and status tracking of the notices

required by this rule will not be available until February 17, 1998.

Prior to that date, exporters and reexporters may contact the Bureau of

Export Administration at (202) 482-0899 or (202) 482-0436. After

February 17, exporters and reexporters may contact STELA at (202) 482-

2752. Written comments on this rule should be sent to Hillary Hess,

Director, Regulatory Policy Division, Bureau of Export Administration,

Department of Commerce, P.O. Box 273, Washington, DC 20044.

FOR FURTHER INFORMATION CONTACT: Hillary Hess, Director, Regulatory

Policy Division, Bureau of Export Administration, Telephone: (202) 482-

2440.

SUPPLEMENTARY INFORMATION:

Background

The National Defense Authorization Act (NDAA) for FY98 contains

provisions regarding exports and reexports of high performance

computers. The NDAA establishes requirements for advance notification

of exports and reexports of high performance computers and post-

shipment verifications of such exports and reexports.

[[Page 5449]]

Export Approvals for High Performance Computers (Sec. 1211)

Section 1211 of the NDAA requires advance notification of all

exports and reexports of computers with CTPs between 2,000 and 7,000

MTOPS to Computer Tier 3 countries. Previously, such computers were

eligible for export or reexport to civil end-users under License

Exception CTP without prior government review. License Exception CTP

prohibits exports, reexports, and retransfers to military or

proliferation end-users or end-uses under its terms, and provides that

such transactions require licenses. It also excludes from eligibility

items that the exporter or reexporter knows will be used to enhance the

CTP beyond the eligibility limit allowed to the country of destination.

These exclusions remain in effect; therefore, exporters or reexporters

who have knowledge of a military or proliferation end-user or end-use,

or of a prohibited enhancement, must not submit notifications and

continue to be ineligible to use License Exception CTP. Licenses

continue to be required for such exports. For CTP-eligible transactions

destined to Tier 3 countries, this rule adds the NDAA notification

requirement to the terms and conditions of License Exception CTP.

Exports and reexports of computers with CTPs greater than 7,000 MTOPS

to Tier 3 countries continue to require a license.

To comply with the requirements of the NDAA, exporters and

reexporters are now required to submit ``NDAA notices'' for each

transaction by completing the Multipurpose Application Form (BXA-748P)

including all the information required on that form for a license

application, except for selecting ``other'' as the purpose of the

application. This designator will automatically place the notice onto a

special review track. BXA will refer complete NDAA notices to the

Departments of Defense, Energy, State, and the Arms Control and

Disarmament Agency (ACDA) within 24 hours of date of registration of

the request. After February 17, 1998, when BXA completes the changes to

its system, NDAA notices may be submitted electronically using the

procedure for electronic submission of license applications. Before

that date, only paper submissions can be accepted.

Since the NDAA authorizes shipment of the computer ``if no

objection is raised within the 10-day period,'' any agency objections

must be received by Commerce within nine calendar days of referral. In

contrast to the Executive Order on License Processing, under which pre-

license checks or requests for additional information may stop the

clock, there is no provision for stopping the clock during this

procedure. However, BXA will not initiate the registration of NDAA

notice unless all the information on the form is complete. Imposition

of a license requirement as a result of an objection to an NDAA notice

does not constitute ``informing'' or ``knowledge'' for purposes of part

744. Similarly, an interagency decision not to impose a licensing

requirement does not excuse the exporter or reexporter from licensing

requirements based on knowledge of a prohibited end-use and end-user as

referenced in general prohibition five (part 736) and set forth in part

744.

Prior to February 17, 1998, BXA will notify exporters and

reexporters of the status of their notifications. After February 17,

the application control number on the NDAA notice will allow exporters

and reexporters to track their notices by calling STELA. STELA will

provide the date of registration of the NDAA notice and a notice

number. If no agencies raise objections within the 10-day period, STELA

will confirm that you may proceed with the transaction. BXA will issue

subsequent written confirmation. STELA will also advise the exporter or

reexporter if a license is required. The NDAA notice will then be

processed by BXA as a license application in accordance with the

procedures described in part 750, and the licensing policies set forth

in the Export Administration Regulations. Its NDAA notice number will

be changed to a license application number. At this time, BXA may

request additional information from the exporter or reexporter to

complete the processing of the license application.

Post-Shipment Verification of Export of High Performance Computers

(Sec. 1213)

The NDAA requires post-shipment verification of exports to Tier 3

countries of computers with a CTP greater than 2,000 MTOPS.

In order to comply with the post-shipment verification requirement,

each exporter must provide a written report to BXA within 30 days of

export. The report must include the following information: exporter's

name, address, and telephone number; the number of the NDAA notice or

the license number, whichever is applicable; date of export; end-user's

name, a point of contact, address, and telephone number; carrier; air

waybill or bill of lading number; commodity description; and quantity.

BXA is considering creating a new form that will incorporate these data

elements and replace the written report.

Additionally, BXA may require the exporter or exporter's agent to

keep records and provide information on any visit to the site he or she

conducts, such as for installation or servicing. When a license is

required, BXA will continue to require various safeguards by the

exporter or exporter's agent as a license condition.

Savings Clause

Shipments of items now subject to the NDAA notice requirement as a

result of this regulatory action that were on dock for loading, on

lighter, laden aboard an exporting carrier, or en route aboard a

carrier to a port of export pursuant to actual orders for export before

February 17, 1998 may be exported without submitting an NDAA notice up

to and including February 17, 1998. Any such items not actually

exported before midnight February 17, 1998, require an NDAA notice in

accordance with this regulation.

Rulemaking Requirements

1. This interim rule has been determined to be significant for

purposes of E.O. 12866.

2. Notwithstanding any other provision of law, no person is

required to, nor shall any person be subject to a penalty for failure

to comply with a collection of information, subject to the Paperwork

Reduction Act (PRA), unless that collection of information displays a

currently valid OMB Control Number. This rule involves collections of

information subject to the Paperwork Reduction Act of 1995 (44 U.S.C.

3501 et seq.). These collections have been approved by the Office of

Management and Budget under control number 0694-0088, ``Multi-Purpose

Application,'' which carries a burden hour estimate of 52.5 minutes per

submission. This rule contains two new information collection

requirements approved under control number 0694-0107, ``National

Defense Authorization Act'', Advance Notifications and Post-Shipment

Verification reports. Advance Notifications using the existing

Multipurpose Application Form (BXA-748P) require an estimated 52.5

minutes per submission. Reports in support of Post-Shipment

Verifications require 15 minutes per submission, whether the Post-

Shipment Verification is conducted on an export authorized under a

license or License Exception CTP.

3. This rule does not contain policies with Federalism implications

sufficient to warrant preparation of a Federalism assessment under

Executive Order 12612.

[[Page 5450]]

4. The provisions of the Administrative Procedure Act (5 U.S.C.

553) requiring notice of proposed rulemaking, the opportunity for

public participation, and a delay in effective date, are inapplicable

because this regulation involves a military and foreign affairs

function of the United States (Sec. 5 U.S.C. 553(a)(1)). Further, no

other law requires that a notice of proposed rulemaking and an

opportunity for public comment be given for this interim rule. Because

a notice of proposed rulemaking and an opportunity for public comment

are not required to be given for this rule under 5 U.S.C. 553 or by any

other law, the analytical requirements of the Regulatory Flexibility

Act (5 U.S.C. 601 et seq.) are not applicable.

However, because of the importance of the issues raised by these

regulations, this rule is being issued in interim form and comments

will be considered in the development of final regulations.

Accordingly, the Department encourages interested persons who wish

to comment to do at the earliest possible time to permit the fullest

consideration of views.

The period for submission of comments will close March 20, 1998.

The Department will consider all comments received before the close of

the comment period in developing final regulations. Comments received

after the end of the comment period will be considered if possible, but

their consideration cannot be assured. The Department will not accept

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

material be treated confidentially because of its business proprietary

nature or for any other reason. The Department will return such

comments and materials to the persons submitting the comments and will

not consider them in the development of final regulations. All public

comments on these regulations will be a matter of public record and

will be available for public inspection and copying. In the interest of

accuracy and completeness, the Department requires comments in written

form.

Oral comments must be followed by written memoranda, which will

also be a matter of public record and will be available for public

review and copying. Communications from agencies of the United States

Government or foreign governments will not be available for public

inspection.

The public record concerning these regulations will be maintained

in the Bureau of Export Administration Freedom of Information Records

Inspection Facility, Room 4525, Department of Commerce, 14th Street and

Pennsylvania Avenue, N.W., Washington, D.C. 20230. Records in this

facility, including written public comments and memoranda summarizing

the substance of oral communications, may be inspected and copied in

accordance with regulations published in part 4 of Title 15 of the Code

of Federal Regulations. Information about the inspection and copying of

records at the facility may be obtained from Margaret Cornejo, Bureau

of Export Administration Freedom of Information Officer, at the above

address or by calling (202) 482-5653.

List of Subjects

15 CFR Parts 740

Administrative practice and procedure, Exports, Foreign trade,

Reporting and recordkeeping requirements.

15 CFR Part 742

Exports, Foreign trade.

Accordingly, parts 740 and 742 of the Export Administration

Regulations (15 CFR parts 730-799) are amended to read as follows:

PART 740--[AMENDED]

1. The authority citation for part 740 is revised to read as

follows:

Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;

E.O. 12924, 59 FR 43437, 3 CFR, 1994 Comp., p. 917; E.O. 13026, 61

FR 58767, 3 CFR, 1996 Comp., p. 228 (1997); Notice of August 15,

1995, 3 CFR, 1995 Comp. 501 (1996); Notice of August 14, 1996, 61 FR

42527, 3 CFR 1996 Comp., p. 298 (1997); Notice of August 13, 1997

(62 FR 43629, August 15, 1997); and P.L. 105-85, 111 Stat. 1629.

2. Section 740.7 is amended by adding a new paragraph (d)(4),

adding a sentence to the end of paragraph (e)(2), and revising

paragraph (f) to read as follows:

Sec. 740.7 Computers (CTP).

* * * * *

(d) * * *

(4) NDAA notification--(i) General requirement. The National

Defense Authorization Act (NDAA) of FY98 enacted on November 18, 1997

requires advance notification of all exports and reexports of computers

with CTPs between 2,000 and 7,000 MTOPS to Computer Tier 3 countries.

For each transaction destined to Computer Tier 3, prior to using

License Exception CTP, you must first notify BXA by submitting a

completed Multipurpose Application Form (BXA-748P). The Multipurpose

Application Form should be completed including all information required

for a license application according to the instructions described in

Supplement No. 1 to part 748 of the EAR, with two exceptions. You (the

applicant as listed in Block 14) shall in Block 5 (Type of Application)

mark the box ``Other.'' This designator will permit BXA to route the

NDAA notice into a special processing procedure. (Blocks 6 and 7,

regarding support documentation, may be left blank.) You must also

provide a notice using this procedure prior to exporting or reexporting

items that you know will be used to enhance beyond 2,000 MTOPS the CTP

of a previously exported or reexported computer. BXA will not initiate

the registration of an NDAA notice unless all information on the

Multipurpose Application form is complete.

(ii) Action by BXA. Within 24 hours of the registration of the NDAA

notice, BXA will refer the notice for interagency review. Registration

is defined as the point at which the notice is entered into BXA's

electronic system.

(iii) Review by other departments or agencies. The Departments of

Defense, Energy, State, and the Arms Control and Disarmament Agency

(ACDA) have the authority to review the NDAA notice. Objections by any

department or agency must be received by the Secretary of Commerce

within nine days of the referral. Unlike the provisions described in

Sec. 750.4(b) of the EAR, there are no provisions for stopping the

processing time of the NDAA notice. If, within 10 days after the date

of registration, any reviewing agency provides a written objection to

the export or reexport of a computer, License Exception CTP may not be

used. In such cases, you will be notified that a license is required

for the export or reexport. The NDAA notice will then be processed by

BXA as a license application in accordance to the provisions described

in Sec. 750.4 of the EAR, and the licensing policies set forth in the

Export Administration Regulations. Its NDAA notice number will be

changed to a license application number. BXA may at this time request

additional information to properly review the license application. If

BXA confirms that no objection has been raised within the 10-day period

(as described in paragraph (d)(4)(iv) of this section), you may proceed

with the transaction on the eleventh day following date of

registration. (Note that the fact that you have been advised to proceed

with the transaction does not exempt you from other licensing

requirements under the EAR, such as those based on knowledge of a

prohibited end-use or end-user as referenced in general prohibition

five (part 736 of the EAR) and set forth in part 744 of the EAR.)

[[Page 5451]]

(iv) Status of pending advance notification requests. You must

contact BXA's System for Tracking Export License Applications

(``STELA'') at (202) 482-2752. (See Sec. 750.5 of the EAR for

procedures to access information on STELA.) STELA will provide the date

of registration of the NDAA notice. If no departments or agencies raise

objections within the 10-day period, STELA will provide you on the

eleventh day following date of registration with confirmation that no

objections have been raised and you may proceed with the transaction.

BXA will subsequently issue written confirmation to you. If a license

is required, STELA will notify you that an objection has been raised

and a license is required. The NDAA notice will be processed as a

license application. In addition, BXA may provide notice of an

objection by telephone, fax, courier service, or other means.

(v) Post-shipment verification. This section outlines special post-

shipment reporting requirements for exporters of computers with a CTP

between 2,000 and 7,000 MTOPS to destinations in Computer Tier 3 under

the NDAA. These reporting requirements also apply when you know that

the items being exported will be used to enhance beyond 2,000 MTOPS the

CTP of a previously exported or reexported computer. Such reports must

be submitted in accordance with the provisions of this paragraph

(d)(4)(v), and records of such exports subject to the post-shipment

reporting requirements of this section, must be kept in accordance with

part 762 of the EAR.

(A) Information that must be included in each post-shipment report.

Within 30 days from date of export, the exporter must submit the

following information to BXA at the address listed in paragraph

(d)(4)(v)(B) of this section:

(1) Exporter name, address, and telephone number;

(2) NDAA notification number;

(3) Date of export;

(4) End-user name, point of contact, address, telephone number;

(5) Carrier;

(6) Air waybill or bill of lading number;

(7) Commodity description, quantities--listed by model numbers or

serial numbers; and

(8) Certification line for exporters to sign and date. The exporter

must certify that the information contained in the report is accurate

to the best of his or her knowledge.

(B) Mailing address and facsimile number. A copy of the post-

shipment report[s] required under paragraph (d)(4)(v)(A) of this

section shall be delivered to one of the following addresses. Note that

BXA will not accept reports sent C.O.D.

(1) For deliveries by U.S. postal service: Bureau of Export

Administration, U.S. Department of Commerce, P.O. Box 273, Attn: Tom

Andrukonis, Director OES, Washington, D.C. 20044.

(2) For courier deliveries: Bureau of Export Administration, U.S.

Department of Commerce, Attn: Tom Andrukonis, Director OES, Room 4065,

14th Street and Pennsylvania Ave., Washington, DC 20230.

(3) Facsimile: 202-482-0971.

* * * * *

(e) Restrictions.

* * * * *

(2) * * * Additionally, the end-use and end-user restrictions in

paragraph (d)(3) of this section must be conveyed to any consignee in

Computer Tier 3.

(f) Reporting requirements. In addition to the reporting

requirements set forth in paragraph (d) of this section, see Sec. 743.1

of the EAR for additional reporting requirements of certain items under

License Exception CTP.

PART 742--[AMENDED]

3. The authority citation for part 742 is revised to read as

follows:

Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.;

18 U.S.C. 2510 et seq.; 22 U.S.C. 3201 et seq.; 42 U.S.C. 2139a;

E.O. 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. 179; E.O. 12851, 58

FR 33181, 3 CFR 1993 Comp., p. 608; E.O. 12924, 59 FR 43437, 3 CFR,

1994 Comp., p. 917; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p.

950; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228 (1997);

Notice of August 15, 1995, 3 CFR, 1995 Comp. 501 (1996); Notice of

August 14, 1996, 61 FR 42527, 3 CFR 1996 Comp., p. 298 (1997);

Notice of August 13, 1997 (62 FR 43629, August 15, 1997); and P.L.

105-85, 111 Stat. 1629.

4. Section 742.12 is amended:

a. By adding paragraph (b)(3)(i)(C); and

b. By adding a new paragraph (b)(3)(iv), as follows:

Sec. 742.12 High performance computers.

* * * * *

(b) * * *

(3) * * *

(i) * * *

(C) A license may be required to export or reexport computers with

a CTP between 2,000 and 7,000 MTOPS to countries in Computer Tier 3

pursuant to the NDAA (see Sec. 740.7(d)(4) of the EAR).

* * * * *

(iv) Post-shipment verification. This section outlines special

post-shipment reporting requirements for exporters of computers with a

CTP in excess of 2,000 MTOPS to destinations in Computer Tier 3 under

the NDAA. These reporting requirements also apply when you know that

the items being exported will be used to enhance beyond 2,000 MTOPS the

CTP of a previously exported or reexported computer. Such reports must

be submitted in accordance with the provisions of this paragraph

(b)(3)(iv), and records of such exports subject to the post-shipment

reporting requirements of this section, must be kept in accordance with

part 762 of the EAR.

(A) Information that must be included in each post-shipment report.

Within 30 days from date of export, the exporter must submit the

following information to BXA at the address listed in paragraph

(b)(3)(iv)(B) of this section:

(1) Exporter name, address, and telephone number;

(2) License number;

(3) Date of export;

(4) End-user name, point of contact, address, telephone number;

(5) Carrier;

(6) Air waybill or bill of lading number;

(7) Commodity description, quantities--listed by model numbers or

serial numbers; and

(8) Certification line for exporters to sign and date. The exporter

must certify that the information contained in the report is accurate

to the best of his or her knowledge.

(B) Mailing address and facsimile number. A copy of the post-

shipment report[s] required under paragraph (b)(3)(vi)(A) of this

section shall be delivered to one of the following addresses. Note that

BXA will not accept reports sent C.O.D.

(1) For deliveries by U.S. postal service: Bureau of Export

Administration, U.S. Department of Commerce, P.O. Box 273, Attn: Tom

Andrukonis, Director OES, Washington, D.C. 20044.

(2) For courier deliveries: Bureau of Export Administration, U.S.

Department of Commerce Attn: Tom Andrukonis, Director OES, Room 4065,

14th Street and Pennsylvania Ave., Washington, DC 20230.

(3) Facsimile: 202-482-0971.

* * * * *

Dated: January 28, 1998.

R. Roger Majak,

Assistant Secretary for Export Administration.

[FR Doc. 98-2499 Filed 2-2-98; 8:45 am]

BILLING CODE 3510-33-P