Exports of High Performance Computers Under License Exception CTP

DEPARTMENT OF COMMERCE

Bureau of Export Administration

15 CFR Parts 740, 742, and 748

[Docket No. 981208298-8298-01]

RIN 0694-AB82

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 (BXA) is amending the

Export Administration Regulations by revising the requirements for

exports of high performance computers to the People's Republic of

China. This rule requires that exports of high performance computers,

regardless of value, to the People's Republic of China under License

Exception CTP be supported by a PRC End-User Certificate. The PRC End-

User Certificate must be obtained by the exporter prior to export. In

addition, this rule also removes the $5,000 End-User Certification

exemption for license applications for exports of high performance

computers to the People's Republic of China.

DATES: Effective Date: This rule is effective January 14, 1999.

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

March 1, 1999.

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

The National Defense Authorization Act for Fiscal Year 1998 (NDAA)

requires the Department of Commerce to conduct a post shipment

verification of each high performance computer exported to a country in

Computer Tier 3 as defined Sec. 740.7(d) of the Export Administration

Regulations. For purposes of this post shipment verification

requirement, the NDAA defines a high performance computer as one with a

composite theoretical performance greater than 2,000 millions of

theoretical operations per second. Tier 3 includes the People's

Republic of China. In order to facilitate the Department's ability to

conduct the required verifications, the Bureau of Export Administration

is amending the Export Administration Regulations to require the

exporter to obtain a PRC End-User Certificate issued by the Ministry of

Foreign Trade and Economic Cooperation before exporting any high

performance computer to the People's Republic of China if the computer

is to be exported under the authority of an export license or License

Exception CTP regardless of value. This rule also requires exporters to

report the End-User Certificate number to the Bureau of Export

Administration. This amendment does not affect the requirements for

reexports of high performance computers because the NDAA does not

require the Department to conduct post shipment verifications on those

computers.

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).

Savings Clause

Shipments of items now subject to a PRC End-User Certificate 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

January 28, 1999 may be exported up to and including February 11, 1999.

Any such items not actually exported before midnight February 11, 1999,

require a PRC End-User Certificate, 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

[[Page 2430]]

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 and

control number 0694-0107, ``National Defense Authorization Act,''

Advance Notifications and Post-Shipment Verification reports. 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. In

addition, this rule contains a new collection of information

requirement approved under control number 0694-0112, which carries a

burden hour estimate of 15 minutes per submission for obtaining and

maintaining the PRC End-Use Certificate for License Exception CTP

shipments. An additional 1 minute per submission is needed for

recordkeeping. Comments are invited on: (a) Whether the collection of

information is necessary for the proper performance of the functions of

the agency, including whether the information shall have practical

utility; (b) the accuracy of the agency's estimate of the burden of the

proposed collection of information; (c) ways to enhance the quality,

utility, and clarity of the information to be collected; and (d) ways

to minimize the burden of the collection of information on respondents,

including through the use of automated collection techniques or other

forms of information technology. Comments regarding these burden

estimates or any other aspect of the collection of information,

including suggestions for reducing the burdens, should be forwarded to

Patricia Muldonian, Regulatory Policy Division, Office of Exporter

Services, Bureau of Export Administration, Department of Commerce, P.O.

Box 273, Washington, DC 20044, and David Rostker, Office of Management

and Budget, OMB/OIRA, 725 17th Street, NW, NEOB Rm. 10202, Washington,

DC 20503.

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. 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 so at the earliest possible time to permit the fullest

consideration of views.

The period for submission of comments will close March 1, 1999. 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, 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

15 CFR Parts 740 and 748

Administrative practice and procedure, Exports, Foreign trade,

Reporting and recordkeeping requirements.

15 CFR Part 742

Exports, Foreign trade, Terroism.

Accordingly, parts 740, 742, and 748 of the Export Administration

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

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

follows:

Authority: 50 U.S.C. app. 4201 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. 501 (1996); notice of August 14, 1996

(61 FR 42527, August 15, 1996); Notice of August 13, 1997 (62 FR

43629, August 15, 1997); P.L. 105-85, 111 Stat. 1629; and Notice of

August 13, 1998 (63 FR 44121).

2. 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, 3

CFR, 1993 Comp., p. 608; E.O. 12924, 59 FR 43437, 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; Notice of

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

13, 1998 (63 FR 44121).

3. The authority citation for part 748 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, 3 CFR, 1994 Comp., p. 917; E.O. 13026, 3 CFR, 1996

Comp., p. 228; Notice of August 13, 1997 (62 FR 43629, August 15,

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

PART 740--[AMENDED]

4. Section 740.7 is amended:

a. By redesignating paragraph (d)(4) as paragraph (d)(5) and by

adding a new paragraph (d)(4);

b. By amending newly designated paragraph (d)(5) as follows:

i. In newly designated paragraph (d)(5)(iii), revise the phrase

``paragraph (d)(4)(iv) of this section'' to read ``paragraph (d)(5)(iv)

of this section'';

ii. In newly designated paragraph (d)(5)(v) introductory text,

revise the

[[Page 2431]]

phrase ``paragraph (d)(4)(v)'' to read ``paragraph (d)(5)(v)'';

iii. In newly designated paragraph (d)(5)(v)(A) introductory text,

revise the phrase ``paragraph (d)(4)(v)(B)'' to read ``paragraph

(d)(5)(v)(B)'';

iv. In newly designated paragraph (d)(5)(v)(A), add a ``note'' at

the end of paragraph (d)(5)(v)(A)(8); and

c. By revising newly designated paragraph (d)(5)(v)(B).

The additions and revision read as follows:

Sec. 740.7 Computers (CTP).

* * * * *

(d) * * *

(4) Supporting documentation. Exports of computers as described by

paragraph (d)(2) of this section, regardless of value, to the People's

Republic of China must be supported by a PRC End-User Certificate. (See

Sec. 748.10(c)(3) of the EAR for information on obtaining the PRC End-

User Certificate.) Exporters are required to obtain a PRC End-User

Certificate before exporting computers regardless of value to the

People's Republic of China. Exporters are also required to provide the

PRC End-User Certificate Number to BXA as part of their post-shipment

report (see paragraph (d)(5) of this section). When providing the PRC

End-User Certificate Number to BXA, you must identify the transaction

in the post shipment report to which that PRC End-User Certificate

Number applies. The original PRC End-User Certificate shall be retained

in the exporter's files in accordance with the recordkeeping provisions

of Sec. 762.2 of the EAR.

(5) * * *

(v) * * *

(A) * * *

Note to paragraph (d)(5)(v)(A): For exports authorized under

License Exception CTP to the Peoples Republic of China (PRC), you

must submit the PRC End-User Certificate Number identifying the

transaction for which the End-User Certificate Number applies.

(B) Mailing address. A copy of the post-shipment report[s] required

under paragraph (d)(5)(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: HPC

Team, Washington, DC 20044.

(2) For courier deliveries: U.S. Department of Commerce, Office of

the Assistant Secretary for Export Enforcement, Room 3721, 14th Street

and Constitution Ave., NW., Washington, DC 20230.

* * * * *

PART 742--[AMENDED]

5. Section 742.12 is amended:

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

b. By revising paragraph (b)(3)(iv)(B) to read 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 greater than 2,000 MTOPS to countries in Computer Tier 3 pursuant

to the NDAA (see Sec. 740.7(d)(5) of the EAR).

* * * * *

(iv) * * *

(B) Mailing address. 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: HPC

Team, Washington, DC 20044.

(2) For courier deliveries: U.S. Department of Commerce, Office of

the Assistant Secretary for Export Enforcement, Room 3721, 14th Street

and Constitution Ave., NW., Washington, DC 20230.

* * * * *

PART 748--[AMENDED]

Sec. 748.9 [Amended]

6. Section 748.9 is amended by removing paragraph (b)(2)(i)(1) and

redesignating paragraphs (b)(2)(i)(2) and (b)(2)(i)(3), as paragraphs

(b)(2)(i)(A) and (b)(2)(i)(B), respectively.

7. Section 748.10 is amended by removing ``; and'' at the end of

paragraph (b)(2) and adding a period in its place, by redesignating

paragraph (b)(3) as paragraph (b)(4), by adding a new paragraph (b)(3),

and by revising the introductory text of newly designated paragraph

(b)(4) to read as follows:

Sec. 748.10 Import and End-User Certificates.

* * * * *

(b) * * *

(3) Your transaction involves an export of a computer with a

Composite Theoretical Performance (CTP) greater than 2,000 Million

Operations Per Second (MTOPS) under either a license application or

under License Exception CTP to the People's Republic of China, you must

obtain a PRC End-User Certificate, regardless of dollar value.

(4) Your license application involves the export of commodities and

software classified in a single entry on the CCL, the total value of

which exceeds $5,000. Note that this $5,000 threshold, does not apply

to exports of computers with a CTP exceeding 2,000 MTOPS to the

People's Republic of China.

* * * * *

Dated: January 8, 1999.

R. Roger Majak,

Assistant Secretary for Export Administration.

[FR Doc. 99-867 Filed 1-13-99; 8:45 am]

BILLING CODE 3510-33-P