Document ID: BIS-2015-0013-0001
Agency: bis
Document Type: Proposed Rule
Title: Export Administration Regulations: Destination Control Statements; Harmonization
Posted Date: 2015-05-22T04:00Z

[Federal Register Volume 80, Number 99 (Friday, May 22, 2015)]
[Proposed Rules]
[Pages 29551-29554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12298]

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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 80, No. 99 / Friday, May 22, 2015 / Proposed 
Rules  

[[Page 29551]]

DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 758

[Docket No. 150107020-5160-01]
RIN 0694-AG47

Export Administration Regulations (EAR): Harmonization of the 
Destination Control Statements

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule would revise the destination control 
statement in the Export Administration Regulations (EAR) to harmonize 
the statement required for the export of items subject to the EAR with 
the destination control statement in the International Traffic in Arms 
Regulations (ITAR).
    This proposed rule is published in conjunction with the publication 
of a Department of State, Directorate of Defense Trade Controls 
proposed rule revising the destination control statement in the ITAR. 
Both proposed rules being published today by the Departments of 
Commerce and State are part of the President's Export Control Reform 
Initiative. This proposed rule is also part of Commerce's retrospective 
regulatory review plan under Executive Order (E.O.) 13563 (see the 
SUPPLEMENTARY INFORMATION for availability of the plan).

DATES: The Bureau of Industry and Security will accept comments on this 
proposed rule until July 6, 2015.

ADDRESSES: You may submit comments by any of the following methods:
     By the Federal eRulemaking Portal: http://www.regulations.gov. The identification number for this rulemaking is 
BIS-2015-0013.
     By email directly to publiccomments@bis.doc.gov. Include 
RIN 0694-AG47 in the subject line.
     By mail or delivery to Regulatory Policy Division, Bureau 
of Industry and Security, U.S. Department of Commerce, Room 2099B, 14th 
Street and Pennsylvania Avenue NW., Washington, DC 20230. Refer to RIN 
0694-AG47.

FOR FURTHER INFORMATION CONTACT: For questions about this rule, contact 
Timothy Mooney, Regulatory Policy Division, Office of Exporter 
Services, Bureau of Industry and Security, at 202-482-2440 or email: 
timothy.mooney@bis.doc.gov.

SUPPLEMENTARY INFORMATION: 

Background

    The EAR currently requires exporters to include a destination 
control statement, specified in Sec.  758.6 (Destination control 
statement and other information furnished to consignees) of the EAR, on 
certain export control documents that accompany a shipment for most 
exports. The purpose of this statement is to alert other parties 
outside the United States that receive the item that the item is 
subject to the EAR, the item was exported in accordance with the EAR, 
and that diversion contrary to U.S. law is prohibited.
    The ITAR, under Sec.  123.9(b)(1), also includes the same type of 
destination control statement requirement, but specific to the ITAR 
context and with slightly different text than what is used under the 
EAR, although the purpose of the destination control statement 
requirements is the same under both sets of export control regulations. 
As a general principle under the Export Control Reform (ECR) 
implementation that is currently underway, wherever the ITAR and EAR 
have provisions that are intended to achieve the same purpose, the U.S. 
Government is making an effort to harmonize those provisions, except 
when circumstances exist that require that those provisions remain 
different. The destination control statement requirements under the 
ITAR and the EAR are an example of requirements that can and should be 
harmonized to reduce the burden on exporters, improve compliance, and 
ensure the regulations are achieving their intended purpose for use 
under the U.S. export control system, specifically under the 
transactions ``subject to the ITAR'' and ``subject to the EAR.'' The 
proposed harmonization changes to be made to the EAR are described 
below under the heading ``Harmonization of destination control 
statement.''

Harmonization of Destination Control Statement

    This proposed rule would revise Sec.  758.6 of the EAR to harmonize 
the destination control statement requirement text with Sec.  
123.9(b)(1) of the ITAR. This change would be made to facilitate 
implementation of the President's Export Control Reform Initiative, 
which has transferred thousands of formerly ITAR controlled defense 
article parts and components, along with other items, to the Commerce 
Control List in the EAR under the jurisdiction of the Department of 
Commerce.
    This change in jurisdiction for many of the parts and components 
for military systems has increased incidence of exporters' shipping 
articles subject to both the ITAR and the EAR in the same shipment. 
Both regulations have a mandatory destination control statement that 
must be on the export control documents for shipments that include 
items subject to those regulations. This has caused confusion to 
exporters as to which statement to include on such mixed shipments, or 
whether to include both. Harmonizing these statements is intended to 
ease the regulatory burden on exporters.
    This change is also being made to harmonize the two sets of 
regulations, the EAR and the ITAR, per the President's instructions. 
While the creation of a single export control list and licensing agency 
would require legislation, the President has directed BIS and the 
Directorate of Defense Trade Controls at the Department of State to 
undertake all available actions to prepare for consolidation as a 
single agency with a single set of regulations. Harmonization, to the 
extent possible, is one important step for preparing both regulators 
and the regulated public.
    The harmonization of the destination control statement would 
include the following proposed changes to the EAR. The heading of Sec.  
758.6 of the EAR would remain the same. However, the provisions 
currently under paragraph (b) would be moved to a new paragraph (a)(2).
    Further, regarding proposed new paragraph (a)(2), this paragraph 
would specify that the ECCN for each 9x515 or ``600 series'' item being 
exported must be included, which is the same requirement that is 
currently in paragraph (b), although it would be

[[Page 29552]]

slightly shortened because the introductory text of paragraph (a) would 
specify some of the requirements that previously were included in 
paragraph (b), specifically the documents for which the 9x515 and ``600 
series'' classification must be included on under this section. These 
documents are the same as those documents that the destination control 
statement would be included on, so this change would shorten and 
simplify this section by moving the text of paragraph (b) to paragraph 
(a)(2). This change would reduce the number of documents that this 
classification would need to be included on to conform with the 
destination control statement changes described below.
    The proposed new introductory text paragraph (a) would specify that 
the exporter shall incorporate the information specified under 
paragraph (a)(1) (destination control statement) and (a)(2) (ECCN for 
each 9x515 or ``600 series'' item being exported) as an integral part 
of the commercial invoice and contractual documentation, when such 
contractual documentation exists. This proposed change would mean this 
section of the EAR would no longer include a requirement to include the 
destination control statement on the air waybill, bill of lading or 
other export control documents, and would instead focus the requirement 
on the two documents--the commercial invoice and contractual 
documentation. This rule proposes requiring the destination control 
statement on the commercial invoice and contractual documentation 
because these two documents are the most likely to travel with the item 
from its time of export from the United States to its ultimate 
destination and ultimate consignee. The intent of the destination 
control statement requirement is to ensure that the statement reaches 
the ultimate destination and ultimate consignee of the item, so 
requiring the destination control statement to be included on such 
documentation, when it exists, would be more likely to achieve the 
intended purpose of this provision. At the same time, the requirement 
would have the added benefit of reducing the number of documents on 
which exporters would be responsible for entering the destination 
statement. Consistent with the current destination control statement 
provisions, this rule would not require an EAR destination control 
statement for exports of EAR99 items or items exported under License 
Exception BAG or GFT. Any other export from the United States of any 
item on the CCL would require the destination statement as specified in 
paragraph (a)(1) and any export of a 9x515 or ``600 series'' ECCN would 
also need to be specified on those two documents as specified in 
paragraph (a)(2), when they exist.
    The text of the harmonized destination control statement would be 
specified under revised paragraph (a)(1) of Sec.  758.6 of the EAR. The 
new destination control statement would not include EAR-specific 
language, but rather would adopt language that would be equally 
applicable under the ITAR as well as the EAR. The first sentence of the 
statement would specify that ``these items are controlled and 
authorized by the U.S. Government for export only to the specified 
country of ultimate destination for use by the end-user herein 
identified.'' This first sentence is intended to alert the person 
outside the United States receiving the item that the item is subject 
to U.S. export laws and regulations and was authorized by the U.S. 
Government for export. In addition, the first sentence would specify 
that the U.S. Government only authorized the export to the specified 
country of ultimate destination and for use by the specified end-user. 
The new destination control statement would use the term authorized, 
but in the context of this EAR paragraph ``authorized'' would also 
include exports that were designated under No License Required (NLR).
    The second sentence of the new harmonized destination control 
statement would focus on alerting the persons receiving the items that 
they may not be resold, transferred, or otherwise be disposed of, to 
any other country or to any person other than the authorized end-user 
or consignee(s), either in their original form or after being 
incorporated into other items, without first obtaining approval from 
the U.S. government or as otherwise authorized by U.S. law and 
regulations. Similar to the first sentence, this proposed second 
sentence adopts common language that can be used under the ITAR and the 
EAR. The application of this second sentence would be different under 
the ITAR and the EAR due to the different types of authorizations and 
other approvals in the respective regulations, as well as other 
differences, such as the de minimis requirements in the EAR, which is 
not provided for in the ITAR. But the advantage of the proposed text is 
that it would adopt a new harmonized destination control statement, 
while at the same time still being flexible enough to not impact other 
ITAR or EAR provisions that do warrant differentiation, such as the 
availability of de minimis provisions, which are available under the 
EAR, but because of statutory limitations in the Arms Export Control 
Act are not available under the ITAR.
    Adoption of a new harmonized destination control statement would 
simplify export clearance requirements for exporters because they would 
not have to decide which destination control statement to include, 
especially for mixed shipments containing both ITAR and EAR items.
    An exporter would still need to go through all of the steps to 
determine jurisdiction, classification, license requirements, and to 
obtain and use the proper authorization under the respective 
regulations, prior to moving on to the respective export clearance 
requirements under the ITAR or EAR. This is important to remember when 
evaluating these proposed changes because the regulations need to be 
reviewed and evaluated in the context in which they are intended to be 
applied, including the steps for determining the applicable export 
control requirements under the ITAR and the EAR. For those parties 
outside the United States that would be receiving items under this new 
destination control statement, although the new destination control 
statement is not ITAR or EAR specific, in the case of the USML the 
classification of the USML items would be required on the 
documentation. This classification would alert the parties that the 
items are subject to the ITAR. For military items under the EAR, 
because of the proposed requirement in paragraph (a)(2)(which is 
currently required under paragraph (b)) of Sec.  758.6 of the EAR, 
anyone receiving a ``600 series'' military item or an ECCN 9x515 item 
would know that specific item was subject to the EAR because the 
classification information would also need to be included on the same 
documentation. For other EAR items, there would not be a requirement to 
include the classification information, although BIS does encourage the 
inclusion of that information as a good export compliance practice.

Removal of Paragraph (c)

    BIS proposes removing paragraph (c) of Sec.  758.6 in this rule. 
Paragraph (c) was added recently (January 23, 2015, 80 FR 3463) and 
requires a special DCS for items controlled under ECCNs for crime 
control columns 1 and 3 or regional stability column 2 reasons when 
those items are destined to India. BIS proposes removing this 
requirement because the benefit for this requirement in paragraph (c) 
is outweighed by the added complexity to the EAR of including this 
country specific requirement. Therefore, consistent with

[[Page 29553]]

the purpose of the retrospective regulatory review, BIS proposes 
removing paragraph (c).
    As required by Executive Order (EO) 13563, BIS intends to review 
this rule's impact on the licensing burden on exporters. Commerce's 
full retrospective regulatory review plan is available at: http://open.commerce.gov/news/2011/08/23/plan-retrospective-analysis-existing-rules. Data are routinely collected on an ongoing basis, including 
through the comments to be submitted and through new information and 
results from Automated Export System data. These results and data have 
formed, and will continue to form, the basis for ongoing reviews of the 
rule and assessments of various aspects of the rule. As part of its 
plan for retrospective analysis under E.O. 13563, BIS intends to 
conduct periodic reviews of this rule and to modify, or repeal, aspects 
of this rule, as appropriate, and after public notice and comment. With 
regard to a number of aspects of this rule, assessments and refinements 
will be made on an ongoing basis. This is particularly the case with 
regard to possible modifications that will be considered based on 
public comments described above.

Export Administration Act

    Although the Export Administration Act expired on August 20, 2001, 
the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 
2001 Comp., p. 783 (2002), as amended by Executive Order 13637 of March 
8, 2013, 78 FR 16129 (March 13, 2013) and as extended by the Notice of 
August 7, 2014, 79 FR 46959 (August 11, 2014), has continued the Export 
Administration Regulations in effect under the International Emergency 
Economic Powers Act. BIS continues to carry out the provisions of the 
Export Administration Act, as appropriate and to the extent permitted 
by law, pursuant to Executive Order 13222 as amended by Executive Order 
13637.

Rulemaking Requirements

    1. Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distribute impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This proposed rule has been determined to be not 
significant for purposes of Executive Order 12866.
    2. Notwithstanding any other provision of law, no person is 
required to respond to, nor is subject to a penalty for failure to 
comply with, a collection of information, subject to the requirements 
of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), 
unless that collection of information displays a currently valid OMB 
control number. This regulation involves collections previously 
approved by the OMB under control numbers 0694-0122, ``Licensing 
Responsibilities and Enforcement.'' This rule does not alter any 
information collection requirements; therefore, total burden hours 
associated with the PRA and OMB control number 0694-0122 are not 
expected to increase as a result of this rule. 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.
    3. This rule does not contain policies with Federalism implications 
as that term is defined under E.O. 13132.
    4. The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 
601 et seq., generally requires an agency to prepare 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 a regulatory flexibility analysis. 
Pursuant to section 605(b), the Chief Counsel for Regulation, 
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.

Number of Small Entities

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

Economic Impact

    This proposed rule is part of the Administration's Export Control 
Reform (ECR) Initiative. The destination control statement is an 
existing regulatory requirement under the EAR that exporters must use 
for export clearance purposes for most export transactions that are 
subject to the EAR.
    The improvements to the export control system being implemented 
under ECR have resulted in reduced burdens on exporters, including 
small businesses, because the military items moved to the CCL now have 
the availability of more flexible EAR authorizations and availability 
of de minimis provisions among other advantages for exporters of items 
that have moved from the USML to the CCL. However, the existing 
destination control statement requirements impose an unnecessary burden 
on exporters of mixed shipments (shipments that include items subject 
to the EAR and ITAR). The current provisions create ambiguity for 
exporters on which destination control statement to use for such mixed 
shipments, which imposes unnecessary administrative costs and burdens 
on such exporters. The proposed changes in this rule would relieve this 
burden by adopting a harmonized destination control statement under the 
EAR. The corresponding Department of State proposed rule would adopt a 
harmonized destination control statement under the ITAR. This proposed 
harmonized destination control statement would result in time savings 
for exporters when they determine their export clearance requirements. 
These proposed changes would also reduce the economic impact on 
exporters, including small businesses, because it would make it easier 
for exporters to comply with this export clearance requirement under 
the EAR and the ITAR for specific transactions and would also simplify 
the export control clearance requirements associated with mixed 
transactions.
    In practice, the greatest impact of this rule on small entities 
would likely be reduced administrative costs and reduced delay for 
exports of items. Therefore, this proposed rule would not cause any 
economic impact and would result in no additional compliance cost. On 
the contrary, this proposed rule would reduce compliance costs.

[[Page 29554]]

Conclusion

    BIS is unable to determine the precise number of small entities 
that would be affected by this rule. Based on the facts and conclusions 
set forth above, BIS believes that any burdens imposed by this rule 
would be offset by the improvements made to harmonization of the 
destination control statement under the EAR and the ITAR. For these 
reasons, the Chief Counsel for Regulation of the Department of Commerce 
certified to the Chief Counsel for Advocacy of the Small Business 
Administration that this rule, if adopted in final form, would not have 
a significant economic impact on a substantial number of small 
entities.

List of Subjects in 15 CFR Part 758

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

    Accordingly, Part 758 of the Export Administration Regulations (15 
CFR parts 730-774) is proposed to be amended as follows:

PART 758--[AMENDED]

0
1. The authority citation for 15 CFR part 758 continues to read as 
follows:

    Authority:  50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 
7, 2014, 79 FR 46959 (August 11, 2014).

0
2. Section 758.6 is revised to read as follows:

Sec.  758.6  Destination control statement and other information 
furnished to consignees.

    (a) The exporter shall incorporate the following information as an 
integral part of the commercial invoice and contractual documentation, 
when such contractual documentation exists, whenever items on the 
Commerce Control List are exported, unless the export may be made under 
License Exception BAG or GFT (see part 740 of the EAR):
    (1) For any item on the Commerce Control List being exported, the 
following statement: ``These items are controlled and authorized by the 
U.S. Government for export only to the specified country of ultimate 
destination for use by the end-user herein identified. They may not be 
resold, transferred, or otherwise disposed of, to any other country or 
to any person other than the authorized end-user or consignee(s), 
either in their original form or after being incorporated into other 
items, without first obtaining approval from the U.S. government or as 
otherwise authorized by U.S. law and regulations'' and
    (2) The ECCN for each 9x515 or ``600 series'' item being exported.
    (b) [Reserved]

    Dated: May 13, 2015.
Kevin J. Wolf,
Assistant Secretary of Commerce for Export Administration.
[FR Doc. 2015-12298 Filed 5-21-15; 8:45 am]
 BILLING CODE 3510-33-P