POLICY ISSUE

(Notation Vote)

July 1, 2002 SECY-02-0122

FOR: The Commissioners

FROM: William D. Travers

Executive Director for Operations /RA/

SUBJECT: STAFF REVIEW GUIDANCE FOR GASEOUS DIFFUSION PLANT

CHANGES IN OWNERSHIP OR CONTROL

PURPOSE:

The purpose of this paper is to forward, for Commission review, the revised staff review

guidance for foreign ownership or control and financial qualifications, at gaseous diffusion

plants (GDPs).

BACKGROUND:

In a Staff Requirements Memorandum (SRM) dated February 21, 2002, the Commission

approved an approach for performing financial qualification reviews applicable to changes in

ownership or control of gaseous diffusion plants. The Commission indicated that the financial

qualification review should be similar to 10 CFR Part 70 financial qualification reviews, which

are oriented to ensuring health and safety, and should be performed only for changes in

ownership or control. In addition, the Commission indicated that the changes should not be

adopted under the “reliable and economical” criterion, but in a new section within the Standard

Review Plan (SRP). The Commission also instructed the staff to provide the revisions to the

Commission for review.

CONTACT: T. Johnson, NMSS/FCSS

 (301) 415-7299
The Commissioners 2

DISCUSSION:

The staff is attaching, for Commission review, revised guidance applicable to Chapter 16 of

Draft NUREG-1671, “Standard Review Plan for the Recertification of the Gaseous Diffusion 

Plants.” Chapter 16 addresses determinations of foreign ownership, control, or domination;

common defense and security; and reliable and economical source of domestic

enrichment services.

In accordance with the Commission’s instructions, staff revised the guidance to reflect that the

foreign ownership, control, or domination review satisfies the criteria for a “reliable and

economical” domestic source of enrichment services.

In addition, staff has added a new guidance document, applicable to performing Part 70

financial qualification reviews, oriented to ensuring that entities have financial resources

sufficient to conduct the required health and safety programs. In preparing this guidance, staff

adapted financial qualification guidance from NUREG-1520, “Standard Review Plan for the

Review of a License Application for a Fuel Cycle Facility,” and NUREG-1718, “Standard Review

Plan for the Review of an Application for a Mixed Oxide (MOX) Fuel Fabrication Facility.” The

staff concluded from reviewing the guidance in NUREG-1520, in response to the Staff

Requirements Memorandum, that the guidance provides only very broad language and does

not provide sufficient guidance to the staff or applicants for performing financial qualification

reviews. Therefore, the staff also considered the guidance in NUREG-1718 for the MOX

facility, which is also being licensed under 10 CFR Part 70. This guidance provides for a

general review of financial statements and business plans. The staff intends, at the next

opportunity, to amend NUREG-1520 to incorporate the financial qualifications standards in

NUREG-1718. 

In SECY-02-0002, staff indicated that it would revise Chapter 16 of draft NUREG-1671 in

accordance with Commission instructions. The proposed Chapter 16 revisions and a new

Chapter 17 on financial qualifications are attached. However, staff reevaluated the need to

complete a final version of draft NUREG-1671 since the submittal of SECY-02-0002. 

NUREG-1671 was initially intended to provide staff guidance for reviewing recertification actions

for the gaseous diffusion plants. It was then planned to be used to address various significant

amendments to certifications. 

Staff estimates that about 1 full time equivalent (FTE) will be needed to complete the final SRP

in it’s entirety, which is a substantial effort given the scope of the activities occurring at a GDP. 

As part of the Office of Nuclear Material Safety and Safeguards (NMSS) planning, budgeting,

performance, management process, the resources required to finalize the SRP have not been

budgeted in this planning period because the development of regulatory guidance is a low

priority for GDP’s. The staff has recently reviewed major changes to the GDPs, such as the

Paducah High Assay Upgrade Project, which was a unique licensing application that was not

addressed by the SRP. The staff expects that future GDP licensing actions will be unique

applications and will not require extensive use of the SRP. It is, therefore, not necessary to

finalize the draft to make recertification decisions. In the staff’s view, finalizing the draft

NUREG-1671 would not be an efficient and effective use of resources.
The Commissioners 3

Because the staff does not plan to issue a final NUREG-1671, the staff plans to issue the

same guidance as an NMSS Policy and Guidance Directive (P&GD) as provided in Attachment

2. Therefore, the attached Draft NMSS P&GD reflects the above discussed revisions to

Chapter 16 and the new Chapter 17 of draft NUREG-1671, in accordance with the February

21, 2002, SRM.

The Commission stated in the SRM, that Section 16.4.3, Reliable and Economical Source of

Domestic Enrichment Services, should reflect “that the foreign ownership, control, or

domination review satisfies this criterion.” However, the staff notes that the position in the

SRM regarding the criterion for reliable and economic source of domestic enrichment services

does not include the complete test provided in the Commission’s November 14, 2001,

Memorandum and Order (CLI -01-23) on the review of the Director’s Decision concerning

Section 193(f).

Specifically, at page 16 of that decision, the Commission stated that Section 193(f) provides

for two related tests:

1) is the certificate holder to be owned, controlled, or dominated by a foreign entity;

and 2) if the certificate holder is not to be owned, controlled, or dominated by a foreign 

 entity, is the certificate holder likely to be subject to influence by an entity,

principally a foreign entity, that would be inimical to a) the common defense and

security, or b) maintaining a domestic enrichment capability.

To incorporate the second test the staff modified the P&GD Section 5.3 (Enclosure 1 to

Attachment 2), subsection “Reliable and Economical Source of Domestic Enrichment Services,”

to add the following:

The review criteria for a finding related to a reliable and economical source of domestic

services includes the above criteria for foreign ownership, control, and domination. The

following additional criterion is applicable if the applicant is not to be owned, controlled,

or dominated by a foreign entity: The applicant is not likely to be subject to influence by

an entity, principally a foreign entity, that would be inimical to a) the common defense

and security, or b) maintaining a domestic enrichment capability.

Section 4 of the proposed P&GD was not modified as it’s guidance develops the necessary

information to make this finding. In addition, a favorable financial finding should provide 

support for a finding that there is an intent to operate the facility and, therefore, the transfer

would not be inimical to maintaining a domestic enrichment capability. (See footnote 3 of SECY

02-0002, January 2, 2002).

After Commission approval of SRP Chapters 16 and 17 and of the P&GD, the staff intends to

transmit the final version of the documents to the U.S. Enrichment Corporation and make the

transmittal letter and the guidance publically available in the Agencywide Documents Access

and Management System (ADAMS).

COORDINATION:

This paper has been coordinated with the Office of the General Counsel, which has no legal

objection.
The Commissioners 4

RECOMMENDATION:

Recommend that the Commission approve Draft SRP Chapters 16 and 17 and the Draft P&GD.

/RA/

William D. Travers

Executive Director

 for Operations

Attachments:

1. Draft SRP Chapters 16 and 17

2. Draft NMSS Policy and Guidance Directive 

 PG-X-XX, “Staff Reviews of Gaseous Diffusion 

 Plant Transfers of Ownership or Control”

3. Redline-Strikeout version of Chapter 16 of Draft NUREG-1671 
4

RECOMMENDATION:

Recommend that the Commission approve Draft SRP Chapters 16 and 17 and the Draft P&GD.

/RA/

William D. Travers

Executive Director 

 for Operations

Attachments:

1. Draft SRP Chapters 16 and 17

2. Draft NMSS Policy and Giudance Directive 

 PGX_XX, “Staff Reviews of Gaseous Diffusion 

 Plant Transfers of Ownership or Control”

3. Redline-Strikeout version of Chapter 16 of Draft NUREG-1671

 G:\SPB\TCJ\GDP&GD * See Previous Concurrence ML020540001

OFC SPIB* SPIB* Tech. Ed.* SPIB* FCFB*

NAME TJohnson:dw DAHoadley EKraus JGiitter DGillen

DATE 4/ 22 /02 3/ 19 /02 4/ 8-9 /02 4/25/02 4/26/02

OFC OGC* FCSS* NMSS* DEDMRS EDO

NAME STreby RPierson MVirgilio CPaperiello WTravers

DATE 5/16/02 5/10 /02 5/ 31 /02 7/01/02 7/01/02

 OFFICIAL RECORD COPY
ROUTING AND TRANSMITTAL SLIP

 

Date: March , 2002

NAME INITIALS DATE

T. Johnson, SPB 4/ /02

D.A. Hoadley, SPB 3/ 19 /02

E. Kraus, Tech. Editor 4/ 8-9 /02

J. Giitter, SPB 4/26 /02

D. Gillen 4/ 26/02

OGC 5/ 02 /02

R. Pierson, FCSS 5/07/02

M. Virgilio, FCSS 5/ /02

C. Paperiello, DEDMRS 5/ /02

W. Travers, EDO 5/ /02

************************************************************************************************************

ACTION: __X_ APPROVAL: ______FOR YOUR INFO: _____

NOTE & RETURN:_____ PREPARE REPLY: ______COORDINATION: _____

**********************************************************************************************************************

EDO/NMSS TICKET NO.200200042

DUE TO DIVISION:5/9/02

DUE TO NMSS: 5/13/02

DUE TO EDO: 5/17/02

ML021280106

************************************************************************************************************

MEMORANDUM FOR: The Commissioners

FROM: William D. Travers
SUBJECT: STAFF REVIEW GUIDANCE FOR GASEOUS DIFFUSION

PLANT CHANGES IN OWNERSHIP OR CONTROL

***********************************************************************************************************

REMARKS:

**********************************************************************************************************************

ORIGINATOR: Tim Johnson PHONE: 415-7299

SECRETARY: Dwight Walker 415-6850 

********************************************************************************************************************** 
ATTACHMENT 1
1 Note: The procedures in this Standard Review Plan for a statutory determination of

foreign ownership, control, or domination, are not to be used to determine foreign

ownership, control, or influence (FOCI) for granting access to classified material. The

National Industrial Security Program Operating Manual (NISPOM) (see Reference 1) is

the governing document for determining FOCI and the granting of access to classified

material.

NUEREG-1671 16-1 5/29/02

16.0 DETERMINATION OF FOREIGN OWNERSHIP, CONTROL,

OR DOMINATION, COMMON DEFENSE AND SECURITY, AND

RELIABLE AND ECONOMICAL SOURCE OF DOMESTIC

ENRICHMENT SERVICES

16.1 Responsibility for Review

16.1.1 Primary: As designated.

16.1.2 Secondary: Facility security specialist/safeguards technical analyst.

16.1.3 Supporting: Material control and accounting inspector/resident inspector.

16.2 Purpose of Review

The purpose of this review is to determine that an applicant for transfer of certificates to a new

entity is not owned, controlled, or dominated by an alien, a foreign corporation, or a foreign

government; that issuance of a certificate would not be inimical to the common defense and

security of the United States; and that issuance of a certificate would not be inimical to the

maintenance of a reliable and economical domestic source of enrichment services.1

 Reviews

under this section will apply to certificate transfers to a new owner or any transfer of control

under 10 CFR 76.65. Reviews under this section will also apply to submittals required under

the certificate conditions described in Section 16.4.2.1, Item 6, in this Standard Review Plan.

16.3 Areas of Review

The staff reviews an application to transfer certificates to a new entity to examine if the

application for the transfer meets the requirements related to foreign ownership, control, or

domination; common defense and security; and whether a reliable and economical domestic

source of enrichment services will be maintained.
NUEREG-1671 16-2 5/29/02

16.4 Review Procedures

16.4.1 Acceptance Review

An acceptance review under this section is needed only when there is an application to transfer

certificates for a change of ownership or control. The primary reviewer should determine that

the application meets the requirements of 10 CFR 76.35, “Contents of Application,” and 10 CFR

76.36, “Renewals,” with respect to the determination of foreign ownership (see Section 16.5.1,

“Regulatory Requirements”), and that the topics discussed in Section 16.3, “Areas of Review,”

have been addressed.

If significant deficiencies are identified in the application, the applicant should be requested to

submit additional material before the staff begins the application review.

16.4.2 Evaluation

The reviewer should determine whether the applicant is subject to any of the criteria set forth in

10 CFR 76.22, “Ineligibility of Certain Applicants.” If so, the primary reviewers should perform

an evaluation of the information presented in the application against the acceptance criteria in

SRP Section 16.5, using the evaluation procedures described in the following sections.

16.4.2.1 Foreign Ownership, Control, or Domination

An applicant is considered to be foreign owned, controlled, or dominated whenever a foreign

interest has the power, direct or indirect, whether or not exercised, through the ownership of the

applicant's securities, by contractual arrangements or other means, to direct or decide matters

affecting the management or operations of the applicant.

A foreign interest is defined as any foreign government, agency of a foreign government, or

representative of a foreign government; any form of business enterprise or legal entity

organized, chartered, or incorporated under the laws of any country other than the United

States (U.S.) or its possessions and trust territories; any person who is not a citizen or national

of the U.S.; and any U.S. interest effectively controlled by one of the above foreign entities.

Information submitted by the applicant, as specified in, “Foreign Ownership, Control, or

Influence Guidance Documents for the Privatization of the United States Enrichment

Corporation,” (see Reference 2) will be reviewed. The reviewer assesses the following items to

determine if the applicant is foreign owned, controlled, or dominated:

1. The applicant provides answers to the following questions. If any of the answers

are affirmative, the applicant furnishes detailed information that describes all

conditions that exist. The information is considered in the aggregate. The fact

that some of the below listed conditions may apply does not necessarily render

the applicant ineligible for recertification.

a. Does a foreign interest own or have beneficial ownership in 5 percent or

more of the organization’s voting securities?
NUEREG-1671 16-3 5/29/02

b. Does the organization own 10 percent or more of any foreign interest?

c. Do any foreign interests have management positions such as directors,

officers, or executive personnel in the organization?

d. Does any foreign interest control or influence, or is any foreign interest in

a position to control or influence, the election, appointment, or tenure of

any of the directors, officers, or executive personnel?

e. Does the organization have any contracts, binding agreements,

understandings, or arrangements with a foreign interest(s), that

cumulatively represent 10 percent or more of your organization’s gross

income?

f. Is the organization indebted to foreign interests?

g. During the last fiscal year, did the organization derive 5 percent or more

of its total revenues or net income, from any single foreign interest, or in

the aggregate, 30 percent or more of its revenues or net income from

foreign interests? 

h. Is 5 percent or more of any class of the organization’s securities held in

“nominee shares”, in “street names,” or in some other method that does

not disclose beneficial owner of equitable title? 

i. Does the organization have interlocking directors/officers with foreign

interests?

j. Are there any citizens of foreign countries employed by the organization

or who may visit offices or facilities in a capacity that may permit them to

have access to classified information or a significant quantity of special

nuclear material?

k. Does the organization have foreign involvement not otherwise covered in

the answers to the above questions?

2. The reviewer obtains a foreign intelligence threat assessment. This assessment

is conducted through the intelligence community and others, and is coordinated

by the Department of Energy (DOE). The reviewer obtains the assessment by

contacting the DOE representative to the Enrichment Oversight Committee.

3. If the applicant submits any affirmative information listed in Section 16.5.1 or

Steps 1.a through 1.k above, or the foreign intelligence threat assessment

contains information that the applicant may be foreign owned, controlled, or

dominated, the reviewer determines:

a. The nature and extent of foreign ownership, control, or domination, to

include whether a foreign interest occupies a controlling or dominant

minority position;
NUEREG-1671 16-4 5/29/02

b. The source of foreign ownership, control, or domination, to include

identification of immediate, intermediate, and ultimate parent

organizations; and

c. The type of actions, if any, that would be necessary to negate the effects

of foreign ownership, control, or domination to an acceptable level.

4. The staff determines that an applicant is considered to be foreign owned,

controlled, or dominated, or that additional action is necessary to negate the

foreign ownership, control, or domination; the applicant is promptly advised and

requested to submit a negation action plan. In cases that involve foreign

ownership, a plan may consist of one of the methods described in Chapter 2,

Section 2-306, of the National Industrial Security Program Operating Manual

(NISPOM). When factors not related to ownership are present, the plan provides

positive measures that assure that the foreign interest can be effectively denied

control or domination. Examples of such measures include: modification or

termination of loan agreements, contracts, and other understandings with foreign

interests; diversification or reduction of foreign source income; demonstration of

financial condition independent of foreign interests; elimination or resolution of

problem debt; assignment of specific oversight duties and responsibilities to

board members; adoption of special board resolutions; and other actions that

negate foreign control or domination.

5. The reviewer arranges to meet with, or otherwise communicate these findings to,

the principal members of the Enrichment Oversight Committee and obtain their

comments.

6. The reviewer ensures that NRC remains informed regarding foreign ownership,

control, or domination by preparing certificate conditions of the following types:

If, at any time after the privatization date, the applicant obtains information

reasonably indicating changes described in the NISPOM, Chapter 1, Section 3,

1-302(h) (see Reference 1), to the information previously submitted to NRC,

described in the NISPOM, Chapter 2, Section 3, 2-302 b(1) through (11) (see

Reference 1), the applicant shall notify NRC in writing within 15 days.

If the applicant enters into negotiations for the proposed merger, acquisition, or

takeover by a foreign person, the applicant submits notification to NRC, in

writing, within 15 days of the beginning of such negotiations. The submission

includes the type of transaction under negotiation (stock purchase, asset

purchase, etc.); the identity of the potential foreign person investor; a plan to

negate foreign ownership, control, or domination; and copies of any related loan,

purchase, and shareholder agreements as well as annual reports, bylaws,

articles of incorporation, partnership agreements, and reports filed with other

Federal agencies.
NUEREG-1671 16-5 5/29/02

16.4.2.2 Common Defense and Security

The reviewer assesses the following items to determine if the applicant is in compliance with

NRC regulatory requirements to protect the common defense and security:

1. The reviewer determines that NRC has reviewed and approved the applicant’s

physical security plan and fundamental nuclear material control plan.

2. The reviewer consults with the primary reviewer of the Classified Matter Plan to

ensure that the applicant’s security plan for the protection of classified matter

has been reviewed and approved.

3. If the applicant has previously been issued a certificate of compliance, the

reviewer ensures that NRC inspection reports -- dealing with facility and

transportation physical protection, material control and accounting, information

security programs, and control of classified material -- do not indicate a general

failure to protect the common defense and security interests of the United

States.

4. The reviewer arranges to meet with, or otherwise consult with, the principal

members of the Enrichment Oversight Committee, to obtain the committee’s

assessment of the applicant’s performance as the U.S. agent for the Russian

High Enriched Uranium (HEU) Agreement, if applicable.

5. If applicable, the reviewer ensures that NRC remains informed regarding the

applicant’s performance as the U.S. agent for the Russian HEU Agreement by

preparing a certificate condition of the following type:

The applicant, or its successors, as the Executive Agent for the United States for

implementing the Russian HEU Agreement, shall notify NRC, in writing, within 15

days, if at any time and for any reason, including actions of third parties, the

applicant or its successors become aware of, or anticipate, any change in the

provisions of, or in the implementation of, the terms of any Memorandum of

Agreement applicable to an entity serving as Executive Agent for the Russian

HEU Agreement. [License reviewer to provide specific Memorandum of

Agreement Title and Date of Execution.]

16.4.2.3 Reliable and Economical Source of Domestic Enrichment Services

Under the Atomic Energy Act of 1954, as amended, Section 193(f)(2)(B) requires that the

Commission may not issue a license or certificate of compliance if the Commission determines

that issuance would be inimical to “... the maintenance of a reliable and economical domestic

source of enrichment services.” Section 193(f)(2)(B) is principally directed to the possibility of

foreign entities gaining control and undermining U.S. domestic enrichment capabilities. 

Therefore, the reviews related to Foreign Ownership, Control, or Domination, will encompass

the “reliable and economical” issue when there is an application to transfer certificates to a new

facility owner, or transfer of control under 10 CFR 76.65.
NUEREG-1671 16-6 5/29/02

Issuance of a certificate of compliance is considered inimical to the maintenance of a reliable

and economical source of domestic enrichment services if the applicant does not meet the

conditions for foreign ownership, control, and domination.

The review consists of the procedures in Section 16.4.2.1.

16.5 Criteria

16.5.1 Regulatory Requirements

1. 10 CFR 76.22 addresses the ineligibility of applicants for recertification.

2. 10 CFR 76.33 provides for NRC to require the applicant to supply additional information,

as necessary.

3. 10 CFR 95.15 addresses the collection of information necessary to determine that the

applicant is not owned, controlled, nor dominated by an alien, foreign corporation, or

foreign government.

4. 10 CFR Parts 76 and 95 contain and reference applicable regulatory requirements

necessary to protect the common defense and security.

16.5.2 Regulatory Guidance

1. U.S. Nuclear Regulatory Commission, NUREG/CR-5734, “Recommendations to the

NRC on Acceptable Standard Format and Content for the Fundamental Nuclear Material

Control (FNMC) Plan Required for Low-Enriched Uranium Enrichment Facilities.”

2. U.S. Nuclear Regulatory Commission, Regulatory Guide 5.67, “Material Control and

Accounting for Uranium Enrichment Facilities Authorized to Produce Special Nuclear

Material of Low Strategic Significance.”

3. U.S. Nuclear Regulatory Commission, “Security Plan Format and Content Guide for

NRC Licensees, Certificate Holders, and Related Organizations.”

16.5.3 Regulatory Review Criteria

The staff should use the following regulatory review criteria, or information demonstrating

acceptable alternatives, in its review of the application. Acceptability should be based on the

following:

Foreign Ownership, Control, or Domination

After a review of the potential foreign involvement information, in accordance with the Review

Procedures, in Section 16.4, the reviewer determines that no foreign interest has the ability,

direct or indirect, to direct or decide matters affecting the management or operations of the

applicant.
NUEREG-1671 16-7 5/29/02

The following additional criteria are applicable:

1. Foreign competitors of the current certificate holder are precluded from participating in

any acquisition of the current certificate holder.

2. Entities with a substantial commercial relationship with foreign enrichment providers,

with respect to uranium and uranium products, are precluded from participating in any

acquisition of the current certificate holder.

3. Foreign interests own no more than 10 percent of the outstanding voting securities of

the applicant.

4. Foreign-sourced financing of an acquisition of the current certificate holder is no more

than 10 percent of the purchase price.

Common Defense and Security

1. NRC has reviewed and approved the applicant’s physical security plan.

2. NRC has reviewed and approved the applicant’s security plan for the protection of

classified matter.

3. NRC has reviewed and approved the applicant’s fundamental nuclear material control

plan.

4. If the applicant has previously been issued a certificate of compliance, a review of NRC

inspection reports does not indicate the applicant’s general failure to protect the

common defense and security interests of the United States.

5. If applicable, consultation with the principal members of the Enrichment Oversight

Committee indicates that the applicant’s performance as the U.S. Agent for the Russian

HEU Agreement is acceptable.

Reliable and Economical Source of Domestic Enrichment Services

The review criteria for a finding related to a reliable and economical source of domestic

enrichment services are subsumed by the above criteria for foreign ownership, control, and

domination.

16.6 Evaluation Findings

16.6.1 Introduction

The staff’s review should verify that sufficient information has been provided in the application

to satisfy the intent of requirements in 10 CFR 76.35, “Contents of Application,” and 10 CFR

76.36, “Renewals,” relative to determination of foreign ownership; and the information provided
NUEREG-1671 16-8 5/29/02

is consistent with the guidance in this SRP. On the basis of this information, the staff should be

able to conclude that this evaluation is complete.

16.6.2 Sample Evaluation Findings

The staff could document the safety evaluation for the certificate application as follows:

On the basis of the staff’s review and evaluation of the application to transfer

certificates for a change in ownership or control, the staff has found no cause to

determine that:

1. The applicant is owned, controlled, or dominated by an alien, a foreign

corporation, or a foreign government; or

2. Issuance of a certificate of compliance would be inimical to the common defense

and security of the United States; or

3. Issuance of a certificate of compliance would be inimical to the maintenance of a

reliable and economical domestic source of enrichment services.

On the basis of its review, the NRC staff determined that the information related to

foreign ownership, control, or domination, common defense and security, and reliable

and economical source of domestic enrichment services, is acceptable to support the

application to transfer certificates to: a new facility owner; or transfer of control, under

10 CFR 76.65.

16.7 References

1. U.S. Department of Defense, “National Industrial Security Program Operating Manual

(NISPOM),” DOD 5520.22-M, January 1995.

2. U.S. Department of Energy, U.S. Nuclear Regulatory Commission, U.S. Enrichment

Corporation, “Foreign Ownership, Control, or Influence Guidance Documents for the

Privatization of the United States Enrichment Corporation.”
Financial Qualifications

NUEREG-1671 17-1 5/29/02

17.0 FINANCIAL QUALIFICATIONS

17.1 Responsibility for Review

17.1.1 Primary: Financial Specialist

17.1.2 Secondary: Licensing Project Manager

17.1.3 Supporting: Office of the General Counsel

17.2 Purpose of Review

The purpose of this review is to determine that an applicant for transfer or control of certificates

to a new entity has current financial qualifications and continuing access to the financial

resources necessary to engage in the proposed activity and meet the regulatory requirements

in 10 CFR 76.60. Reviews under this section will apply only to certificate transfers to a new

owner or any transfer of control under 10 CFR 76.65. This financial qualifications review will be

part of the public health and safety review of an application for transfer of ownership or control.

17.3 Areas of Review

The staff reviews an application for transfer or control of the certificate to a new entity to

determine if the applicant has provided financial information sufficient to indicate that resources

are available to the applicant to pursue the activities for which the certificate is sought.

The areas of review for financial qualifications should include:

1. Projected Costs of Operation

a. Projected costs of gaseous diffusion plant operations.

b. Projected costs of significant new corporate projects.

2. Sources of Funds

a. Funding plans for the proposed action and significant new corporate projects (if

any), including, but not limited to, revenues and debt equity.

b. The source(s) and planned or existing funding commitments or contracts which

the applicant relies, including government contracts.

3. Contingency Funds

The contingencies for cost overruns and revenue shortfalls.
NUEREG-1671 17-2 5/29/02

4. Financial Qualifications

a. The financial description of the applicant, of any partnership established to

finance the proposed action, and of any parent or other affiliated companies

upon whom the applicant is relying for sources of operating funds. 

b. The applicant should provide NRC with a copy of the most recent financial report

and U.S. Securities and Exchange Commission Report 10-K, for itself, any

planned or existing partners, and any parent or other affiliated companies upon

whom the applicant is relying for the sources of operating funds. In the event

that an annual financial report and U.S. Securities and Exchange Commission

Report 10-K is not available for the applicant, a partner, or other affiliated

company, the applicant should provide audited financial statements that include:

i. Statements of earnings, to include revenues, costs and expenses;

earnings before and after taxes; net earnings, and per-share earnings

and dividends;

ii. Consolidated statements of changes in share owners’ equity;

iii. Statements of financial position to include assets, liabilities, and equity;

iv. Statements of cash flows to include cash flows from operating, investing,

and financing activities;

v. Management’s discussion of financial operations, resources, liquidity, and

significant selected financial data;

vi. Any notes applicable to the financial statements needed to clarify or

explain significant items, assumptions, potential risks and liabilities, or

limitations; and

vii. An independent auditor’s report describing the accounting principles

used, and any opinions or qualifications applicable to the financial

statements.

17.4 Review Procedures

17.4.1 Acceptance Review

An acceptance review under this section is needed only when there is an application for transfer

or control of the certificate to a new entity. If significant deficiencies are identified in the

application, the applicant should be requested to submit additional material before the staff

begins the application review.

17.4.2 Evaluation

After determining that the financial qualifications are acceptable for review in accordance with

Section 17.4.1, the primary reviewer should perform an evaluation against the acceptance

criteria described in Section 17.5. On the basis of its review, the staff may request that the

applicant provide additional information or modify the application to meet the acceptance

criteria in Section 17.5.
Financial Qualifications

NUEREG-1671 17-3 5/29/02

17.5 Acceptance Criteria

17.5.1 Regulatory Requirements

The regulation applicable to the area of financial qualifications review is 10 CFR 76.35(a)(3).

17.5.2 Regulatory Guidance

There are no regulatory guides that apply to financial qualifications for a gaseous diffusion plant

certificate.

17.5.3 Regulatory Acceptance Criteria

The application is acceptable if the description of the applicant’s financial qualifications

demonstrates the applicant’s current and continuing access to the financial resources is

sufficient to engage in the proposed activity.

The reviewer should find the applicant's financial qualifications acceptable if the following

acceptance criteria are met:

1. Projected Costs of Operation

The applicant’s costs of operation do not appear to be underestimated given the size and scope

of the proposed actions and any significant new corporate projects.

2. Sources of Funds

The applicant’s sources of funds (including the applicant’s funding plan(s) and debt, equity and

revenue levels and planned or existing source(s) of funding commitments) are consistent with

the estimated operating costs of the proposed action and any significant new corporate

projects.

3. Contingency Funds

The applicant’s contingency funds are appropriate for unforeseen operating contingencies. The

applicant indicates its plans for the case where cost overruns are much higher than anticipated,

(e.g., in excess by 30 percent).

4. Financial Qualifications

The financial data for the applicant, planned or existing partners, or other affiliated companies

support the financial commitments of each; are consistent with generally accepted accounting

practices; and represent a reasonable financial basis for operating the facility.

The applicant commits to providing its annual report to NRC. If the applicant does not issue an

annual report, the applicant commits to annually provide NRC with the information described in

Section 17.3.4(b)(i)-(vii).
Financial Qualifications

NUEREG-1671 17-4 5/29/02

17.6 Evaluation Findings

The primary reviewer should document the safety evaluation by preparing material suitable for

inclusion in the Safety Evaluation Report (SER). The primary reviewer should describe the

review, explain the basis for the findings, and state the conclusions. 

The staff could document the safety evaluation as follows:

The staff reviewed the financial qualifications for [insert name of facility] according to

Chapter 17.0 of draft NUREG-1671. The staff evaluated [insert a summary of the material

reviewed] and found that [state the findings]. 

The staff concluded that the applicant appears financially qualified to engage in the

proposed activities in accordance with 10 CFR Part 76. As a result, the staff finds that the

applicant’s financial qualifications support the staff's approval of the transfer of ownership or

control.

17.7 References

Code of Federal Regulations, Title 10, Part 76, "Certification of Gaseous Diffusion Plants," U.S.

Government Printing Office, Washington, DC.
ATTACHMENT 2
POLICY AND GUIDANCE DIRECTIVE

PG X-XX

STAFF REVIEWS OF GASEOUS DIFFUSION PLANT

TRANSFERS OF OWNERSHIP OR CONTROL

PREPARED BY:

Timothy C. Johnson, SPB

REVIEWED BY:

Joseph G. Giitter, SPB

REVIEWED BY:

James Lieberman, OGC

APPROVED BY:

Robert C. Pierson, FCSS

PG X-XX, Rev. 0
STAFF REVIEWS OF GASEOUS DIFFUSION PLANT

TRANSFERS OF OWNERSHIP OR CONTROL

Table of Contents

Page

1. Purpose ........................................................................................ 1

2. Background .................................................................................. 1

3. Guidance ...................................................................................... 1

Enclosure 1 “Determination of Foreign Ownership, Control, or Domination; Common Defense

and Security, and Reliable and Economical Source of Domestic Enrichment

Services”

Enclosure 2 “Financial Qualifications”

PG X-XX
-1-

STAFF REVIEWS OF GASEOUS DIFFUSION PLANT

TRANSFERS OF OWNERSHIP OR CONTROL

1. Purpose

The purpose of this directive is to provide instructions for staff reviews of transfers of ownership

or control of gaseous diffusion plants.

2. Background

In February 1999, staff issued Draft “Standard Review Plan for the Recertification of the

Gaseous Diffusion Plants,” NUREG-1671. Chapter 16 of Draft NUREG-1671 provides staff

guidance applicable to foreign ownership and “reliable and economical” reviews that would be

undertaken for routine recertifications; for changes to the previous review basis; for changes in

ownership or control; and for changes applicable to certificate conditions on foreign ownership. 

Detailed financial and business characteristics analyses would be performed if a certificate

holder, or other entities taking ownership or control, do not have investment-grade corporate

bond ratings.

In November 2001, the Commission in the Memorandum and Order (CLI-01-23) of the June 14,

2001 Directors’s Decision concerning the application of section 193 (f) of the Atomic Energy Act

of 1954, as amended, held that the “reliable and economical” reviews are not required for

recertification. Rather, the “reliable and economical” review is only required for a change in

ownership or control. As to the scope of the “reliable and economical” review, the Commission

held that the following test applies: 1) is the certificate holder to be owned, controlled, or

dominated by a foreign entity, and 2) if the certificate holder is not to be owned, controlled, or

dominated by a foreign entity, is the certificate holder likely to be subject to influence by an

entity, principally a foreign entity, that would be inimical to a) the common defense and security,

or b) maintaining a domestic enrichment capability. 

3. Guidance

Based on the Commission’s decision in CLI-01-23 and Commission guidance in the Staff

Requirements Memorandum dated February 21, 2002, the staff is revising the guidance in Draft

Chapter 16 of the NUREG-1671 as an Office of Nuclear Material Safety and Safeguards Policy

and Guidance Directive that would be applicable only in cases of a transfer of ownership or

control of the gaseous diffusion plants. In accordance with the Commission’s instructions, staff

revised the guidance to reflect that the foreign ownership, control, or domination review satisfies

the criteria for a “reliable and economical” domestic source of enrichment services. The

guidance applicable to foreign ownership reviews is attached in Enclosure 1.

In addition, staff added a new guidance document for performing financial qualification reviews

oriented to ensuring that entities have financial resources sufficient to conduct the required

health and safety programs. Then financial qualification review will be part of the public health

and safety review of an application for transfer of ownership or control. This is modeled from

the staff adapted financial qualifications guidance from NUREG-1520, “Standard Review Plan

for the Review of a License Application for a Fuel Cycle Facility,” and NUREG-1718, “Standard

Review Plan for the Review of an Application for a Mixed Oxide (MOX) Fuel Fabrication

Facility.” This guidance also applies only in cases of a transfer of ownership or control of the
-2-

gaseous diffusion plants. The guidance applicable to financial qualifications reviews is attached

in Enclosure 2.
ENCLOSURE 1
2 Note: The procedures in this Nuclear Material Safety and Safeguards Policy and

Guidance Directive (NMSS P&GD), for a statutory determination of foreign ownership,

control, or domination, are not to be used to determine foreign ownership, control, or

influence (FOCI) for granting access to classified material. The National Industrial

Security Program Operating Manual (NISPOM) (see Reference 1) is the governing

document for determining FOCI and the granting of access to classified material.

-1-

DETERMINATION OF FOREIGN OWNERSHIP, CONTROL, OR

DOMINATION, COMMON DEFENSE AND SECURITY, AND

RELIABLE AND ECONOMICAL SOURCE OF DOMESTIC

ENRICHMENT SERVICES

1 Responsibility for Review

1.1 Primary: As designated.

1.2 Secondary: Facility security specialist/safeguards technical analyst.

1.3 Supporting: Material control and accounting inspector/resident inspector.

2 Purpose of Review

The purpose of this review is to determine that an applicant for transfer of certificates to a new

entity is not owned, controlled, nor dominated by an alien, a foreign corporation, or a foreign

government; that issuance of a certificate would not be inimical to the common defense and

security of the United States; and that issuance of a certificate would not be inimical to the

maintenance of a reliable and economical domestic source of enrichment services.2

 Reviews

under this section will apply to certificate transfers to a new owner or any transfer of control

under 10 CFR 76.65. Reviews under this section will also apply to submittals required under

the certificate conditions described in Section 4.2.1, Item 6, in this NMSS P&GD.

3 Areas of Review

The staff reviews an application to transfer certificates to a new entity to examine if the

application for the transfer meets the requirements related to foreign ownership, control, or

domination; common defense and security; and whether a reliable and economical domestic

source of enrichment services will be maintained.
-2-

4 Review Procedures

4.1 Acceptance Review

An acceptance review under this section is needed only when there is an application to transfer

certificates for a change of ownership or control. The primary reviewer should determine that

the application meets the requirements of 10 CFR 76.35, “Contents of Application,” and 10 CFR

76.36, “Renewals,” with respect to the determination of foreign ownership (see Section 5.1,

“Regulatory Requirements”), and that the topics discussed in Section 3, “Areas of Review,”

have been addressed.

If significant deficiencies are identified in the application, the applicant should be requested to

submit additional material before the staff begins the application review.

4.2 Evaluation

The reviewer should determine whether the applicant is subject to any of the criteria set forth in

10 CFR 76.22, “Ineligibility of Certain Applicants.” If so, the primary reviewers should perform

an evaluation of the information presented in the application against the acceptance criteria in

Section 5, using the evaluation procedures described in the following sections.

4.2.1 Foreign Ownership, Control, or Domination

An applicant is considered to be foreign owned, controlled, or dominated whenever a foreign

interest has the power, direct or indirect, whether or not exercised, through the ownership of the

applicant's securities, by contractual arrangements or other means, to direct or decide matters

affecting the management or operations of the applicant.

A foreign interest is defined as any foreign government, agency of a foreign government, or

representative of a foreign government; any form of business enterprise or legal entity

organized, chartered, or incorporated under the laws of any country other than the United

States (U.S.) or its possessions and trust territories; any person who is not a citizen nor national

of the U.S.; and any U.S. interest effectively controlled by one of the above foreign entities.

Information submitted by the applicant, as specified in, “Foreign Ownership, Control, or

Influence Guidance Documents for the Privatization of the United States Enrichment

Corporation,” (see Reference 2) will be reviewed. The reviewer assesses the following items to

determine if the applicant is foreign owned, controlled, or dominated:

1. The applicant provides answers to the following questions. If any of the answers are

affirmative, the applicant furnishes detailed information that describes all conditions that

exist. The information is considered in the aggregate. The fact that some of the below

listed conditions may apply does not necessarily render the applicant ineligible for

recertification.

a. Does a foreign interest own or have beneficial ownership in 5 percent or

more of the organization’s voting securities?
-3-

b. Does the organization own 10 percent or more of any foreign interest?

c. Do any foreign interests have management positions, such as directors,

officers, or executive personnel, in the organization?

d. Does any foreign interest control or influence, or is any foreign interest in

a position to control or influence, the election, appointment, or tenure of

any of the directors, officers, or executive personnel?

e. Does the organization have any contracts, binding agreements,

understandings, or arrangements, with a foreign interest(s), that

cumulatively represent 10 percent or more of the organization’s gross

income?

f. Is the organization indebted to foreign interests?

g. During the last fiscal year, did the organization derive 5 percent or more

of its total revenues or net income, from any single foreign interest or, in

the aggregate, 30 percent or more of its revenues or net income from

foreign interests? 

h. Is 5 percent or more of any class of the organization’s securities held in

“nominee shares,” in “street names,” or in some other method that does

not disclose beneficial owner of equitable title? 

i. Does the organization have interlocking directors/officers with foreign

interests?

j. Are there any citizens of foreign countries employed by the organization

or who may visit offices or facilities in a capacity that may permit them to

have access to classified information or a significant quantity of special

nuclear material?

k. Does the organization have foreign involvement not otherwise covered in

the answers to the above questions?

2. The reviewer obtains a foreign intelligence threat assessment. This assessment is

conducted through the intelligence community and others, and is coordinated by the

U.S. Department of Energy (DOE). The reviewer obtains the assessment by contacting

the DOE representative to the Enrichment Oversight Committee.

3. If the applicant submits any affirmative information listed in Section 5.1 or Steps 1.a

through 1.k above, or the foreign intelligence threat assessment contains information

that the applicant may be foreign owned, controlled, or dominated, the reviewer

determines:

a. The nature and extent of foreign ownership, control, or domination, to

include whether a foreign interest occupies a controlling or dominant

minority position;
-4-

b. The source of foreign ownership, control, or domination, to include

identification of immediate, intermediate, and ultimate parent

organizations; and

c. The type of actions, if any, that would be necessary to negate the effects

of foreign ownership, control, or domination to an acceptable level.

4. The staff determines that an applicant is considered to be foreign owned, controlled, or

dominated, or that additional action is necessary to negate the foreign ownership,

control, or domination; the applicant is promptly advised and requested to submit a

negation action plan. In cases that involve foreign ownership, a plan may consist of one

of the methods described in Chapter 2, Section 2-306, of the National Industrial Security

Program Operating Manual (NISPOM). When factors not related to ownership are

present, the plan provides positive measures that assure that the foreign interest can be

effectively denied control or domination. Examples of such measures include: 

modification or termination of loan agreements, contracts, and other understandings

with foreign interests; diversification or reduction of foreign source income,

demonstration of financial condition independent of foreign interests; elimination or

resolution of problem debt; assignment of specific oversight duties and responsibilities

to board members; adoption of special board resolutions; and other actions that negate

foreign control or domination.

5. The reviewer arranges to meet with, or otherwise communicate these findings to, the

principal members of the Enrichment Oversight Committee and obtain their comments.

6. The reviewer ensures that the U.S. Nuclear Regulatory Commission (NRC) remains

informed regarding foreign ownership, control, or domination by preparing certificate

conditions of the following types:

If, at any time after the privatization date, the applicant obtains information reasonably

indicating changes described in the NISPOM, Chapter 1, Section 3, 1-302(h) (see

Reference 1), to the information previously submitted to NRC, described in the

NISPOM, Chapter 2, Section 3, 2-302 b(1) through (11) (see Reference 1), the applicant

shall notify NRC, in writing, within 15 days.

If the applicant enters into negotiations for the proposed merger, acquisition, or takeover

by a foreign person, the applicant submits notification to NRC, in writing, within 15 days

of the beginning of such negotiations. The submission includes the type of transaction

under negotiation (stock purchase, asset purchase, etc.); the identity of the potential

foreign person investor; a plan to negate foreign ownership, control, or domination; and

copies of any related loan, purchase, and shareholder agreements, as well as annual

reports, bylaws, articles of incorporation, partnership agreements, and reports filed with

other Federal agencies.

4.2.2 Common Defense and Security

The reviewer assesses the following items to determine if the applicant is in compliance with

NRC regulatory requirements to protect the common defense and security:
-5-

1. The reviewer determines that NRC has reviewed and approved the applicant’s physical

security plan and fundamental nuclear material control plan. 

2. The reviewer consults with the primary reviewer of the Classified Matter Plan to ensure

that the applicant’s security plan for the protection of classified matter has been

reviewed and approved.

3. If the applicant has been issued a certificate of compliance previously, the reviewer

ensures that NRC inspection reports -- dealing with facility and transportation physical

protection, material control and accounting, information security programs, and control

of classified material -- do not indicate a general failure to protect the common defense

and security interests of the United States.

4. The reviewer arranges to meet with, or otherwise consult with, the principal members of

the Enrichment Oversight Committee, to obtain their assessment of the applicant’s

performance as the U.S. agent for the Russian Highly Enriched Uranium (HEU)

Agreement if applicable.

5. If applicable, the reviewer ensures that NRC remains informed regarding the applicant’s

performance as the U.S. agent for the Russian HEU Agreement by preparing a

certificate condition of the following type:

The applicant, or its successors, as the Executive Agent for the United States for

implementing the Russian HEU Agreement, shall notify NRC, in writing within 15 days, if

at any time and for any reason, including actions of third parties, the applicant or its

successors become aware of, or anticipate, any change in the provisions of, or in the

implementation of, the terms of any Memorandum of Agreement applicable to an entity

serving as Executive Agent for the Russian HEU Agreement. [License reviewer to

provide specific Memorandum of Agreement Title and Date of Execution]

4.2.3 Reliable and Economical Source of Domestic Enrichment Services

Under the Atomic Energy Act of 1954, as amended, Section 193(f)(2)(B) requires that the

Commission may not issue a license or certificate of compliance if the Commission determines

that issuance would be inimical to “...the maintenance of a reliable and economical domestic

source of enrichment services.” Section 193(f)(2)(B) is principally directed to the possibility of

foreign entities gaining control and undermining U.S. domestic enrichment capabilities. 

Therefore, the reviews related to Foreign Ownership, Control, or Domination, and Common

Defense and Security will encompass the “reliable and economical” issue when there is an

application to transfer certificates to a new facility owner, or transfer of control under 10 CFR

76.65.

Issuance of a certificate of compliance is considered inimical to the maintenance of a reliable

and economical source of domestic enrichment services if the applicant does not meet the

conditions for foreign ownership, control, and domination, and common defense and security.

The review consists of the procedures in Sections 4.2.1 and 4.2.2.
-6-

5 Criteria

5.1 Regulatory Requirements

1. 10 CFR 76.22 addresses the ineligibility of applicants for recertification.

2. 10 CFR 76.33 provides for NRC to require the applicant to supply additional information,

as necessary.

3. 10 CFR 95.15 addresses the collection of information necessary to determine that the

applicant is not owned, controlled, nor dominated by an alien, foreign corporation, or

foreign government.

4. 10 CFR Parts 76 and 95 contain and reference applicable regulatory requirements

necessary to protect the common defense and security.

5.2 Regulatory Guidance

1. U.S. Nuclear Regulatory Commission, NUREG/CR-5734, “Recommendations to the

NRC on Acceptable Standard Format and Content for the Fundamental Nuclear Material

Control (FNMC) Plan Required for Low-Enriched Uranium Enrichment Facilities.”

2. U.S. Nuclear Regulatory Commission, Regulatory Guide 5.67, “Material Control and

Accounting for Uranium Enrichment Facilities Authorized to Produce Special Nuclear

Material of Low Strategic Significance.”

3. U.S. Nuclear Regulatory Commission, “Security Plan Format and Content Guide for

NRC Licensees, Certificate Holders, and Related Organizations.”

5.3 Regulatory Review Criteria

The staff should use the following regulatory review criteria, or information demonstrating

acceptable alternatives, in its review of the application. Acceptability should be based on

the following:

Foreign Ownership, Control, or Domination

After a review of the potential foreign involvement information, in accordance with the Review

Procedures, in Section 4, the reviewer determines that no foreign interest has the ability, direct

or indirect, to direct or decide matters affecting the management or operations of the applicant.

The following additional criteria are applicable:

1. Foreign competitors of the current certificate holder are precluded from participating in

any acquisition of the current certificate holder.
-7-

2. Entities with a substantial commercial relationship with foreign enrichment providers,

with respect to uranium and uranium products, are precluded from participating in any

acquisition of the current certificate holder.

3. Foreign interests own no more than 10 percent of the outstanding voting securities of

the applicant.

4. Foreign-sourced financing of an acquisition of the current certificate holder is no more

than 10 percent of the purchase price.

Common Defense and Security

1. NRC has reviewed and approved the applicant’s physical security plan.

2. NRC has reviewed and approved the applicant’s security plan for the protection of

classified matter.

3. NRC has reviewed and approved the applicant’s fundamental nuclear material control

plan.

4. If the applicant has previously been issued a certificate of compliance, a review of NRC

inspection reports does not indicate the applicant’s general failure to protect the

common defense and security interests of the United States.

5. If applicable, consultation with the principal members of the Enrichment Oversight

Committee indicates that the applicant’s performance as the U.S. Agent for the Russian

HEU Agreement is acceptable.

Reliable and Economical Source of Domestic Enrichment Services

The review criteria for a finding related to a reliable and economical source of domestic services 

includes the above criteria for foreign ownership, control, and domination. The following

additional criterion is applicable if the applicant is not to be owned, controlled, or dominated by

a foreign entity: The applicant is not likely to be subject to influence by an entity, principally a

foreign entity, that would be inimical to a) the common defense and security, or b) maintaining a

domestic enrichment capability.

6 Evaluation Findings

6.1 Introduction

The staff’s review should verify that sufficient information has been provided in the application

to satisfy the intent of requirements in 10 CFR 76.35, “Contents of Application,” and 10 CFR

76.36, “Renewals,” relative to determination of foreign ownership; and the information provided

is consistent with the guidance in this NMSS P&GD. On the basis of this information, the staff

should be able to conclude that this evaluation is complete.
-8-

6.2 Sample Evaluation Findings

The staff could document the safety evaluation for the certificate application as follows:

On the basis of the staff’s review and evaluation of the application to transfer

certificates for a change in ownership or control, the staff has found no cause to

determine that:

1. The applicant is owned, controlled, or dominated by an alien, a foreign

corporation, or a foreign government; or

2. Issuance of a certificate of compliance would be inimical to the common defense

and security of the United States; or

3. Issuance of a certificate of compliance would be inimical to the maintenance of a

reliable and economical domestic source of enrichment services.

On the basis of its review, the NRC staff determined that the information related to

foreign ownership, control, or domination, common defense and security, and reliable

and economical source of domestic enrichment services, is acceptable to support the

application to transfer certificates to: a new facility owner; or transfer of control, under

10 CFR 76.65.

7 References

1. U.S. Department of Defense, “National Industrial Security Program Operating Manual

(NISPOM),” DOD 5520.22-M, January 1995.

2. U.S. Department of Energy, U.S. Nuclear Regulatory Commission, U.S. Enrichment

Corporation, “Foreign Ownership, Control, or Influence, Guidance Documents for the

Privatization of the United States Enrichment Corporation.”
ENCLOSURE 2
- 1 -

FINANCIAL QUALIFICATIONS

1 Responsibility for Review

1.1 Primary: Financial Specialist

1.2 Secondary: Licensing Project Manager

1.3 Supporting: Office of the General Counsel

2 Purpose of Review

The purpose of this review is to determine that an applicant for transfer of ownership or control

of certificates to a new entity has current financial qualifications and continuing access to the

financial resources necessary to engage in the proposed activity. Reviews under this section

will apply only to certificate transfers to a new owner or any transfer of control under 

10 CFR 76.65.

3 Areas of Review

The staff reviews an application for transfer of ownership or control of the certificate to a new

entity to determine if the applicant has provided financial information sufficient to indicate that

resources are available to the applicant to pursue the activities for which the certificate is

sought.

The areas of review for financial qualifications should include:

1. Projected Costs of Operation

a. Projected costs of gaseous diffusion plant operations.

b. Projected costs of significant new corporate projects.

2. Sources of Funds

a. Funding plans for the proposed action and significant new corporate projects (if

any), including, but not limited to, revenues and debt equity.

b. The source(s) and planned or existing funding commitments or contracts which

the applicant relies, including government contracts.
- 2 -

3. Contingency Funds

The contingencies for cost overruns and revenue shortfalls.

4. Financial Qualifications

The financial description of the applicant, of any partnership established to finance the

proposed action, and of any parent or other affiliated companies whom the applicant is

relying for sources of operating funds. 

The applicant should provide the U.S. Nuclear Regulatory Commission (NRC) with a

copy of the most recent financial report and U.S. Securities and Exchange Commission

Report 10-K, for itself, any planned or existing partners, and any parent or other

affiliated companies whom the applicant is relying for the sources of operating funds. If

an annual financial report and U.S. Securities and Exchange Commission Report 10-K

is not available for the applicant, a partner, or other affiliated company, the applicant

should provide audited financial statements that include:

a. Statements of earnings, to include revenues: costs and expenses; earnings

before and after taxes; net earnings; and per-share earnings and dividends;

b. Consolidated statements of changes in share owners’ equity;

c. Statements of financial position, to include assets, liabilities, and equity;

d. Statements of cash flows, to include cash flows from operating, investing, and

financing activities;

e. Management’s discussion of financial operations, resources, liquidity, and

significant selected financial data;

f. Any notes applicable to the financial statements needed to clarify or explain

significant items, assumptions, potential risks and liabilities, or limitations; and

g. An independent auditor’s report describing the accounting principles used, and

any opinions or qualifications applicable to the financial statements.

4 Review Procedures

4.1 Acceptance Review

An acceptance review under this section is needed only when there is an application for transfer

of ownership or control of the certificate to a new entity. If significant deficiencies are identified

in the application, the applicant should be requested to submit additional material before the

staff begins the application review.
Financial Qualifications

- 3 -

4.2 Evaluation

After determining that the financial qualifications are acceptable for review in accordance with

Section 4.1, the primary reviewer should perform an evaluation against the acceptance criteria

described in Section 5. On the basis of its review, the staff may request that the applicant

provide additional information or modify the application to meet the acceptance criteria 

in Section 5.

5 Acceptance Criteria

5.1 Regulatory Requirements

The regulation applicable to the area of financial qualifications review is 10 CFR 76.35(a)(3).

5.2 Regulatory Guidance

There are no regulatory guides that apply to financial qualifications for a gaseous diffusion

plant certificate.

5.3 Regulatory Acceptance Criteria

The application is acceptable if the description of the applicant’s financial qualifications

demonstrates that the applicant’s current and continuing access to the financial resources is

sufficient to engage in the proposed activity.

The reviewer should find the applicant's financial qualifications acceptable if the following

acceptance criteria are met:

1. Projected Costs of Operation

The applicant’s costs of operation do not appear to be underestimated given the size and scope

of the proposed actions and any significant new corporate projects.

2. Sources of Funds

The applicant’s sources of funds (including the applicant’s funding plan(s) and debt, equity and

revenue levels, and planned or existing source(s) of funding commitments) are consistent with

the estimated operating costs of the proposed action and any significant new corporate

projects.

3. Contingency Funds

The applicant’s contingency funds are appropriate for unforeseen operating contingencies. The

applicant indicates its plans for the case where cost overruns are much higher than anticipated

(e.g., in excess of 30 percent).
- 4 -

4. Financial Qualifications

The financial data for the applicant, planned or existing partners, or other affiliated companies,

support the financial commitments of each; are consistent with generally accepted accounting

practices; and represent a reasonable financial basis for operating the facility.

The applicant commits to providing its annual report to NRC. If the applicant does not issue an

annual report, the applicant commits to annually provide NRC with the information described in

Section 3.4(a)-(g).

6 Evaluation Findings

The primary reviewer should document the safety evaluation by preparing material suitable for

inclusion in the Safety Evaluation Report. The primary reviewer should describe the review,

explain the basis for the findings, and state the conclusions. 

The staff could document the safety evaluation as follows:

The staff reviewed the financial qualifications for [insert name of facility] according to NMSS

Policy and Guidance Directive X-XX. The staff evaluated [insert a summary of the material

reviewed] and found that [state the findings]. 

The staff concluded that the applicant appears financially qualified to engage in the

proposed activities in accordance with 10 CFR Part 76. As a result, the staff finds that the

applicant’s financial qualifications support the staff's approval of the transfer of ownership or

control.

7 References

Code of Federal Regulations, Title 10, Part 76, "Certification of Gaseous Diffusion Plants," U.S.

Government Printing Office, Washington, DC.
ATTACHMENT 3
3 Note: The procedures in this Standard Review Plan for a statutory determination of

foreign ownership, control, or domination, are not to be used to determine foreign

ownership, control, or influence (FOCI) for granting access to classified material. The

National Industrial Security Program Operating Manual (NISPOM) (see Reference 1) is

the governing document for determining FOCI and the granting of access to classified

material.

- 1 -

16.0 DETERMINATION OF FOREIGN OWNERSHIP, CONTROL,

OR DOMINATION, COMMON DEFENSE AND SECURITY, AND

RELIABLE AND ECONOMICAL SOURCE OF DOMESTIC

ENRICHMENT SERVICES

16.1 Responsibility for Review

16.1.1 Primary: As designated.

16.1.2 Secondary: Facilitiesy security specialist/safeguards technical analyst.

16.1.3 Supporting: Material control and accounting inspector/resident inspector.

16.2 Purpose of Review

The purpose of this review is to determine that an applicant for transfer of certificates to a new

entity is not owned, controlled, nor dominated by an alien, a foreign corporation, or a foreign

government; that issuance of a certificate would not be inimical to the common defense and

security of the United States; and that issuance of a certificate would not be inimical to the

maintenance of a reliable and economical domestic source of enrichment services3. Reviews

under this section will apply to certificate transfers to a new owner or any transfer of control

under 10 CFR 76.65. Reviews under this section will also apply to submittals required under

the certificate conditions described in Section 16.4.2.1, Item 6, in this Standard Review Plan.

The purpose of this review is to determine that an applicant for recertification is not owned,

controlled, or dominated by an alien, a foreign corporation, or a foreign government; that

issuance of a certificate would not be inimical to the common defense and security of the

United States; and that issuance of a certificate would not be inimical to the maintenance of a

reliable and economical domestic source of enrichment services.

16.3 Areas of Review

General
- 2 -

The staff reviews an application to transfer certificates to a new entity to examine if the

application for the transfer meets the requirements related to foreign ownership, control, or

domination; common defense and security; and whether a reliable and economical domestic

source of enrichment services will be maintained.

The staff reviews an application to transfer certificates to examine the changes proposed in the

application for the transfer from that which is currently approved or permitted under the existing

certificates.

Foreign Ownership, Control, or Domination

Information submitted by the applicant, as specified in, “Foreign Ownership, Control, or

Influence Guidance Documents for the Privatization of the United States Enrichment

Corporation,” will be reviewed. This information includes, but is not limited to:

1. Portions of securities held by foreign entities or held by means that prevent the

identification of the beneficial owner.

2. Management positions held by non-U.S. citizens.

3. Ability of foreign entities to control the appointment of management positions.

4. Contracts and other agreements with foreign entities.

5. Finance and revenue sources involving foreign entities.

Common Defense and Security

The following items will be reviewed for compliance with NRC regulatory requirements to

protect the common defense and security:

1. Physical security plan.

2. Security plan for the protection of classified matter.

3. Fundamental nuclear material control plan.

4. Inspection, event, and resident inspector reports dealing with facility and

transportation physical protection, material control and accounting, information

security programs, and control of classified material.

5. Information regarding the impact of the Russian High Enriched Uranium (HEU)

Agreement, and any related contracts, on the financial condition of the applicant.

6. An assessment of the performance of the applicant as the executive agent of the

United States for the Russian HEU Agreement in consultation with members of

the Enrichment Oversight Committee.

Reliable and Economical Source of Domestic Enrichment Services
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Under the Atomic Energy Act of 1954, as amended, Section 193(f)(2)(B) requires that the

Commission may not issue a license or certificate of compliance to the United States

Enrichment Corporation if the Commission determines that issuance would be inimical to “the

maintenance of a reliable and economical domestic source of enrichment services.” Section

193(f)(2)(B) is principally directed to the possibility of foreign entities gaining control and

undermining U.S. domestic enrichment capabilities. Therefore, the reviews related to Foreign

Ownership, Control, or Domination, and Common Defense and Security will encompass the

“reliable and economical” issue when there is an application to transfer certificates to a new

facility owner.

16.4 Review Procedures

16.4.1 Acceptance Review

An acceptance review under this section is needed only when there is an application to transfer

certificates for a change in ownership or control. The primary reviewer should determine that

the application meets the requirements of 10 CFR 76.35, “Contents of Application,” and 10 CFR

76.36, “Renewals,” with respect to the determination of foreign ownership (see Section 16.5.1,

“Regulatory Requirements”), and that the topics discussed in Section 16.3, “Areas of Review,”

have been addressed.

The staff reviews assessments of the financial condition of the applicant. The assessments will

be based on the actual or estimated credit rating of the applicant, a standard used by the

financial community to objectively measure an entity’s financial condition and its ability to meet

its obligations and other economic, financial, and business characteristics. The current public

credit rating of the applicant, published by a recognized credit rating agency (e.g., Standard &

Poor’s, Moody’s Investor Service, Duff & Phelps, or Fitch), will be reviewed. If (1) the applicant

does not have a current public credit rating, or (2) in the case of a transfer of the certificates, a

public credit rating would not apply to the applicant after the transfer, then an assessment of the

financial condition of the applicant, based upon an estimate of the applicant's credit rating, will

be reviewed. This estimated credit rating will be based on quantitative and qualitative analyses

of the financial and business risks of the applicant.

If significant deficiencies are identified in the application, the applicant should be requested to

submit additional material before the staff begins resumes the application review.

16.4.2 Evaluation

The reviewer should determine whether the applicant is subject to any of the criteria set forth in

10 CFR Part 76.22, “Ineligibility of Certain Applicants.” If so, the primary reviewers should

perform an evaluation of the information presented in the application against the acceptance

criteria in Section 16.5, using the evaluation procedures described in the following sections.

16.4.2.1 Foreign Ownership, Control, or Domination

An applicant is considered to be foreign owned, controlled, or dominated whenever a foreign

interest has the power, direct or indirect, whether or not exercised, and whether or not
- 4 -

exercisable, through the ownership of the applicant’s securities, by contractual arrangements or

other means, to direct or decide matters affecting the management or operations of the

applicant.

A foreign interest is defined as any foreign government, agency of a foreign government, or

representative of a foreign government; any form of business enterprise or legal entity

organized, chartered, or incorporated under the laws of any country other than the United

States (U.S.) or its possessions and trust territories; any person who is not a citizen nor national

of the U.S.; and any U.S. interest effectively controlled by one of the above foreign entities.

Information submitted by the applicant, as specified in, “Foreign Ownership, Control, or

Influence Guidance Documents for the Privatization of the United States Enrichment

Corporation,” (see Reference 2) will be reviewed. The reviewer assesses the following items to

determine if the applicant is foreign owned, controlled, or dominated:

1. The applicant provides answers to the following questions. If any of the answers

are affirmative, the applicant furnishes detailed information that describes all

conditions that exist. The information is considered in the aggregate. The fact

that some of the below listed conditions may apply does not necessarily render

the applicant ineligible for recertification.

a. Does a foreign interest own or have beneficial ownership in 5 percent or

more of your the organization’s voting securities?

b. Does your the organization own 10 percent or more of any foreign

interest?

c. Do any foreign interests have management positions, such as directors,

officers, or executive personnel, in your the organization?

d. Does any foreign interest control or influence, or is any foreign interest in

a position to control or influence, the election, appointment, or tenure of

any of your the directors, officers, or executive personnel?

e. Does your the organization have any contracts, binding agreements,

understandings, or arrangements with a foreign interest(s), that

cumulatively represent 10 percent or more of your the organization’s

gross income?

f. Is your the organization indebted to foreign interests?

g. During your the last fiscal year, did your the organization derive 5 percent

or more of its total revenues or net income, from any single foreign

interest, or in the aggregate, 30 percent or more of its revenues or net

income from foreign interests? 

h. Is 5 percent or more of any class of your the organization’s securities

held in “nominee shares,” in “street names,” or in some other method that

does not disclose beneficial owner of equitable title? 
- 5 -

i. Does your the organization have interlocking directors/officers with

foreign interests?

j. Are there any citizens of foreign countries employed by the organization

or who may visit your offices or facilities in a capacity that may permit

them to have access to classified information or a significant quantity of

special nuclear material?

k. Does your the organization have foreign involvement not otherwise

covered in your the answers to the above questions?

2. The reviewer obtains a foreign intelligence threat assessment. This assessment

is conducted through the intelligence community and others, and is coordinated

by the U.S. Department of Energy (DOE). The reviewer obtains the assessment

by contacting the DOE representative to the Enrichment Oversight Committee.

3. If the applicant submits any affirmative information listed in Section 16.5.1 or

Steps 1.a through 1.k above, or the foreign intelligence threat assessment

contains information that the applicant may be foreign owned, controlled, or

dominated, the reviewer determines:

a. The nature and extent of foreign ownership, control, or domination, to

include whether a foreign interest occupies a controlling or dominant

minority position;

b. The source of foreign ownership, control, or domination, to include

identification of immediate, intermediate, and ultimate parent

organizations; and

c. The type of actions, if any, that would be necessary to negate the effects

of foreign ownership, control, or domination to an acceptable level.

4. The staff determines that an applicant is considered to be foreign owned,

controlled, or dominated, or that additional action is necessary to negate the

foreign ownership, control, or domination,; the applicant is promptly advised and

requested to submit a negation action plan. In cases that involve foreign

ownership, a plan may consist of one of the methods described in Chapter 2,

Section 2-306, of the National Industrial Security Program Operating Manual

(NISPOM). When factors not related to ownership are present, the plan provides

positive measures that assure that the foreign interest can be effectively denied

control or domination. Examples of such measures include: modification or

termination of loan agreements, contracts, and other understandings with foreign

interests,; diversification or reduction of foreign source income; demonstration of

financial condition independent of foreign interests,; elimination or resolution of

problem debt,; assignment of specific oversight duties and responsibilities to

board members,; adoption of special board resolutions,; and other actions that

negate foreign control or domination.
- 6 -

5. The reviewer arranges to meet with, or otherwise communicate these findings to,

the principal members of the Enrichment Oversight Committee and obtain their

comments.

6. The reviewer ensures that the NRC remains informed regarding foreign

ownership, control, or domination by preparing certificate conditions of the

following types:

If, at any time after the privatization date, the applicant obtains information

reasonably indicating changes described in the NISPOM, DOD 5520.22-M,

January 1995, Chapter 1, Section 3, 1-302(h) (see Reference 1), to the

information previously submitted to the NRC, described in the NISPOM, Chapter

2, Section 3, 2-302 b(1) through (11) (see Reference 1), the applicant shall notify

the NRC, in writing, within 15 days.

If the applicant enters into negotiations for the proposed merger, acquisition, or

takeover by a foreign person, the applicant submits notification to the NRC, in

writing, within 15 days of the commencement beginning of such negotiations. 

The submission includes the type of transaction under negotiation (stock

purchase, asset purchase, etc.); the identity of the potential foreign person

investor; a plan to negate foreign ownership, control, or domination,; and copies

of any related loan, purchase, and shareholder agreements, as well as annual

reports, bylaws, articles of incorporation, partnership agreements, and reports

filed with other Federal agencies.

16.4.2.2 Common Defense and Security

The reviewer assesses the following items to determine if the applicant is in compliance with

NRC regulatory requirements to protect the common defense and security:

1. The reviewer determines that NRC has reviewed and approved the applicant’s

physical security plan and fundamental nuclear material control plan have been

reviewed and approved by the NRC.

2. The reviewer consults with the primary reviewer of the Classified Matter Plan to

ensure that the applicant’s security plan for the protection of classified matter

has been reviewed and approved.

3. If the applicant has previously been issued a certificate of compliance previously,

the reviewer ensures that NRC inspection reports -- dealing with facility and

transportation physical protection, material control and accounting, information

security programs, and control of classified material -- do not indicate a general

failure to protect the common defense and security interests of the United

States.

4. The reviewer considers the impact of executing contracts associated with the

Russian HEU Agreement on the financial condition of the applicant. The

analysis of the applicant’s financial condition, described below, includes

information concerning the cost of procuring Russian material, the amount of
- 7 -

material the applicant has contracted to procure, the costs of enrichment

services provided by the applicant, and current market prices. This information

allows the reviewer to gauge whether executing such contracts might be a

significant economic disadvantage, or favorable to an extent that would motivate

the applicant to reduce the production of domestic enrichment services.

5 4. The reviewer arranges to meet with, or otherwise consult with, the principal members of

the Enrichment Oversight Committee, to obtain the committee’s their assessment of the

applicant’s performance as the U.S. agent for the Russian High Enriched Uranium

(HEU) Agreement, if applicable.

6 5. The reviewer ensures that the NRC remains informed regarding the applicant’s

performance as the U.S. agent for the Russian HEU Agreement by preparing a

certificate condition of the following type:

The applicant USEC, or its successors, as the Executive Agent for the United

States for implementing the Russian HEU Agreement, shall notify the NRC, in

writing, within 15 days, if at any time and for any reason, including actions of

third parties, the applicant USEC or its successors become aware of, or

anticipate, any change in the provisions of, or in the implementation of, the terms

of any the Memorandum of Agreement applicable to an entity serving as

Executive Agent for the Russian HEU Agreement. [License reviewer to provide

specific title of the Memorandum of Agreement and the execution date.]

“Memorandum of Agreement Between the United States Acting By and Through

the United States Department of State, and the United States Department of

Energy and the United States Enrichment Corporation, for USEC to Serve as the

United States Government’s Executive Agent Under the Agreement Between the

United States and the Russian Federation Concerning the Disposition of Highly

Enriched Uranium Extracted from Nuclear Weapons,” entered into as of April 18,

1997.

16.4.2.3 Reliable and Economical Source of Domestic Enrichment Services

Under the Atomic Energy Act of 1954, as amended, Section 193(f)(2)(B) requires that the

Commission may not issue a license or certificate of compliance if the Commission determines

that issuance would be inimical to “... the maintenance of a reliable and economical domestic

source of enrichment services.” Section 193(f)(2)(B) is principally directed to the possibility of

foreign entities gaining control and undermining U.S. domestic enrichment capabilities. 

Therefore, the reviews related to Foreign Ownership, Control, or Domination, will encompass

the “reliable and economical” issue when there is an application to transfer certificates to a new

facility owner, or transfer of control under 10 CFR 76.65.

Issuance of a certificate of compliance is considered inimical to the maintenance of a reliable

and economical source of domestic enrichment services if the applicant does not meet the

conditions for foreign ownership, control, and domination. have a sufficiently strong financial

condition to allow the expectation that it can remain viable for at least 5 years.

The review consists of the procedures in Section 16.4.2.1.
- 8 -

The review consists of the following procedures. If the staff elects to have a contractor conduct

these procedures, the staff reviews the contractor’s analysis and findings and either concur with

the findings or specify the staff’s basis for taking a different position.

1. If the applicant has one or more current credit ratings issued by a recognized

rating agency (e.g., Standard & Poor’s Corp., Moody’s, Investors Service, Duff &

Phelps Credit Rating Co., or Fitch Investors Services, L.P.), the reviewer

determines whether the lowest such rating is of investment grade (e.g., AAA, AA,

A, or BBB as rated by Standard & Poor’s, or Aaa, Aa, A, or Baa as rated by

Moody's) or below investment grade (e.g., BB, B, CCC or lower as rated by

Standard & Poor’s, or Ba, B, Caa, or lower as rated by Moody’s).

2. If the applicant does not have a current credit rating issued by a recognized

rating agency, the reviewer conducts an independent analysis to estimate a

credit rating and determine whether the estimated credit rating is of investment

grade. The estimated credit rating is based on quantitative and qualitative

analysis of information provided by the applicant, including information regarding

the applicant’s parent company or companies, to the extent that they might affect

the financial condition of the applicant. 

a. The reviewer ensures that the NRC has received the following

information from the applicant:

(1) The types, amounts, and holders of debt and the types and

amounts of equity of the applicant. In the case of the privatization

of USEC, the method of financing to be used to purchase USEC

(if applicable), and the types, amounts, and holders of any debt

and the types and amounts of equity of the privatized entity;

(2) A 5 year business plan addressing the applicant’s enrichment

business line as well as other anticipated business lines, including

alternative enrichment technologies, that will require investments

of capital (including working capital) by the applicant, and the

portion of projected revenue, for each of the 5 years covered by

contracts in existence at the time of the application;

(3) All significant business and economic assumptions underlying the

plan;

(4) Pro forma financial statements for the applicant for each of the

next 5 years;

(5) Current financial statements (if applicable) for the applicant, and

in the case of privatization, for USEC, along with an independent

certified public accountant’s opinion on the financial statements;

(6) Identification of the applicant’s proposed directors and officers

and a discussion of their qualifications to provide financial and

business management;
- 9 -

(7) The organizational structure of the applicant and its relationship to

corporate parents and other affiliates; and

(8) Information on the financial condition of the applicant’s corporate

parents, including credit ratings, profiles prepared by the

investment industry, and/or audited financial statements reflecting

the 3 most recently completed fiscal years.

b. The reviewer ensures that the items specified above are consistent and

that they provide a comprehensive and reasonable picture of the

applicant. If pro forma financial statements are based on inconsistent or

unrealistic assumptions, the staff may need to discuss with the applicant

the basis of the projections.

c. The reviewer quantitatively assesses the financial characteristics of the

applicant relative to available historical benchmarks. Some corporate

financial analysis expertise will be necessary to complete this step. The

reviewer need one or more financial texts for reference, such as Standard

& Poor’s “Corporate Ratings Criteria.” The reviewer’s analysis includes

the following measures:

(1) Size Measures

- Net sales

- Net income

- Total assets

- Net worth

(2) Capital Structure Ratios

- Total debt ÷ capitalization 

- Total debt ÷ equity

- Long-term debt ÷ capitalization

(3) Coverage Ratios

- Net income plus depreciation and other noncash items ÷

total debt

- Pretax income plus interest expense ÷ gross interest

- Pretax income plus depreciation and other noncash items

plus interest expense ÷ gross interest

(4) Profitability Ratios

- Net income ÷ total assets

- Pretax income plus interest ÷ total assets

- Net income ÷ equity

- Operating income ÷ sales
- 10 -

Other ratios and measures addressing the above categories or other

financial characteristics may be used if they provide a measure of the

applicant’s financial condition (e.g., see Standard & Poor’s “Corporate

Ratings Criteria”).

d. The reviewer also considers qualitative factors in light of the financial

analysis. Factors to be assessed include the applicants competitive

position, market environment, quality of management, and financial and

business risks. These factors are considered in proportion to their

potential impacts on the applicant. 

e. The reviewer evaluates the financial condition of the applicant’s corporate

parents and affiliates to the extent that they might affect the applicant’s

financial condition. The financial condition of corporate parents or

affiliates are considered in proportion to the potential impact on the

applicant.

f. Based on the preceding steps, the reviewer establishes an estimated

credit rating of the applicant. In establishing the estimated rating, the

reviewer first determines what the estimated rating would be if it were

based solely on an analysis of the applicant’s financial ratios and size

measures relative to available benchmarks. The reviewer then adjusts

the estimated credit rating based on other considerations identified

above. Adjustments are proportional to each factor's potential impacts on

the applicant. Assignment of a specific estimated rating (e.g., AA versus

A) is not necessary if the reviewer is able to determine that the estimated

credit rating is investment grade. Assignment of a specific rating may be

necessary if the estimated rating is below investment grade.

3. If the actual or estimated credit rating is of investment grade, the reviewer finds

that the applicant has sufficiently strong financial condition to allow it to remain

viable for at least 5 years, and that issuance of a certificate of compliance would

not be inimical to the maintenance of a reliable and economical source of

domestic enrichment services. If the actual or estimated credit rating is below

investment grade, the reviewer considers whether any other economic, financial,

or business characteristics (e.g., contracts adequate to support the applicant’s

operations over a 5 year time period, financial guarantees provided by a parent

company, compelling business prospects) exist that provide reasonable

assurance of the applicant’s condition for at least 5 years. If the reviewer finds

that such factors exist, and that the applicant is expected to remain viable for at

least 5 years, then the reviewer finds that issuance of a certificate of compliance

would not be inimical to the maintenance of a reliable and economical source of

domestic enrichment services. However, if the reviewer finds that such factors

do not exist, then the reviewer finds that issuance of a certificate of compliance

to the applicant may be inimical to the maintenance of a reliable and economical

source of domestic enrichment services.

16.5 Acceptance Criteria
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16.5.1 Regulatory Requirements

1. 10 CFR 76.22 addresses the ineligibility of applicants for recertification.

2. 10 CFR 76.33 provides for NRC to require the applicant to supply additional information,

as necessary.

3. 10 CFR 95.15 addresses the collection of information necessary to determine that the

applicant is not owned, controlled, nor dominated by an alien, foreign corporation, or

foreign government.

4. 10 CFR Parts 76 and 95 contain and reference applicable regulatory requirements

necessary to protect the common defense and security.

16.5.2 Regulatory Guidance

1. U.S. Nuclear Regulatory Commission, NUREG/CR-5734, “Recommendations to the

NRC on Acceptable Standard Format and Content for the Fundamental Nuclear Material

Control (FNMC) Plan Required for Low-Enriched Uranium Enrichment Facilities.”

2. U.S. Nuclear Regulatory Commission, Regulatory Guide 5.67, “Material Control and

Accounting for Uranium Enrichment Facilities Authorized to Produce Special Nuclear

Material of Low Strategic Significance.”

3. U.S. Nuclear Regulatory Commission, “Security Plan Format and Content Guide for

NRC Licensees, Certificate Holders, and Related Organizations.”

16.5.3 Regulatory Review Criteria

The staff should use the following regulatory review criteria, or information demonstrating

acceptable alternatives, in its review of the application. Acceptability should be based on the

following:

Foreign Ownership, Control, or Domination

After a review of the potential foreign involvement information, in accordance with the Review

Procedures, in Section 16.5.14, the reviewer determines that no foreign interest has the ability,

direct or indirect, whether or not exercised, to direct or decide matters affecting the

management or operations of the applicant.

The following additional criteria are applicable in the case of USEC:

1. Foreign competitors of the current certificate holder USEC are precluded from

participating in any acquisition of the current certificate holder USEC.

2. Entities with a substantial commercial relationship with foreign enrichment providers,

with respect to uranium and uranium products, are precluded from participating in any

acquisition of the current certificate holder USEC.
- 12 -

3. Foreign interests own no more than 10 percent of the outstanding voting securities of

the applicant.

4. Foreign-sourced financing of an acquisition of the current certificate holder USEC is no

more than 10 percent of the purchase price.

Common Defense and Security

1. The NRC has reviewed and approved the applicant’s physical security plan.

2. The NRC has reviewed and approved the applicant’s security plan for the protection of

classified matter.

3. The NRC has reviewed and approved the applicant’s fundamental nuclear material

control plan.

4. If the applicant has previously been issued a certificate of compliance, a review of NRC

inspection reports does not indicate the applicant’s a general failure by the applicant to

protect the common defense and security interests of the United States.

5. If applicable, Cconsultation with the principal members of the Enrichment Oversight

Committee indicates that the applicant’s performance as the U.S. Agent for the Russian

HEU Agreement is acceptable.

Reliable and Economical Source of Domestic Enrichment Services

The review criteria for a finding related to a reliable and economical source of domestic

enrichment services are subsumed by the above criteria for foreign ownership, control, and

domination.

1. The applicant’s current actual or estimated public credit rating is investment grade (e.g.

Standard & Poor’s AAA to BBB, Moody’s Aaa to Baa), or

2. The applicant’s current actual or estimated public credit rating is not investment grade,

but other economic, financial, or business characteristics exist that strongly indicate the

entity’s financial condition is adequate for at least 5 years.

16.6 Evaluation Findings

16.6.1 Introduction

The staff’s review should verify that sufficient information has been provided in the application

for renewal of certification to satisfy the intent of requirements in 10 CFR 76.35, “Contents of

Application,” and 10 CFR 76.36, “Renewals,” relative to determination of foreign ownership; and

that the information provided is consistent with the guidance in this SRP. On the basis of this

information, the staff should be able to conclude that this evaluation is complete. The staff can

document its review as follows.
- 13 -

16.6.2 Sample Evaluation Findings

The staff could document the safety evaluation for the certificate application as follows:

On the basis of the staff’s review and evaluation of the application to transfer

certificates for a change in ownership or control for recertification, the staff has

found no cause to determine that:

1. The applicant is owned, controlled, or dominated by an alien, a foreign

corporation, or a foreign government; or

2. Issuance of a certificate of compliance would be inimical to the common defense

and security of the United States; or

3. Issuance of a certificate of compliance would be inimical to the maintenance of a

reliable and economical domestic source of enrichment services.

On the basis of its review, the NRC staff determined that the information related to

foreign ownership, control, or domination, common defense and security, and reliable

and economical source of domestic enrichment services, is acceptable to support the

application to transfer certificates to: a new facility owner; or transfer of control, under

10 CFR 76.65 recertification.

16.7 References

1. U.S. Department of Defense, “National Industrial Security Program Operating Manual

(NISPOM),” DOD 5520.22-M, January 1995.

2. U.S. Department of Energy, U.S. Nuclear Regulatory Commission, U.S. Enrichment

Corporation, “Foreign Ownership, Control, or Influence Guidance Documents for the

Privatization of the United States Enrichment Corporation.”