Document ID: BIS-2020-0013-0001
Agency: bis
Document Type: Rule
Title: Elimination of License Exception Civil End Users (CIV)
Posted Date: 2020-04-28T04:00Z

[Federal Register Volume 85, Number 82 (Tuesday, April 28, 2020)]
[Rules and Regulations]
[Pages 23470-23473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07240]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 740 and 774

[Docket No. 190513446-9446-01]
RIN 0694-AH84

Elimination of License Exception Civil End Users (CIV)

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Final rule.

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SUMMARY: In this final rule, the Bureau of Industry and Security (BIS) 
is amending the Export Administration Regulations (EAR) by removing 
License Exception Civil End Users (CIV) and requiring a license for 
national security-controlled items on the Commerce Control List (CCL) 
to countries of national security concern. This will advance U.S. 
national security interests by allowing U.S. government review of these 
transactions to these countries prior to export, reexport or transfer 
(in-country) in accordance with current licensing policy for national 
security-controlled items on the CCL. This rule also makes conforming 
changes to the CCL by removing the CIV paragraph from each Export 
Control Classification Number on the CCL where it appears.

DATES: This rule is effective June 29, 2020.

FOR FURTHER INFORMATION CONTACT: Eileen Albanese, Director, Office of 
National Security and Technology Transfer Controls, Bureau of Industry 
and Security, Department of Commerce, Phone: (202) 482-0092 or by email 
at eileen.albanese@bis.doc.gov.

SUPPLEMENTARY INFORMATION: 

Background

    The Department of Commerce's Bureau of Industry and Security (BIS) 
administers U.S. laws, regulations and policies governing the export, 
reexport, and transfer (in-country) of commodities, software, and 
technology (collectively ``items'') falling under the jurisdiction of 
the Export Administration Regulations (EAR) (15 CFR, subchapter C, 
parts 730 through 774). The primary goal of this effort is to advance 
U.S. national security, foreign policy, and economic objectives by 
ensuring an effective export control and treaty compliance system and 
promoting continued U.S. strategic technology leadership. Items subject 
to the EAR may require a license or other type of authorization prior 
to export, reexport, or transfer (in-country).
    An export license exception is an authorization allowing export, 
re-export, or transfer (in-country) under stated conditions, of items 
subject to the EAR otherwise requiring a license. Because there are a 
number of circumstances under which a license exception may replace the 
need for a license, there are several types of license exceptions. A 
description of each of the license exception types, as well as 
information regarding license exceptions more generally, can be found 
in 15 CFR part 740, which is available at https://www.bis.doc.gov/index.php/documents/regulations-docs/2341-740-2/file.
    As described in 15 CFR part 736, transactions involving items 
subject to the EAR must abide by 10 general prohibitions. Obligations 
under the ten general prohibitions rely largely on knowledge of the 
details of a transaction, including the classification and destination 
of the item as well as the end-user and end-use of the item. The EAR 
contains a definition of ``knowledge'' and its variants ``know'', 
``reason to know'', or ``reason to believe'' in part 772.

Removal of License Exception CIV (Sec.  740.5 Civil End Users)

    In this final rule, BIS is removing License Exception Civil End-
Users (CIV) (Sec.  740.5 of the EAR), which authorized exports, 
reexports, and transfers (in-country) of certain national security-
controlled items, without prior review by BIS provided the exception's 
criteria were met, to most civil end users for civil end uses in 
Country Group D:1. As

[[Page 23471]]

set forth in Supplement No. 1 to part 740 of the EAR, countries listed 
in Country Group D:1 are of concern for national security reasons. To 
advance the objectives discussed in the Administration's National 
Security Strategy released in December 2017 available on 
www.whitehouse.gov as well as address the challenges discussed in the 
Administration's National Defense Strategy released in January 2018 at 
https://dod.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy-Summary.pdf, BIS is removing License Exception CIV due to the 
increasing integration of civilian and military technology development 
in these countries of concern.
    BIS acknowledges many countries seek to align civil and defense 
technology development for many reasons--to achieve greater efficiency, 
innovation, and growth. This can present an economic challenge to 
nations that export high-tech products, including the United States, as 
individual country goals could also directly support military 
modernization goals contrary to U.S. national security or foreign 
policy interests. This integration also makes it more difficult for 
industry to know or determine whether the end use and end users of 
items proposed for export, reexport or transfer (in-country) will not 
be or are not intended for military uses or military end users. BIS is 
making this determination based on the following data:
     An evaluation of export data from current CIV end-users,
     publicly available strategies of D:1 countries currently 
implementing civil-military integration strategies to obscure U.S. 
exporters from easily determining if a national-security controlled 
item will not be or is not intended to be exported, reexported or 
transferred (in-country) to military uses or military end users, and
     U.S. Government enforcement actions identifying diversion 
of U.S.-origin items to military end uses and military end users by 
purported civil end users in these countries.
    Based on the above discussion, and in line with the objectives 
discussed in the National Security Strategy and National Defense 
Strategy, BIS has determined that transactions involving the national 
security-controlled items currently permitted under CIV should be 
reviewed by the U.S. Government prior to export, reexport or transfer 
(in-country). By removing License Exception CIV and requiring a license 
for national security-controlled items to Country Group D:1 
destinations, U.S. national security interests are maintained as the 
Government will then review each transaction prior to export in 
accordance with the licensing policy set forth in Sec.  742.4(b) of the 
EAR.

Changes To Conform the CCL for the Removal of License Exception CIV

    This final rule makes conforming changes to Supplement No. 1 to 
part 774 (the Commerce Control List). The Commerce Control List 
identifies controlled items by Export Control Classification Number 
(ECCN). An ECCN is typically made up of four sections, including a 
section for the list-based license exceptions, which, where applicable, 
provide eligibility for the ECCN-driven License Exceptions. As a 
conforming change to the removal of License Exception CIV, this final 
rule by amendatory instruction removes the CIV paragraph from the List-
Based License Exceptions section wherever it appears in ECCNs on the 
CCL.

Export Control Reform Act of 2018

    On August 13, 2018, the President signed into law the John S. 
McCain National Defense Authorization Act for Fiscal Year 2019, which 
included the Export Control Reform Act of 2018 (ECRA) (50 U.S.C. 4801-
4852) that provides the legal basis for BIS's principal authorities and 
serves as the authority under which BIS issues this rule. As set forth 
in Section 1768 of ECRA, all delegations, rules, regulations, orders, 
determinations, licenses, or other forms of administrative action that 
have been made, issued, conducted, or allowed to become effective under 
the Export Administration Act of 1979 (50 U.S.C. 4601 et seq.) (as in 
effect prior to August 13, 2018 and as continued in effect pursuant to 
the International Emergency Economic Powers Act (50 U.S.C. 1701 et 
seq.) and Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., 
p. 783 (2002), as amended by Executive Order 13637 of March 8, 2013, 78 
FR 16129 (March 13, 2013), and as extended by the Notice of August 14, 
2019, 84 FR 41881 (August 15, 2019)), or the Export Administration 
Regulations, and are in effect as of August 13, 2018, shall continue in 
effect according to their terms until modified, superseded, set aside, 
or revoked under the authority of ECRA.

Rulemaking Requirements

    1. Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This final rule has been designated a ``significant 
regulatory action,'' although not economically significant, under 
section 3(f) of Executive Order 12866.
    2. This final rule is not subject to the requirements of E.O. 13771 
(82 FR 9339, February 3, 2017) because it is issued with respect to a 
national security function of the United States. As described in this 
rule and consistent with the Administration's National Security 
Strategy and National Defense Strategy, removing and modifying the 
license exception CIV for D:1 countries would enhance United States' 
national security by reducing the risk that exports, reexports, and 
transfers (in-country) of items subject to the EAR could be diverted 
and contribute to the military capability of countries of concern. 
Review of these transactions before completion enhances the 
Government's visibility in this area and mitigates the risk associated 
with certain items on the CCL being used contrary to U.S. national 
security interests. Thus, the cost-benefit analysis required pursuant 
to Executive Orders 13563 and 12866 indicate this rule is intended to 
improve national security as its primary direct benefit. Accordingly, 
this rule meets the requirements set forth in the April 5, 2017, Office 
of Management and Budget (OMB) guidance implementing E.O. 13771 (82 FR 
9339, February 3, 2017), regarding what constitutes a regulation issued 
``with respect to a national security function of the United States,'' 
and it is, therefore, exempt from the requirements of E.O. 13771.
    3. Notwithstanding any other provision of law, no person is 
required to respond to, nor may be made subject to a penalty for 
failure to comply, with a collection of information subject to the 
requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et 
seq.) (PRA), unless that collection of information displays a currently 
valid OMB Control Number. This regulation involves collections 
previously approved by OMB under control number 0694-0088, Simplified 
Network Application Processing System, which includes, among other 
things, license applications and carries a burden estimate of 42.5 
minutes for a manual or electronic submission.
    BIS expects the total burden hours associated with this collection 
to increase. BIS notes for the purposes of

[[Page 23472]]

discussing change in burden that exports can be more than physical 
overseas shipments of commodities. Exports may be either ``'tangible'' 
or ``intangible''. Tangible items can be exported by ship or aircraft, 
sent by post or courier, or carried in checked-in or hand-held luggage. 
They can include technology stored on a physical medium such as a USB 
or computer hard drive or in the form of blueprints, diagrams, or 
notes. An ``intangible export'' occurs when a person in the U.S. 
releases or transfers controlled technology by to a foreign person 
verbally or electronic means by email, fax, telephone, video 
conferencing, or providing access to electronic files that contain 
technology.
    Tangible shipments that were previously authorized for export, 
reexport or transfer (in-country) under License Exception CIV will 
require a license or other license authorization under the EAR. BIS 
expects the burden hours on these tangible transactions to increase but 
anticipates a limited impact based on evaluation of current export data 
regarding CIV usage and the fact that once issued, BIS licenses 
typically have a four-year validity period and may include prospective 
sales. Additionally, while BIS recognizes that there may be increased 
burden hours relating to the intangible exports, as well as the 
tangible and intangible re-exports and in-country transfers currently 
authorized by License Exception CIV, there is no readily available data 
at this time to estimate the increase as there are no filing 
requirements for these types of transactions. You may send comments 
regarding the collection of information associated with this rule, 
including suggestions for reducing the burden, to Jasmeet K. Seehra, 
Office of Management and Budget (OMB), by email to 
Jasmeet_K._Seehra@omb.eop.gov, or by fax to (202) 395-7285.
    4. This rule does not contain policies with federalism implications 
as that term is defined in Executive Order 13132.
    5. Pursuant to section 1762 of the Export Control Reform Act of 
2018 (50 U.S.C 4801-4852, at 4821), which was included in the John S. 
McCain National Defense Authorization Act for Fiscal Year 2019 (Pub. L. 
115-232, 132 Stat. 1636), this action is exempt from the Administrative 
Procedure Act (5 U.S.C. 553) requirements for notice of proposed 
rulemaking, opportunity for public participation, and delay in 
effective date.
    6. Because a notice of proposed rulemaking and an opportunity for 
public comment are not required to be given for this rule by 5 U.S.C. 
553, or by any other law, the analytical requirements of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq., are not applicable. 
Accordingly, no regulatory flexibility analysis is required and none 
has been prepared.

List of Subjects

15 CFR Part 740

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

15 CFR Part 774

    Exports, Reporting and recordkeeping requirements.
    Accordingly, parts 740 and 774 of the Export Administration 
Regulations (15 CFR parts 730-774) are amended as follows:

PART 740--[AMENDED]

0
1. The authority citation for 15 CFR part 740 continues to read as 
follows:

    Authority:  50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50 
U.S.C. 1701 et seq.; 22 U.S.C. 7201 et seq.; E.O. 13026, 61 FR 
58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 
2001 Comp., p. 783.

Sec.  740.5   [Removed and Reserved]

0
2. Remove and reserve Sec.  740.5.

PART 774--[AMENDED]

0
3. The authority citation for 15 CFR part 774 continues to read as 
follows:

    Authority:  50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.; 50 
U.S.C. 1701 et seq.; 10 U.S.C. 8720; 10 U.S.C. 8730(e); 22 U.S.C. 
287c, 22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; 42 U.S.C. 2139a; 15 
U.S.C. 1824; 50 U.S.C. 4305; 22 U.S.C. 7201 et seq.; 22 U.S.C. 7210; 
E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 
FR 44025, 3 CFR, 2001 Comp., p. 783.

Supplement No. 1 to Part 774 [Amended]

0
4. In Supplement No. 1 to part 774, remove the CIV paragraph from the 
List-based License Exceptions section in the following ECCNs: 0A018, 
0A501, 0A502, 0A503, 0A504, 0A505, 0A602, 0A604, 0A606, 0A614, 0A617, 
0A919, 0A978, 0A979, 0A981, 0A982, 0A983, 0A998, 0A999, 0B501, 0B505, 
0B602, 0B604, 0B606, 0B614, 0B617, 0B999, 0C606, 0C617, 0D001, 0D501, 
0D505, 0D602, 0D604, 0D606, 0D614, 0D617, 0D999, 0E001, 0E501, 0E502, 
0E504, 0E505, 0E602, 0E604, 0E606, 0E614, 0E617, 0E982, 1A001, 1A002, 
1A003, 1A004, 1A005, 1A006, 1A007, 1A008, 1A101, 1A202, 1A225, 1A226, 
1A227, 1A231, 1A290, 1A607, 1A613, 1A984, 1A985, 1A995, 1A999, 1B001, 
1B002, 1B003, 1B018, 1B101, 1B102, 1B115, 1B116, 1B117, 1B118, 1B119, 
1B201, 1B225, 1B226, 1B228, 1B229, 1B230, 1B231, 1B232, 1B233, 1B234, 
1B607, 1B608, 1B613, 1B999, 1C001, 1C002, 1C003, 1C004, 1C005, 1C006, 
1C007, 1C008, 1C009, 1C010, 1C011, 1C101, 1C107, 1C111, 1C116, 1C117, 
1C118, 1C202, 1C210, 1C216, 1C225, 1C226, 1C227, 1C228, 1C229, 1C230, 
1C231, 1C232, 1C233, 1C234, 1C235, 1C236, 1C237, 1C239, 1C240, 1C241, 
1C298, 1C350, 1C351, 1C353, 1C354, 1C355, 1C395, 1C607, 1C608, 1C990, 
1C991, 1C992, 1C995, 1C996, 1C997, 1C998, 1C999, 1D001, 1D002, 1D003, 
1D018, 1D101, 1D103, 1D201, 1D390, 1D607, 1D608, 1D613, 1D993, 1D999, 
1E001, 1E002, 1E101, 1E102, 1E103, 1E104, 1E201, 1E202, 1E203, 1E350, 
1E351, 1E355, 1E607, 1E608, 1E613, 1E994, 1E998, 2A001, 2A101, 2A225, 
2A226, 2A290, 2A291, 2A983, 2A984, 2A991, 2A992, 2A993, 2A994, 2A999, 
2B001, 2B002, 2B003, 2B004, 2B005, 2B006, 2B007, 2B008, 2B009, 2B104, 
2B105, 2B109, 2B116, 2B117, 2B119, 2B120, 2B121, 2B122, 2B201, 2B204, 
2B206, 2B207, 2B209, 2B225, 2B226, 2B227, 2B228, 2B229, 2B230, 2B231, 
2B232, 2B233, 2B350, 2B351, 2B352, 2B991, 2B992, 2B993, 2B996, 2B997, 
2B998, 2B999, 2D001, 2D002, 2D003, 2D101, 2D201, 2D202, 2D290, 2D351, 
2D983, 2D984, 2D991, 2D992, 2D993, 2D994, 2E001, 2E002, 2E003, 2E018, 
2E101, 2E201, 2E290, 2E301, 2E983, 2E984, 2E991, 2E993, 2E994, 3A001, 
3A002, 3A003, 3A101, 3A201, 3A225, 3A226, 3A227, 3A228, 3A229, 3A230, 
3A231, 3A232, 3A233, 3A234, 3A611, 3A980, 3A981, 3A991, 3A992, 3A999, 
3B001, 3B002, 3B611, 3B991, 3B992, 3C001, 3C002, 3C003, 3C004, 3C005, 
3C006, 3C992, 3D001, 3D002, 3D003, 3D004, 3D005, 3D101, 3D201, 3D202, 
3D611, 3D980, 3D991, 3E001, 3E002, 3E003, 3E101, 3E102, 3E201, 3E202, 
3E611, 3E980, 3E991, 4A001, 4A003, 4A004, 4A101, 4A980, 4A994, 4D001, 
4D980, 4D993, 4D994, 4E001, 4E980, 4E992, 4E993, 5A001, 5A101, 5A980, 
5A991, 5B001, 5B991, 5C991, 5D001, 5D101, 5D980, 5D991, 5E001, 5E101, 
5E980, 5E991, 5A002, 5A992, 5A003, 5A004, 5B002, 5D002, 5D992, 5E002, 
5E992, 6A001, 6A002, 6A003, 6A004, 6A005, 6A006, 6A007, 6A008, 6A102, 
6A107, 6A108, 6A202, 6A203, 6A205, 6A225, 6A226, 6A991, 6A992, 6A993, 
6A994, 6A995, 6A996, 6A997, 6A998, 6A999, 6B004, 6B007, 6B008, 6B108, 
6B619, 6B995, 6C002, 6C004, 6C005, 6C992, 6C994, 6D001, 6D002, 6D003, 
6D102, 6D103, 6D201, 6D619, 6D991, 6D992, 6D993, 6E001, 6E002, 6E003, 
6E101, 6E201, 6E202, 6E619, 6E991, 6E992, 6E993, 7A001, 7A002, 7A003, 
7A004, 7A005, 7A006, 7A008, 7A101, 7A102,

[[Page 23473]]

7A103, 7A104, 7A105, 7A107, 7A116, 7A611, 7A994, 7B001, 7B002, 7B003, 
7B101, 7B102, 7B611, 7B994, 7D001, 7D002, 7D003, 7D004, 7D005, 7D101, 
7D102, 7D611, 7D994, 7E001, 7E002, 7E003, 7E004, 7E101, 7E102, 7E611, 
7E994, 8A001, 8A002, 8A609, 8A620, 8A992, 8B001, 8B609, 8B620, 8C001, 
8C609, 8D001, 8D002, 8D609, 8D620, 8D992, 8D999, 8E001, 8E002, 8E609, 
8E620, 8E992, 9A001, 9A002, 9A003, 9A004, 9A012, 9A101, 9A102, 9A106, 
9A110, 9A115, 9A120, 9A515, 9A604, 9A610, 9A619, 9A620, 9A980, 9A990, 
9A991, 9A992, 9B001, 9B002, 9B003, 9B004, 9B005, 9B006, 9B007, 9B008, 
9B009, 9B010, 9B104, 9B105, 9B106, 9B115, 9B116, 9B117, 9B515, 9B604, 
9B610, 9B619, 9B620, 9B990, 9B991, 9C110, 9C610, 9C619, 9D001, 9D002, 
9D003, 9D004, 9D101, 9D104, 9D515, 9D604, 9D610, 9D619, 9D620, 9D990, 
9D991, 9E001, 9E002, 9E003, 9E101, 9E102, 9E515, 9E604, 9E610, 9E619, 
9E620, 9E990, 9E991, and 9E993.

Matthew S. Borman,
Deputy Assistant Secretary for Export Administration.
[FR Doc. 2020-07240 Filed 4-27-20; 8:45 am]
 BILLING CODE 3510-33-P