[Federal Register Volume 63, Number 112 (Thursday, June 11, 1998)]
[Rules and Regulations]
[Pages 31918-31931]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15410]


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DEPARTMENT OF COMMERCE

Bureau of Export Administration

15 CFR Part 700

[Docket No. 970827205-8126-02]
RIN 0694-AA02


Defense Priorities and Allocations System

AGENCY: Bureau of Export Administration, Commerce.

ACTION: Final rule.

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SUMMARY: The Department of Commerce is issuing this rule to amend the 
Defense Priorities and Allocations System (DPAS) regulation by 
updating, modifying and clarifying a number of its provisions.
    In reviewing the current DPAS and in issuing this rule, the 
objective has been to improve DPAS administration and implementation 
and make it more effective and efficient in the post-Cold War era.

EFFECTIVE DATE: This rule is effective July 13, 1998.

FOR FURTHER INFORMATION CONTACT: Richard V. Meyers, DPAS Program 
Manager, Office of Strategic Industries and Economic Security, Room 
3876, U.S. Department of Commerce, 14th Street and Constitution Avenue, 
N.W., Washington, D.C. 20230; telephone: (202) 482-3634, FAX: (202) 
482-5650, and E-Mail: <a href="/cdn-cgi/l/email-protection#c1b3aca4b8a4b3b281a3b9a0efa5aea2efa6aeb7"><span class="__cf_email__" data-cfemail="4d3f202834283f3e0d2f352c6329222e632a223b">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Background

    On October 1, 1997, the Department of Commerce published in the 
Federal Register (62 FR 51389) a request for comments on a proposed 
rule that would amend the Defense Priorities and Allocations System 
(DPAS) regulation by updating, modifying, and clarifying a number of 
its provisions.
    Interested parties were requested to submit comments on the 
proposed rule by October 31, 1997. Interested parties were also 
requested to provide comments on any other provision of the DPAS that 
may be hindering effective and efficient administration or 
implementation. Of the seven comments received, only two were from 
private sector firms. Based on these comments and an editorial review 
of the proposed rule, several provisions of the proposed rule are 
further revised and clarified, and various editorial changes are made.

Analysis of Comments

    No commenters objected to the proposed rule. Accordingly, the 
Department is proceeding with publication of this final rule with the 
changes discussed below.
    Public comments were particularly sought concerning the proposed 
revision of three provisions that directly affect industry operations 
under the DPAS. These provisions pertain to: (1) the time period within 
which a supplier must accept or reject a rated order 
[Sec. 700.13(d)(1)]; (2) the order of precedence to be given by 
contractors and suppliers to conflicting rated orders of equal priority 
status (Sec. 700.14); and (3) the combining by a contractor of defense 
rated requirements with commercial (unrated) requirements on one 
purchase order to a supplier [Sec. 700.17(d)].
    Comments were also sought concerning (1) a proposal to remove the 
controlled materials provisions from Secs. 700.30-700.31 and all other 
provisions, references, and supporting schedules to the program from 
throughout the regulation; and (2) proposals to make various other 
jurisdictional, technical, administrative, and miscellaneous revisions 
to a number of DPAS provisions. These revisions are needed to address 
changes to delegated authority, to update and clarify the text, and to 
improve generally the administration, effectiveness, and efficiency of 
the DPAS in support of our nation's post-Cold War defense requirements 
and its ability to respond fully to a national security emergency or 
domestic emergency preparedness situation.

1. Customer Notification of Acceptance or Rejection of Rated Orders

    Industry has complained about the difficulty of complying with the 
customer notification requirements of Sec. 700.13(d)(1). These rules 
required a supplier to accept or reject a rated order in writing within 
ten (10) working days after receipt of a DO rated order and within five 
(5) working days after receipt of a DX rated order. Accordingly, 
Sec. 700.13(d)(1) is revised to extend the time within which a person 
must accept or reject a rated order by five (5) working days to fifteen 
(15) working days after receipt of a DO rated order, and ten (10) 
working days after receipt of a DX rated order. No commenter on the 
proposed rule objected to this change.
    Also, because of the increasing use by industry of electronic data 
interchange to place contracts and purchase orders, Sec. 700.13(d) is 
revised to reference specifically the electronic placement, acceptance, 
and rejection of rated orders. However, if the rated order is

[[Page 31919]]

rejected, the rule requires that the reasons for rejection be provided 
in writing (not electronically).
    One commenter objected to the requirement that a person must 
acknowledge acceptance of a rated order. The primary goal of the DPAS 
is to ensure timely delivery of defense items. Thus, it is most 
important that customers receive written or electronic proof from their 
suppliers that their rated orders were accepted for delivery as 
required by the order. It should be noted that this requirement to 
acknowledge acceptance of the receipt of a rated order is an obligation 
placed on the recipient of the order, not on the person placing the 
order.

2. Precedence of Rated Orders of Equal Priority Status

    Many companies have requested clarification of the DPAS rules on 
the preference to be given to rated orders which have equal priority 
status (DX or DO) when production, delivery or performance scheduling 
conflicts or other problems arise following acceptance of the rated 
orders. Accordingly, Sec. 700.14(c) (Preferential scheduling) is 
revised to provide that if a person finds that delivery or performance 
against any accepted rated orders conflicts with the delivery or 
performance against any other accepted rated orders of equal priority 
status, preference shall be given to the conflicting rated orders in 
the sequence in which they are to be delivered or performed (not to the 
receipt dates). However, if the conflicting rated orders are scheduled 
to be delivered or performed on the same day, the person shall give 
preference to those orders which have the earliest receipt dates. If 
under these rules, the delivery or performance conflicts cannot be 
resolved, or if the customer objects to the rescheduling of the rated 
order, special priorities assistance should be requested promptly under 
Secs. 700.50-700.54.
    It should be noted that the proposed rule specified the receipt 
dates of the conflicting rated orders as the criteria for precedence. 
Because Department of Defense (DOD) and an industry commenter 
objections, and to emphasize the importance of timely delivery against 
rated orders, the final rule establishes the delivery or performance 
schedule as the criteria for precedence.

3. Combining Defense Rated Requirements With Commercial (Unrated) 
Requirements

    The final rule revises Sec. 700.17(d) (Use of rated orders) to 
eliminate the requirement for a contractor who combines rated and 
unrated order quantities on a purchase order to a supplier, to attach 
to the combined order a separate rated order with the rated quantities. 
Many companies have objected to this separate rated order requirement 
and the industry commenters on the proposed rule expressed support for 
its elimination.
    The final rule also provides that the rated quantities in the 
combined purchase order must be clearly and separately identified and 
that a special statement must be included on the combined purchase 
order to notify the supplier that the order contains rated quantities 
certified for national defense use and that the provisions of the DPAS 
apply only to the rated quantities.

4. National Security Emergency Preparedness and Removal of the 
Controlled Materials Provisions

    No commenter objected to removal from the DPAS of all provisions 
and references pertaining to the controlled materials program. 
Therefore, the final rule removes all such provisions and references, 
including Schedules II, III, and IV to part 700.
    The final rule also further revises the text of Sec. 700.30 to 
clearly state how the DPAS may be expanded in a national security 
emergency to ensure rapid industrial response and the timely 
availability of critical industrial items and facilities to meet the 
urgent national defense or domestic emergency preparedness requirements 
of approved programs.

5. New Approved Programs

    Except as discussed below, no commenter objected to the proposed 
addition of two new approved programs, ``Designated Programs'' and 
``Food Resources (combat rations)'', and changing the ``N1'' Federal 
Emergency Management Agency program name to ``Emergency Preparedness 
Activities''. Accordingly, the final rule revises Schedule 1 to part 
700 to title the Schedule ``Approved Programs and Delegate Agencies''; 
assign the ``Designated Programs'' program to the Department of 
Commerce as Delegate Agency and identify the program with the ``H8'' 
Program Identification Symbol; and assign the ``Food Resources (combat 
rations)'' program to the Department of Defense (DOD) as Delegate 
Agency and identify the program with the ``C1'' Program Identification 
Symbol. At the request of DOD, the program name ``Designated Programs'' 
is used in this final rule instead of the name ``Special Projects'' to 
avoid confusion over use of this term for other purposes.

6. Minimum Rated Order Amount

    Under the proposed rule, the minimum rated order amount in 
Sec. 700.17(f) would have increased from $5000 to $100,000 to conform 
to the current simplified Federal Acquisition Regulation (FAR) small 
order threshold of $100,000 (see FAR Sec. 2.101). Although the private 
sector commenters supported this change, DOD objected on the grounds 
that too many lower cost critical defense orders, especially at the 
lower-tier levels of the industrial base, would no longer be priority 
rated, this impacting DPAS effectiveness.
    However, recognizing the need to increase the minimum rated order 
amount, DOD recommended that this amount be established at $50,000, or 
one half of the FAR Simplified Acquisition Threshold, which ever amount 
is larger, provided that delivery can be obtained in a timely fashion 
without the use of a priority rating. We have decided to adopt the DOD 
recommendation and increase the minimum rated order amount accordingly. 
During the next several years, we will review the impact of this 
revision on the timeliness of defense procurement and public comment is 
invited. If warranted, a further adjustment of the minimum rated order 
amount will be proposed.

7. Other Revisions and Non-Substantive and Editorial Changes

    Several commenters provided comment on various technical issues 
such as the correctness of citations and definitions; the use of terms 
such as ``national security emergency'', ``domestic emergency 
preparedness'', and ``requirements contract'' and ``calls''; and the 
need for a definition of the term ``industrial resources''. To further 
improve the clarity and effectiveness of the DPAS, this rule 
incorporates these revisions. An editorial review of the proposed rule 
also suggested the need for further editorial and technical corrections 
and these revisions are made in this rule.

8. DPAS Schedule I and the Other DPAS Schedules

    This rule revises DPAS Schedule 1 to part 700, which lists all 
Approved Programs for DPAS support. All other DPAS Schedules (II 
through V), which pertained to the controlled materials program, are 
removed.
    DPAS Schedule 1 is revised by changing the term ``Authorized 
Program'' to ``Approved Program'' wherever it appears in the Schedule 
and

[[Page 31920]]

by making appropriate changes to the first paragraph of the two 
paragraph explanation of the Schedule. This rule also removes from the 
Schedule (1) all program identification symbols and associated 
authorized program names from the Schedule that pertained to the 
controlled materials program [``C8--Controlled materials for Defense 
Industrial Supply Center (DISC)'', ``H2--Controlled materials 
producers'', ``H3--Further converters (controlled materials)'', and 
``H4--Distributors of controlled materials'']; and (2) the term 
``Federal Aviation Administration'' from the list of Associated 
Agencies of the Department of Defense contained in footnote 1.
    Added to Schedule 1 by this rule are two new program identification 
symbols and associated approved program names, as follows: ``C1--Food 
resources (combat rations)'' under the ``Defense Programs'' heading; 
and ``H8--Designated Programs'', under the ``Other Defense, Energy and 
Related Programs'' heading.
    Finally, this rule revises (1) the ``Other Energy Programs'' 
heading in Schedule 1 to read: ``Domestic Energy Programs''; (2) the 
``F3'' program name ``Construction and Maintenance'' to read: 
``Construction, repair, and maintenance''; and (3) the ``N1'' program 
name ``Approved civil defense programs'' to read ``Emergency 
Preparedness Activities''.

9. Appendices

    There are a number of documents required to support the effective 
and efficient implementation and administration of the DPAS regulation. 
These documents include (1) Delegations of Authority from the 
Department of Commerce to the Departments of Defense and Energy, 
General Services Administration, and the Federal Emergency Management 
Agency (Delegate Agencies) who use the DPAS to support their national 
defense related procurement; (2) Interagency Memoranda of Understanding 
between the Department of Commerce and Departments of Agriculture, 
Energy, and the Interior pertaining to resource jurisdiction issues and 
delegated authority; (3) Form BXA-999 (formerly Form ITA-999), used to 
request Special Priorities Assistance; (4) Memorandum of Understanding 
on Priorities and Allocations Support Between the Department of 
Commerce and the Canadian Public Works and Government Services Canada 
(formerly the Canadian Department of Supply and Services); and (5) DPAS 
Emergency Delegation 1. These documents, except for DPAS Emergency 
Delegation 1, were previously included in the Code of Federal 
Regulations (CFR) as Appendices I through IV. DPAS Emergency Delegation 
1 would be implemented if in a catastrophic national security 
emergency, communications with Department of Commerce headquarters in 
Washington, D.C. are severed. All of these documents have been updated 
and revised.
    Because it is used by the public and therefore of significant 
public interest, Form BXA-999 is redesignated as Appendix I to part 700 
and published with this rule. Because they are of limited public 
interest, the Delegations of Authority, Interagency Memoranda of 
Understanding, Memorandum of Understanding on Priorities and 
Allocations Support Between the Department of Commerce and the Canadian 
Public Works and Government Services Canada, and DPAS Emergency 
Delegation 1, will not be published with this rule. However, copies of 
Appendix I and these other DPAS documents, designated as Appendices II 
through V, respectively, may be obtained by contacting the DPAS Program 
Manager at the Department of Commerce (see FOR FURTHER INFORMATION 
CONTACT section above). Copies of Appendix I may also be obtained from 
any Department of Defense, Defense Contract Management Command field 
office.

Public Rulemaking Docket

    The public rulemaking docket concerning this regulation is 
maintained in the Bureau of Export Administration Freedom of 
Information Records Inspection Facility, Room 4525, U.S. Department of 
Commerce, 14th Street and Pennsylvania Avenue, N.W., Washington, D.C. 
20230. Records in this facility may be inspected and copied in 
accordance with regulations published in 15 CFR part 4. Information 
pertaining to the inspection and copying of records may be obtained 
from Ms. Margaret Cornejo, Freedom of Information Officer, at the 
Records Inspection Facility, or by calling (202) 482-5653.

Rulemaking Requirements

    The Department made certain determinations with respect to the 
following rulemaking requirements:
    1. Classification under E.O. 12866: This amendment of the DPAS 
regulation has been determined to be ``not significant'' for the 
purpose of Executive Order 12866.
    2. Regulatory Flexibility Act: The Assistant General Counsel for 
Legislation and Regulation certified to the Chief Counsel for Advocacy, 
Small Business Administration, that this amendment of the DPAS 
regulation will not have a significant economic impact on a substantial 
number of small entities. This amendment of the DPAS merely updates, 
modifies, or clarifies a number of provisions to make the DPAS more 
effective and efficient in the post Cold War era. Many of the changes 
are made in response to comments and recommendations received from the 
business community, thus ensuring that the updated DPAS conforms to 
current business practices and enabling all business entities subject 
to its requirements to increase the efficiency of their operations and 
realize certain cost savings. In addition, some DPAS provisions are 
revised to conform the regulation to recent statutory and 
organizational changes while other provisions are deleted because they 
are obsolete.
    Because of the self-administered nature of the DPAS, there is no 
way to accurately estimate the number of business entities throughout 
the U.S. industrial base to whom the DPAS is applicable. However, it 
has been roughly estimated that there are at least 18,000 business 
entities during any one year that on at least one or more occasions 
must respond to its requirements. It is also estimated that given the 
nature of defense production, relatively few of these entities are 
small entities.
    The DPAS regulation has been in effect since 1984 and is the 
successor to priorities and allocations regulations that were first 
promulgated in the mid-1950s. Thus, most business entities engaged in 
defense production under the DPAS, including small entities, can and do 
respond to applicable DPAS requirements in the ordinary course of their 
business with very little, if any, economic impact. These DPAS 
revisions, in and of themselves, impose no economic impact on any 
business entity, including small entities, and will further reduce 
whatever minimal economic impact is associated with DPAS compliance.
    3. Paperwork Reduction Act: The information collection requirements 
imposed by the DPAS regulation were approved by the Office of 
Management and Budget (OMB) under the provisions of Section 3507 of the 
Paperwork Reduction Act of 1980, amended (44 U.S.C. 3501 et seq.) (OMB 
Control Number 0694-0053).
    Notwithstanding any other provision of law, no person is required 
to respond to nor shall a person be subject to a penalty for failure to 
comply with any DPAS information collection requirements unless the 
information

[[Page 31921]]

collection displays a currently valid OMB Control Number.
    The collection of information requirements in the DPAS apply to all 
persons who receive priority rated orders under the DPAS. These 
requirements are necessary to support proper administration of the DPAS 
and ensure its effectiveness and efficiency. The total annual public 
burden per respondent for this collection of information is estimated 
at 14,477 hours. This estimate includes (a) 11,667 total extra record 
keeping hours to create a record of the receipt of a priority rated 
order (700,000 priority rated orders annually  x  1 minute per order); 
(b) 972 total hours to provide notice of acceptance of a priority rated 
order (699,650 priority rated orders accepted annually  x  5 seconds 
per order); (c) 88 total hours to provide notice of rejection of a 
priority rated order (350 priority rated orders rejected annually  x  
15 minutes per order); and (d) 1,750 total hours to provide notice of 
delayed delivery against a priority rated order (7000 total priority 
rated orders annually against which delivery will be delayed  x  15 
minutes per order).
    Send comments regarding this burden estimate or any other aspect of 
the data requirements, including suggestions for reducing this burden, 
to Richard V. Meyers at the address given in the FOR FURTHER 
INFORMATION CONTACT section above, or to the Office of Information and 
Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, 725 17th Street, N.W., Room 10235, Washington, D.C. 
20503; Attn.: Desk Officer for the Bureau of Export Administration
    4. E.O. 12612: This amendment of the DPAS regulation does not 
contain policies with Federalism implications sufficient to warrant 
preparation of a Federalism assessment under E.O. 12612.

List of Subjects in 15 CFR Part 700

    Administrative practice and procedure, Business and industry, 
Government contracts, National defense, Reporting and recordkeeping 
requirements, Strategic and critical materials.

    For the reasons stated in the preamble, part 700 of Subchapter A, 
National Security Industrial Base Regulations (15 CFR part 700), is 
amended as follows:

PART 700--[AMENDED]

    1. The authority citation for 15 CFR part 700 is revised to read as 
follows:

    Authority: Titles I and VII of the Defense Production Act of 
1950, as amended (50 U.S.C. app. 2061 et seq.), Title VI of the 
Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 
U.S.C. 5195 et seq.), and Executive Order 12919, 59 FR 29525, 3 CFR, 
1994 Comp., p. 901; Section 18 of the Selective Service Act of 1948 
(50 U.S.C. App. 468), 10 U.S.C. 2538, 50 U.S.C. 82, and Executive 
Order 12742, 56 FR 1079, 3 CFR, 1991 Comp., p. 309; and Executive 
Order 12656, 53 FR 226, 3 CFR, 1988 Comp., p. 585.

    2. Section 700.1 is amended:
    a. By revising the phrase ``materials and facilities'' to read 
``materials, services, and facilities'', and revising the phrase 
``materials and equipment'' to read ``materials, equipment, and 
services'', in paragraph (a);
    b. By revising paragraph (b);
    c. By redesignating paragraph (c) as paragraph (e); and
    d. By adding new paragraphs (c) and (d); as follows:


Sec. 700.1  Purpose of this regulation.

* * * * *
    (b) Section 18 of the Selective Service Act of 1948 (50 U.S.C. app. 
468) (Selective Service Act) authorizes the President to place an order 
with a supplier for any articles or materials required for the 
exclusive use of the U.S. armed forces whenever the President 
determines that in the interest of national security, prompt delivery 
of the articles and materials is required. The supplier must give 
precedence to the order so as to deliver the articles or materials in a 
required time period. 10 U.S.C. 2538, and 50 U.S.C. 82, provide similar 
authority specifically for Department of Defense procurement, but only 
in time of war or when war is imminent.
    (c) Section 602(b) of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5195a(b)) provides that the terms 
``national defense'' and ``defense'' as used in the Defense Production 
Act includes ``emergency preparedness activities'' conducted pursuant 
to Title VI of the Stafford Act. The definition of ``national defense'' 
in Section 702(13) of the Defense Production Act provides that this 
term includes ``emergency preparedness activities'' conducted pursuant 
to Title VI of the Stafford Act.
    (d) The Defense Priorities and Allocations System (DPAS) regulation 
implements the priorities and allocations authority of the Defense 
Production Act and as this authority pertains to Title VI of the 
Stafford Act, and the priorities authority of the Selective Service Act 
and related statutes, all with respect to industrial resources. The 
DPAS ensures the timely availability of industrial resources for 
approved programs and provides an operating system to support rapid 
industrial response to a national emergency.
* * * * *
    3. Section 700.2 is amended by revising paragraphs (a) and (b), and 
by revising the phrase ``Appendix I'' to read ``Appendix II'' in 
paragraph (c); as follows:


Sec. 700.2  Introduction.

    (a) Certain national defense and energy programs (including 
emergency preparedness activities) are approved for priorities and 
allocations support. For example, military aircraft production, 
ammunition, and certain programs which maximize domestic energy 
supplies are ``approved programs.'' A complete list of currently 
approved programs is provided at Schedule 1 to this part.
    (b) The Department of Commerce administers the DPAS to ensure the 
timely delivery of industrial items to meet approved program 
requirements.
* * * * *


Sec. 700.3   [Amended]

    4. Section 700.3(a) is amended by revising the term ``authorized 
program'' to read ``approved program''.
    5. Section 700.4 is revised to read as follows:


Sec. 700.4  Priorities and allocations in a national emergency.

    (a) In the event of a national emergency, special rules may be 
established as needed to supplement this part, thus ensuring rapid 
industrial response and the timely availability of critical industrial 
items and facilities to meet the urgent national defense requirements, 
including domestic emergency preparedness requirements, of approved 
programs.
    (b) The special rules established in response to the emergency may 
include provisions for the taking of certain emergency official actions 
and the allocation of critical and scarce materials and facilities.


Sec. 700.7  [Amended]

    6. Section 700.7(a) is amended by adding the phrase ``and the 
Selective Service Act and related statutes'' following the phrase ``the 
Defense Production Act''.
    7. Section 700.8 is amended:
    a. By removing the following definitions: ``Authorized program'', 
``Controlled materials'', ``Controlled materials suppliers'', 
``Distributors of controlled materials'', ``Further conversion'', 
``Lead time'', and ``Minimum mill quantity'';
    b. By amending the definition of ``Delegate Agency'', by revising 
the term

[[Page 31922]]

``authorized programs'' to read ``approved programs'';
    c. By amending the definition of ``Official action'', by adding the 
phrase ``, the Selective Service Act and related statutes,'' following 
the phrase ``the Defense Production Act'';
    d. By amending the definition of ``Rated order'', by revising the 
term ``authorized program'' to read ``approved program''; and
    e. By revising the introductory sentence after the section heading, 
revising the definition of ``person'', and adding new definitions of 
``approved program'', ``industrial resources'', and ``Selective Service 
Act and related statutes'' to read as follows:


Sec. 700.8  Definitions.

    In addition to the definitions provided in Section 702 of the 
Defense Production Act (excepting the definition of ``industrial 
resources'') and Section 602(a) of the Stafford Act, the following 
definitions pertain to all sections of this part:
    Approved program--a program determined as necessary or appropriate 
for priorities and allocations support to promote the national defense 
by the Secretary of Defense, the Secretary of Energy, or the Director, 
Federal Emergency Management Agency, under the authority of the Defense 
Production Act, the Stafford Act, and Executive Order 12919, or the 
Selective Service Act and related statutes and Executive Order 12742.
* * * * *
    Industrial resources--all materials, services, and facilities, 
including construction materials, the authority for which has not been 
delegated to other agencies under Executive Order 12919. This term also 
includes the term ``item'' as defined and used in this part.
* * * * *
    Person--any individual, corporation, partnership, association, or 
any other organized group of persons, or legal successor or 
representative thereof; or any authorized State or local government or 
agency thereof; and for purposes of administration of this part, 
includes the United States Government and any authorized foreign 
government or agency thereof, delegated authority as provided in this 
part.
* * * * *
    Selective Service Act and related statutes--Section 18 of the 
Selective Service Act of 1948 (50 U.S.C. app. 468), 10 U.S.C. 2538, and 
50 U.S.C. 82.
* * * * *
    Stafford Act--Title VI (Emergency Preparedness) of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act, as amended (42 
U.S.C. 5195 et seq.).
    8. Section 700.10 is amended:
    a. By revising paragraph (a); and
    b. By revising the phrase ``Office of Industrial Resource 
Administration'' to read ``Office of Strategic Industries and Economic 
Security'', by revising the phrase ``authorized programs'' to read 
``approved programs'', and by revising the phrase ``Appendix I'' to 
read ``Appendix II'', in paragraph (b); as follows:


Sec. 700.10  Delegation of authority.

    (a) The priorities and allocations authorities of the President 
under Title I of the Defense Production Act with respect to industrial 
resources have been delegated to the Secretary of Commerce under 
Executive Order 12919 of June 3, 1994 (59 FR 29525). The priorities 
authorities of the President under the Selective Service Act and 
related statutes with respect to industrial resources have also been 
delegated to the Secretary of Commerce under Executive Order 12742 of 
January 8, 1991 (56 FR 1079).
* * * * *


Sec. 700.11  [Amended]

    9. Section 700.11(b) is amended by revising the term ``authorized 
program'' to read ``approved program'', and revising the term 
``authorized programs'' to read ``approved programs''.
    10. Section 700.12 is amended by revising paragraphs (b) and (c) to 
read as follows:


Sec. 700.12  Elements of a rated order.

* * * * *
    (b) A required delivery date or dates. The words ``immediately'' or 
``as soon as possible'' do not constitute a delivery date. A 
``requirements contract'', ``basic ordering agreement'', ``prime vendor 
contract'', or similar procurement document bearing a priority rating 
may contain no specific delivery date or dates and may provide for the 
furnishing of items from time-to-time or within a stated period against 
specific purchase orders, such as ``calls'', ``requisitions'', and 
``delivery orders''. These purchase orders must specify a required 
delivery date or dates and are to be considered as rated as of the date 
of their receipt by the supplier and not as of the date of the original 
procurement document;
    (c) The written signature on a manually placed order, or the 
digital signature or name on an electronically placed order, of an 
individual authorized to sign rated orders for the person placing the 
order. The signature or use of the name certifies that the rated order 
is authorized under this part and that the requirements of this part 
are being followed; and
* * * * *
    11. Section 700.13 is amended:
    a. By adding a new paragraph (b)(4);
    b. By removing paragraphs (c)(5), (c)(6), and (c)(7);
    c. By redesignating paragraph (c)(8) as paragraph (c)(5) and 
amending redesignated paragraph (c)(5) by adding the phrase ``or the 
Selective Service Act and related statutes'' following the phrase ``the 
Defense Production Act'';
    d. By revising paragraph (d); and
    e. By adding an OMB control number; as follows:


Sec. 700.13  Acceptance and rejection of rated orders.

* * * * *
    (b) Mandatory rejection. * * *
    (4) If a person is unable to fill all the rated orders of equal 
priority status received on the same day, the person must accept, based 
upon the earliest delivery dates, only those orders which can be 
filled, and reject the other orders. For example, a person must accept 
order A requiring delivery on December 15 before accepting order B 
requiring delivery on December 31. However, the person must offer to 
accept the rejected orders based on the earliest delivery dates 
otherwise possible.
* * * * *
    (d) Customer notification requirements. (1) A person must accept or 
reject a rated order in writing or electronically within fifteen (15) 
working days after receipt of a DO rated order and within ten (10) 
working days after receipt of a DX rated order. If the order is 
rejected, the person must give reasons in writing (not electronically) 
for the rejection.
    (2) If a person has accepted a rated order and subsequently finds 
that shipment or performance will be delayed, the person must notify 
the customer immediately, give the reasons for the delay, and advise of 
a new shipment or performance date. If notification is given verbally, 
written or electronic confirmation must be provided within five (5) 
working days.

(The information collection requirements in paragraphs (d)(1) and 
(d)(2) are approved by the Office of Management and Budget under OMB 
control number 0694-0053.)

    12. Section 700.14 is amended by revising paragraph (c) to read as 
follows:


Sec. 700.14  Preferential scheduling.

* * * * *
    (c) Conflicting rated orders. (1) If a person finds that delivery 
or performance against any accepted rated

[[Page 31923]]

orders conflicts with the delivery or performance against other 
accepted rated orders of equal priority status, the person shall give 
preference to the conflicting orders in the sequence in which they are 
to be delivered or performed (not to the receipt dates). If the 
conflicting rated orders are scheduled to be delivered or performed on 
the same day, the person shall give preference to those orders which 
have the earliest receipt dates.
    (2) If a person is unable to resolve rated order delivery or 
performance conflicts under this section, the person should promptly 
seek special priorities assistance as provided in Secs. 700.50 through 
700.54. If the person's customer objects to the rescheduling of 
delivery or performance of a rated order, the customer should promptly 
seek special priorities assistance as provided in Secs. 700.50 through 
700.54. For any rated order against which delivery or performance will 
be delayed, the person must notify the customer as provided in 
Sec. 700.13(d)(2).
* * * * *
    13. Section 700.17 is amended:
    a. By removing the parenthetical phrase ``(except as provided in 
Sec. 700.31(d)--Controlled materials program identification symbols)'' 
in paragraph (b)(2);
    b. By removing the parenthetical phrase ``(not applicable to 
controlled materials producers)'' in paragraph (b)(3);
    c. By removing the phrase found at the end of the paragraph, ``, 
except as provided in Sec. 700.31(d) (Controlled materials program 
identification symbols)'', in paragraph (c).
    d. By revising paragraph (d)(1);
    e. By redesignating paragraph (d)(2) as (d)(3);
    f. By adding a new paragraph (d)(2); and
    g. By revising paragraph (f); as follows:


Sec. 700.17  Use of rated orders.

* * * * *
    (d) Combining rated and unrated orders. (1) A person may combine 
rated and unrated order quantities on one purchase order provided that:
    (i) The rated quantities are separately and clearly identified; and
    (ii) The four elements of a rated order, as required by 
Sec. 700.12, are included on the order with the statement required in 
Sec. 700.12(d) modified to read in substance:

    This purchase order contains rated order quantities certified 
for national defense use, and you are required to follow all the 
provisions of the Defense Priorities and Allocations System 
regulation (15 CFR part 700) only as it pertains to the rated 
quantities.

    (2) A supplier must accept or reject the rated portion of the 
purchase order as provided in Sec. 700.13 and give preferential 
treatment only to the rated quantities as required by this part. This 
part may not be used to give preferential treatment to the unrated 
portion of the order.
* * * * *
    (f) A person is not required to place a priority rating on an order 
for less than $50,000, or one half of the Federal Acquisition 
Regulation (FAR) Simplified Acquisition Threshold (see FAR 2.101), 
whichever amount is larger, provided that delivery can be obtained in a 
timely fashion without the use of the priority rating.
    14. Section 700.18 is amended:
    a. By adding a new paragraph (a)(2)(v);
    b. By revising paragraph (b)(1);
    c. By revising the phrase ``Appendix II'' to read ``Appendix III'' 
in paragraph (b)(2); and
    d. By removing the first item listed, ``communication services'', 
and the parenthetical phrase, ``(as defined in Schedule III)'' which 
follows the item, ``Copper raw materials'', in paragraph (b)(3); as 
follows:


Sec. 700.18  Limitations on placing rated orders.

    (a) * * *
    (2) * * *
    (v) Any items related to the development of chemical or biological 
warfare capabilities or the production of chemical or biological 
weapons, unless such development or production has been authorized by 
the President or the Secretary of Defense.
    (b) Jurisdictional limitations. (1) The priorities and allocations 
authority for certain items has been delegated under Executive Orders 
12919 and 12742, other executive order, or Interagency Memoranda of 
Understanding to other agencies. Unless otherwise agreed to by the 
concerned agencies, the provisions of this part are not applicable to 
these items which include:
    (i) Food resources, food resource facilities, and the domestic 
distribution of farm equipment and commercial fertilizer (Department of 
Agriculture--see Attachment A to DPAS Delegation 1 in Appendix II to 
part 700 concerning combat rations);
    (ii) All forms of energy, including radioisotopes, stable isotopes, 
source material, and special nuclear material produced in Government-
owned plants or facilities operated by or for the Department of Energy 
(Department of Energy);
    (iii) Health resources (Department of Health and Human Services);
    (iv) All forms of civil transportation (Department of 
Transportation);
    (v) Water resources (Department of Defense/U.S. Army Corps of 
Engineers);
    (vi) Communications services (National Communications System under 
Executive Order 12472 of April 3, 1984); and
    (vii) Mineral resources and mineral processing facilities 
(Department of the Interior/U.S. Geological Survey--see Memorandum of 
Understanding Between Interior and Commerce in DPAS Appendix III to 
part 700).
* * * * *
    15. Section 700.21 is amended:
    a. By revising paragraph (a);
    b. By revising the phrases ``materials or equipment'' and 
``material or equipment'' to read ``materials, equipment, or services'' 
in paragraphs (b)(2), (c) introductory text, (c)(1) introductory text, 
and (d); and
    c. By revising the term ``authorized programs'' to read ``approved 
programs'' in paragraph (f); as follows:


Sec. 700.21  Application for priority rating authority.

    (a) For projects believed to maximize domestic energy supplies, a 
person may request priority rating authority for scarce, critical, and 
essential supplies of materials, equipment, and services (related to 
the production of materials or equipment, or the installation, repair, 
or maintenance of equipment) by submitting DOE Form PR 437 to the 
Department of Energy. Blank applications and further information may be 
obtained from the U.S. Department of Energy, Office of Clearance and 
Support, Field/Headquarters Support Division, Forrestal Building, 1000 
Independence Avenue, S.W., Washington, D.C. 20585; Attn.: PR-132.
* * * * *
    16. Subpart F is revisied to read as follows:

Subpart F--National Emergency Preparedness and Critical Items


Sec. 700.30  Priorities and allocations in a national emergency.

    (a) In the event of a national emergency, special rules may be 
established as needed to supplement this part, thus ensuring rapid 
industrial response and the timely availability of critical industrial 
items and facilities to meet the urgent national defense requirements, 
including domestic emergency preparedness requirements, of approved 
programs.
    (1) Emergency official actions. (i) As needed, this part may be 
supplemented

[[Page 31924]]

to include additional definitions to cover civilian emergency 
preparedness industrial items, support for essential civilian programs, 
and provisions for the taking of certain emergency official actions 
under sections Secs. 700.60 through 700.63.
    (ii) Emergency official actions may include:
    (A) Controlling inventories of critical and scarce defense and/or 
emergency preparedness items;
    (B) Restricting the purchase, use, or distribution of critical and 
scarce defense and/or emergency preparedness items, or the use of 
production or distribution facilities, for non-essential purposes; and
    (C) Converting the production or distribution of non-essential 
items to the production or distribution of critical and scarce defense 
and/or emergency preparedness items.
    (2) Allocation of critical and scarce items and facilities. (i) As 
needed, this part may be supplemented to establish special rules for 
the allocation of scarce and critical items and facilities to ensure 
the timely availability of these items and facilities for approved 
programs, and to provide for an equitable and orderly distribution of 
requirements for such items among all suppliers of the items. These 
rules may provide for the allocation of individual items or they may be 
broad enough to direct general industrial activity as required in 
support of emergency requirements.
    (ii) Allocation rules (i.e., controlled materials programs) were 
established in response to previous periods of national security 
emergency such as World War II and the Korean Conflict. The basic 
elements of the controlled materials programs were the set-aside (the 
amount of an item for which a producer or supplier must reserve order 
book space in anticipation of the receipt of rated orders), the 
production directive (requires a producer to supply a specific 
quantity, size, shape, and type of an item within a specific time 
period), and the allotment (the maximum quantity of an item authorized 
for use in a specific program or application). These elements can be 
used to assure the availability of any scarce and critical item for 
approved programs. Currently, a set-aside applies only to metalworking 
machines (see Sec. 700.31).
    (3) In the event that certain critical items become scarce, and 
approved program requirements for these items cannot be met without 
creating a significant dislocation in the civilian market place so as 
to create appreciable hardship, Commerce may establish special rules 
under section 101(b) of the Defense Production Act to control the 
general distribution of such items in the civilian market.
    (b) Regional Emergency Coordinators. (1) If due to a catastrophic 
national security emergency event, communications with Commerce 
headquarters in Washington, D.C. are severed, DPAS Emergency Delegation 
1 will provide authority to the Regional Emergency Coordinators (REC) 
located in the Standard Federal Region Council cities (Boston, New 
York, Philadelphia, Atlanta, Dallas, Kansas City, Chicago, Denver, San 
Francisco, and Seattle) to represent the Secretary of Commerce, and as 
necessary, act for the Secretary to carry out the emergency industrial 
production and distribution control functions of Commerce as set forth 
in this part, in any supplement thereto, or other applicable authority. 
See DPAS Emergency Delegation 1 for further information about the 
authority and duties of the RECs, and the effective date of the 
Delegation.
    (2) If DPAS Emergency Delegation 1 is implemented due to a 
catastrophic national security emergency event, requests for special 
priorities assistance under Secs. 700.50 through 700.55 should be filed 
with the nearest Regional Emergency Coordinator located in one of the 
Standard Federal Region Council cities as provided in DPAS Delegation 
1.


Sec. 700.41  [Redesignated as Sec. 700.31]

Subpart G--[Removed and Reserved]

    17. Section 700.41 is redesignated as Sec. 700.31 in Subpart F; and 
Subpart G is removed and reserved.


Sec. 700.50  [Amended]

    18. Section 700.50(c) is amended by revising the term ``ITA-999'' 
to read ``BXA-999'' each of the three times it appears in the 
paragraph; by revising the term ``(OMB control number 0625-0015)'' to 
read ``(OMB control number 0694-0057)''; by removing the phrase ``, any 
Commerce District Office''; and by revising the phrase ``Appendix III'' 
to read ``Appendix I''.
    19. Section 700.54 is amended by revising the section heading and 
the second sentence of the introductory text, as follows:


Sec. 700.54  Instances where assistance may not be provided.

* * * * *
    Examples where assistance may not be provided include situations 
when a person is attempting to:
* * * * *


Sec. 700.55  [Amended]

    20. Section 700.55 is amended:
    a. By revising the term ``authorized programs'' to read ``approved 
programs'' in paragraph (a);
    b. By revising the term ``Canadian Department of Supply and 
Services'' to read ``Canadian Public Works and Government Services 
Canada'' in paragraphs (b)(2), (b)(3), (b)(4), (b)(5), and (b)(6); and 
by revising the phrase ``The Department of Supply and Services'' to 
``Public Works and Government Services Canada'' in paragraph (b)(5).
    c. By revising the term ``ITA-999'' to read ``BXA-999'' in 
paragraph (b)(6).
    21. The phrase ``the Selective Service Act and related statutes,'' 
is added following the phrase ``the Defense Production Act,'' wherever 
it appears in the following places:

Sec.
700.70(a)
700.71(a)
700.71(c)(1)
700.71(c)(2)
700.71(c)(3)
700.72(a)
700.73(a)
700.73(b)
700.75
700.80(a)(2)
700.91(d)


Sec. 700.72  [Amended]

    22. Section 700.72(b) is amended by revising the term ``Assistant 
General Counsel for International Trade'' to read ``Chief Counsel for 
Export Administration''.
    23. Section 700.74 is amended:
    a. By revising paragraph (a);
    b. By removing paragraph (b);
    c. By redesignating paragraph (c) as paragraph (b), and paragraph 
(d) as paragraph (c); as follows:


Sec. 700.74  Violations, penalties, and remedies.

    (a) Willful violation of the provisions of Title I or Sections 705 
or 707 of the Defense Production Act, the priorities provisions of the 
Selective Service Act and related statutes, this part, or an official 
action, is a crime and upon conviction, a person may be punished by 
fine or imprisonment, or both. The maximum penalty provided by the 
Defense Production Act is a $10,000 fine, or one year in prison, or 
both. The maximum penalty provided by the Selective Service Act and 
related statutes is a $50,000 fine, or three years in prison, or both.
* * * * *
    24. The term ``Office of Industrial Resource Administration'' is 
revised to read ``Office of Strategic Industries and Economic 
Security'' in the following places:


[[Page 31925]]


Sec.
700.80(a)
700.80(c)
700.80(d)
700.81(a)
700.81(b)
700.93

    25. The phrase ``Assistant Secretary for Trade Administration'' is 
revised to read ``Assistant Secretary for Export Administration'' in 
the following places:

Sec.
700.80(d)
700.81(a)
700.81(b)
700.81(d)
700.81(e)
700.81(f)
700.81(g)
700.81(h)


Sec. 700.81  [Amended]

    26. Section 700.81(b) is amended by revising the term 
``International Trade Administration'' to read ``Bureau of Export 
Administration''.


Sec. 700.91  [Amended]

    27. Section 700.91(a) is amended by revising the term ``(OMB 
control number 0625-0107)'' to read ``(OMB control number 0694-0053)''.


Sec. 700.93  [Amended]

    28. Section 700.93 is amended by revising the phrase ``telephone: 
(202) 377-4506'' to read ``telephone: (202) 482-3634, or FAX: (202) 
482-5650''.
    29. Schedule 1 to part 700 is revised, as follows:

Defense Priorities and Allocations System

SCHEDULE 1 TO PART 700

Approved Programs and Delegate Agencies

    The programs listed in this schedule have been approved for 
priorities and allocations support under this part. They have equal 
preferential status. The Department of Commerce has authorized the 
Delegate Agencies to use this part in support of those programs 
assigned to them, as indicated below.

----------------------------------------------------------------------------------------------------------------
       Program identification symbol            Approved program                    Delegate agency             
----------------------------------------------------------------------------------------------------------------
Defense programs:                                                                                               
    A1....................................  Aircraft................  Department of Defense.\1\                 
    A2....................................  Missiles................      Do.                                   
    A3....................................  Ships...................      Do.                                   
    A4....................................  Tank--Automotive........      Do.                                   
    A5....................................  Weapons.................      Do.                                   
    A6....................................  Ammunition..............      Do.                                   
    A7....................................  Electronic and                Do.                                   
                                             communications                                                     
                                             equipment.                                                         
    B1....................................  Military building             Do.                                   
                                             supplies.                                                          
    B8....................................  Production equipment          Do.                                   
                                             (for defense                                                       
                                             contractor's account).                                             
    B9....................................  Production equipment          Do.                                   
                                             (Government owned).                                                
    C1....................................  Food resources (combat        Do.                                   
                                             rations).                                                          
    C2....................................  Department of Defense         Do.                                   
                                             construction.                                                      
    C3....................................  Maintenance, repair, and      Do.                                   
                                             operating supplies                                                 
                                             (MRO) for Department of                                            
                                             Defense facilities.                                                
    C9....................................  Miscellaneous...........      Do.                                   
International defense programs:                                                                                 
    Canada:                                                                                                     
        D1................................  Canadian military         Department of Commerce.                   
                                             programs.                                                          
        D2................................  Canadian production and       Do.                                   
                                             construction.                                                      
        D3................................  Canadian atomic energy        Do.                                   
                                             program.                                                           
    Other Foreign Nations:                                                                                      
        G1................................  Certain munitions items   Department of Commerce.                   
                                             purchased by foreign                                               
                                             governments through                                                
                                             domestic commercial                                                
                                             channels for export.                                               
        G2................................  Certain direct defense        Do.                                   
                                             needs of foreign                                                   
                                             governments other than                                             
                                             Canada.                                                            
        G3................................  Foreign nations (other        Do.                                   
                                             than Canada) production                                            
                                             and construction.                                                  
    Co-Production:                                                                                              
        J1................................  F-16 Co-Production        Departments of Commerce and Defense.      
                                             Program.                                                           
Atomic energy programs:                                                                                         
    E1....................................  Construction............  Department of Energy.                     
    E2....................................  Operations--including         Do.                                   
                                             maintenance, repair,                                               
                                             and operating supplies                                             
                                             (MRO).                                                             
    E3....................................  Privately owned               Do.                                   
                                             facilities.                                                        
Domestic energy programs:                                                                                       
    F1....................................  Exploration, production,  Department of Energy.                     
                                             refining, and                                                      
                                             transportation.                                                    
    F2....................................  Conservation............      Do.                                   
    F3....................................  Construction, repair,         Do.                                   
                                             and maintenance.                                                   
Other defense, energy, and related                                                                              
 programs:                                                                                                      
    H1....................................  Certain combined orders   Department of Commerce.                   
                                             (see section 700.17(c)).                                           
    H5....................................  Private domestic              Do.                                   
                                             production.                                                        
    H6....................................  Private domestic              Do.                                   
                                             construction.                                                      
    H7....................................  Maintenance, repair, and      Do.                                   
                                             operating supplies                                                 
                                             (MRO).                                                             
    H8....................................  Designated Programs.....      Do.                                   
    K1....................................  Federal supply items....  General Services Administration.          
    N1....................................  Emergency preparedness    Federal Emergency Management Agency.      
                                             activities.                                                        
----------------------------------------------------------------------------------------------------------------
\1\ Department of Defense includes: Armed Services--Army, Navy (including Marines and Coast Guard), and Air     
  Force; Component Agencies, including Defense Logistics Agency, National Security Agency, Defense Advanced     
  Research Projects Agency, Defense Information Systems Agency, Defense Nuclear Agency, Defense Mapping Agency, 
  and On-Site Inspection Agency; and Associated Agencies, including Central Intelligence Agency and National    
  Aeronautics and Space Administration.                                                                         


[[Page 31926]]

    30. Schedule II to part 700 (Controlled Materials), Schedule III to 
part 700 (Technical Definitions of Controlled Materials Products), 
Schedule IV to part 700 (Copper Controlled Materials Producers' Set-
aside Base and Percentages), and Schedule V to part 700 (Nickel Alloys 
Controlled Materials Producers' Set-aside Base and Percentages) are 
removed.
    31. Appendix I to part 700 is revised, as follows:
Defense Priorities and Allocations System

Appendix 1 to Part 700

Form BXA-999--Request for Special Priorities Assistance

BILLING CODE 3510-JT-P

[[Page 31927]]

[GRAPHIC] [TIFF OMITTED] TR11JN98.008



[[Page 31928]]

[GRAPHIC] [TIFF OMITTED] TR11JN98.009



[[Page 31929]]

[GRAPHIC] [TIFF OMITTED] TR11JN98.010



[[Page 31930]]

[GRAPHIC] [TIFF OMITTED] TR11JN98.011



BILLING CODE 3510-JT-C
    32. Appendix II to part 700: Interagency Memoranda of 
Understanding; Appendix III to part 700: Form ITA-999--Request for

[[Page 31931]]

Special Priorities Assistance; and Appendix IV to part 700: Memorandum 
of Understanding on Priorities and Allocations Support Between the 
Department of Commerce and the Canadian Department of Supply and 
Services, are removed.

    Issued: June 5, 1998.
Iain S. Baird,
Deputy Assistant Secretary for Export Administration.
[FR Doc. 98-15410 Filed 6-10-98; 8:45 am]
BILLING CODE 3510-JT-P


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