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[Federal Register Volume 76, Number 217 (Wednesday, November 9, 2011)]
[Rules and Regulations]
[Pages 69609-69612]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-28916]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 748

[Docket No. 110804481-1527-01]
RIN 0694-AF32

Amendment to Existing Validated End-User Authorizations in the 
People's Republic of China: National Semiconductor Corporation and 
Semiconductor Manufacturing International Corporation

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Final rule.

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SUMMARY: In this rule, the Bureau of Industry and Security (BIS) amends 
the Export Administration Regulations (EAR) to remove National 
Semiconductor Corporation (National Semiconductor) from the list of 
``Validated End-Users'' and ``Eligible Destinations'' in the People's 
Republic of China (PRC). BIS also removes one facility from the list of 
``Eligible Destinations'' for Semiconductor Manufacturing International 
Corporation (SMIC) in the PRC, the Semiconductor Manufacturing 
International (Chengdu) Corporation, Assembly and Testing (AT2) 
Facility (SMIC AT2 facility). These amendments are due to material 
changes in the ownership and control of National Semiconductor and the 
SMIC AT2 facility. These amendments are not the result of activities of 
concern by National Semiconductor or SMIC and do not establish any new 
license requirements or licensing policies for exports, reexports, or 
transfers (in-country) of items to National Semiconductor, SMIC, or 
their facilities.

DATES: This rule is effective November 9, 2011.

FOR FURTHER INFORMATION CONTACT: Karen Nies-Vogel, Chair, End-User 
Review Committee, Bureau of Industry and Security, U.S. Department of 
Commerce, 14th Street & Pennsylvania Avenue NW., Washington, DC 20230; 
by telephone: (202) 482-5991, by fax: (202) 482-3991, or email: 
ERC@bis.doc.gov.

SUPPLEMENTARY INFORMATION: 

Background

Authorization Validated End-User (VEU)

    BIS amended the EAR in a final rule on June 19, 2007 (72 FR 33646), 
creating a new authorization for ``validated end-users'' (VEUs) located 
in eligible destinations to which eligible items may

[[Page 69610]]

be exported, reexported, or transferred (in-country) under a general 
authorization instead of a license, in conformance with section 748.15 
of the EAR. VEUs may obtain eligible items that are on the Commerce 
Control List, set forth in Supplement No. 1 to Part 774 of the EAR, 
without having to wait for their suppliers to obtain export licenses 
from BIS. Eligible items may include commodities, software, and 
technology, except those controlled for missile technology or crime 
control reasons.
    The VEUs listed in Supplement No. 7 to Part 748 of the EAR were 
reviewed and approved by the U.S. Government in accordance with the 
provisions of section 748.15 and Supplement Nos. 8 and 9 to Part 748 of 
the EAR.

Amendment to Existing Validated End-User Authorizations for the PRC

Removal of VEU Authorization for National Semiconductor Corporation 
(National Semiconductor)

    In a rule published in the Federal Register on October 19, 2007 (72 
FR 59164), BIS designated National Semiconductor as a VEU and 
identified three of its facilities (NSC VEU facilities) as ``Eligible 
Destinations,'' thus authorizing exports, reexports, and transfers (in-
country) of certain eligible items to the three eligible facilities 
under Authorization VEU. Due to a material change in the ownership and 
control of National Semiconductor, National Semiconductor asked that 
its VEU authorization be ended. Accordingly, consistent with section 
748.15 of the EAR, BIS now amends Supplement No. 7 to Part 748 of the 
EAR to remove National Semiconductor from the list of approved VEUs and 
eligible destinations. As a result of this rule, National Semiconductor 
Corporation and the NSC VEU facilities at the following addresses are 
no longer authorized to receive items under Authorization VEU:

National Semiconductor Hong Kong Limited, Beijing Representative 
Office, Room 604, CN Resources Building, No. 8 Jianggumenbei A, 
Beijing, China, 100005.
National Semiconductor Hong Kong Limited, Shanghai Representative 
Office, Room 903-905 Central Plaza, No. 227 Huangpi Road North, 
Shanghai, China, 200003.
National Semiconductor Hong Kong Limited, Shenzhen Representative 
Office, Room 1709 Di Wang Commercial Centre, Shung Hing Square, 5002 
Shenna Road East, Shenzhen, China, 518008.

    This amendment is made due to a material change in the ownership 
and control of National Semiconductor and is not the result of 
activities of concern by National Semiconductor or the NSC VEU 
facilities. This action does not establish any new license requirements 
or licensing policies for exports, reexports or transfers (in-country) 
of items to National Semiconductor. Rather, the license requirements 
set forth in the EAR continue to apply to this entity and its 
facilities. Parties seeking to export, reexport or transfer (in-
country) items under the EAR to National Semiconductor or these 
facilities may now have to obtain a license to do so, depending on the 
item at issue.
    All conditions and restrictions that applied to transactions that 
were undertaken pursuant to Authorization VEU prior to the effective 
date of this amendment that involved National Semiconductor or the NSC 
VEU facilities continue to apply to those transactions. These 
restrictions and conditions include any that were imposed on National 
Semiconductor or the NSC VEU facilities in connection with its 
eligibility for Authorization VEU, as established by BIS in its 
communications authorizing National Semiconductor's participation in 
the VEU program.

Removal of Semiconductor Manufacturing International (Chengdu) 
Corporation, Assembly and Testing (AT2) Facility (SMIC AT2 Facility) 
From the List of VEU Semiconductor Manufacturing International 
Corporation's (SMIC's) Approved Facilities in the PRC

    In a rule published in the Federal Register on October 19, 2007 (72 
FR 59164), BIS designated SMIC as a VEU, thus authorizing certain 
specific exports, reexports and transfers (in-country) to five listed 
facilities of the company, including the SMIC AT2 facility. Due to a 
material change in the ownership and control of the SMIC AT2 facility, 
SMIC has requested that BIS remove that facility's VEU authorization. 
Accordingly, in this rule, BIS further amends Supplement No. 7 to Part 
748 of the EAR to remove the SMIC AT2 facility and its address (8-8 
Kexin Road, Export Processing Zone (West Area), Chengdu, China 611731) 
from the list of SMIC's authorized VEU facilities. This change leaves 
three SMIC facilities that are approved to receive eligible items under 
SMIC's VEU authorization.
    As a result of this rule, the SMIC AT2 facility is no longer 
authorized to receive items under Authorization VEU. Thus, parties 
seeking to export, reexport, or transfer (in-country) items under the 
EAR to the SMIC AT2 facility may now need to obtain a license to do so, 
depending on the item at issue.
    This amendment is made due to a material change in the ownership 
and control at the SMIC AT2 facility and is not the result of 
activities of concern by the SMIC AT2 facility or SMIC. SMIC remains a 
qualified participant in the VEU program, and thus exports, reexports 
and transfers (in-country) of the items controlled under the ECCNs 
listed in SMIC's entry in Supplement No. 7 to Part 748 of the EAR to 
the SMIC facilities listed in the same part may continue to be made 
under Authorization VEU. This action does not establish any new license 
requirements or licensing policies for exports, reexports or transfers 
(in-country) of items to the SMIC AT2 facility. Rather, the license 
requirements set forth in the EAR continue to apply to this entity and 
its facilities.
    This amendment applies only to transactions under Authorization VEU 
involving the SMIC AT2 facility. All conditions and restrictions that 
applied to transactions that were undertaken pursuant to Authorization 
VEU prior to the effective date of this amendment, and that involved 
the SMIC AT2 facility, continue to apply to those transactions. These 
restrictions and conditions include any that were imposed on the SMIC 
AT2 facility in connection with its eligibility for Authorization VEU, 
as established by BIS in its communications authorizing the SMIC AT2 
facility's participation in the VEU program.

Saving Clause

    Shipments of items removed from eligibility for export, reexport or 
transfer (in-country) under Authorization VEU (i.e., under the 
designator VEU) as a result of this regulatory action that were on dock 
for loading, on lighter, laden aboard an exporting carrier, or en route 
aboard a carrier to a port of export, on November 9, 2011, pursuant to 
actual orders for export, reexport or transfer (in-country) to an 
eligible destination, may proceed to that destination under the 
previously applicable Authorization so long as they are exported, 
reexported or transferred (in-country) before November 25, 2011. Any 
such items not actually exported, reexported or transferred (in-
country) before midnight, on November 25, 2011, require an individual 
license or other applicable authorization under the EAR.
    Since August 21, 2001, the Export Administration Act (the Act) has 
been in lapse and the President, through Executive Order 13222 of 
August 17,

[[Page 69611]]

2001 (3 CFR, 2001 Comp., p. 783 (2002)), as extended most recently by 
the Notice of August 12, 2011, 76 FR 50661 (August 16, 2011), has 
continued the EAR in effect under the International Emergency Economic 
Powers Act. BIS continues to carry out the provisions of the Act, as 
appropriate and to the extent permitted 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, distributive 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 determined to be not significant for 
purposes of Executive Order 12866.
    2. This rule involves collections previously approved by the Office 
of Management and Budget (OMB) under Control Number 0694-0088, ``Multi-
Purpose Application,'' which carries a burden hour estimate of 43.8 
minutes to prepare and submit form BIS-748; and for recordkeeping, 
reporting and review requirements in connection with Authorization VEU, 
which carries an estimated burden of 30 minutes per submission. This 
rule is expected to result in a decrease in license applications 
submitted to BIS. Total burden hours associated with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA) and OMB Control 
Number 0694-0088 are not expected to increase significantly as a result 
of this rule.
    Notwithstanding any other provisions of law, no person is required 
to respond or to be subject to a penalty for failure to comply with a 
collection of information, subject to the requirements of the PRA, 
unless that collection of information displays a currently valid OMB 
Control Number.
    3. This rule does not contain policies with Federalism implications 
as that term is defined under Executive Order 13132.
    4. There is good cause under 5 U.S.C. 553(b)(B) to waive the 
provisions of the Administrative Procedure Act (APA) requiring prior 
notice and the opportunity for public comment because, specific to this 
rule, they are unnecessary, impracticable, and contrary to the public 
interest.
    In determining whether to grant or revoke VEU designations, a 
committee of U.S. Government agencies evaluates a variety of 
information, the nature and terms of which are set forth in 15 CFR part 
748, supplement No. 8. The criteria for evaluation by the committee are 
set forth in 15 CFR 748.15(a)(2). The information, commitments, and 
criteria for this extensive review were all established through the 
notice of proposed rulemaking and public comment process (71 FR 38313, 
July 2, 2006, and 72 FR 33646, June 19, 2007). Thus, authorization of a 
VEU is similar to granting a license: To receive authorization VEU, an 
application must be submitted on behalf of an entity; the entity must 
be found to meet certain previously identified criteria; and the 
application must be approved. Because the authorization granted by BIS 
pursuant to 15 CFR 748.15 is similar to that granted to exporters for 
individual licenses, which do not undergo public review when they are 
approved, denied, revoked, or amended, allowing public review and 
comments to this rule is unnecessary.
    Publication of this rule in other than final form is unnecessary 
because the procedure for revocation of a VEU or facility from the 
Authorized VEU list is similar to the license revocation procedure, 
which does not undergo public review. During the revocation procedure, 
the U.S. Government analyzes confidential business information 
according to set criteria to determine whether a given authorized VEU 
entity remains eligible for VEU status. Revocation may, as in this 
case, be the result of a material change in circumstance at the VEU or 
the VEU's authorized facility. Examples of such a material change 
include changes in the operational status of a VEU facility or changes 
in the end-use of the products produced at the facility. Such changes 
may result in a VEU or VEU facility no longer meeting the eligibility 
criteria for Authorization VEU, and may thus lead the U.S. Government 
to modify or revoke VEU authorization. VEUs or VEU facilities that 
undergo material changes that result in their no longer meeting the 
criteria to be eligible VEUs must, according to the VEU program, have 
their VEU status revoked. Here, National Semiconductor requested 
removal from the VEU program and SMIC requested that BIS remove the 
SMIC AT2 facility from the VEU program due to material changes in 
ownership and control. Consequently, BIS is removing National 
Semiconductor from the list of ``Validated End-Users'' and ``Eligible 
Destinations'' and removing the SMIC AT2 facility from ``Eligible 
Destinations'' in the EAR. Public comments on whether to make these 
removals are unnecessary.
    Additionally, allowing for prior public notice and comment on this 
rule may be impracticable and contrary to the public interest. The EAR 
advance U.S. national security, foreign policy, and economic objectives 
by ensuring an effective export control system. In accordance with the 
pre-set criteria, the U.S. Government reviews each VEU and its 
facilities to ensure that exports, reexports and transfers (in-country) 
of specified items to these entities are consistent with such 
objectives. Accordingly, VEUs and their facilities may receive through 
export, reexport or transfer (in-country) items that would otherwise 
require a license and transaction-specific review, in part due to 
national security concerns. However, the VEU and listed facility here 
are no longer eligible to receive items under Authorized VEU, and in 
order to protect national security, the restrictions of the EAR must be 
in place as soon as possible. Allowing public comments on this rule 
would hinder the ability of BIS to enforce the EAR's restrictions on 
exports without a license to the listed facilities. Thus public comment 
on this rule is both impracticable, because allowing such comment would 
prevent BIS from undertaking its statutory duties, and contrary to the 
public's national security interests.
    In addition, BIS finds good cause to waive the requirement of 5 
U.S.C. 553(d)(3) to delay the effectiveness of this regulation, because 
such a delay is contrary to the public's interest. When the U.S. 
Government has been notified of or has identified a material change in 
circumstances that warrants revocation or modification of VEU status 
for an end-user or a facility of an end-user, there is a need to 
quickly alert the public that the facility is no longer authorized as a 
recipient of items under Authorization VEU. Delaying this action's 
effectiveness could result in items that otherwise require licenses 
being exported, reexported, or transferred (in-country), license-free, 
to an ineligible facility, at risk to national security. Accordingly, 
it would be contrary to the public interest to delay this rule's 
effectiveness.
    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 APA or by any other 
law, the analytical requirements of the

[[Page 69612]]

Regulatory Flexibility Act (5 U.S.C. 601 et seq.) are not applicable 
and no regulatory flexibility analysis has been prepared.

List of Subjects in 15 CFR Part 748

    Administrative practice and procedure, Exports, Reporting and 
recordkeeping requirements.

    Accordingly, part 748 of the EAR (15 CFR parts 730-774) is amended 
as follows:

PART 748--[AMENDED]

0
1. The authority citation for 15 CFR part 748 continues to read as 
follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
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).

0
2. Supplement No. 7 to Part 748 is amended by:
0
a. Removing the entire entry for National Semiconductor Corporation; 
and
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b. Removing ``Semiconductor Manufacturing International (Chengdu) 
Corporation, Assembly and Testing (AT2) Facility, 8-8 Kexin Road, 
Export Processing Zone (West Area), Chengdu, China 611731'' from the 
``Eligible Destinations'' column in ``China (People's Republic of)''.

    Dated: November 1, 2011.
Kevin J. Wolf,
Assistant Secretary for Export Administration.
[FR Doc. 2011-28916 Filed 11-8-11; 8:45 am]
BILLING CODE 3510-33-P
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