```

[Federal Register Volume 77, Number 114 (Wednesday, June 13, 2012)]
[Proposed Rules]
[Pages 35310-35317]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14444]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 742 and 774

[Docket No. 120202094-2065-01]
RIN 0694-AF54

Revisions to the Export Administration Regulations (EAR): Control 
of Military Training Equipment and Related Items the President 
Determines No Longer Warrant Control Under the United States Munitions 
List (USML)

AGENCY: Bureau of Industry and Security, Department of Commerce.

ACTION: Proposed rule.

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SUMMARY: This proposed rule describes how articles the President 
determines no longer warrant control under Category IX (Military 
Training Equipment and Training) of the United States Munitions List 
(USML) would be controlled under the Commerce Control List (CCL) in new 
Export Control Classification Numbers (ECCNs) 0A614, 0B614, 0D614, and 
0E614.
    This rule is one in a planned series of proposed rules describing 
how various types of articles the President determines, as part of the 
Administration's Export Control Reform Initiative, no longer warrant 
USML control, would be controlled on the CCL and by the EAR. This 
proposed rule is being published in conjunction with a proposed rule 
from the Department of State, Directorate of Defense Trade Controls, 
which would amend the list of articles enumerated in USML Category IX. 
The revisions in this rule are part of Commerce's retrospective plan 
under EO 13563 completed in August 2011. Commerce's full plan can be 
accessed at: http://open.commerce.gov/news/2011/08/23/commerce-plan-retrospective-analysis-existing-rules.

DATES: Comments must be received by July 30, 2012.

ADDRESSES: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
The identification number for this rulemaking is BIS-2012-0023.
     By email directly to publiccomments@bis.doc.gov. Include 
RIN 0694-AF54 in the subject line.
     By mail or delivery to Regulatory Policy Division, Bureau 
of Industry and Security, U.S. Department of Commerce, Room 2099B, 14th 
Street and Pennsylvania Avenue NW., Washington, DC 20230. Refer to RIN 
0694-AF54.

FOR FURTHER INFORMATION CONTACT: Daniel Squire, Office of National 
Security and Technology Transfer Controls, Sensors and Aviation 
Division, tel. 202 482 3710, email daniel.squire@bis.doc.gov.

SUPPLEMENTARY INFORMATION:

Background

    On July 15, 2011, as part of the Administration's ongoing Export 
Control Reform Initiative, BIS published a proposed rule (76 FR 41958) 
(herein ``the July 15 proposed rule'') that set forth a framework for 
how articles the President determines, in accordance with section 38(f) 
of the Arms Export Control Act (AECA) (22 U.S.C. 2778(f)), would no 
longer warrant control on the United States Munitions List (USML) and 
would be controlled on the Commerce Control List (CCL) in Supplement 
No. 1 to Part 774 of the Export Administration Regulations (EAR). On 
November 7, 2011, BIS published a rule (76 FR 68675) proposing several 
changes to the framework initially proposed in the July 15 rule.
    Following the structure of the July 15 and November 7 proposed 
rules, this proposed rule describes BIS's proposal for controlling 
under the EAR and its CCL military training equipment and related 
articles now controlled by the ITAR's USML under Category IX but that 
would no longer be so controlled if the State Department's proposed 
revision to the Category were to become final. The changes described in 
this proposed rule and the State Department's proposed companion rule 
to Category IX of the USML are based on a review of Category IX by the 
Defense Department, which worked with the Departments of State and 
Commerce in preparing the proposed amendments. The review was focused 
on identifying the types of articles that are now enumerated in USML 
Category IX that are either (i) inherently military and otherwise 
warrant control on the USML or (ii) common to non-military training 
equipment applications, possess parameters or characteristics that 
provide a critical military or intelligence advantage to the United 
States, and almost exclusively available from the United States. If an 
article satisfied one or both of those criteria, the article remained 
on the USML. If an article did not satisfy either standard but was 
nonetheless a type of article that is, as a result of differences in 
form and fit, ``specially designed'' for military applications, it was 
identified in the new ECCNs proposed in this notice. The licensing 
requirements and other EAR-specific controls for such items described 
in this notice would enhance national security by permitting the U.S. 
Government to focus its resources on controlling, monitoring, 
investigating, analyzing, and, if need be, prohibiting exports and 
reexports of more significant items to destinations, end uses, and end 
users of greater concern than our NATO allies and other multi-regime 
partners.
    Pursuant to section 38(f) of the AECA, the President shall review 
the USML ``to determine what items, if any, no longer warrant export 
controls under'' the AECA. The President must report the results of the 
review to Congress and wait 30 days before removing any such items from 
the USML. The report must ``describe the nature of any controls to be 
imposed on that item under any other provision of law.'' 22 U.S.C. 
2778(f)(1).

[[Page 35311]]

    In the July 15 proposed rule, BIS proposed creating a series of new 
ECCNs to control items that would be removed from the USML, or that are 
items from the Munitions List of the Wassenaar Arrangement on Export 
Controls for Conventional Arms and Dual Use Goods and Technologies List 
(Wassenaar Arrangement Munitions List or WAML) that are already 
controlled elsewhere on the CCL. The proposed rule referred to this 
series as the ``600 series'' because the third character in each of the 
new ECCNs would be a ``6.'' The first two characters of the 600 series 
ECCNs serve the same function as any other ECCN as described in Sec.  
738.2 of the EAR. The first character is a digit in the range 0 through 
9 that identifies the Category on the CCL in which the ECCN is located. 
The second character is a letter in the range A through E that 
identifies the product group within a CCL Category. In the 600 series, 
the third character is the number 6. With few exceptions, the final two 
characters identify the WAML category that covers items that are the 
same or similar to items in a particular 600 series ECCN.
    This proposed rule would create four such ECCNs: 0A614, 0B614, 
0D614, and 0E614. ECCN 0A614 would control military training equipment 
and specific ``parts,'' ``components,'' and ``accessories and 
attachments'' therefor. ECCN 0B614 would control test, inspection, and 
production ``equipment,'' including related ``parts,'' ``components,'' 
and ``accessories and attachments,'' for the ``production'' or 
``development'' of commodities controlled by ECCN 0A614 or articles 
controlled by USML Category IX. ECCN 0D614 would control ``software'' 
for the ``development,'' ``production,'' operation or maintenance of 
items controlled by ECCNs 0A614 or 0B614. ECCN 0E614 would control 
``technology'' for the ``development,'' ``production,'' operation, 
installation, maintenance, repair or overhaul of commodities controlled 
by ECCNs 0A614 or 0B614 or ``software'' controlled by ECCN 0D614.
    The revisions in this rule are part of Commerce's retrospective 
plan under EO 13563 completed in August 2011. Commerce's full plan can 
be accessed at: http://open.commerce.gov/news/2011/08/23/commerce-plan-retrospective-analysis-existing-rules.
    BIS will publish additional Federal Register notices containing 
proposed amendments to the CCL that will describe proposed controls for 
additional categories of articles the President determines no longer 
warrant control under the USML. The State Department will publish 
concurrently proposed amendments to the USML that correspond to the BIS 
notices. BIS will also publish proposed rules to further align the CCL 
with the WAML and the Missile Technology Control Regime Equipment, 
Software and Technology Annex.

Detailed Description of Changes Proposed by This Rule

New ECCN 0A614: Military Training ``Equipment''

    Proposed ECCN 0A614 would impose national security (NS Column 1), 
regional stability (RS Column 1), and anti-terrorism controls on 
military training ``equipment'' not controlled by the USML and on most 
``parts,'' ``components,'' and ``accessories and attachments'' 
``specially designed'' for such military training ``equipment.'' ECCN 
0A614 also would apply the same controls to ``parts,'' ``components,'' 
and ``accessories and attachments'' for military training ``equipment'' 
controlled by Category IX of the USML unless such ``parts,'' 
``components,'' or ``accessories and attachments'' are specifically 
controlled by the USML or another ECCN on the Commerce Control List. 
Notes to proposed ECCN 0A614 would identify how specific commodities 
would be classified under ECCN 0A614, including simulators for non-
combat military aircraft, certain radar training units, and training 
``equipment'' for ground military operations. ECCN 0A614.y would impose 
only anti-terrorism controls on specific ``parts,'' ``components,'' and 
``accessories and attachments'' that are ``specially designed'' for a 
commodity controlled by ECCN 0A614 and not specified elsewhere in the 
CCL.

New ECCN 0B614: Test, Inspection, and Production ``Equipment'' for 
Military Training ``Equipment'' and ``Specially Designed'' ``Parts,'' 
``Components,'' and ``Accessories and Attachments'' Therefor

    Proposed ECCN 0B614 would impose national security (NS Column 1), 
regional stability (RS Column 1), and anti-terrorism controls on test, 
inspection and production equipment, and on ``parts,'' ``components,'' 
and ``accessories and attachments'' therefor, that are ``specially 
designed'' for the ``production'' of commodities controlled by ECCN 
0A614 or USML Category IX. ECCN 0B614.y would impose only anti-
terrorism controls on specific ``parts,'' ``components,'' and 
``accessories and attachments'' that are ``specially designed'' for a 
commodity controlled by ECCN 0B614 and not specified elsewhere in the 
CCL.

New ECCN 0D614: ``Software'' Related to Military Training ``Equipment''

    Proposed ECCN 0D614 would impose national security, (NS Column 1), 
regional stability (RS Column 1), and anti-terrorism (AT Column 1) 
controls on ``software'' ``specially designed'' for the 
``development,'' ``production,'' operation or maintenance of 
commodities controlled by ECCNs 0A614 or 0B614 (except the .y 
paragraphs of these ECCNs). ECCN 0D614.y would impose only anti-
terrorism controls on specific ``software'' that is ``specially 
designed'' for the ``production,'' ``development,'' operation or 
maintenance of commodities controlled by ECCNs 0A614.y or 0B614.y.

New ECCN 0E614: ``Technology'' (Related to ECCNs 0A014, 0B014, and 
0D014)

    Proposed ECCN 0E614 would impose national security (NS Column 1), 
regional stability (RS Column 1), and anti-terrorism (AT Column 1) 
controls on ``technology'' ``required'' for the ``development,'' 
``production,'' operation, installation, maintenance, repair, or 
overhaul of commodities controlled by 0A614 or 0B614, or software 
controlled by 0D614 (except the .y paragraphs of these ECCNs). ECCN 
0E614.y would impose only anti-terrorism controls on specific 
``technology'' that is ``required'' for the ``production,'' 
``development,'' operation, installation, maintenance, repair or 
overhaul of commodities controlled by ECCNs 0A614.y or 0B614.y or 
software controlled by ECCN 0D614.y.

Inclusion of ``.y.99'' Paragraphs in 600 Series ECCNs

    Proposed new ECCNs 0A614, 0B614, 0D614 and 0E614 also would contain 
a paragraph ``.y.99'' that would control any item that meets all of the 
following criteria: (i) The item is not listed on the CCL; (ii) the 
item was previously determined to be subject to the EAR in an 
applicable commodity jurisdiction determination issued by the U.S. 
Department of State; and (iii) the item would otherwise be controlled 
under one of these 0x614 ECCNs because, for example, the item was 
``specially designed'' for a military use.

Revisions to Sec.  742.6 of the EAR

    To implement the regional stability controls that apply to the four 
new ``600 series'' ECCNs noted above, this proposed rule would revise 
Sec.  742.6(a)(1) of the EAR to apply the RS Column 1 licensing policy 
to items classified

[[Page 35312]]

under ECCNs 0A614, 0B614, 0D614 and 0E614 (except the .y paragraphs).

Proposed New ECCNs and License Exception STA

    The July 15 proposed rule, as modified by the November 7 proposed 
rule, would preclude use of License Exception STA for end-items in 600 
series ECCNs unless eligibility for such use was applied for and 
approved by BIS. This proposed rule would exempt end items classified 
under ECCN 0A614 (military training ``equipment'') and classified under 
ECCN 0B614 (test, inspection and production ``equipment'' for military 
training ``equipment'') from that requirement. BIS notes this proposed 
policy by including in the STA paragraphs of these two ECCNs a 
statement that reads: ``Paragraph (c)(1) of License Exception STA 
(Sec.  740.20(c)(1)) may be used for items in 0A614 without the need 
for a determination described in Sec.  740.20(g).'' This provision 
would prevail over the elements of the July 15 proposed rule, as 
modified by the November 7 proposed rule, that indicated that ``600 
series'' ``end items'' may not be exported, reexported or transferred 
pursuant to License Exception STA unless those end items have been 
identified by BIS in writing or published as an eligible item for 
License Exception STA in response to a License Exception STA 
eligibility request in accordance with Sec.  740.20(g) of the EAR.

Request for Comments

    All comments must be in writing and submitted via one or more of 
the methods listed under the ADDRESSES caption to this notice. All 
comments (including any personal identifiable information) will be 
available for public inspection and copying. Those wishing to comment 
anonymously may do so by submitting their comment via regulations.gov 
and leaving the fields for identifying information blank.

Relationship to the July 15 Proposed Rule and the November 7 Proposed 
Rule

    As referenced above, the purpose of the July 15 proposed rule was 
to set up the framework to support the transfer of items from the USML 
to the CCL. To facilitate that goal, the July 15 proposed rule 
contained definitions and concepts that were meant to be applied across 
categories. However, as BIS undertakes rulemakings to move specific 
categories of items from the USML to the CCL, there may be unforeseen 
issues or complications that may require BIS to reexamine those 
definitions and concepts. The comment period for the July 15 proposed 
rule closed on September 13, 2011. In the November 7 proposed rule, BIS 
proposed several changes to those definitions and concepts. The comment 
period for the November 7 proposed rule closed on December 22, 2011.
    To the extent that this rule's proposals affect any provision in 
either of those proposed rules or any provision in either of those 
proposed rules affect this proposed rule, BIS will consider comments on 
those provisions so long as they are within the context of the changes 
proposed in this rule.
    BIS believes that the following aspects of the July 15 proposed 
rule and the November 7 proposed rule are among those that could affect 
this proposed rule:
     De minimis provisions in Sec.  734.4;
     Restrictions on use of license exceptions in Sec. Sec.  
740.2, 740.10, 740.11, and 740.20;
     Change to national security licensing policy in Sec.  
742.4;
     Licensing policy in Sec.  742.4(b)(1)(ii);
     Addition of 600 series items to Supplement No. 2 to Part 
744--List of Items Subject to the Military End-Use Requirement of Sec.  
744.21;
     Addition of U.S. arms embargo policy regarding 600 series 
items set forth in Sec.  742.4(b)(1)(ii) (national security) of the 
July 15 proposed rule to Sec.  742.6(b)(1) (regional stability) of the 
November 7 proposed rule; and
     Definitions of terms in Sec.  772.1.

Effects of This Proposed Rule

De minimis

    The July 15 proposed rule would impose certain unique de minimis 
requirements on items controlled under the new 600 series ECCNs. 
Section 734.3 of the EAR provides, inter alia, that under certain 
conditions, items made outside the United States that incorporate items 
subject to the EAR are not subject to the EAR if they do not exceed a 
de minimis percentage of controlled U.S.-origin content. Depending on 
the destination, the de minimis percentage can be either 10 percent or 
25 percent. The military training ``equipment'' and the test, 
inspection and production ``equipment'' for military training 
``equipment'' that would be subject to the EAR as a result of this 
proposed rule would become eligible for de minimis treatment.

Use of License Exceptions

    Military training ``equipment'' and test, inspection, and 
production ``equipment'' therefor currently on the USML that would be 
classified under ECCNs 0A614 and 0B614 would become eligible for 
several license exceptions, including STA, which would be available for 
exports to certain government agencies of NATO and other multi-regime 
close allies. The exchange of information and statements required under 
STA is substantially less burdensome than are the license application 
requirements currently required under the ITAR, as discussed in more 
detail in the ``Regulatory Requirements'' section of this proposed 
rule. None of the military training ``equipment'' or test, inspection 
and production ``equipment'' therefor that would be controlled by ECCNs 
0A614 or 0B614 would be subject to the provision in the July 15 
proposed rule that proposes to preclude the use of License Exception 
STA for ``600 series'' end items unless approval for such use is sought 
from and granted by BIS. The items covered by this rule also would be 
eligible for the following license exceptions: LVS (limited value 
shipments), up to $1500; TMP (temporary exports); and RPL (servicing 
and parts replacement).

Alignment With the Wassenaar Arrangement Munitions List

    The Administration has stated since the beginning of the Export 
Control Reform Initiative that the reforms will be consistent with U.S. 
obligations to the multilateral export control regimes. Accordingly, 
the Administration will, in this and subsequent proposed rules, 
exercise its national discretion to implement, clarify, and, to the 
extent feasible, align its controls with those of the regimes. This 
proposed rule would align controls on the items that it adds to the CCL 
by placing them in new 600 series ECCNs ending in ``14'' to parallel 
Category ML14 on the Wassenaar Arrangement Munitions List (`` 
`Specialised equipment for military training' or for simulating 
military scenarios, simulators specially designed for training in the 
use of any firearm or weapon specified by ML.1 or ML.2, and specially 
designed components and accessories therefor''). Items in proposed ECCN 
0A614 are covered by WAML Category ML 14.
    Although the Export Administration Act expired on August 20, 2001, 
the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 
2001 Comp., p. 783 (2002), as extended by the Notice of August 12, 
2011, 76 FR 50661 (August 16, 2011), has continued the Export 
Administration Regulations in effect under the International Emergency 
Economic Powers Act. BIS continues to carry out the provisions of the 
Export Administration Act, as appropriate and to the extent permitted

[[Page 35313]]

by law, pursuant to Executive Order 13222.

Rulemaking Requirements

    1. 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 rule has been designated a ``significant regulatory 
action,'' although not economically significant, under section 3(f) of 
Executive Order 12866. Accordingly, the rule has been reviewed by the 
Office of Management and Budget (OMB).
    2. Notwithstanding any other provision of law, no person is 
required to respond to, nor is 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 OMB 
control number. This proposed rule would affect two approved 
collections: Simplified Network Application Processing System (control 
number 0694-0088), which includes, among other things, license 
applications, and License Exceptions and Exclusions (0694-0137).
    As stated in the proposed rule published at 76 FR 41958 (July 15, 
2011), BIS believes that the combined effect of all rules to be 
published adding items to the EAR that would be removed from the ITAR 
as part of the administration's Export Control Reform Initiative would 
increase the number of license applications to be submitted by 
approximately 16,000 annually, resulting in an increase in burden hours 
of 5,067 (16,000 transactions at 17 minutes each) under control number 
0694-0088.
    Military training ``equipment,'' related test, inspection, and 
production ``equipment,'' ``parts,'' ``components,'' ``accessories and 
attachments,'' ``software'' and ``technology'' formerly on the USML 
would become eligible for License Exception STA under this rule. As 
stated in the July 15 proposed rule, BIS believes that the increased 
use of License Exception STA resulting from combined effect of all 
rules to be published adding items to the EAR that would be removed 
from the ITAR as part of the administration's Export Control Reform 
Initiative would increase the burden associated with control number 
0694-0137 by about 23,858 hours (20,450 transactions @ 1 hour and 10 
minutes each).
    BIS expects that this increase in burden would be more than offset 
by a reduction in burden hours associated with approved collections 
related to the ITAR. The largest impact of the proposed rule would 
likely apply to exporters of replacement parts for military training 
``equipment'' that has been approved under the ITAR for export to 
allies and regime partners. Because, with few exceptions, the ITAR 
allows exemptions from license requirements only for exports to Canada, 
most exports of such parts, even when destined to NATO and other close 
allies, require specific State Department authorization. Under the EAR, 
as proposed in this notice, such parts as well as non-combat military 
trainers, certain radar trainers and training ``equipment'' for ground 
military operations along with related test, inspection, and production 
``equipment'' would become eligible for export to NATO and other multi-
regime allies under License Exception STA. Use of License Exception STA 
imposes a paperwork and compliance burden because, for example, 
exporters must furnish information about the item being exported to the 
consignee and obtain from the consignee an acknowledgement and 
commitment to comply with the EAR. However, the Administration 
understands that complying with the burdens of STA is likely less 
burdensome than applying for licenses. For example, under License 
Exception STA, a single consignee statement can apply to an unlimited 
number of products, need not have an expiration date, and need not be 
submitted to the government in advance for approval. Suppliers with 
regular customers can tailor a single statement and assurance to match 
their business relationship rather than applying repeatedly for 
licenses with every purchase order to supply reliable customers in 
countries that are close allies or members of export control regimes or 
both.
    Even in situations in which a license would be required under the 
EAR, the burden is likely to be reduced compared to the license 
requirement of the ITAR. In particular, license applications for 
exports of technology controlled by ECCN 0E614 are likely to be less 
complex and burdensome than the authorizations required to export ITAR-
controlled technology, i.e., Manufacturing License Agreements and 
Technical Assistance Agreements.
    3. This rule does not contain policies with Federalism implications 
as that term is defined under E.O. 13132.
    4. The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 
601 et seq., generally requires an agency to prepare an initial 
regulatory flexibility analysis (IRFA) of any rule subject to the 
notice and comment rulemaking requirements under the Administrative 
Procedure Act (5 U.S.C. 553) or any other statute. However, under 
section 605(b) of the RFA, however, if the head of an agency certifies 
that a rule will not have a significant impact on a substantial number 
of small entities, the RFA does not require the agency to prepare a 
regulatory flexibility analysis. Pursuant to section 605(b), the Chief 
Counsel for Regulation, Department of Commerce, submitted a memorandum 
to the Chief Counsel for Advocacy, Small Business Administration, 
certifying that this proposed rule, if promulgated, will not have a 
significant impact on a substantial number of small entities.

Number of Small Entities

    The Bureau of Industry and Security (BIS) does not collect data on 
the size of entities that apply for and are issued export licenses. 
Although BIS is unable to estimate the exact number of small entities 
that would be affected by this rule, it acknowledges that this rule 
would affect some unknown number.

Economic Impact

    This proposed rule is part of the Administration's Export Control 
Reform Initiative. Under that initiative, the United States Munitions 
List (22 CFR part 121) (USML) would be revised to be a ``positive'' 
list, i.e., a list that does not use generic, catch-all controls on any 
part, component, accessory, attachment, or end item that was in any way 
specifically modified for a defense article, regardless of the 
article's military or intelligence significance or non-military 
applications. At the same time, articles that are determined to no 
longer warrant control on the USML would become controlled on the 
Commerce Control List (CCL). Such items, along with certain military 
items that currently are on the CCL, will be identified in specific 
Export Control Classification Numbers (ECCNs) known as the ``600 
series'' ECCNs. In addition, some items currently on the Commerce 
Control List would move from existing ECCNs to the new 600 series 
ECCNs. In practice, the greatest impact of this rule on small entities 
would likely be reduced administrative costs and

[[Page 35314]]

reduced delay for exports of items that are now on the USML but would 
become subject to the EAR. This rule addresses Category IX articles, 
which are: military training ``equipment,'' ``parts,'' ``components,'' 
and ``accessories and attachments'' therefor; test, inspection, and 
production ``equipment'' for military training ``equipment'' and 
``parts,'' ``components'' and ``accessories and attachments'' therefor; 
and related ``software'' and ``technology.'' Training ``equipment'' 
related to certain inherently military functions would remain on the 
USML. However, parts, components, and ``accessories and attachments'' 
for that ``equipment'' would be included on the CCL unless expressly 
controlled on the USML. Such parts and components are more likely to be 
produced by small businesses than are complete items of training 
equipment, and would in many cases become subject to the EAR. Moreover, 
officials of the Department of State have informed BIS that license 
applications for such parts and components are a high percentage of the 
license applications for USML articles reviewed by that department.
    Changing the jurisdictional status of Category IX items would 
reduce the burden on small entities (and other entities as well) 
through:

--Elimination of some license requirements,
--Greater availability of license exceptions,
--Simpler license application procedures, and
--Reduced (or eliminated) registration fees.

    In addition, parts and components controlled under the ITAR remain 
under ITAR control when incorporated into foreign-made items, 
regardless of the significance or insignificance of the item, 
discouraging foreign buyers from incorporating such U.S. content. The 
availability of de minimis treatment under the EAR may reduce the 
incentive for foreign manufacturers to avoid purchasing U.S.-origin 
parts and components.
    Many exports and reexports of the Category IX articles that would 
be placed on the CCL, as proposed in this rule, particularly parts and 
components, would become eligible for license exceptions that apply to 
shipments to U.S. Government agencies, shipments valued at less than 
$1,500, parts and components being exported for use as replacement 
parts, temporary exports, and License Exception Strategic Trade 
Authorization (STA), reducing the number of licenses that exporters of 
these items would need. License exceptions under the EAR would allow 
suppliers to send routine replacement parts and low level parts to NATO 
and other close allies and export control regime partners for use by 
those governments and for use by contractors building equipment for 
those governments or for the U.S. Government without having to obtain 
export licenses. Under License Exception STA, the exporter would need 
to furnish information about the item being exported to the consignee 
and obtain a statement from the consignee that, among other things, 
would commit the consignee to comply with the EAR and other applicable 
U.S. laws. Because such statements and obligations can apply to an 
unlimited number of transactions and have no expiration date, they 
would impose a net reduction in burden on transactions that the 
government routinely approves through the license application process 
that the License Exception STA statements would replace.
    Even for exports and reexports in which a license would be 
required, the process would be simpler and less costly under the EAR. 
When a USML Category IX article is moved to the CCL, the number of 
destinations for which a license is required would remain unchanged. 
However, the burden on the license applicant would decrease because the 
licensing procedure for CCL items is simpler and more flexible than the 
license procedure for USML articles.
    Under the USML licensing procedure, an applicant must include a 
purchase order or contract with its application. There is no such 
requirement under the CCL licensing procedure. This difference gives 
the CCL applicant at least two advantages. First, the applicant has a 
way of determining whether the U.S. government will authorize the 
transaction before it enters into potentially lengthy, complex and 
expensive sales presentations or contract negotiations. Under the USML 
procedure, the applicant will need to caveat all sales presentations 
with a reference to the need for government approval and is more likely 
to have to engage in substantial effort and expense only to find that 
the government will reject the application. Second, a CCL license 
applicant need not limit its application to the quantity or value of 
one purchase order or contract. It may apply for a license to cover all 
of its expected exports or reexports to a particular consignee over the 
life of a license (normally two years, but may be longer if 
circumstances warrant a longer period), reducing the total number of 
licenses for which the applicant must apply.
    In addition, many applicants exporting or reexporting items that 
this rule would transfer from the USML to the CCL would realize cost 
savings through the elimination of some or all registration fees 
currently assessed under the ITAR's licensing procedure. Currently, 
ITAR applicants must pay to use the ITAR licensing procedure even if 
they never actually are authorized to export. Registration fees for 
manufacturers and exporters of articles on the USML start at $2,500 per 
year, increase to $2,750 for organizations applying for one to ten 
licenses per year and further increases to $2,750 plus $250 per license 
application (subject to a maximum of three percent of total application 
value) for those who need to apply for more than ten licenses per year. 
There are no registration or application processing fees for 
applications to export items listed on the CCL. Once the Category IX 
items that are the subject to this rulemaking are removed from the USML 
and added to the CCL, entities currently applying for licenses from the 
Department of State would find their registration fees reduced if the 
number of ITAR licenses those entities need declines. If an entity's 
entire product line is moved to the CCL, then its ITAR registration and 
registration fee requirement would be eliminated.
    De minimis treatment under the EAR would become available for all 
items that this rule proposes to transfer from the USML to the CCL. 
Items subject to the ITAR remain subject to the ITAR when they are 
incorporated abroad into a foreign-made product regardless of the 
percentage of U.S. content in that foreign made product. Foreign-made 
products that incorporate items that this rule would move to the CCL 
would be subject to the EAR only if their total controlled U.S.-origin 
content exceeded 10 percent. Because including small amounts of U.S.-
origin content would not subject foreign-made products to the EAR, 
foreign manufacturers would have less incentive to avoid such U.S.-
origin parts and components, a development that potentially would mean 
greater sales for U.S. suppliers, including small entities.
    BIS is still considering comments made in response to the July 15 
rule pertaining to these proposed new de minimis levels and, as noted 
above, will consider de minimis-related comments to this proposed rule 
provided they are in the context of this proposed rule. However, BIS 
believes that increased burden imposed by those actions will be offset 
substantially by the reduction in

[[Page 35315]]

burden attributable to the moving of items from the USML to CCL and the 
compliance benefits associated with the consolidation of all WAML items 
subject to the EAR in one series of ECCNs.

Conclusion

    BIS is unable to determine the precise number of small entities 
that would be affected by this rule. Based on the facts and conclusions 
set forth above, BIS believes that any burdens imposed by this rule 
would be offset by a reduction in the number of items that would 
require a license, increased opportunities for use of license 
exceptions for exports to certain countries, simpler export license 
applications, reduced or eliminated registration fees and application 
of a de minimis threshold for foreign-made items incorporating U.S.-
origin parts and components, which would reduce the incentive for 
foreign buyers to design out or avoid U.S.-origin content. For these 
reasons, the Chief Counsel for Regulation of the Department of Commerce 
certified to the Chief Counsel for Advocacy of the Small Business 
Administration that this rule, if adopted in final form, would not have 
a significant economic impact on a substantial number of small 
entities. Accordingly, no IRFA is required, and none has been prepared.

List of Subjects

15 CFR Part 742

    Exports, Terrorism.

15 CFR Part 774

    Exports, Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, parts 742 and 774 of the 
Export Administration Regulations (15 CFR parts 730-774) are proposed 
to be amended as follows:

PART 742--[AMENDED]

    1. The authority citation for 15 CFR part 742 continues to read as 
follows:

    Authority: 50 U.S.C. app. 2401 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 of May 7, 2003, 68 FR 26459, May 16, 2003; 
Notice of August 12, 2011, 76 FR 50661 (August 16, 2011); Notice of 
November 9, 2011, 76 FR 70319 (November 10, 2011).

    2. Section 742.6 is amended by revising paragraph (a)(1) to read as 
follows:

Sec.  742.6  Regional stability.

    (a) License requirements. The following controls are maintained in 
support of U.S. foreign policy to maintain regional stability:
    (1) RS Column 1 License Requirements in General. As indicated in 
the CCL and in RS column 1 of the Commerce Country Chart (see 
Supplement No. 1 to part 738 of the EAR), a license is required to all 
destinations, except Canada, for items described on the CCL under ECCNs 
0A606 (except 0A606.b and .y); 0A614 (except 0A614.y); 0A617 (except 
0A617.y); 0B606 (except 0B606.y); 0B614 (except 0B614.y); 0B617 (except 
0B617.y); 0C606 (except 0C606.y); 0C617; 0D606 (except 0D606.y); 0D614 
(except 0D614.y); 0D617 (except 0D617.y); 0E606 (except 0E606.y); 0E614 
(except 0E614.y); 0E617 (except 0E617.y); 1A607 (except 1A607.y); 
1B607; (except 1B607.y); 1B608 (except 1B608.y); 1C607; 1C608; 1D607 
(except 1D607.y); 1D608(except 1D608.y); 1E607 (except 1E607.y); 1E608 
(except 1E608.y); 3A982; 3D982; 3E982; 6A002.a.1, a.2, a.3, .c, or .e; 
6A003.b.3, and b.4.a; 6A008.j.1; 6A998.b; 6D001 (only ``software'' for 
the ``development'' or ``production'' of items in 6A002.a.1, a.2, a.3, 
.c; 6A003.b.3 and .b.4; or 6A008.j.1); 6D002 (only ``software'' for the 
``use'' of items in 6A002.a.1, a.2, a.3, .c; 6A003.b.3 and .b.4; or 
6A008.j.1); 6D003.c, 6D991 (only ``software'' for the ``development,'' 
``production,'' or ``use'' of equipment controlled by 6A002.e or 
6A998.b); 6E001 (only technology'' for ``development'' of items in 
6A002.a.1, a.2, a.3 (except 6A002.a.3.d.2.a and 6A002.a.3.e for lead 
selenide focal plane arrays), and .c or .e, 6A003.b.3 and b.4, or 
6A008.j.1); 6E002 (only ``technology'' for ``production'' of items in 
6A002.a.1, a.2, a.3, .c, or .e, 6A003.b.3 or b.4, or 6A008.j.1); 6E991 
(only ``technology'' for the ``development,'' ``production,'' or 
``use'' of equipment controlled by 6A998.b); 6D994; 7A994 (only QRS11-
00100-100/101 and QRS11-0050-443/569 Micromachined Angular Rate 
Sensors); 7D001 (only ``software'' for ``development'' or 
``production'' of items in 7A001, 7A002, or 7A003); 7E001 (only 
``technology'' for the ``development'' of inertial navigation systems, 
inertial equipment, and specially designed components therefor for 
civil aircraft); 7E002 (only ``technology'' for the ``production'' of 
inertial navigation systems, inertial equipment, and specially designed 
components therefor for civil aircraft); 7E101 (only ``technology'' for 
the ``use'' of inertial navigation systems, inertial equipment, and 
specially designed components for civil aircraft); 8A609 (except 
8A609.y); 8A620 (except 8A620.y); 8B609 (except 8B609.y); 8B620 (except 
8B620.y); 8C609 (except 8C609.y); 8D609 (except software for the 
``development,'' ``production,'' operation, or maintenance of 
commodities controlled by 8A609.y, 8B609.y, or 8C609.y); 8D620 (except 
software for the ``development,'' ``production,'' operation, or 
maintenance of commodities controlled by 8A620.y or 8B620.y); 8E609 
(except ``technology'' for the ``development,'' ``production,'' 
operation, installation, maintenance, repair, or overhaul of 
commodities controlled by 8A609.y, 8B609.y, or 8C609.y); 8E620 (except 
``technology'' for the ``development,'' ``production,'' operation, 
installation, maintenance, repair, overhaul, or refurbishment of 
commodities controlled by 8A620.y or 8B620.y); 9A610 (except 9A610.y); 
9A619 (except 9A619.y); 9B610 (except 9B610.y); 9B619 (except 9B619.y); 
9C610 (except 9C610.y); 9C619 (except 9C619.y); 9D610 (except software 
for the ``development,'' ``production,'' operation, installation, 
maintenance, repair, or overhaul of commodities controlled by 9A610.y, 
9B610.y, or 9C610.y); 9D619 (except software for the ``development,'' 
``production,'' operation, or maintenance of commodities controlled by 
9A619.y, 9B619.y, or 9C619.y); 9E610 (except ``technology'' for the 
``development,'' ``production,'' operation, installation, maintenance, 
repair, or overhaul of commodities controlled by ECCN 9A610.y, 9B610.y, 
or 9C610.y); and 9E619 (except ``technology'' for the ``development,'' 
``production'' operation, installation, maintenance, repair, or 
overhaul of commodities controlled by ECCN 9A619.y, 9B619.y, or 
9C619.y).
* * * * *

PART 774--[AMENDED]

    3. The authority citation for 15 CFR part 774 continues to read as 
follows:

    Authority:  50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
10 U.S.C. 7420; 10 U.S.C. 7430(e); 22 U.S.C. 287c, 22 U.S.C. 3201 et 
seq., 22 U.S.C. 6004; 30 U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 42 
U.S.C. 6212; 43 U.S.C. 1354; 15 U.S.C. 1824a; 50 U.S.C. app. 5; 22 
U.S.C. 7201 et seq.; 22 U.S.C. 7210; E.O. 13026, 61 FR 58767, 3 CFR, 
1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 
783; Notice of August 12, 2011, 76 FR 50661 (August 16, 2011).

[[Page 35316]]

    4. In Supplement No. 1 to Part 774, the Commerce Control List, add, 
between the entries for Export Control Classification Numbers 0A018 and 
0A918, a new entry for Export Control Classification Number 0A614 to 
read as follows:

Supplement No. 1 to Part 774--The Commerce Control List

* * * * *
0A614 Military Training ``Equipment,'' as follows (see List of items 
controlled):

License Requirements

Reason for Control: NS, RS, AT

------------------------------------------------------------------------
                Control(s)                          Country chart
------------------------------------------------------------------------
NS applies to entire entry except 0A614.y.  NS Column 1
------------------------------------------------------------------------
RS applies to entire entry except 0A614.y.  RS Column 1
------------------------------------------------------------------------
AT applies to entire entry................  AT Column 1
------------------------------------------------------------------------

License Exceptions

LVS: $1500
GBS: N/A
CIV: N/A
STA: Paragraph (c)(1) of License Exception STA (Sec.  740.20(c)(1)) 
may be used for items in 0A614 without the need for a determination 
described in Sec.  740.20(g). Paragraph (c)(2) of License Exception 
STA (Sec.  740.20(c)(2)) of the EAR may not be used for any item in 
0A614.

List of Items Controlled

Unit: ``End items'' in number; ``parts,'' ``components,'' and 
``accessories and attachments'' in $ value
Related Controls: (1) Defense articles that are enumerated in USML 
Category IX and ``technical data'' (including ``software'') directly 
related thereto are subject to the ITAR. (2) See ECCN 0A919 for 
foreign-made ``military commodities'' that incorporate more than 10% 
U.S.-origin ``600 series'' items. (3) ``Parts,'' ``components,'' and 
``accessories and attachments'' that are common to a simulator 
controlled by ECCN 0A614.a and to a simulated system or an end item 
that is controlled on the USML or elsewhere on the CCL are 
controlled under the same USML Category or ECCN as the ``parts,'' 
``components,'' and ``accessories and attachments'' of the simulated 
system or end item.
Related Definitions: N/A
Items:

    a. ``Equipment'' ``specially designed'' for military training 
that is not enumerated in USML Category IX.

    Note:  This entry includes operational flight trainers, radar 
target trainers, flight simulators for aircraft classified under 
ECCN 9A610.a, human-rated centrifuges, radar trainers for radars 
classified under ECCN 3A611, instrument flight trainers for military 
aircraft, navigation trainers for military items, target equipment, 
armament trainers, military pilotless aircraft trainers, mobile 
training units and training ``equipment'' for ground military 
operations.

    Note:  This entry does not apply to ``equipment'' ``specially 
designed'' for training in the use of hunting or sporting weapons.

    b. through w. [Reserved]
    x. ``Parts,'' ``components,'' and ``accessories and 
attachments'' that are ``specially designed'' for a commodity 
controlled by this entry or an article enumerated in USML Category 
IX, and not specified elsewhere in the CCL or the USML.

    Note:  Forgings, castings, and other unfinished products, such 
as extrusions and machined bodies, that have reached a stage in 
manufacturing where they are clearly identifiable by material 
composition, geometry, or function as commodities controlled by ECCN 
0A614.x are controlled by ECCN 0A614.x.

    y. Specific ``parts,'' ``components,'' ``accessories and 
attachments'' ``specially designed'' for a commodity subject to 
control in this ECCN and not elsewhere specified in the CCL, as 
follows:
    y.1 to y.98 [Reserved]
    y.99. Commodities not identified on the CCL that (i) have been 
determined, in an applicable commodity jurisdiction determination 
issued by the U.S. Department of State, to be subject to the EAR and 
(ii) would otherwise be controlled elsewhere in ECCN 0A614.

    5. In Supplement No. 1 to Part 774, the Commerce Control List, add, 
between the entries for Export Control Classification Numbers 0B006 and 
0B968, a new entry for Export Control Classification Number 0B614 to 
read as follows:

0B614 Test, inspection, and production ``equipment'' for military 
training ``equipment'' and ``specially designed'' ``parts,'' 
``components,'' and ``accessories and attachments'' therefor, as 
follows (see list of items controlled).

License Requirements

Reason for Control: NS, RS, AT

------------------------------------------------------------------------
                Control(s)                          Country chart
------------------------------------------------------------------------
NS applies to entire entry except 0B614.y.  NS Column 1
------------------------------------------------------------------------
RS applies to entire entry except 0B614.y.  RS Column 1
------------------------------------------------------------------------
AT applies to entire entry................  AT Column 1
------------------------------------------------------------------------

License Exceptions

LVS: $1500
GBS: N/A
CIV: N/A
STA: Paragraph (c)(1) of License Exception STA (Sec.  740.20(c)(1)) 
may be used for items in 0B614 without the need for a determination 
described in Sec.  740.20(g). Paragraph (c)(2) of License Exception 
STA (Sec.  740.20(c)(2)) of the EAR may not be used for any item in 
0B614.

List of Items Controlled

Unit: N/A
Related Controls:
Related Definitions: N/A
Items:

    a. Test, inspection, and other production ``equipment'' 
``specially designed'' for the ``production'' of commodities 
controlled by ECCN 0A614 or articles enumerated in USML Category IX.
    b. through .w [Reserved]
    x. ``Parts,'' ``components,'' and ``accessories and 
attachments'' that are ``specially designed'' for a commodity 
controlled by ECCN 0B614.

    Note 1: Forgings, castings, and other unfinished products, such 
as extrusions and machined bodies, that have reached a stage in 
manufacturing where they are clearly identifiable by material 
composition, geometry, or function as commodities controlled by ECCN 
0B614.x are controlled by ECCN 0B614.x.

    y. Specific ``parts,'' ``components,'' and ``accessories and 
attachments'' ``specially designed'' for a commodity subject to 
control in this ECCN and not elsewhere specified in the CCL, as 
follows:
    y.1 to y.98 [Reserved]
    y.99. Commodities not identified elsewhere on the CCL that (i) 
have been determined, in an applicable commodity jurisdiction 
determination issued by the U.S. Department of State, to be subject 
to the EAR and (ii) would otherwise be controlled elsewhere in this 
entry.

    6. In Supplement No. 1 to Part 774, the Commerce Control List, add, 
between the entries for Export Control Classification Number 0C201 and 
before the header that reads ``D. Software'' a new entry for Export 
Control Classification Number 0D614 to read as follows:
0D614 ``Software'' related to military training ``equipment,'' as 
follows (See list of items controlled).

License Requirements

Reason for Control: NS, RS, AT

------------------------------------------------------------------------
                Control(s)                          Country chart
------------------------------------------------------------------------
NS applies to entire entry except 0D614.y.  NS Column 1
------------------------------------------------------------------------
RS applies to entire entry except 0D614.y.  RS Column 1
------------------------------------------------------------------------
AT applies to entire entry................  AT Column 1
------------------------------------------------------------------------

 License Exceptions

CIV: N/A
TSR: N/A

[[Page 35317]]

STA: Paragraph (c)(2) of License Exception STA (Sec.  
740.20(c)(2))of the EAR may not be used for any ``software'' in 
0D614.

List of Items Controlled

Unit: $ value
Related Controls: ``Software'' directly related to articles 
enumerated in USML Category IX is subject to the control of USML 
paragraph IX(e). See ECCN 0A919 for foreign made ``military 
commodities'' that incorporate more than 10% U.S.-origin ``600 
series'' items.
Related Definitions: N/A
Items:

    a. ``Software'' (other than ``software'' controlled in paragraph 
.y of this entry) ``specially designed'' for the ``development,'' 
``production,'' operation or maintenance of commodities controlled 
by ECCNs 0A614 (except 0A614.y) or 0B614 (except 0B614.y).
    b. to x. [RESERVED]
    y. Specific ``software'' ``specially designed'' for the 
``production,'' ``development,'' or operation or maintenance of 
commodities controlled by ECCNs 0A614 or 0B614, as follows:
    y.1. Specific ``software'' ``specially designed'' for the 
``production,'' ``development,'' operation or maintenance of 
commodities controlled by ECCNs 0A614.y or 0B614.y.
    y.2 through y.98 [RESERVED]
    y.99. ``Software'' that would otherwise be controlled elsewhere 
in this entry but that (i) has been determined to be subject to the 
EAR in a commodity jurisdiction determination issued by the U.S. 
Department of State and (ii) is not otherwise identified elsewhere 
on the CCL.

    7. In Supplement No. 1 to Part 774, the Commerce Control List, add, 
between the entries for Export Control Classification Numbers 0E018 and 
0E918, a new entry for Export Control Classification Number 0E614 to 
read as follows:

0E614 ``Technology,'' as follows (See list of items controlled).

License Requirements

Reason for Control: NS, RS, AT

------------------------------------------------------------------------
                Control(s)                          Country chart
------------------------------------------------------------------------
NS applies to entire entry except 0E614.y.  NS Column 1
------------------------------------------------------------------------
RS applies to entire entry except 0E614.y.  RS Column 1
------------------------------------------------------------------------
AT applies to entire entry................  AT Column 1
------------------------------------------------------------------------

License Exceptions

CIV: N/A
TSR: N/A
STA: Paragraph (c)(2) of License Exception STA (Sec.  740.20(c)(2)) 
of the EAR may not be used for any technology in 0E614.

List of Items Controlled

Unit: $ value
Related Controls: ``Technical data'' directly related to articles 
enumerated in USML Category IX is subject to the control of USML 
paragraph IX(e).
Related Definitions: N/A
Items:

    a. ``Technology'' (other than ``technology'' controlled by 
paragraph .y of this entry) ``required'' for the ``development,'' 
``production,'' operation, installation, maintenance, repair 
overhaul, or refurbishing of commodities or ``software'' controlled 
by ECCNs 0A614 (except 0A614.y), 0B614 (except 0B614.y), or 0D614 
(except 0D614.y).
    b. through x. [RESERVED]
    y. Specific ``technology'' ``required'' for the ``production,'' 
``development,'' operation, installation, maintenance, repair, or 
overhaul of commodities controlled by ECCNs 0A614.y or 0B614.y, or 
``software'' controlled by ECCN 0D614.y, as follows:
    y.1. Specific ``technology'' ``required'' for the 
``production,'' ``development,'' operation, installation, 
maintenance, repair or overhaul of commodities controlled by ECCNs 
0A614.y or 0B614.y or ``software'' controlled by ECCN 0D614.y.
    y.2. through y.98 [RESERVED]
    y.99. ``Technology'' that would otherwise be controlled 
elsewhere in this entry but that (i) has been determined to be 
subject to the EAR in a commodity jurisdiction determination issued 
by the U.S. Department of State and (ii) is not otherwise identified 
elsewhere on the CCL.

    Dated: June 6, 2012.
Kevin J. Wolf,
Assistant Secretary of Commerce for Export Administration.
[FR Doc. 2012-14444 Filed 6-12-12; 8:45 am]
BILLING CODE 3510-33-P
```