**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of )

)

Amendment of Part 2, Subpart K of the )

Commission\'s Rules regarding the Importation )

of Radio Frequency Devices Capable of Causing ) CI Docket No. 98-69

Harmful Interference )

)

**SECOND REPORT AND ORDER**

**Adopted:** October 29, 1999 **Released:** November 5, 1999

By the Commission:

# Introduction

1.  In this *Second Report and Order*, we eliminate the requirement for
    filing an original FCC Form 740 with the Commission when the Form
    740 is submitted to the U.S. Customs Service to make the required
    declaration upon importation of a device capable of causing harmful
    interference. We also amend the importation rules to clarify
    language regarding use of radio frequency devices that are imported
    for export to make the rule more easily enforceable.

# Background

2.  Pursuant to Section 302 of the Communications Act, (47 U.S.C.
    §302(a)), the Commission has adopted rules for marketing radio
    frequency (RF) devices. These rules control the importation for sale
    of devices that have a potential for causing harmful interference by
    denying entry to those devices that do not comply with FCC technical
    rules.[^1] In 1976, the Commission, in consultation with the U.S.
    Customs Service, adopted procedures to implement cooperative
    enforcement of the importation requirements.[^2]

3.  The FCC Form 740 is used by importers to declare that imported
    devices comply with applicable FCC technical requirements.[^3] In
    1991, the Commission revised the importation rules to eliminate
    unnecessary duplicative reporting and accommodate the U.S. Customs
    Service's transition to an electronic filing system.[^4] These
    changes allowed companies to file FCC Form 740 electronically with
    the U.S. Customs Service. Importers that were unable to file the
    Form 740 information using U.S. Customs electronic system filed an
    original FCC Form 740 submission with the FCC, as well as provided a
    copy of the form with the documentation presented to U.S. Customs.

4.  In June 1998, the Commission released an *Order and Notice of
    Proposed Rule Making (Order and NPRM)*.[^5] The *Order and NPRM*
    changed the authority to waive the radio frequency importation rules
    from the Compliance and Information Bureau to the Office of
    Engineering and Technology (OET), the office that manages the
    equipment authorization program. The Commission proposed and sought
    comment on the regulation requiring the submission of the original
    Form 740 to the Commission when unable to file it electronically
    with U.S. Customs. The Form 740 would still accompany the
    documentation presented to the U.S. Customs Service. The Commission
    also proposed and sought comment concerning amending the rule
    allowing importation for export of devices. This amendment will
    address concerns raised by both the U.S. Customs Service and the FCC
    regarding the difficulty of enforcing this aspect of the FCC
    importation criteria.

## Discussion

##### Form 740 filings

5.  The Commission proposed to eliminate the requirement for filing an
    original FCC Form 740 with the Commission when an importer or
    consignee is unable to file electronically with U.S. Customs.
    Efficiency and industry acceptance of the U. S. Custom's electronic
    filing system provided the basis for this proposal. In 1990, the
    Commission received 40,000 FCC Form 740 declarations per month.[^6]
    By July of 1999, the number of filings had decreased to less then
    200 per month. By comparison, the U.S. Customs Service receives
    80,000 electronic filings per month.[^7] The U.S. Customs Service's
    electronic filing system currently handles over 99% of the
    declarations made by importers of RF devices. Compliance related
    information is available to the Commission via paper filings made as
    part of the Customs entry process.

6.  The Commission received no comments opposing this proposal.
    Accordingly, the Commission will modify its rules and eliminate the
    requirement that the FCC Form 740 be filed with the FCC when an
    importer is unable to do so electronically. FCC Form 740
    submissions, however, will continue to be a part of the submission
    made to the U.S. Customs Service. The dual filing system has
    provided sufficient time for the electronic system to be
    successfully deployed and accepted by industry. No additional or
    unique information is gained by requiring that the original form be
    filed with the FCC. The FCC will obtain Form 740 information, when
    needed, from U.S. Customs.

##### Import for export rule amendment

7.  The Commission also sought comment regarding the proposal to amend
    language in Section 2.1204(a)(5) in order to improve enforcement by
    prohibiting entry of devices that are not approved for use in the
    United States. The current rule allows unauthorized devices to be
    imported. The rule states that "the radio frequency device is being
    imported solely for export. The device will not be marketed or
    offered for sale *for use* in the U.S."[^8] (emphasis added). The
    Commission seeks to remove the words "for use" from the regulation
    to prevent entities from selling these devices in the U.S. for
    domestic use under the guise that they will be sold for use outside
    of the U.S. Many of the devices that are imported in this way are
    those that the FCC rules deny entry because they present a real
    source of harmful interference.

8.  Some concerns over amending this rule were expressed. GTE Service
    Corporation (GTE) and Iridium North America (INA) oppose the removal
    of the language "for use" from the rule. As a provider of global
    roaming services for cellular telephones, GTE contends that removing
    the words \"for use\" will prevent GTE from offering its GlobalRoam®
    service in its present form. Currently, GTE imports the required
    foreign-standard equipment and resells it to its affiliates, other
    cellular carriers, and GTE distributors, who, in turn, rent or sell
    the handsets to travelers in advance of their traveling abroad.[^9]
    If equipment intended for foreign use cannot be sold in the United
    States, GTE contends that cellular carriers will lose the ability to
    provide customers with a convenient way to procure the
    foreign-standard cellular handset. As a result, GTE contends the
    rule change will be costly and inconvenient for cellular customers
    and put customers and businesses from the United States at a
    disadvantage when conducting business internationally.

9.  GTE also contends that the Commission\'s concerns with the current
    rule do not apply to the wireless phones sold for use in the
    international roaming context. GTE contends that the Commission
    expressed concerns in the *Order and NPRM* that the current rule
    creates a loophole by which persons can purchase imported devices
    for use domestically. Because it knows to whom it is selling the
    devices and the purpose for which the telephones will be used, GTE
    \"sees no reason why the FCC\'s proposed solution to the perceived
    problem should prohibit the sale of imported phones for use in the
    international roaming context.\" Thus, GTE believes that the
    Commission should abandon the rule change or amend the rule to allow
    GTE and others to continue to import and sell foreign-standard
    phones intended for use in foreign countries. [^10]

10. INA raises concerns regarding the rule change and its impact on its
    business practices, contending that the Commission's specific
    proposal is far too broad and will cause serious harm to one of
    INA's planned communications businesses. INA initially notes that
    the rule change does not apply to its business concerns within the
    United States because any terrestrial wireless adapter will comply
    with applicable U.S. standards and licensing requirements. INA
    notes, however, that it will be prepared to sell or lease a
    "cellular handset" that will permit a subscriber to use the INA
    Iridium subscriber unit (ISU) handset to access terrestrial wireless
    services in a foreign country where the terrestrial wireless
    standards and spectrum usage are incompatible with U.S. terrestrial
    wireless systems. While the ISU handset will not be "exported"
    within the meaning of Section 2.1204, the proposed change to Section
    2.1204(a)(5) is intended to prohibit importation of an unlicensed
    radio frequency device that is marketed or offered for sale in the
    United States, regardless of where it is intended to be used. Thus,
    INA contends that the proposed language appears to foreclose
    Iridium's plans for leasing or selling imported cellular handsets
    intended for and solely capable for use overseas. Iridium maintains
    that this is obviously not what the Commission intended by the NPRM
    and the unanticipated result should not be allowed to occur. To
    remedy this shortcoming, INA proposes alternative language to the
    rule change. Iridium revision would read as: "... (5) \[t\]he radio
    frequency device is being imported solely for export or is
    inherently capable of functioning only outside the U.S. Except for
    devices inherently capable of functioning only outside the U.S., no
    radio frequency device may be marketed or offered for sale in the
    U.S." INA believes that this language would define a
    technology-based exception to the broad prohibition the Commission
    seeks to achieve in the public interest in the NPRM while allowing
    INA and other authorized entities to pursue telecommunications
    businesses such as importing and selling cellular handsets to U.S.
    [^11]

11. The Commission does not seek to impede the efforts of those engaged
    in business pursuits that do not violate Commission rules. However,
    we cannot allow those that do violate the rules to continue to
    undermine organizations that do take the time and effort to insure
    that their products operate in accordance with our rules. We have
    reviewed the suggested rule language contained in the record and
    agree with commenters that the original proposal may impede their
    business efforts in the telecommunications industry. After giving
    careful consideration to the proposed language in the record we will
    amend rule Section 2.1204(a)(5) to read:

> \(a\) Radio frequency devices may be imported only if one or more of
> these conditions are met:
>
> \* \* \*
>
> The radio frequency device is being imported solely for export. The
> device will not be marketed or offered for sale in the U.S., except:

(i) if the device is a foreign standard cellular phone solely capable of
    functioning outside the U.S.

> or;
>
> \(ii\) if the device is a multi-mode wireless handset that has been
> certified under the Commission's rules and a component (or components)
> of the handset is a foreign standard cellular phone solely capable of
> functioning outside the U.S.

This amendment will allow the importation of foreign standard cellular
handsets that are incapable of operating in the United States similar to
those addressed in GTE's and INA's comments.[^12] Wireless telephones
that combine standards capable of operating within the United States
with foreign standards must continue to abide by the Commission
certification rules in regard to the portions of the device that
function in the United States. Any unauthorized foreign standards
utilized in phones cannot function or be operated in the United States
at any time.

12. Upon review of the record, including the legitimate concerns
    expressed by those in the telecommunications industry, we believe
    that the proposal to amend the rule will close the unintended
    "loophole" in the current rule. This change also serves the public
    interest by making the implementation and enforcement of the rule
    less problematic, and assists the Commission in its goal of
    preventing the marketing and distribution of illegal devices.
    Accordingly, we amend rule Section 2.1204(a)(5).

**IV. ADMINISTRATIVE MATTERS**

# A. Final Regulatory Flexibility Act

13. As required by the Regulatory Flexibility Act (RFA),[^13] an Initial
    Regulatory Flexibility Analysis (IRFA) was incorporated in the
    *Order and Notice of Proposed Rule Making* *(Order and NPRM*.)[^14]
    The Commission sought written public comment on the proposals in the
    *Order and NPRM*, including comment on the IRFA. This present Final
    Regulatory Flexibility Analysis (FRFA) conforms to the RFA.[^15]

###### Ex Parte Rules \-- Permit but Disclose Proceeding 

14. This is a permit-but-disclose notice and comment rule making
    proceeding. Ex parte presentations are permitted except during the
    sunshine agenda period provided they are disclosed as outlined in
    the Commission's rules. See generally 47 C.F.R. §§ 1.1202, 1.1203
    and 1.1206(a)

# V. ORDERING CLAUSES

V.  

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15. **ACCORDINGLY, IT IS ORDERED** that, pursuant to the authority
    contained in Sections 4(i), 4(j), 7(a), 302, 303(b), 303(f), 303(g),
    and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C.
    §§ 154(i), 154(j), 157(a), 302a, 303(b), 303(f), 303(g), 303(r),
    Part 2, Subpart K, Sections 2.1204(a)(5), 2.1205(a), 47 C.F.R. §§
    2.1204(a)(5) and 2.1205(a) are amended as set forth in Appendix A.

16. **IT IS FURTHER ORDERED**, that this *Second Report and Order* will
    be effective sixty (60) days after publication of a summary thereof
    in the Federal Register.

17. **IT IS FURTHER ORDERED** that a copy of the *Second Report and
    Order* will be sent to the Chief Counsel for Advocacy of the Small
    Business Administration.

**G. Contacts for Information**

18. For further information, contact David Sturdivant, Compliance and
    Information Bureau (202) 418-1170 or via e-mail to
    \"dsturdiv@fcc.gov\".

**FEDERAL COMMUNICATIONS COMMISSION**

Magalie Roman Salas

Secretary

Attachment

# Appendix A

**Final Rules**

Part 2 of Title 47 of the Code of Federal Regulations is amended as
follows:

Part 2 -- FREQUENCY ALLOCATIONS AND RADIO TREATY MATTERS; GENERAL RULES
AND REGULATIONS

1.  The authority citation for Part 2 is amended to read as follows:

**AUTHORITY: 47 U.S.C. §§ 154, 302a, 303, and 336, unless otherwise
noted.**

2.  Section 2.1204 is revised by amending paragraph (a)(5) to read as
    follows:

**§ 2.1204 Import Conditions**

**\* \* \* \* \***

Number range level0Number range level1Number range level2Number range
level3Number range level4Number range level5Number range level6Number
range level7(a)(5) The radio frequency device is being imported solely
for export. The device will not be marketed or offered for sale in the
U.S., except:

> \(i\) if the device is a foreign standard cellular phone solely
> capable of functioning outside the U.S.

or;

> \(ii\) if the device is a multi-mode wireless handset that has been
> certified under the Commission's rules and a component (or components)
> of the handset is a foreign standard cellular phone solely capable of
> functioning outside the U.S.

\* \* \* \* \*

3.  Section 2.1205 is revised by deleting the note and paragraph (a)(1)
    and redesignating (a ) and (a)(2) to a new paragraph (a) to read as
    follows:

**§2.1205 Filing of Required Declaration**

Note: \[Removed\]

\(a\) For points of entry where electronic filing with Customs has not
been implemented, use FCC Form 740 to provide the needed information and
declarations. Attach a copy of the completed FCC Form 740 to the Customs
entry papers.

§ 2.1205(a)(1) \[Removed\]

§ 2.1205(a)(2) \[Removed\]

\* \* \* \* \*

> **Appendix B**

####### Comments

1)  GTE Service Corporation

2)  Iridium North America

> **Appendix C**

######## Final Regulatory Flexibility Act

### Need for and Objectives of, the Report and Order

19. The Commission is amending Part 2 of the rules to eliminate the
    filing of the FCC Form 740 with the FCC when an importer is unable
    to use the electronic filing system operated by U. S. Customs. The
    form is currently filed with both the U.S Customs Service and the
    FCC. The form will continue to be filed with the U.S. Customs
    Service. This action will simplify the importation process and is
    part of the transition to the electronic filing system used by U.S.
    Customs.

20. This *Second Report and Order* also amends the Commission rule that
    unintentionally allows non-compliant radio frequency devices to
    enter the United States. The current language requires that the
    Commission show that imported RF devices that do not meet FCC
    technical rules are imported and sold for use in the United States.
    Establishing the fact that the item was marketed for use in the
    United States is problematic. The rule amendment removes a way for
    allowing devices that normally would be denied entry into the United
    States due to non-compliance with FCC rules.

#### Summary of Significant Issues Raised by Public Comments in Response to the IRFA

21. No comments were submitted in reference to the IFRA. The Commission
    does not anticipate any adverse economic impact on small business
    entities resulting from these rule amendments. The elimination of
    the duplicative FCC Form 740 filing should reduce the administrative
    burden on any business affected, particularly small businesses.

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A.  **Description and Estimate of the Number of Small Entities to Which
    Rules Will Apply**

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22. The RFA directs agencies to provide a description of, and, where
    feasible, an estimate of the number of small entities that may be
    affected by the proposed rules, if adopted.[^16] The RFA generally
    defines the term \"small entity\" as having the same meaning as the
    terms \"small business,\" \"small organizations,\" and \"small
    governmental jurisdiction\".[^17] In addition, the term \"small
    business\" has the same meaning as the term \"small business
    concern\" under the Small Business Act.[^18] A small business
    concern is one which: (1) is independently owned and operated; (2)
    is not dominant in its field of operation; and (3) satisfies any
    additional criteria established by the Small Business Administration
    (SBA).[^19] The Commission will need to receive more data regarding
    the brokers who currently file FCC Form 740 with the Commission,
    rather than filing them electronically through the U.S. Customs
    Service (Customs). We estimate that 200 of these forms are filed per
    month, presumably by smaller firms that do not subscribe to the
    Customs electronic filing system due to the relatively small number
    of FCC declarations that they handle. While there is no readily
    apparent link between the number of paper filings per month and the
    number of entities submitting the declarations, we presume most of
    the entities involved are small businesses or individuals. These
    entities will continue to be subject to the requirement to submit
    FCC Form 740 documents, but only to one government agency, not two.
    They will address and mail only one FCC Form 740 per declaration,
    not two, thereby reducing their mailing cost by at least half. Other
    administrative costs, such as staff time required to duplicate the
    FCC Form 740, will also be significantly reduced.

D. Description of Projected Reporting, Record Keeping, and Other
Compliance Requirements

23. There is no new requirement. The *Second Report and Order* removes
    the requirement to file a copy of FCC Form 740 with the Commission
    for entities that do not use U.S. Custom's electronic filing
    procedures. Entities that do not use electronic filing will continue
    to provide an original FCC Form 740 to U.S. Customs with the
    shipment, but will not be required to file a second copy with the
    FCC.

E. Steps Taken to Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered

24. This *Second Report and Order* will reduce the burden on small
    entities. This item eliminates the duplicative filing of the FCC
    Form 740 and, as a result, should reduce administrative overhead,
    such as processing and mailing costs for small businesses.

**[Report to Congress]{.underline}**: The Commission will send a copy of
the *Second Report and Order*, including this FRFA, in a report to be
sent to Congress pursuant to the Small Business Regulatory Enforcement
Fairness Act of 1996, *see* 5 U.S.C. § 801(a)(1)(A). In addition, the
Commission will send a copy of the *Second Report and Order*, including
FRFA, to the Chief Counsel for Advocacy of the Small Business
Administration. A copy of the *Second Report and Order* and FRFA (or
summaries thereof) will also be published in the Federal Register. *See*
5 U.S.C. § 604(b).

[^1]: 47 C.F.R. §§2.801-2.815

[^2]: *Report and Order*, *Amendment of Part 2 With Respect to
    Importation of Certain Electronic Equipment,* 59 FCC Rcd 2d 1083
    (1976). The 1976 *Report and Order* adopted the original importation
    requirements.

[^3]: 47 C.F.R § 2.1203(a)

[^4]: *Report and Order,* *Amendment of Part 2 of the Rules Concerning
    the Importation of Radio Frequency Devices Capable of Causing
    Harmful Interference,* 6 FCC Rcd 3296 (1991).

[^5]: *Order and Notice of Proposed Rule Making*, 13 FCC Rcd 13629
    (1998).

[^6]: *Id*. at ¶ 5.

[^7]: *Id.*

[^8]: 47 C.F.R. § 2.1204(a)(5).

[^9]: Comments of GTE Services Corporation, at 2.

[^10]: GTE comments at 2-5.

[^11]: Iridium Comments at 2-5.

[^12]: The rule amendments we adopt here will not adversely affect those
    companies engaged in selling Global Mobile Personal Communications
    Satellite (GMPCS) devices. In the *Report and Order concerning the
    1998 Biennial Regulatory Review -- Amendments of Parts 2, 25, and
    68, (GMPCS R&O)* the Commission implements Mutual Recognition
    Agreements and Arrangements that provide product approval for GMPCS
    devices on a global basis. 13 FCC Rcd 24687 (1998). This rule will
    allows the products to be imported in accordance with the
    Commission's amended importation rules.

[^13]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et. seq*.,
    has been amended by the Contract With America Advancement Act of
    1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of
    the CWAAA is the Small Business Regulatory Enforcement Fairness Act
    of 1996 (SBREFA).

[^14]: *Supra* note Error: Reference source not found.

[^15]: *See* 5 U.S.C. § 604.

[^16]: 5 U.S.C. § 603(b)(3).

[^17]: *Id*.; 5 U.S.C. § 601(6).

[^18]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    \"small business concern\" in 15 U.S.C. § 632). Pursuant to the RFA,
    the statutory definition of a small business applies \"unless an
    agency, after consultation with the Office of Advocacy of the Small
    Business Administration and after opportunity for public comment,
    establishes one or more definitions of such terms which are
    appropriate to the activities of the agency and publishes such
    definition(s) in the Federal Register. 5 U.S.C. § 601(3).

[^19]: Small Business Act, 15 U.S.C. § 632 (1996).