Clarification of Reporting Requirements Under the Wassenaar Arrangement

DEPARTMENT OF COMMERCE

Bureau of Export Administration

15 CFR Parts 740 and 743

[Docket No. 980814218-8218-01]

RIN 0694-AB724

Clarification of Reporting Requirements Under the Wassenaar

Arrangement

AGENCY: Bureau of Export Administration, Commerce.

ACTION: Interim rule with request for comments.

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SUMMARY: On January 15, 1998, the Bureau of Export Administration (BXA)

published an interim rule implementing the Wassenaar Arrangement list

of dual-use items and reporting requirements under the Wassenaar

Arrangement. On February 17, 1998, BXA published an interim final rule

that conformed the savings clause date for shipments of items removed

from eligibility for export or reexport under a particular License

Exception authorization or the designator NLR until April 15, 1998. The

February 17 rule did not affect the reporting requirement provisions

and any item removed from License Exception or NLR eligibility as a

result of the January 15 rule continues to be subject to the reporting

requirements of the Wassenaar Arrangement. This interim rule provides

further clarification on the savings clause provisions and the

reporting requirements under the Wassenaar Arrangement. Specifically,

this rule clarifies: the reporting requirement obligations of items

described on the Wassenaar Arrangements Annex 1 (Sensitive List) and

Annex 2 (Very Sensitive List) of the List of Dual-Use Goods and

Technologies, including clarification on the timing of the first report

in accordance with the savings clause provision; the reporting

requirements for computers controlled under Export Control

Classification Number (ECCN) 4A003.b; the reporting requirement

procedures under License Exception TSR; and that the reporting

requirement provisions do not apply to reexports, release of technology

or source code to foreign nationals in the United States (i.e.,

``deemed exports'' to foreign nationals), or to items not controlled

for National Security (NS) reasons.

In addition, this rule revises the country scope for reporting

requirements.

DATES: Effective Date: This rule is effective October 14, 1998.

Comment Date: Comments on this rule must be received on or before

December 14, 1998.

ADDRESSES: Written comments should be sent to Patricia Muldonian,

Regulatory Policy Division, Bureau of Export Administration, Department

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

FOR FURTHER INFORMATION CONTACT: Patricia Muldonian, Regulatory Policy

Division, Bureau of Export Administration, telephone: (202) 482-2440.

SUPPLEMENTARY INFORMATION:

Background

On January 15, 1998, the Bureau of Export Administration (BXA)

published an interim rule (63 FR 2452) that made changes to the

Commerce Control List necessary to implement the Wassenaar Arrangement

List of Dual-Use Goods and Technologies. In addition, the January 15

rule imposed new reporting requirements on persons that export certain

items controlled under the Wassenaar Arrangement to countries outside

of Country Group A:1 in order to fulfill the information exchange

requirements of the Wassenaar Arrangement. The January 15 rule also

removed License Exception availability for certain items controlled for

missile technology reasons and for certain other items controlled for

national security reasons for which the U.S. has agreed to license with

extreme vigilance.

BXA received many industry comments on the savings clause provision

date of February 17, 1998, for submission of license applications for

items removed from eligibility for export or reexport under a

particular License Exception authorization or the designator NLR,

stating that more time

[[Page 55018]]

was required to determine how the rule affected their products and to

develop and revise their export compliance software necessary to

implement the provisions of the Export Administration Regulations. In

response to the industry issues raised, BXA published an interim rule

on February 17, 1998 (63 FR 7699) that conformed the saving clause date

for shipments of items removed from eligibility for export or reexport

under a particular License Exception authorization or NLR until April

15, 1998. The February 17 rule did not affect the reporting

requirements of section 743.1 of the Export Administration Regulations,

and any item removed from License Exception or NLR eligibility as a

result of the January 15 rule continued to be subject to reporting

requirements.

This rule provides further clarification on the savings clause

provision of the February 17 rule and on reporting requirements under

the Wassenaar Arrangement.

Clarification of Reporting Requirements of Items on the Wassenaar

Arrangement's Annex 1 and Annex 2

Reporting obligations under the Wassenaar Arrangement are required

for exports in accordance with the provisions of Sec. 743.1 of the

Export Administration Regulations (items on the Wassenaar Arrangement's

Annex 1--List of Dual-Use Goods and Technologies (Sensitive List)),

effective from January 15, 1998 until April 15, 1998, and for the

following items on the Wassenaar Arrangement's Annex 2--List of Dual-

Use Goods and Technologies (Very Sensitive List), in which License

Exceptions or the designator NLR have been removed and export license

requirements imposed in accordance with the savings clause provision.

Reports for Annex 2 items are also effective from January 15, 1998

until April 15, 1998. After April 15, 1998, these items require a

license for export or reexport.

License Exception eligibility has been removed and licensing

requirements imposed for the following ECCNs on the Wassenaar

Arrangement's Annex 2--List of Dual-Use Goods and Technologies:

1A002.a, 1C001, 1E001, 4A003.b, 4A003.c, 4D001, 4E001, 5A001.b.9,

5D001, 5E001.a, 6A001.a.2.a.1, 6A001.a.2.a.2, 6A001.a.2.a.7,

6A001.a.2.b, 6A001.a.2.c, 6A001.a.2.e, 6A008.l.3, 6B008, 6D001,

6D003.a, 6E001, 6E002, 8A001.b, 8A001.d, 8A002.o.3.b, 8D001, 8E001, and

9A001. The Bureau of Export Administration will extract the necessary

information from licenses to report these exports to the Arrangement.

The Wassenaar reporting requirement provisions do not apply to:

(1) Reexports;

(2) Any release of technology or source code subject to the EAR to

a foreign national in the United States; or

(3) Items controlled solely for Missile Technology (MT), Nuclear

Nonproliferation (NP), Chemical and Biological Weapons (CB), or Short

Supply (SS) reasons.

Clarification of License Exception TSR

BXA received comments from industry requesting guidance on how to

comply with the Wassenaar reporting requirements for exports of

technology under License Exception TSR. This rule clarifies that, for

exports of technology under License Exception TSR for which reports are

required under Sec. 743.1(c) of the EAR, exporters should report the

number of units in the shipment as one (1) for the initial export of

the technology to a single ultimate consignee. Additional exports of

the technology must be reported only when the type or scope of

technology changes or exports are made to other ultimate consignees. In

addition, release of controlled technology or source code to foreign

nationals in the U.S., should not be included in the reports.

Revisions to the Reporting Requirements for Computers

In order to reduce duplicative reporting requirements on industry,

this rule revises Sec. 743.1(c)(2) by eliminating the reporting

requirement for computers controlled under 4A003.b for exports to

destinations in Computer Tier 3. Reporting requirements for exports of

such computers to destinations in Computer Tier 3 continue to be

required under the post-shipment verification reporting requirements of

Sec. 740.7(d)(4)(v) and Sec. 742.12(b)(3)(iv).

Clarification of Reporting Requirement for License Exception GOV

This rule corrects an inadvertent error in the January 15 rule for

License Exception GOV. This rule revises Sec. 740.11(b)(2)(iii)(A) and

paragraph (a) to Supplement No. 1 to Sec. 740.11 by revising the phrase

``Items for official use within a national territory by agencies of the

U.S. Government'' to read ``Items for official use within a national

territory by agencies of cooperating governments''.

Additions to the Commerce Control List and Clarification of the

Savings Clause Provision

BXA received comments from industry requesting that BXA clearly

describe the new entries that were added in the January 15 rule and

explain the impact of those entries in accordance with the February 17

extension of the savings clause provision. This rule clarifies that, in

addition to the modifications in some parameters of items controlled on

the Commerce Control List, the following new entries have been added

that control items previously (prior to January 15, 1998) eligible for

export or reexport under the designator NLR. Items changed from NLR

eligibility to requiring a license for export or reexport were

authorized for export or reexport under the designator NLR in

accordance with the February 17 rule until April 15, 1998. After April

15, 1998, these items require a license for export or reexport.

However, use of the designator NLR until April 15, 1998, does not

relieve exporters of their responsibility to provide reports for items

subject to the reporting requirements under the Wassenaar Arrangement

retroactive from January 15, 1998 to April 15, 1998.

New ECCNs Added to the Commerce Control List by the January 15 Rule

1A005: Body armor, and specially designed components therefor, not

manufactured to military standards or specifications, not to their

equivalents in performance.

1C006.d: Certain fluorocarbon electronic cooling fluids.

1C007.f: Certain ceramic-ceramic composite materials with oxide or

glass matrix.

1C009.b: Fluorinated polymides containing 10% by weight or more of

combined fluorine. (Note that this control is a slight rollback, based

on % by weight of combined fluorine.)

1C011: Certain metals and compounds.

2B007.d: Robots specially designed to operate at altitudes

exceeding 30,000 m.

2B009: Certain spin-forming/flow forming machines.

5E001.b.10: Development technology for spread spectrum and

frequency hopping techniques.

6A001.a.2.e: Certain bottom or bay cable systems.

6A005.a.4.c.1: Carbon dioxide lasers having a pulse energy

exceeding 5 J per pulse. (Note that this control is a slight rollback,

because ``peak power'' is no longer a controlling parameter.)

6D003.a.3: Software for bottom or bay cable systems.

7D003.e: Computer aided design software.

7E004.a.5: Technology for the development or production of electric

actuators specially designed for primary flight control.

[[Page 55019]]

7E004.a.6: Technology for the development or production of flight

control optical sensor arrays.

8A002.j.4: Certain stirling cycle engine air independent power

systems.

9B004: Intermetallic airfoil-to-disk combinations.

In addition, this rule revises the country scope for reports under

the Wassenaar Arrangement. The January 15 rule stated that reporting

requirements apply to all destinations, except Country Group A:1. This

rule revises Sec. 743.1(d), Country Exceptions, to state that the

reporting requirements apply to all destinations, except Wassenaar

member countries, as identified in a new Supplement No. 1 to part 743.

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

1994, the President invoked the International Emergency Economic Powers

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

law, the provisions of the EAA 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), August 13, 1997 (62 FR 43629),

and August 13, 1998 (63 FR 44121).

Rulemaking Requirements

1. This interim rule has been determined to be not significant for

purposes of E.O. 12866.

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

required to respond to, nor shall any person be subject to a penalty

for failure to comply with a collection of information, subject to the

requirements of 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 has been approved by the Office of Management and Budget

under control numbers 0694-0088 and 0694-0201.

3. This rule does not contain policies with Federalism implications

sufficient to warrant preparation of a Federalism assessment under

Executive Order 12612.

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. 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 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 so at the earliest possible time to permit the fullest

consideration of their views.

The period for submission of comments will close December 14, 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 person 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 made 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, NW., Washington, DC 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 in 15 CFR Parts 740 and 743

Administrative practice and procedure, Exports, Foreign trade,

Reporting and recordkeeping requirements.

Accordingly, parts 740 and 743 of the Export Administration

Regulations (15 CFR parts 730 through 799) are amended as follows:

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; Notice of August

15, 1995, 3 CFR, 1995 Comp., p. 501; Notice of August 14, 1996, 3

CFR, 1996 Comp., p. 289; Notice of August 13, 1997 (62 FR 43629,

August 15, 1997); and Notice of August 13, 1998 (63 FR 44121).

2. The authority citation for part 743 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; Notice of August

15, 1995, 3 CFR, 1995 Comp., p. 501; Notice of August 14, 1996, 3

CFR, 1996 Comp., p. 289; Notice of August 13, 1997 (62 FR 43629,

August 15, 1997); and Notice of August 13, 1998 (63 FR 44121).

PART 740--[AMENDED]

3. Section 740.6 is amended by revising paragraph (b) to read as

follows:

Sec. 740.6 Technology and software under restriction (TSR).

* * * * *

(b) Reporting requirements. See Sec. 743.1 of the EAR for reporting

requirements for exports of certain items under License Exception TSR.

Note that reports are not required for release of technology or source

code subject to the EAR to foreign nationals in the U.S. under the

provisions of License Exception TSR.

4. Section 740.11 is amended:

a. By revising the heading of paragraph (b)(2)(iii)(A); and

b. By revising the first sentence of paragraph (a) in Supplement

No. 1, to read as follows:

Sec. 740.11 Governments and international organizations (GOV).

* * * * *

(b) * * *

(2) * * *

(iii) * * *

(A) Items for official use within national territory by agencies of

cooperating governments. * * *

* * * * *

[[Page 55020]]

Supplement No. 1 to Sec. 740.11--Additional Restrictions on Use of

License Exception GOV

(a) Items for official use within the national territory by

agencies of cooperating governments. * * *

* * * * *

PART 743--[AMENDED]

5. Section 743.1 is amended:

a. By revising paragraph (b);

b. By adding a note immediately following paragraph (c)(2);

c. By revising paragraph (d); and

d. By adding a note immediately following paragraph (e)(1)(ii), to

read as follows:

Sec. 743.1 Wassenaar Arrangement.

* * * * *

(b) Requirements. You must submit two (2) copies of each report

required under the provisions of this section and maintain accurate

supporting records (see Sec. 762.2(b) of the EAR) for all exports of

items specified in paragraph (c) of this section under any of the

following License Exceptions authorized by part 740 of the EAR: License

Exceptions GBS, CIV, TSR, LVS, CTP, GOV and KMI (under the provisions

of Sec. 740.8(b)(2)(ii) and (iii) only). Exports of technology and

source code under License Exception TSR to foreign nationals in the

U.S. should not be reported. For purposes of this part 743, ``you'' has

the same meaning as ``U.S. exporter'', as defined in part 772 of the

EAR.

(c) * * *

(2) * * *

Note to paragraph (c)(2): Exports of computers controlled under

4A003.b to destinations in Computer Tier 3 (see Sec. 740.7(d)(1) of

the EAR) should not be included in the reports required under

paragraph (c) of this section. Reporting for computers under 4A003.b

to Computer Tier 3 destinations should be reported under the post-

shipment verification reporting provisions of Sec. 740.7(d)(4)(v) or

under Sec. 742.12(b)(3)(iv) of the EAR.

(d) Country Exceptions. You must report each export subject to the

provisions of this section, except for exports to Wassenaar member

countries, as identified in Supplement No. 1 to part 743.

(e) * * *

(1) * * *

(ii) * * *

Note to paragraph (e)(1)(ii): For exports of technology for

which reports are required under Sec. 743.1(c) of this section, the

number of units in the shipment should be reported as one (1) for

the initial export of the technology to a single ultimate consignee.

Additional exports of the technology must be reported only when the

type or scope of technology changes or exports are made to other

ultimate consignees. Additionally, do not report the release of

technology or source code subject to the EAR to foreign nationals in

the U.S.

* * * * *

6. Part 743 is amended by adding a new Supplement No. 1 to read as

follows:

Supplement No. 1 to Part 743--Wassenaar Arrangement Member Countries

Argentina

Australia

Austria

Belgium

Bulgaria

Canada

Czech Republic

Denmark

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Luxembourg

Netherlands

New Zealand

Norway

Poland

Portugal

Romania

Russia

Slovakia

South Korea

Spain

Sweden

Switzerland

Turkey

Ukraine

United Kingdom

United States

Dated: October 5, 1998.

R. Roger Majak,

Assistant Secretary for Export Administration.

[FR Doc. 98-27391 Filed 10-13-98; 8:45 am]

BILLING CODE 3510-33-P