Revision of High Performance Computer Licensing Policy

DEPARTMENT OF COMMERCE

Bureau of Export Administration

15 CFR Parts 734, 738, 740, and 742

[Docket No. 990709187-9187-01]

RIN 0694-AB96

Revision of High Performance Computer Licensing Policy

AGENCY: Bureau of Export Administration, Commerce.

ACTION: Final rule.

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SUMMARY: The Bureau of Export Administration (BXA) is amending the

Export Administration Regulations (EAR) by raising the performance

parameters for those computers which can be exported and reexported

under License Exception CTP. The upper threshold of the Composite

Theoretical Performance (CTP) parameter for Computer Tier 2 countries

is raised from 10,000 millions of theoretical operations per second

(MTOPS) to 20,000 MTOPS. The upper threshold for Computer Tier 3

countries is raised from 7,000 MTOPS to 12,300 MTOPS for civilian end-

users and end-uses. For military end-users and end-uses in Computer

Tier 3 destinations the CTP parameter remains at 2,000 MTOPS for the

immediate future. The upper parameter for military end-users and end-

uses to Computer Tier 3 countries will be raised from 2,000 MTOPS to

6,500 MTOPS on the same date the threshold for advance notification for

high performance computers (HPC) exports to Tier 3 countries is raised

from 2,000 MTOPS to 6,500 MTOPS. The threshold for advance notification

for exports of HPCs to Tier 3 countries is raised to 6,500 MTOPS,

effective approximately 180 days following the submission of a

statutorily mandated report to Congress. The President sent this report

to Congress on July 26, 1999. In addition, the following countries are

moved from Computer Tier 2 to Computer Tier 1: Brazil, the Czech

Republic, Hungary, and Poland.

DATES: This rule is effective August 3, 1999.

FOR FURTHER INFORMATION CONTACT: James A. Lewis, Office of Strategic

Trade and Foreign Policy Controls, Bureau of Export Administration,

Telephone: (202) 482-4196.

SUPPLEMENTARY INFORMATION:

Background

On January 25, 1996, the Bureau of Export Administration created

License Exception CTP for exports and reexports of HPCs. This policy

took into account rapid technical advances in computing power, as well

as national security and nonproliferation concerns. License Exception

CTP divided the world into tiers based on U.S. national security and

foreign policy interests. These tiers represent the level of

proliferation and security risk a country poses to the U.S. and, as a

result, the technical level of computer exports tier members can

receive without applying for an export license. Computer Tier 1

consists of close U.S. allies; Computer Tier 2 includes countries

representing minimal security concerns to the U.S; countries

representing a potential proliferation or security concern are listed

in Computer Tier 3; and Computer Tier 4 consists of terrorist

supporting states.

The President has decided to amend these country tiers by

transferring Brazil, the Czech Republic, Hungary, and Poland from Tier

2 to Tier 1. The Administration will consider moving additional

countries between Computer Tiers in the future.

The rapid evolution of computer technology has also made CTP

parameter revisions necessary. This rule changes the upper threshold of

the CTP

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parameter for Computer Tier 2 from 10,000 MTOPS to 20,000 MTOPS and the

upper threshold of Computer Tier 3 countries from 7,000 MTOPS to 12,300

MTOPS for civilian end-users and end-uses. License Exception CTP will

be made available for military end-users and end-uses in Computer Tier

3 in approximately 180 days along with the raising of the advance

notification level under the 1998 National Defense Authorization Act

(NDAA) from 2,000 MTOPS to 6,500 MTOPS. Revision of the advance

notification threshold will be effective 180 days after the submission

by the President of a required report notifying the Congress of this

change. The President sent this report to Congress on July 26, 1999.

Following this 180 day period, the upper parameter will be raised from

2,000 MTOPS to 6,500 MTOPS for military end-users and end-uses in

Computer Tier 3. This level reflects the Administration's determination

that widespread commercial availability makes computers with a

performance of 6,500 MTOPS or less uncontrollable. Note that the

advance notification requirements of the 1998 NDAA for exports and

reexports of computers with a CTP greater than 2,000 MTOPS to Computer

Tier 3 destinations remains in effect until such changes are reviewed

by the U.S. Congress.

This rule does not have an immediate impact on post-shipment

reporting and record keeping requirements compelled by the 1998 NDAA

for HPC exports. All HPC exports with a CTP greater than 2,000 MTOPS to

Tier 3 Countries still require post-shipment reporting. However, BXA

may, prior to January 23, 2000, publish an additional rule regarding

further reporting requirements to meet stipulations under the 1998 NDAA

to provide the Congress an annual report on all HPC exports to Computer

Tier 3 destinations. This potential rule will most likely require HPC

exporters to report the intended end-use of all HPC exports with a CTP

greater than 2,000 MTOPS but less than or equal to 6,500 MTOPS to

Computer Tier 3 destinations. This information is currently provided by

exporters in their advance notification requests for computers with a

CTP greater than 2,000 MTOPS to Computer Tier 3 destinations. In light

of the rapid technological advancement in HPCs, the United States will

routinely review these licensing levels to determine if further

adjustments are warranted. In particular, for Tier 2, the United States

will review the licensing level in six months with the expectation of

raising the level to the 32,000 to 36,000 MTOPS range. Changes to Tier

3 may also be made at that time.

This rule specifically amends the EAR in the following ways:

1. In section 740.7, Brazil, the Czech Republic, Hungary, and

Poland are moved from Computer Tier 2 to Computer Tier 1, and the upper

threshold of the CTP parameter for Computer Tier 2 is raised from

10,000 MTOPS to 20,000 MTOPS.

2. In section 740.7, the upper threshold of the CTP parameter for

Computer Tier 3 is raised from 7,000 MTOPS to 12,300 MTOPS for civilian

end-users and end-uses. The upper parameter for military end-users and

uses is raised from 2,000 MTOPS to 6,500 MTOPS, effective January 23,

2000.

3. In section 740.7, the CTP level for computers requiring advance

notification for export and reexport to Computer Tier 3 destinations is

raised from 2,000 MTOPS to 6,500 MTOPS, effective January 23, 2000.

4. In section 740.11 and Supplement No. 1 to section 740.11, the

CTP level for computers not eligible for License Exception GOV is

raised from 10,000 MTOPS to 20,000 MTOPS.

5. In section 742.12, the upper threshold of the CTP parameter as

measured in MTOPS for Computer Tier 2 is raised from 10,000 MTOPS to

20,000 MTOPS.

6. In section 742.12, the upper threshold of the CTP parameter for

Computer Tier 3 is raised from 7,000 MTOPS to 12,300 MTOPS for civil

end-users and end-uses. Effective January 23, 2000, the upper threshold

of the CTP parameter for Computer Tier 3 is raised from 2,000 MTOPS to

6,500 MTOPS for military end-users and end-uses.

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, as amended, 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).

Rule Making Requirements

1. This final 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 respond to nor be subject to a penalty for failure to

comply with a collection of information subject to the requirements of

the Paperwork Reduction Act unless that collection of information

displays a current valid OMB Control Number. This regulation involves

collections previously approved by the Office of Management and Budget

under control numbers 0694-0088, ``Multi-Purpose Application,'' which

carries a burden hour estimate of 45 minutes per manual submission and

40 minutes per electronic submission. Miscellaneous and recordkeeping

activities account for 12 minutes per submission. In addition,

information is also collected under OMB control number 0694-0107,

``National Defense Authorization Act,'' Advance Notifications and Post-

Shipment Verification reports.

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 requiring

notice of proposed rule making, the opportunity for public

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

this regulation involves a military or foreign affairs function of the

United States (see 5 U.S.C. 553(a)(1)). Further, no other law requires

that a notice of proposed rule making and an opportunity for public

comment be given for this rule. Because a notice of proposed rule

making and opportunities for public comment are not required to be

given for this rule by 5 U.S.C. 553, or by any other law, the

analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601

et seq., are inapplicable.

Therefore, this regulation is issued in final form. Although there

is no formal comment period, public comments on this regulation are

welcome on a continuing basis. Comments should be submitted to Frank J.

Ruggiero, Office of Exporter Services, Bureau of Export Administration,

Department of Commerce, P.O. Box 273, Washington, D.C. 20044.

List of Subjects

15 CFR Part 734

Administrative practice and procedure, Exports, Foreign trade.

15 CFR Part 738

Administrative practice and procedure, Exports, Foreign trade.

15 CFR Part 740

Administrative practice and procedure, Exports, Foreign trade,

Reporting and recordkeeping requirements.

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15 CFR Part 742

Exports, Foreign Trade.

Accordingly, parts 734, 738, 740, and 742 of the Export

Administration Regulations (15 CFR Parts 730-774) are amended as

follows:

1. The authority citation for 15 CFR part 734 is revised to read as

follows:

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

12924, 3 CFR, 1994 Comp., p. 917; E.O. 12938, 3 CFR, 1994 Comp., p.

950; E.O. 13020, 3 CFR, 1996 Comp., p. 219; E.O. 13026, 3 CFR, 1996

Comp., p. 228; and Notice of August 13, 1998, 63 FR 44121, 3 CFR,

1998 Comp., p. 294.

2. The authority citation for 15 CFR Part 738 is revised to read as

follows:

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

10 U.S.C. 7420; 10 U.S.C. 7430(e); 18 U.S.C. 2510 et seq.; 22 U.S.C.

287c; 22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; 30 U.S.C. 185(s),

185(u); 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C.

app. 466c; 50 U.S.C. app. 5; E.O. 12924, 59 FR 43437, 3 CFR, 1994

Comp., p. 917; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228;

and Notice of August 13, 1998, 63 FR 44121, 3 CFR 1998 Comp., p.

294.

3. The authority citation for 15 CFR 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; and Notice of August 13, 1998,

63 FR 44121, 3 CFR 1998 Comp., p. 294.

4. The authority citation for 15 CFR 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, 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; and Notice of August

13, 1998, 63 FR 44121, 3 CFR 1998 Comp., p. 294.

PART 734--[AMENDED]

Sec. 734.4 [Amended]

5. Section 734.4 is amended by revising the phrase ``7,000 MTOPS''

in paragraph (a) to read ``12,300 MTOPS''.

PART 738--[AMENDED]

6. Supplement No. 1 to Part 738 is amended by revising the phrase

``greater than 10,000 MTOPS'' in the second footnote to read ``greater

than 20,000 MTOPS''.

PART 740--[AMENDED]

7. Section 740.7 is amended by:

a. Revising paragraphs (b)(1) and (c);

b. Revising paragraphs (d)(2) and (d)(3); and

c. Revising paragraphs (d)(5)(i) and (d)(5)(v) introductory text to

read as follows:

Sec. 740.7 Computers (CTP).

* * * * *

(b) Computer Tier 1--(1) Eligible countries. The countries that are

eligible to receive exports and reexports under this License Exception

are Australia, Austria, Belgium, Brazil, Czech Republic, Denmark,

Finland, France, Germany, Greece, the Holy See, Hungary, Iceland,

Ireland, Italy, Japan, Liechtenstein, Luxembourg, Mexico, Monaco,

Netherlands, New Zealand, Norway, Poland, Portugal, San Marino, Spain,

Sweden, Switzerland, Turkey, and the United Kingdom.

* * * * *

(c) Computer Tier 2--(1) Eligible countries. The countries that are

eligible to receive exports under this License Exception include

Antigua and Barbuda, Argentina, Bahamas, Barbados, Bangladesh, Belize,

Benin, Bhutan, Bolivia, Botswana, Brunei, Burkina Faso, Burma, Burundi,

Cameroon, Cape Verde, Central Africa, Chad, Chile, Colombia, Congo,

Costa Rica, Cote d'Ivoire, Cyprus, Dominica, Dominican Republic,

Ecuador, El Salvador, Equatorial Guinea, Eritrea, Ethiopia, Fiji,

Gabon, Gambia (The), Ghana, Grenada, Guatemala, Guinea, Guinea-Bissau,

Guyana, Haiti, Honduras, Hong Kong, Indonesia, Jamaica, Kenya,

Kiribati, Korea (Republic of), Lesotho, Liberia, Madagascar, Malawi,

Malaysia, Maldives, Mali, Malta, Marshall Islands, Mauritius,

Micronesia (Federated States of), Mozambique, Namibia, Nauru, Nepal,

Nicaragua, Niger, Nigeria, Palau, Panama, Papua New Guinea, Paraguay,

Peru, Philippines, Rwanda, St. Kitts & Nevis, St. Lucia, St. Vincent

and Grenadines, Sao Tome & Principe, Senegal, Seychelles, Sierra Leone,

Singapore, Slovak Republic, Slovenia, Solomon Islands, Somalia, South

Africa, Sri Lanka, Surinam, Swaziland, Taiwan, Tanzania, Togo, Tonga,

Thailand, Trinidad and Tobago, Tuvalu, Uganda, Uruguay, Venezuela,

Western Sahara, Western Samoa, Zaire, Zambia, and Zimbabwe.

(2) Eligible computers. The computers eligible for License

Exception CTP to Tier 2 destinations are those having a CTP greater

than 2,000 MTOPS, but less than or equal to 20,000 MTOPS.

(d) * * *

(2) Eligible computers. The computers eligible for License

Exception CTP to Tier 3 destinations are those having a CTP greater

than 2,000 MTOPS, but less than or equal to 12,300 MTOPS for civil end-

users and end-uses. Beginning on January 23, 2000, computers having a

CTP greater than 2,000 MTOPS but less than or equal to 6,500 MTOPS are

eligible for License Exception CTP to military end-users and end-uses

subject to the restrictions in paragraph (d)(3) of this section.

(3) Eligible exports. Only exports and reexports to permitted end-

users and end-uses located in countries in Computer Tier 3. License

Exception CTP does not authorize exports and reexports to Computer Tier

3 for nuclear, chemical, biological, or missile end-users and end-uses

and military end-users and end-uses subject to license requirements

under Sec. 744.2, Sec. 744.3, 0Sec. 744.4, Sec. 744.5, and Sec. 744.12

of the EAR. Such exports and reexports will continue to require a

license and will be considered on a case-by-case basis. Retransfers to

defined proliferation end-users and end-uses in eligible countries is

strictly prohibited without prior authorization.

(4) * * *

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

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

requires advance notification of certain exports and reexports of

computers to Computer Tier 3 countries. Prior to January 23, 2000,

advance notification is required for all exports and reexports of

computers with a CTP between 2,000 and 12,300 MTOPS to Computer Tier 3

destinations. Beginning on January 23, 2000, advance notification is

required for all exports and reexports of computers with a CTP between

6,500 and 12,300 MTOPS to Computer Tier 3 destinations. For each such

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 must 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. Beginning on January 23, 2000, you

must provide a notice using this

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procedure prior to exporting or reexporting items that you know will be

used to enhance beyond 6,500 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.

* * * * *

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

shipment reporting requirements for exporters of computers with a CTP

over 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

(d)(5)(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.

* * * * *

Sec. 740.11 [Amended]

8. Section 740.11 is amended by revising the phrase ``10,000

MTOPS'' in paragraphs (a)(2)(ii) and (iii) and in paragraph (c)(2)(i)

to read ``20,000 MTOPS''.

9. Supplement No. 1 to section 740.11 is amended by revising the

phrase ``10,000 MTOPS'' in paragraphs (a)(1)(ii), (a)(1)(iii),

(b)(1)(ii), and (b)(1)(iii) to read ``20,000 MTOPS''.

PART 742--[AMENDED]

10. Section 742.12 is amended by revising the phrase ``greater than

10,000'' in paragraph (b)(2)(i) to read ``greater than 20,000''; by

revising the phrase ``to military end-users and end-uses and to

nuclear, chemical, biological, or missile end-users and end-uses

defined in part 744 of the EAR'' in paragraph (b)(3)(i)(A) to read ``to

nuclear, chemical, biological, or missile end-users and end-uses and

military end-users and end-uses subject to license requirements under

Sec. 744.2, Sec. 744.3, Sec. 744.4, Sec. 744.5, and Sec. 744.12 of the

EAR'' by revising the phrase ``to military end-users and end-uses and

nuclear, chemical, biological, or missile end-users and end-uses

defined in part 744 of the EAR'' in paragraph (b)(3)(ii) to read ``to

nuclear, chemical, biological, or missile end-users and end-uses and

military end-users and end-uses subject to license requirements under

Sec. 744.2, Sec. 744.3, Sec. 744.4, Sec. 744.5, and Sec. 744.12 of the

EAR''; and revising paragraphs (b)(3)(i)(B) and (C) to read as follows:

* * * * *

Sec. 742.12 High performance computers.

* * * * *

(b) * * *

(3) * * *

(i) * * *

(B) A license is required to export or reexport computers with a

CTP greater than 12,300 MTOPS for civilian end-users and end-uses in

countries in Computer Tier 3. Prior to January 23, 2000, a license is

required to export or reexport computers having a CTP greater than

2,000 MTOPS to military end-users and end-uses in Computer Tier 3.

Beginning on January 23, 2000, a license is required to export or

reexport computers having a CTP greater than 6,500 MTOPS to military

end-users and end-uses in Computer Tier 3.

(C) Prior to January 23, 2000, a license may be required to export

or reexport computers with a CTP greater than 2,000 MTOPS to countries

in Computer Tier 3 pursuant to the NDAA (see Sec. 740.7(d)(5) of the

EAR). Beginning on January 23, 2000, a license may be required to

export or reexport computers with a CTP greater than 6,500 MTOPS to

countries in Computer Tier 3 pursuant to the NDAA (see Sec. 740.7(d)(5)

of the EAR).

* * * * *

Dated: July 27, 1999.

Iain S. Baird,

Deputy Assistant Secretary for Export Administration.

[FR Doc. 99-19644 Filed 8-2-99; 8:45 am]

BILLING CODE 3510-33-P