19466 Federal Register / Vol. 74, No. 81 / Wednesday, April 29, 2009 / Proposed Rules 

(2) Airbus Model A340–200 and A340–300 

series airplanes, all serial numbers. 

Subject 

(d) Air Transport Association (ATA) of 

America Code 28: Fuel. 

Reason 

(e) The mandatory continuing 

airworthiness information (MCAI) states: 

An A340 operator has reported an 

uncommanded engine N°4 shut down during 

taxi after landing. 

The root cause of this event has been 

identified as failure of the fuel pump NonReturn Valve (NRV) preventing the collector 

cell jet pump from working. This led to 

engine N°4 collector cell fuel level to drop 

below the pump inlet and consequently 

causing engine N°4 flame out. 

A330 aircraft which have a similar design 

are also impacted by this issue. 

Multiple NRV failures in combination with 

failure modes trapping fuel could potentially 

increase the quantity of unusable fuel on 

aircraft possibly leading to fuel starvation 

which could result in engine in-flight shut 

down and would constitute an unsafe 

condition. 

To prevent such an event, this 

Airworthiness Directive (AD) requires a 

periodic operational test to check the correct 

operation of NRV and to apply the associated 

corrective actions. 

The corrective action includes replacing 

any failed NRV with a new NRV. 

Actions and Compliance 

(f) Unless already done, do the following 

actions. 

(1) For Model A330 series airplanes: At the 

later of the times in paragraphs (f)(1)(i) and 

(f)(1)(ii) of this AD, perform an operational 

test for correct functioning of the NRV and 

apply all applicable corrective actions, in 

accordance with instructions defined in 

Airbus Mandatory Service Bulletin A330–28– 

3108, including Appendix 1, dated October 

13, 2008. Do all applicable corrective actions 

before further flight. 

(i) Within 24 months or 8,000 flight hours 

after the effective date of this AD, whichever 

occurs first. 

(ii) Before the accumulation of 10,000 

flight hours after the first flight of the 

airplane. 

(2) For Model A340–200 and –300 series 

airplanes: At the later of the times in 

paragraphs (f)(2)(i) and (f)(2)(ii) of this AD, 

perform an operational test for correct 

functioning of the NRV and apply all 

applicable corrective actions in accordance 

with instructions defined in Airbus 

Mandatory Service Bulletin A340–28–4123, 

including Appendix 1, dated October 13, 

2008. Do all applicable corrective actions 

before further flight. 

(i) Within 24 months or 9,000 flight hours 

after the effective date of this AD, whichever 

occurs first. 

(ii) Before the accumulation of 25,000 

flight hours after the first flight of the 

airplane. 

(3) Repeat the operational test specified in 

paragraph (f)(1) or (f)(2) of this AD at the 

applicable interval in paragraph (f)(3)(i) or 

(f)(3)(ii) of this AD. 

(i) For Model A330 airplanes: At intervals 

not to exceed 10,000 flight hours. 

(ii) For Model A340–200 and –300 

airplanes: At intervals not to exceed 25,000 

flight hours. 

(4) Submit a report of the findings (both 

positive and negative) of the inspection 

required by paragraph (f)(1) or (f)(2) of this 

AD to Airbus, at the time specified in 

paragraph (f)(4)(i) or (f)(4)(ii) of this AD, as 

applicable. The report must include the 

information specified in Appendix 1 of 

Airbus Mandatory Service Bulletins A330– 

28–3108 and A340–28–4123, both dated 

October 13, 2008, as applicable. Send the 

report to Airbus Department SEEE6, Airbus 

Customer Services Directorate, 1 Rond Point 

Maurice Bellonte, 31707 Blagnac Cedex 

France, ATTN: SDC32 Technical Data and 

Documentation Services; fax: +33 5 61 93 28 

06; e-mail: sb.reporting@airbus.com. 

(i) If the inspection was done after the 

effective date of this AD: Submit the report 

within 30 days after the inspection. 

(ii) If the inspection was done on or prior 

to the effective date of this AD: Submit the 

report within 30 days after the effective date 

of this AD. 

FAA AD Differences 

Note 1: This AD differs from the MCAI 

and/or service information as follows: No 

Differences. 

Other FAA AD Provisions 

(g) The following provisions also apply to 

this AD: 

(1) Alternative Methods of Compliance 

(AMOCs): The Manager, International 

Branch, ANM–116, FAA, has the authority to 

approve AMOCs for this AD, if requested 

using the procedures found in 14 CFR 39.19. 

Send information to ATTN: Vladimir 

Ulyanov, Aerospace Engineer, International 

Branch, ANM–116, Transport Airplane 

Directorate, FAA, 1601 Lind Avenue SW., 

Renton, Washington 98057–3356; telephone 

(425) 227–1138; fax (425) 227–1149. Before 

using any approved AMOC on any airplane 

to which the AMOC applies, notify your 

appropriate principal maintenance inspector 

(PMI) or the principal avionics inspector 

(PAI), as appropriate, or lacking a principal 

inspector, your local Flight Standards District 

Office. 

(2) Airworthy Product: For any 

requirement in this AD to obtain corrective 

actions from a manufacturer or other source, 

use these actions if they are FAA-approved. 

Corrective actions are considered FAAapproved if they are approved by the State 

of Design Authority (or their delegated 

agent). You are required to assure the product 

is airworthy before it is returned to service. 

(3) Reporting Requirements: For any 

reporting requirement in this AD, under the 

provisions of the Paperwork Reduction Act, 

the Office of Management and Budget (OMB) 

has approved the information collection 

requirements and has assigned OMB Control 

Number 2120–0056. 

Related Information 

(h) Refer to MCAI European Aviation 

Safety Agency Airworthiness Directive 2008– 

0209, dated November 27, 2008; and Airbus 

Mandatory Service Bulletins A330–28–3108 

and A340–28–4123, both including 

Appendix 1, both dated October 13, 2008; for 

related information. 

Issued in Renton, Washington, on April 15, 

2009. 

Ali Bahrami, 

Manager, Transport Airplane Directorate, 

Aircraft Certification Service. 

[FR Doc. E9–9713 Filed 4–28–09; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF COMMERCE 

Bureau of Industry and Security 

15 CFR Part 701 

[Docket No. 080722875–8876–01] 

RIN 0694–AE40 

Reporting of Offsets Agreements in 

Sales of Weapon Systems or DefenseRelated Items to Foreign Countries or 

Foreign Firms 

AGENCY: Bureau of Industry and 

Security, Department of Commerce. 

ACTION: Proposed rule. 

SUMMARY: The Bureau of Industry and 

Security (BIS) is proposing to amend the 

Reporting of Offsets Agreements in 

Sales of Weapon Systems or DefenseRelated Items to Foreign Countries or 

Foreign Firms regulation (15 CFR part 

701) to update and provide clarification 

with regard to the information U.S. 

companies are required to submit each 

year to BIS to support the preparation of 

the annual report to Congress on offsets 

in defense trade. 

DATES: Comments must be received by 

June 29, 2009. 

ADDRESSES: You may submit comments, 

identified by RIN 0694–AE40, by any of 

the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: OffsetReport@bis.doc.gov. 

Include ‘‘RIN 0694–AE40’’ in the subject 

line of the message. 

• Fax: 202–482–5650. 

• Mail/Hand Delivery: Offset Program 

Manager, U.S. Department of 

Commerce, Bureau of Industry and 

Security, Office of Strategic Industries 

and Economic Security, Room 3876, 

14th Street and Pennsylvania Avenue, 

NW., Washington, DC 20230, ATTN: 

RIN 0694–AE40. 

FOR FURTHER INFORMATION CONTACT: 

Ronald DeMarines, Office of Strategic 

Industries and Economic Security, tel. 

(202) 482–3755, e-mail 

rdemarin@bis.doc.gov. 


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Federal Register / Vol. 74, No. 81 / Wednesday, April 29, 2009 / Proposed Rules 19467 

SUPPLEMENTARY INFORMATION: 

Background 

The Defense Production Act 

Amendments of 1992 required the 

Secretary of Commerce to promulgate 

regulations for U.S. firms to furnish 

information regarding sales of defense 

articles or defense services to foreign 

countries or foreign firms when such 

sales are made pursuant to a contract 

subject to an offset agreement exceeding 

$5,000,000 in value. The Secretary of 

Commerce designated BIS as the 

organization responsible for 

promulgating such regulations. The 

Reporting of Offsets Agreements in 

Sales of Weapon Systems or DefenseRelated Items to Foreign Countries or 

Foreign Firms regulation (15 CFR part 

701) (hereinafter, the ‘‘Offset Reporting 

Regulation’’) was first published in 

1994. The information provided by U.S. 

firms pursuant to the Offset Reporting 

Regulation is aggregated and used to 

determine the impact of offset 

transactions on the defense 

preparedness, industrial 

competitiveness, employment, and trade 

of the United States. Summary reports 

are submitted annually to the Congress 

pursuant to Section 309 of the Defense 

Production Act of 1950, as amended. 

Reasons for the Changes Proposed by 

This Rule 

The changes proposed in this rule are 

a result of an internal BIS review of the 

data that has been collected in the past 

pursuant to the Offset Reporting 

Regulation. The changes in this 

proposed rule clarify the information 

BIS is seeking from companies. BIS 

anticipates that these changes will lead 

to less ambiguity and more consistency 

in submissions from industry and thus 

will allow BIS to improve the 

assessment of the economic effects of 

offsets on defense trade. 

This proposed rule is also in response 

to a recommendation made by the 

Government Accountability Office 

(GAO) in its June 26, 2008 report 

entitled Defense Production Act: 

Agencies Lack Policies and Guidance 

for Use of Key Authorities (GAO–08– 

854). In its report, the GAO stated that 

Commerce provides useful summaries 

of offsets issues in its annual report to 

Congress, but that the type of data 

collected from prime contractors limits 

the ability of BIS to effectively analyze 

the impact of offsets on the U.S. 

economy. Consequently, the GAO 

recommended that Commerce update its 

offset reporting regulation to request 

more precise information on the 

industry sectors that offset activity was 

occurring in from prime contractors, in 

order to improve the assessment of the 

economic effects of offsets. 

The revisions proposed in this rule 

are not anticipated to impose significant 

new burdens on parties subject to the 

reporting requirements of the Offset 

Reporting Regulation. 

Specific Changes That Would be Made 

by This Proposed Rule 

This rule would amend the last 

sentence of § 701.1 of the Offset 

Reporting Regulation to reflect that 

Commerce has already submitted and 

will continue to submit reports to 

Congress. The current § 701.1 suggests 

only that Commerce will be submitting 

reports in the future. 

In addition, this rule would amend 

certain definitions in § 701.2 of the 

Offset Reporting Regulation to reflect 

BIS’s 15-year experience in preparing 

the report to Congress. Specifically, the 

illustrative list of activities listed in the 

definition of ‘‘offset transaction’’ in 

§ 701.2(f) would be updated. Activities 

not commonly reported to BIS would be 

removed (i.e., countertrade, barter, 

counterpurchase, and buy back) and 

replaced with activities that are 

frequently reported (i.e., credit 

assistance, training, and purchase). This 

list remains illustrative. 

This rule also would amend the 

definitions for ‘‘direct offset’’ and 

‘‘indirect offset’’ in § 701.2(g) and 

§ 701.2(h) of the Offset Reporting 

Regulation. The current references to 

‘‘defense articles’’ and ‘‘defense goods’’ 

in the definitions of ‘‘direct offset’’ and 

‘‘indirect offset’’ would be deleted to 

clarify that U.S. firms are required to 

report on all offset transactions for 

which offset credit of $250,000 or more 

has been claimed from a foreign 

representative, even if the offset 

transaction itself does not involve a 

defense article or service (i.e., items or 

services controlled pursuant to the 

International Traffic in Arms 

Regulations (22 CFR Parts 120–130) 

(ITAR)). Companies regularly report 

information to Commerce on offset 

transactions that do not involve defense 

articles or defense services. This change 

would clarify the intent of the reporting 

requirement and would reflect current 

reporting practices. Companies are 

required to keep records of each offset 

transaction for which offset credit is 

claimed, so this information is readily 

available to firms that are required to 

report under this section. The 

definitions would further be clarified 

and examples would be provided to 

illustrate the differences between direct 

and indirect offsets. 

This rule would modify § 701.4 of the 

Offset Reporting Regulation by 

reordering the section in a logical 

fashion, beginning with the reporting 

period and date by which reports shall 

be submitted to BIS, followed by 

updated reporting instructions, and 

finally the contents of the required 

reports to BIS related to offset 

agreements and offset transactions 

concluded during the reporting period. 

BIS feels that this reordering will make 

it easier for those affected by this 

regulation to identify all of the 

information they need to submit timely 

and accurate reports. This section 

would also note that BIS publishes an 

annual notice in the Federal Register to 

remind companies of their 

responsibility to report on offset 

agreements and transactions and the 

deadline. 

This rule would update the reporting 

instructions described in § 701.4(b) of 

the Offset Reporting Regulation 

regarding the address to which reported 

offsets data should be submitted, 

including through the addition of a new 

e-mail address. Reports are now 

requested to be submitted in both 

hardcopy format and electronic format 

when possible. This rule would also 

delete references to outdated software 

and hardware formats described in 

§ 701.4(c) of the Offset Reporting 

Regulation. 

The provisions of the Offset Reporting 

Regulation currently describing the 

contents of reports on offsets 

transactions (§ 701.4(d)) and offsets 

agreements entered into (§ 701.4(e)) 

would also be reordered so that offset 

agreement reporting requirements 

would be described in § 701.4(c)(1) and 

then offset transaction reporting 

requirements would be described later 

in § 701.4(c)(2). BIS believes it makes 

more sense to first describe reporting 

requirements for offsets agreements, and 

then describe reporting requirements for 

offsets transactions taken pursuant to 

offsets agreements. In addition, 

terminology would be updated and 

revised to ensure consistency 

throughout Part 701. BIS had used the 

term ‘‘weapon system’’ in § 701.4(d) and 

§ 701.4(e). The proposed rule would 

replace the term ‘‘weapon system’’ with 

‘‘military export sale,’’ a defined term in 

§ 701.2, which BIS believes is a more 

appropriate term in § 701.4 because not 

all reported defense sales with offset 

agreements are of weapon systems. 

Further, additional clarifying changes 

would be made to the descriptions of 

information required to be reported 

under § 701.4 of the Offset Reporting 

Regulation. 

This proposed rule would eliminate 

the requirement, currently found in 

§ 701.4(e)(1)(iii) of the Offset Reporting 


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19468 Federal Register / Vol. 74, No. 81 / Wednesday, April 29, 2009 / Proposed Rules 

Regulation, that companies report the 

names and titles of the signatories to 

offset agreements. BIS believes that this 

information is not necessary for the 

preparation of BIS’s annual report to 

Congress. Under proposed 

§ 701.4(c)(1)(iv), companies would 

instead be required to report only the 

identity of the foreign government 

agency or branch that is a signatory to 

the offset agreement. 

The proposed rule would also 

separate the reporting requirements on 

offset agreement performance measures 

and non-performance penalties 

currently found in § 701.4(e)(1)(vii) of 

the Offset Reporting Regulation. The 

current section contemplates that nonperformance penalties would be 

included in a description of 

performance measures. However, BIS 

experience has revealed that such 

penalties are best treated as a separate 

category. Accordingly, Sections 

701.4(c)(1)(viii) and 701.4(c)(1)(ix) in 

the proposed rule clarify the reporting 

requirements concerning offset 

agreement performance measures and 

non-performance penalties respectively 

and include lists of examples for each 

based on data collected during the past 

15 years. 

The proposed rule would require 

companies to assign the appropriate 

North American Industry Classification 

System (NAICS) code(s) to each military 

export sale for which there is an offset 

agreement triggering a reporting 

requirement (see proposed 

§ 701.4(c)(1)(iii)), and to each offset 

transaction reported under the Offset 

Reporting Regulation (see proposed 

§ 701.4(c)(2)(iv)). NAICS is the standard 

industrial classification system used in 

the United States. In the current 

regulation, BIS asks industry to classify 

offset transactions by broad industry 

classification and provide a name and 

description of the military export sale. 

Firms are directed to the Standard 

Industrial Classification (SIC) codes for 

assistance in identifying an appropriate 

industry category for offset transactions. 

The SIC has been replaced by the 

NAICS. (See 62 FR 17288, Apr. 4, 1997.) 

All companies that conduct business 

with the U.S. Government are required 

to classify their products and services, 

including those regularly involved in 

military export sales reported to 

Commerce, in accordance with the 

NAICS (See Central Contractor 

Registration Handbook, http:// 

www.ccr.gov). The U.S. Census Bureau 

posts instructions on its Web site on 

how to properly classify products and 

services in accordance with the NAICS. 

Requiring respondents to classify 

military export sales and offset 

transactions by NAICS codes will 

ensure that submissions under the 

Offset Reporting Regulation are 

prepared in a consistent manner. This 

change will also allow BIS to gather 

more accurate information on military 

export sales and offset transactions 

because NAICS is more specific and will 

enhance BIS’s ability to assess the 

economic impact of offsets on the U.S. 

industrial base by allowing BIS to better 

utilize other data published by 

statistical agencies of the U.S. 

Government. BIS has included 

illustrative examples in § 701(c)(1)(iii) 

and § 701(c)(2)(iv) of the proposed rule 

on classifying military export sales and 

offset transactions by NAICS codes. 

This proposed rule also would require 

companies to report for each offset 

transaction the date when the related 

offset agreement was signed 

(§ 701.4(c)(2)(ii)). This data will allow 

BIS to better track the fulfillment of 

offset agreements and identify trends in 

offset transaction activity. Companies 

involved in defense exports and offset 

agreements are required to keep records 

of each offset transaction for which 

offset credit is claimed so they can 

accurately account for their obligations, 

so this information is readily available 

to firms reporting under this section. 

The proposed rule also would revise 

examples of offset transaction 

categories. Section 701.4(d)(1)(vii) in the 

current regulation, entitled ‘‘Description 

of Offset Product/Service’’, would be 

replaced by § 701.4(c)(2)(iii), entitled 

‘‘Offset Transaction Category.’’ The 

categories of offset transactions listed as 

examples in the new section more 

accurately reflect the types of offset 

transactions that have been reported to 

BIS since 1994. In particular, the 

category of ‘‘cash payment’’ will be 

removed, and the categories of ‘‘licensed 

production’’, ‘‘overseas investment’’, 

and ‘‘credit assistance’’ will be added, 

as will a suggestion that other categories 

could be labeled ‘‘other’’ and 

accompanied by a description. 

Finally, this rule would add a new 

section, § 701.6, to the Offset Reporting 

Regulation, to describe the penalties 

available under the Defense Production 

Act should companies not comply with 

this regulation. Willful violation of the 

Defense Production Act may result in 

punishment 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 government may also seek an 

injunction from a court of appropriate 

jurisdiction to prohibit the continuance 

of any violation of, or to enforce 

compliance with, the Defense 

Production Act. 

Rulemaking Requirements 

1. This rule has been determined to be 

significant for purposes of Executive 

Order 12866. 

2. Notwithstanding any other 

provision of law, no person is required 

to respond to nor be subject to a penalty 

for failure to comply with a collection 

of information, subject to the 

requirements of the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.) (PRA), unless that collection of 

information displays a currently valid 

Office of Management and Budget 

(OMB) Control Number. This regulation 

contains a collection previously 

approved by the OMB under control 

number 0694–0084, which carries a 

burden hour estimate of nine hours for 

a reporting firm to prepare and submit 

once per year. In addition, this proposed 

rule will amend that collection for 

reporting on offset agreements and 

transactions by NAICS code, which 

carries an estimated burden of three 

hours for companies submitting annual 

reports to BIS. The 60-day comment 

period on this proposed rule will also 

serve as the public comment period 

regarding the burden of the collection of 

information associated with preparation 

and submission of offset agreements and 

transactions by NAICS code. Send 

comments regarding this burden 

estimate or any other aspect of this 

collection of information, including 

suggestions for reducing the burden, to 

Jasmeet K. Seehra, Office of 

Management and Budget, by e-mail at 

jseehra@omb.eop.gov or by fax to (202) 

395–7285 and to the Offsets Program 

Manager, Bureau of Industry and 

Security, Department of Commerce, as 

indicated in the ADDRESSES section of 

this proposed rule. 

3. This rule does not contain policies 

with Federalism implications as that 

term is defined in Executive Order 

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 a regulatory flexibility 

analysis 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, 

unless the agency certifies that the rule 

will not have a significant economic 

impact on a substantial number of small 

entities. 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 statute 

does not require the agency to prepare 


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Federal Register / Vol. 74, No. 81 / Wednesday, April 29, 2009 / Proposed Rules 19469 

a regulatory flexibility analysis. 

Pursuant to section 605(b), the Chief 

Counsel of Regulations, Department of 

Commerce, certified to the Chief 

Counsel for Advocacy, Small Business 

Administration, that this proposed rule, 

if promulgated, will not have a 

significant impact on a substantial 

number of small entities for the reasons 

explained below. Consequently, BIS has 

not prepared a regulatory flexibility 

analysis. 

Small entities include small 

businesses, small organizations and 

small governmental jurisdictions. For 

purposes of assessing the impacts of this 

proposed rule on small entities, small 

entity is defined as: (1) A small business 

according to RFA default definitions for 

small business (based on SBA size 

standards), (2) a small governmental 

jurisdiction that is a government of a 

city, town, school district or special 

district with a population of less than 

50,000, and (3) a small organization that 

is any not-for-profit enterprise which is 

independently owned and operated and 

is not dominant in its field. BIS has 

determined that this final rule would 

not affect any of these categories of 

small entities. 

Since BIS began collecting in 1994, 

virtually all of the submissions that it 

received are from a small number of 

very large companies that do not meet 

the SBA size standards for a small 

business. Since 1994, the number of 

companies that submit data to BIS 

pursuant to this regulation has been less 

than 25 per year. On average, the 

companies that submit data to BIS have 

annual revenues well in excess of $1 

billion. For instance, in the most recent 

year in which BIS collected data 

pursuant to this regulation, only four of 

the 25 companies that submitted data 

had reported revenue of less than $1 

billion with the lowest revenue at $120 

million. According to SBA’s size 

standards, the maximum annual 

revenue for a small business is $33.5 

million and the maximum number of 

employees is between 500 and 1,000. 

Some small businesses likely are 

involved in fulfilling offset obligations 

by acting as subcontractors to the large 

prime contractors that report directly to 

BIS, meaning that they report indirectly 

to BIS pursuant to this section. 

However, this proposed rule will not 

significantly increase the burden on 

such companies. The information 

collected by BIS pursuant to this section 

is already collected by such small 

businesses so that they can accurately 

account for their obligations under the 

offset agreement and report them to the 

prime contractor. The only new 

reporting requirement in this proposed 

rule is the classification of offset 

agreements and transactions by NAICS 

code. Even subcontractors involved in 

the manufacture of defense articles are 

likely to conduct business with the U.S. 

government and, therefore, be required 

to classify their products and services, 

in accordance with the NAICS (See 

Central Contractor Registration 

Handbook, http://www.ccr.gov). In 

addition, the U.S. government takes 

steps to facilitate selection of the correct 

NAICS code by private parties. The U.S. 

Census Bureau posts instructions on its 

Web site on how to properly classify 

products and services in accordance 

with the NAICS. BIS has included 

illustrative examples in § 701(c)(1)(iii) 

and § 701(c)(2)(iv) on classifying 

military export sales and offset 

transactions by NAICS codes. 

In addition, small governmental 

entities and small organizations, not 

being businesses, are not likely to be 

involved in international defense trade, 

and would therefore have no reason to 

submit data to BIS pursuant to this 

regulation. Consequently, this proposed 

rule, if promulgated, will not have a 

significant impact on a substantial 

number of small entities. 

List of Subjects in 15 CFR Part 701 

Administrative practice and 

procedure, Arms and munitions, 

Business and industry, Exports, 

Government contracts, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the National Security 

Industrial Base Regulations (15 CFR 

parts 700–709) are amended as follows: 

PART 701—AMENDED 

1. The authority citation for part 701 

is revised to read as follows: 

Authority: 50 U.S.C. App. 2099 and 

Executive Order 12919, 59 FR 29525, 3 CFR, 

1994 Comp. 901 and Executive Order 13286, 

68 FR 10619, 3 CFR, 2003 Comp. 166. 

2. In § 701.1, revise the last sentence 

in the section to read: 

§ 701.1 Purpose. 

* * * Summary reports are 

submitted annually to Congress 

pursuant to Section 309 of the Defense 

Production Act of 1950, as amended. 

3. In § 701.2, revise paragraphs (f), (g), 

and (h) to read as follows: 

§ 701.2 Definitions. 

* * * * * 

(f) Offset Transaction—Any activity 

for which the U.S. firm claims credit for 

full or partial fulfillment of the offset 

agreement. Activities to implement 

offset agreements include coproduction, technology transfer, 

subcontracting, credit assistance, 

training, licensed production, overseas 

investment, and purchases. 

(g) Direct Offset—an offset transaction 

directly related to the article(s) or 

service(s) exported or to be exported 

pursuant to the military export sales 

agreement. For example, a U.S. firm 

subcontracting with a foreign firm to 

supply a subassembly for a defense 

article exported pursuant to that 

military export sales agreement could be 

a direct offset. 

(h) Indirect Offset—an offset 

transaction unrelated to the article(s) or 

service(s) exported or to be exported 

pursuant to the military export sales 

agreement. For example, a U.S. firm coproducing, with a foreign government or 

foreign firm, an item unrelated to an 

article or service exported pursuant to 

that military export sales agreement 

could be an indirect offset. 

4. Section 701.4 is revised to read as 

follows: 

§ 701.4 Procedures. 

(a) Reporting period. The Department 

of Commerce publishes a notice in the 

Federal Register annually reminding 

the public that U.S. firms are required 

to report annually on contracts for the 

sale of defense-related items or defenserelated services to foreign governments 

or foreign firms that are subject to offset 

agreements exceeding $5,000,000 in 

value. U.S. firms are also required to 

report annually on offset transactions 

completed in performance of existing 

offset commitments for which offset 

credit of $250,000 or more has been 

claimed from the foreign representative. 

Such reports must be submitted to the 

Department of Commerce no later than 

June 15 of each year for offset agreement 

and transaction data for the previous 

calendar year. 

(b) Reporting instructions. 

(1) To avoid double counting, firms 

shall report only offset transactions that 

they are directly responsible for 

reporting to the foreign customer (i.e., 

prime contractors shall report for their 

subcontractors if the subcontractors are 

not a direct party to the offset 

agreement). 

(2) Reports must be submitted in 

hardcopy to the Offset Program 

Manager, U.S. Department of 

Commerce, Bureau of Industry and 

Security, Room 3876, 14th Street and 

Pennsylvania Avenue, NW., 

Washington, DC 20230, and as an e-mail 

attachment to OffsetReport@bis.doc.gov. 

E-mail attachments must include the 

information in a computerized 

spreadsheet or database format. If 

unable to submit a report in 


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19470 Federal Register / Vol. 74, No. 81 / Wednesday, April 29, 2009 / Proposed Rules 

computerized format, companies should 

contact the Offset Program Manager for 

guidance. All submissions must include 

a point of contact (name and telephone 

number) and must be submitted by a 

company official authorized to provide 

such information. 

(c) Reports must include the 

information described below. Any 

necessary comments or explanations 

relating to the information shall be 

footnoted and supplied on separate 

sheets attached to the reports. 

(1) Reporting on offset agreements. 

U.S. firms shall provide an itemized list 

of new offset agreements entered into 

during the reporting period, including 

the information about each such 

agreement described in paragraphs 

(c)(1)(i) through (c)(1)(ix) of this section. 

(i) Name of foreign country. Identify 

the country of the foreign entity 

involved in the military export sale 

associated with the offset agreement. 

(ii) Description of the military export 

sale. Provide a name and description of 

the defense article and/or defense 

service referenced in the military export 

sale, as well as the date (month and 

year) of the related offset agreement. 

(iii) Military export sale classification. 

Identify the six-digit North American 

Industry Classification System (NAICS) 

code(s) associated with the military 

export sale. Refer to U.S. Census 

Bureau’s United States NAICS Manual 

for a listing of applicable NAICS codes 

(www.census.gov/epcd/www/ 

naics.html). Paragraphs (c)(1)(iii)(A) 

through (c)(1)(iii)(E) of this section 

provide examples that illustrate how to 

select the appropriate NAICS code in 

the instances described therein. 

(A) Example 1. Company A enters 

into an offset agreement associated with 

the sale of 24 fighter aircraft and guided 

missiles to country B. Fighter aircraft 

manufacturing is classified in the North 

American Industry Classification 

System (NAICS) as NAICS 336411, 

Aircraft Manufacturing. Guided missiles 

are classified in the NAICS as NAICS 

336414, Guided Missile and Space 

Vehicle Manufacturing. 

(B) Example 2. Company B enters into 

an offset agreement associated with the 

sale of a navigation system for a fleet of 

military aircraft to country C. 

Navigation system manufacturing is 

classified in the NAICS as NAICS 

334511, Search, Detection, Navigation, 

Guidance, Aeronautical, and Nautical 

System and Instrument Manufacturing. 

(C) Example 3. Company C enters into 

an offset agreement associated with the 

sale of radio communication equipment 

to country D. Radio communication 

equipment is classified in the NAICS as 

NAICS 334220, Radio and Television 

Broadcasting and Wireless 

Communication Equipment 

Manufacturing. 

(D) Example 4. Company D enters into 

an offset agreement associated with the 

sale of 30 aircraft engines to country E. 

Aircraft engines are classified in the 

NAICS as NAICS 336412, Aircraft 

Engine and Engine Parts Manufacturing. 

(E) Example 5. Company E enters into 

an offset agreement associated with the 

sale of armored vehicles to country F. 

Armored vehicles are classified in the 

NAICS as NAICS 336992, Military 

Armored Vehicle, Tank, and Tank 

Component Manufacturing. 

(iv) Foreign party to offset agreement. 

Identify the foreign government agency 

or branch that is the signatory to the 

offset agreement. 

(v) Military export sale value. Provide 

the dollar value of the military export 

sale. Should the military export sale 

involve more than one NAICS code, 

please separately list the values 

associated with each NAICS code. 

(vi) Offset agreement value. Provide 

the value of the offset agreement. 

(vii) Offset agreement term. Identify 

the term of the offset agreement in 

months. 

(viii) Offset agreement performance 

measures. Identify each category that 

describes the offset agreement’s 

performance measures: best efforts, 

accomplishment of obligation, or other 

(please describe). 

(ix) Offset agreement penalties for 

non-performance. Identify each category 

that describes the offset agreement’s 

penalties for non-performance. For 

example, the agreement may include 

penalties such as liquidated damages, 

debarment from future contracts, added 

offset requirements, fees, commissions, 

bank credit guarantees, or other (please 

describe). 

(2) Reporting on offset transactions. 

U.S. firms shall provide an itemized list 

of offset transactions completed during 

the reporting period, including the 

elements listed in paragraphs (c)(2)(i) 

through (c)(2)(x) of this section for each 

such transaction (estimates are 

acceptable when actual figures are 

unavailable; estimated figures shall be 

followed by the letter ‘‘E’’). 

(i) Name of foreign country. Identify 

the country of the foreign entity 

involved in the military export sale 

associated with the offset transaction. 

(ii) Description of the military export 

sale. Provide a name and description of 

the defense article and/or defense 

service referenced in the military export 

sale associated with the offset 

transaction, as well as the date the offset 

agreement was signed (month and year). 

(iii) Offset transaction category. 

Identify each category that describes the 

offset transaction: co-production, 

technology transfer, subcontracting, 

training, licensing of production, 

overseas investment, purchasing, credit 

assistance or other (please describe). 

(iv) Offset transaction classification. 

Identify the six-digit North American 

Industry Classification System (NAICS) 

code(s) associated with the offset 

transaction. Refer to U.S. Census 

Bureau’s United States NAICS Manual 

for a listing of applicable NAICS codes 

(http://www.census.gov/epcd/www/ 

naics.html). Paragraphs (c)(2)(iv)(A) 

through (c)(2)(iv)(E) of this section 

provide examples that illustrate how to 

select the appropriate NAICS code in 

the instances described therein. 

(A) Example 1. Company A completes 

an offset transaction by co-producing 

aircraft engines in country B. Aircraft 

engine manufacturing is classified in the 

NAICS as NAICS 336412, Aircraft 

Engine and Engine Parts Manufacturing. 

(B) Example 2. Company B completes 

an offset transaction by licensing the 

production of automotive electrical 

switches in country C. Company B also 

assists in structuring a wholesale 

distribution network for these products. 

Automotive electrical switch 

manufacturing is classified in the 

NAICS as NAICS 335931, Current 

Carrying Wiring Device Manufacturing, 

and the wholesale distribution network 

is classified in the NAICS as NAICS 

423120, Motor Vehicle Supplies and 

New Parts Merchant Wholesalers. 

(C) Example 3. Company C completes 

an offset transaction by transferring 

technology to establish a biotechnology 

research center in country D. 

Biotechnology research and 

development is classified in the NAICS 

as NAICS 541711, Research and 

Development in Biotechnology. 

(D) Example 4. Company D completes 

an offset transaction by purchasing steel 

forgings from a steel mill in country E. 

Steel forgings are classified in the 

NAICS as NAICS 331111, Iron and Steel 

Mills. 

(E) Example 5. Company E completes 

an offset transaction by providing 

training assistance services in country F 

to certain plant managers. Training 

assistance is classified in the NAICS as 

NAICS 611430, Professional and 

Management Development Training. 

(v) Offset transaction type. Identify 

the offset transaction as a direct offset 

transaction, an indirect offset 

transaction, or a combination of both. 

(vi) Name of offset performing entity. 

Identify, by name, the entity performing 

the offset transaction on behalf of the 


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Federal Register / Vol. 74, No. 81 / Wednesday, April 29, 2009 / Proposed Rules 19471 

U.S. entity that entered into the offset 

agreement. 

(vii) Name of offset receiving entity. 

Identify the foreign entity receiving 

benefits from the offset transaction. 

(viii) Actual offset value. Provide the 

dollar value of the offset transaction 

without taking into account multipliers 

or intangible factors. Should the offset 

transaction involve more than one 

NAICS code, please list the values 

associated with each NAICS code. 

(ix) Offset credit value. Provide the 

dollar value credits claimed by the 

offset performing entity, including any 

multipliers or intangible factors. Should 

an offset transaction involve more than 

one NAICS code, please list the values 

associated with each NAICS code. 

(x) Offset transaction performance 

location. Name the country where each 

offset transaction was fulfilled, such as 

the purchasing country, the United 

States, or a third country. 

5. Section 701.6 is added to read as 

follows: 

§ 701.6 Violations, penalties, and 

remedies. 

(a) Willful violation of the Defense 

Production Act may result in 

punishment 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. 

(b) The government may seek an 

injunction from a court of appropriate 

jurisdiction to prohibit the continuance 

of any violation of, or to enforce 

compliance with, the Defense 

Production Act and this regulation. 

Dated: April 21, 2009. 

Matthew S. Borman, 

Acting Assistant Secretary for Export 

Administration. 

[FR Doc. E9–9514 Filed 4–28–09; 8:45 am] 

BILLING CODE 3510–JT–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R03–OAR–2008–0898; FRL–8898–5] 

Approval and Promulgation of Air 

Quality Implementation Plans; 

Pennsylvania; Transportation 

Conformity Requirements 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: EPA proposes to approve the 

State Implementation Plan (SIP) 

revision submitted by the 

Commonwealth of Pennsylvania for 

Transportation Conformity 

Requirements. In the Final Rules section 

of this Federal Register, EPA is 

approving the State’s SIP submittal as a 

direct final rule without prior proposal 

because the Agency views this as a 

noncontroversial submittal and 

anticipates no adverse comments. A 

detailed rationale for the approval is set 

forth in the direct final rule. If no 

adverse comments are received in 

response to this action, no further 

activity is contemplated. If EPA receives 

adverse comments, the direct final rule 

will be withdrawn and all public 

comments received will be addressed in 

a subsequent final rule based on this 

proposed rule. EPA will not institute a 

second comment period. Any parties 

interested in commenting on this action 

should do so at this time. 

DATES: Comments must be received in 

writing by May 29, 2009. 

ADDRESSES: Submit your comments, 

identified by Docket ID Number EPA– 

R03–OAR–2008–0898 by one of the 

following methods: 

A. http://www.regulations.gov. Follow 

the on-line instructions for submitting 

comments. 

B. E-mail: febbo.carol@epa.gov. 

C. Mail: EPA–R03–OAR–2008–0898, 

Carol Febbo, Chief, Energy, Radiation 

and Indoor Environment Branch, 

Mailcode 3AP23, U.S. Environmental 

Protection Agency, Region III, 1650 

Arch Street, Philadelphia, Pennsylvania 

19103. 

D. Hand Delivery: At the previouslylisted EPA Region III address. Such 

deliveries are only accepted during the 

Docket’s normal hours of operation, and 

special arrangements should be made 

for deliveries of boxed information. 

Instructions: Direct your comments to 

Docket ID No. EPA–R03–OAR–2008– 

0898. EPA’s policy is that all comments 

received will be included in the public 

docket without change, and may be 

made available online at http:// 

www.regulations.gov, including any 

personal information provided, unless 

the comment includes information 

claimed to be Confidential Business 

Information (CBI) or other information 

whose disclosure is restricted by statute. 

Do not submit information that you 

consider to be CBI (or otherwise 

protected) through http:// 

www.regulations.gov or e-mail. The 

http://www.regulations.gov Web site is 

an ‘‘anonymous access system’’, which 

means EPA will not know your identity 

or contact information unless you 

provide it in the body of your comment. 

If you send an e-mail comment directly 

to EPA without going through http:// 

www.regulations.gov, your e-mail 

address will be automatically captured 

and included as part of the comment 

that is placed in the public docket and 

made available on the Internet. If you 

submit an electronic comment, EPA 

recommends that you include your 

name and other contact information in 

the body of your comment and with any 

disk or CD–ROM you submit. If EPA 

cannot read your comment due to 

technical difficulties and cannot contact 

you for clarification, EPA may not be 

able to consider your comment. 

Electronic files should avoid the use of 

special characters, any form of 

encryption, and be free of any defects or 

viruses. 

Docket: All documents in the 

electronic docket are listed in the 

http://www.regulations.gov index. 

Although listed in the index, some 

information is not publicly available, 

i.e., CBI or other information whose 

disclosure is restricted by statute. 

Certain other material, such as 

copyrighted material, is not placed on 

the Internet and will be publicly 

available only in hard copy form. 

Publicly available docket materials are 

available either electronically in http:// 

www.regulations.gov or in hard copy 

during normal business hours at the Air 

Protection Division, U.S. Environmental 

Protection Agency, Region III, 1650 

Arch Street, Philadelphia, Pennsylvania 

19103. Copies of the State submittal are 

available at Pennsylvania Department of 

Environmental Protection, Bureau of Air 

Quality Control, Rachel Carson State 

Office Building, 400 Market Street, 12th 

Floor, Harrisburg, PA 17105–8468. 

FOR FURTHER INFORMATION CONTACT: 

Martin Kotsch, (215) 814–3335, or by email at kotsch.martin@epa.gov. 

SUPPLEMENTARY INFORMATION: For 

further information, please see the 

information provided in the direct final 

action, with the same title, that is 

located in the ‘‘Rules and Regulations’’ 

section of this Federal Register 

publication. 

Dated: April 15, 2009. 

William C. Early, 

Acting Regional Administrator, Region III. 

[FR Doc. E9–9842 Filed 4–28–09; 8:45 am] 

BILLING CODE 6560–50–P 


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