[Federal Register Volume 86, Number 7 (Tuesday, January 12, 2021)]
[Rules and Regulations]
[Pages 2252-2254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27983]



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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 742

[Docket No. 201214-0341]
RIN 0694-AI13


Change to the License Review Policy for Unmanned Aerial Systems 
(UAS) To Reflect Revised United States UAS Export Policy

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Final rule.

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SUMMARY: Consistent with President Donald J. Trump's July 24, 2020 
announcement of a change in U.S. policy regarding the export of 
Unmanned Aerial Systems (UAS), the Bureau of Industry and Security 
(BIS) is amending the Export Administration Regulations (EAR) licensing 
review policy with respect to certain UAS that are controlled for 
Missile Technology (MT) reasons. UAS that have a range and payload 
capability equal to or greater than 300 kilometers (km)/500 kilograms 
(kg) are identified on the Missile Technology Control Regime (MTCR) 
Annex as Category I items. Pursuant to this amendment, BIS will review 
export and reexport license applications involving UAS that fall within 
these parameters and a maximum true airspeed of less than 800 km/hour 
(hr) for export licensing review purposes on a case-by-case basis under 
the more flexible review policy generally applied to MTCR Category II 
items under the EAR. BIS will also review MT items for the design, 
development, production, or use in such UAS on a case-by-case basis. 
This policy change reflects a reasonable approach to technological 
change and the protection of the national security and economic 
interests of the United States, while simultaneously remaining 
committed to the MTCR and its core nonproliferation objectives.

DATES: This rule is effective January 12, 2021.

FOR FURTHER INFORMATION CONTACT: Sharon Bragonje, Nuclear and Missile 
Technology Controls Division, Bureau of Industry and Security, Phone: 
(202) 482-0434; Email: <a href="/cdn-cgi/l/email-protection#cdbea5acbfa2a3e3afbfacaaa2a3a7a88dafa4bee3a9a2aee3aaa2bb"><span class="__cf_email__" data-cfemail="4a39222b3825246428382b2d2524202f0a282339642e2529642d253c">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Background

    The Missile Technology Control Regime (MTCR or Regime) is an export 
control arrangement among 35 nations, including most of the world's 
suppliers of advanced missiles and missile-related equipment, 
materials, software and technology. The Regime establishes a common 
list of controlled items and a common export control policy that member 
countries implement in accordance with their national export controls. 
The MTCR seeks to limit the risk of proliferation of weapons of mass 
destruction (WMD) by controlling exports of goods and technologies that 
could make a contribution to delivery systems (other than manned 
aircraft) for such weapons. The United States became a member at the 
Regime's founding in 1987.
    In 1993, the MTCR's original focus on missiles for nuclear weapons 
delivery was expanded to include the proliferation of missiles for the 
delivery of all types of WMD, i.e., nuclear, chemical, and biological 
weapons. Such proliferation has been identified as a threat to 
international peace and security. One way to address this threat is to 
maintain vigilance over the transfer of missile equipment, material, 
and related technologies usable for systems capable of delivering WMD. 
MTCR members voluntarily pledge to adopt the Regime's Guidelines for 
Sensitive Missile-Relevant Transfers (MTCR Guidelines) and to restrict 
the transfer of items contained in the Regime's Equipment, Software, 
and Technology Annex. The Annex consists of Category I and Category II 
items, with Category I including items of greatest sensitivity. 
Category I items include rocket systems and unmanned aerial vehicle 
systems with a range capability of 300 km and greater and a payload 
capability of 500 kg and greater, and production facilities and major 
sub-systems for such items. Category II items include rocket systems 
and unmanned aerial vehicle systems with a range of 300 km or greater 
but below a payload capability of 500 kg. Category II also includes a 
wide range of equipment, material, and technologies, most of which have 
uses other than for systems capable of delivering WMD.
    Pursuant to the MTCR Guidelines, transfers (including exports and 
reexports) of Category I items are subject to a ``strong presumption of 
denial.'' See MTCR Guidelines, Paragraph 2. Transfers of Category II 
Items are subject to a more flexible case-by-case review policy.
    The MTCR Guidelines are implemented through the national export 
control laws, regulations and policies of Regime members. The United 
States has implemented in Sec.  742.5 of the EAR missile technology 
controls and policies that are consistent with the MTCR Guidelines, 
including by imposing licensing requirements that apply to MTCR 
Category I and Category II items. As a Regime member, the United States 
exercises sovereign national discretion in making implementing 
decisions.

Background on the Revised U.S. UAS Policy

    The U.S. Government remains committed to the goals of the MTCR, 
including the objective of limiting the proliferation of unmanned 
delivery systems for WMD. At the same time, the U.S. Government is 
cognizant of rapid advances in the uses of Unmanned Aerial Systems 
(UAS), including growing commercial uses for UAS that meet the MTCR 
Category I control criteria, as well as the need to protect U.S. 
national security and economic security interests. An inflexible 
approach to implementing the MTCR's strong presumption of denial that 
applies to Category I items creates a competitive disadvantage for the 
United States and other MTCR partners by restraining industry globally 
from fully participating in the expanding commercial UAS market, which 
increasingly includes suppliers outside of the MTCR. Additionally, the 
U.S. Government recognizes the need to enhance security relationships 
with countries that wish to collaborate on counter-terrorism, border 
control, and other mutual security interests. Accordingly, the U.S. 
Government has recognized the need to update its treatment of UAS that 
meet the 300 km/500 kg threshold as MTCR Category I items for the 
implementation of the MTCR's strong presumption of denial and export 
licensing review purposes to ensure U.S. economic, national security, 
and foreign policy interests are appropriately addressed.
    The United States has been working with its MTCR partners on this 
issue since 2017, in the interest of updating UAS controls to address 
the ongoing revolution in both UAS technology and its applications. At 
the MTCR October 2019 Plenary in Auckland, New Zealand the United 
States put forward a revised proposal to increase flexibility for 
export control purposes on a certain subset of MTCR Category I UAS, 
based primarily on a speed value, and thus not subject their transfer 
to the Regime's strong presumption of denial. However, the MTCR 
partners have not achieved consensus on this proposal.

Unilateral Modification to U.S. Licensing Policy for UAS

    To address the national security and economic security concerns 
described above, on July 24, 2020, President

[[Page 2253]]

Trump announced a change in the policy of the United States regarding 
exports of UAS (July 24, 2020 Revised UAS Export Policy). In this final 
rule, consistent with this revised policy, the U.S. Government is 
amending the licensing policy of the United States to allow greater 
flexibility in the export or reexport of certain MTCR Category I UAS 
subject to the Export Administration Regulations (EAR). Pursuant to 
this revision, the United States will invoke its national discretion on 
the implementation of the MTCR's strong presumption of denial to treat 
a subset of MTCR Category I UAS, i.e., those that have a range and 
payload capability equal to or greater than 300 km/500 kg but a maximum 
true airspeed of less than 800 km/hr, as Category II UAS for export 
licensing review purposes, which are generally subject to a more 
flexible case-by-case review. BIS is accordingly amending Sec.  742.5 
(Missile Technology) of the EAR to review license applications 
involving such UAS, as well as MT items for the design, development, 
production, or use in such systems, under a case-by-case review policy.
    While the updated policy of the United States refers to the term 
UAS, the MTCR and the EAR use the term ``Unmanned Aerial Vehicle 
(UAV)''. The change in licensing policy set forth in revised Sec.  
742.5 of the EAR consequently uses the term UAV.
    In making this licensing review policy change, the U.S. Government 
is exercising its national discretion as a member of the MTCR. This 
change will strengthen U.S. national security by improving the 
capabilities of U.S. partners and will increase U.S. economic security 
by opening the expanding UAS market to U.S. industry. The U.S. 
Government is implementing the July 24, 2020 Revised UAS Policy as a 
responsible and reasonable approach to technological change, 
establishing a systematic framework for implementation of the MTCR's 
strong presumption of denial for export licensing review purposes as 
applied to a particular subset of MTCR Category I UAS. This subset of 
UAS is widely used in intelligence, surveillance, and reconnaissance 
(ISR) missions and various commercial and other applications not 
involving WMD delivery, so a case-by-case license review policy is 
warranted.
    The United States takes seriously both its nonproliferation 
commitments and its responsibility to ensure that exports and reexports 
and subsequent use of all U.S.-origin UAS are conducted responsibly, 
with appropriate end users and for appropriate end uses. To this end, 
UAS that fall within this subset of Category I UAS will continue to be 
subject to a strong presumption of denial if they are intended for use 
as WMD delivery systems, or if they present a risk of diversion to such 
an end use.
    This approach will maintain particular restraint on exports and 
reexports of those UAS that present higher risk for WMD delivery--such 
as cruise missiles, hypersonic aerial vehicles, and advanced unmanned 
combat aerial vehicles--without unduly impeding exports for growing 
commercial and conventional military applications. Finally, the United 
States notes that while all MTCR-related concerns are considered when 
reviewing a potential export or reexport of all UAS, the decision to 
approve--or not approve--such an export or reexport is a whole-of-
government decision that takes into account all relevant factors and 
policies, including U.S. national security, nonproliferation, and 
foreign policy objectives, as well as the recipient country's 
capability and willingness to effectively and responsibly use and 
safeguard U.S.-origin items, including technology, in accordance with 
U.S. laws and policies.

Amendments to the Export Administration Regulations (EAR)

    This final rule revises the EAR's missile technology controls to 
reflect the July 24, 2020 Revised UAS Export Policy. Specifically, in 
Sec.  742.5 of the EAR (Missile technology), this final rule revises 
paragraph (b)(1) to add a new licensing review policy for UAVs with a 
specified range, payload, and maximum true airspeed by adding a new 
Note to paragraph (b)(1). The new Note to paragraph (b)(1) added by 
this final rule specifies that UAV systems that have a range and 
payload capability equal to or greater than 300 km/500 kg, but a 
maximum true airspeed of less than 800 km/hr, and MT items for use in 
UAV systems that meet these parameters, will not be subject to a policy 
of denial. Instead, such UAV systems will be reviewed on a case-by-case 
basis to determine whether the export or reexport will be used in 
support of WMD activities or military activities contrary to U.S. 
national security, or whether there is a risk of diversion to such 
activities. In addition, the same, more flexible, review policy will 
apply under the new note to MT-controlled ``parts'' and ``components'' 
and other MT items for the design, ``development,'' ``production,'' or 
``use'' (see Sec.  772.1 of the EAR (15 CFR part 772--Definitions of 
Terms)) of UAV systems that meet these parameters, including foreign-
made UAV systems that do so (whether or not the foreign-made systems 
are or will be subject to the EAR).
    BIS estimates that this licensing review policy change will result 
in an increase of twenty license applications submitted annually to 
BIS. This increase is anticipated because certain exporters that 
previously may have been deterred from applying for a license as a 
result of the more restrictive license review policy in place prior to 
this rule may now be motivated to apply for licenses under the new 
case-by-case license review policy. In addition, in making this 
estimate, BIS took into account the fact that the current number of 
commercial U.S. UAVs with the capability described in this final rule 
is rather small. Consequently, under the new, more flexible license 
review policy, the anticipated increase in the number of license 
applications will be minimal.
    This final rule also makes a conforming technical change by 
revising the second sentence in paragraph (b)(1) of Sec.  742.5 to add 
double quotation marks around the term parts (``part'' is a defined 
term in the EAR) and to add after it the term ``components'' 
(``component'' is also a defined term in the EAR). These technical 
edits clarify that the review standard applies to replacement ``parts'' 
and ``components'' for use in the specified applications (i.e., manned 
aircraft, satellite, land vehicle, or marine vessel).

Export Control Reform Act of 2018

    On August 13, 2018, the President signed into law the John S. 
McCain National Defense Authorization Act for Fiscal Year 2019, which 
included the Export Control Reform Act of 2018 (ECRA) (50 U.S.C. 4801-
4852). ECRA provides the legal basis for BIS's principal authorities 
and serves as the authority under which BIS issues this rule.

Executive Order Requirements

    Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distribute impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This final rule has been designated a ``significant 
regulatory action'' under Executive Order 12866.

[[Page 2254]]

Commerce estimates that this rule will result in a minimal increase to 
the number of license requests submitted to BIS annually.
    This rule does not contain policies with federalism implications as 
that term is defined under E.O. 13132.
    For the purposes of E.O. 13771, ``Reducing Regulation and 
Controlling Regulatory Costs,'' this rule is issued with respect to a 
national security function of the United States. The cost-benefit 
analysis indicates that the rule is intended to improve national 
security as its primary direct benefit. The U.S. Government is acting 
to protect U.S. national security interests, which are directly related 
to U.S. economic security interests. An inflexible approach to 
implementing the MTCR's strong presumption of denial for the subset of 
UAS specified in this rule presents a competitive disadvantage for the 
United States, and other MTCR partners, by restraining industry from 
fully participating in the expanding commercial UAS market. 
Additionally, the U.S. Government needs to meet the growing demand for 
key tools, and capabilities and the development and enhancement of 
security relationships from countries that want to work with the U.S. 
on counter-terrorism, border control, and other mutual security 
interests. The revised U.S. national policy announced on July 24, 2020, 
is consistent with U.S. national security interests, as the United 
States will continue to maintain specific controls on transfers of UAS 
that present higher risks of use in or support for WMD delivery--such 
as cruise missiles, hypersonic aerial vehicles, and advanced unmanned 
combat aerial vehicles--while not unduly impeding exports for growing 
commercial and conventional military applications. Accordingly, this 
rule meets the requirements set forth in the April 5, 2017 OMB guidance 
implementing E.O. 13771 and is exempt from the requirements of E.O. 
13771.

Paperwork Reduction Act Requirements

    Notwithstanding any other provision of law, no person is required 
to respond to, nor shall any person be subject to a penalty for failure 
to comply with, a collection of information subject to the requirements 
of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), 
unless that collection of information displays a currently valid Office 
of Management and Budget (OMB) Control Number.
    This rule involves the following OMB approved collections of 
information subject to the PRA: 0694-0088, ``Multi-Purpose 
Application'', which carries a burden hour estimate of 29.6 minutes for 
a manual or electronic submission; 0694-0096 ``Five Year Records 
Retention Period'', which carries a burden hour estimate of less than 1 
minute; and 0607-0152 ``Automated Export System (AES) Program'', which 
carries a burden hour estimate of 3 minutes per electronic submission. 
This rule changes the respondent burden by increasing the estimated 
number of submissions by 20. Specific license application submission 
estimates are further discussed in the preamble of this rule where the 
regulatory revision is explained. The additional burden falls within 
the estimated burden approved by OMB for the information collections 
0694-0088, 0694-0096, and 0607-0152.
    Any comments regarding these collections of information, including 
suggestions for reducing the burden, may be submitted online at https://www.reginfo.gov/public/do/PRAMain. Find the particular information 
collection by using the search function and entering either the title 
of the collection or the OMB Control Number.

Administrative Procedure Act and Regulatory Flexibility Act 
Requirements

    Pursuant to Section 4821 of ECRA, this action is exempt from the 
Administrative Procedure Act (5 U.S.C. 553) requirements for notice of 
proposed rulemaking, opportunity for public participation, and delay in 
effective date.
    Further, no other law requires that a notice of proposed rulemaking 
and an opportunity for public comment be given for this final rule. 
Because a notice of proposed rulemaking and an opportunity for public 
comment are not required to be given for this rule under the 
Administrative Procedure Act or by any other law, the analytical 
requirements of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) 
are not applicable. Accordingly, no regulatory flexibility analysis is 
required, and none has been prepared.

List of Subjects in 15 CFR Part 742

    Exports, Terrorism.

    Accordingly, part 742 of the Export Administration Regulations (15 
CFR parts 730-774) is amended as follows:

PART 742--[AMENDED]

0
1. The authority citation for part 742 is revised to read as follows:

    Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50 
U.S.C. 1701 et seq.; 22 U.S.C. 3201 et seq.; 42 U.S.C. 2139a; 22 
U.S.C. 7201 et seq.; 22 U.S.C. 7210; Sec. 1503, Pub. L. 108-11, 117 
Stat. 559; E.O. 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. 179; E.O. 
12851, 58 FR 33181, 3 CFR, 1993 Comp., p. 608; E.O. 12938, 59 FR 
59099, 3 CFR, 1994 Comp., p. 950; E.O. 13026, 61 FR 58767, 3 CFR, 
1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 
783; Presidential Determination 2003-23, 68 FR 26459, 3 CFR, 2004 
Comp., p. 320; Notice of November 12, 2020, 85 FR 72897 (November 
13, 2020).


0
2. Section 742.5 is amended by revising paragraph (b)(1) to read as 
follows:


Sec.  742.5  Missile technology.

* * * * *
    (b) * * *
    (1) Applications to export and reexport items identified in ECCNs 
on the CCL as MT Column No. 1 in the Country Chart column of the 
``License Requirements'' section will be considered on a case-by-case 
basis to determine whether the export or reexport would make a material 
contribution to the proliferation of missiles. Applications for exports 
and reexports of such items contained in Category 7A or described by 
ECCN 9A101 on the CCL will be considered favorably if such exports or 
reexports are destined to a manned aircraft, satellite, land vehicle, 
or marine vessel, in quantities appropriate for replacement ``parts'' 
and ``components'' for such applications. When an export or reexport is 
deemed to make a material contribution to the proliferation of 
missiles, the license will be denied.

    Note 1 to paragraph (b)(1):  Applications to export and reexport 
an Unmanned Aerial Vehicle (UAV) that has a range and payload 
capability equal to or greater than 300 km/500 kg but a maximum true 
airspeed of less than 800 km/hr, and items controlled for Missile 
Technology reasons for the design, development, production, or use 
of UAV systems that meet these parameters, will not be subject to a 
policy of denial but will instead be reviewed on a case-by-case 
basis to determine whether the export or reexport will be used in 
support of WMD activities or military activities contrary to U.S. 
national security, or whether there is a risk of diversion to 
support such activities.

* * * * *

Matthew S. Borman,
Deputy Assistant Secretary for Export Administration.
[FR Doc. 2020-27983 Filed 1-11-21; 8:45 am]
BILLING CODE 3510-33-P


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