Document ID: BIS-2020-0042-0001
Agency: bis
Document Type: Rule
Title: Amendments to National Security License Review Policy Under the Export Administration Regulations
Posted Date: 2020-10-29T04:00Z

[Federal Register Volume 85, Number 210 (Thursday, October 29, 2020)]
[Rules and Regulations]
[Pages 68448-68450]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23962]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 742

[Docket No. 201022-0277]
RIN 0694-AI05

Amendments to National Security License Review Policy Under the 
Export Administration Regulations

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) 
amends the Export Administration Regulations (EAR) to revise the 
license review policy for items controlled for national security 
reasons destined to the People's Republic of China (PRC), Venezuela, or 
the Russian Federation (Russia). With this revision, BIS and reviewing 
agencies will determine whether the export, reexport, or transfer (in-
country) of items controlled for National Security (NS) reasons will 
make a material contribution to the ``development,'' ``production,'' 
maintenance, repair, or operation of weapons systems of the PRC, 
Venezuela, or the Russian Federation, as well as setting forth several 
factors that will be considered in reviewing license applications.

DATES: This rule is effective October 29, 2020.

FOR FURTHER INFORMATION CONTACT: Sharron Cook, Regulatory Policy 
Division, Bureau of Industry and Security, Email: 
Sharron.cook@bis.doc.gov or Phone: 202-492-2440.

SUPPLEMENTARY INFORMATION:

Background

    The Bureau of Industry and Security is amending the license review 
policy for items that have a national security (NS) reason for control 
(i.e., pursuant to the Wassenaar Arrangement on Export Controls for 
Conventional Arms and Dual-Use Goods and Technologies)

[[Page 68449]]

when destined to the People's Republic of China (PRC), Venezuela, or 
the Russian Federation (Russia) (Sec.  742.4(b)(7)). BIS and reviewing 
agencies will determine, on a case-by-case basis, whether the proposed 
export, reexport, or in-country transfer of such items will make a 
material contribution to the weapons systems capability of those 
countries. The determination will include an illustrative list of 
factors that will be considered in reviewing license applications. The 
illustrative list of factors will provide more guidance to exporters on 
information to be included with their license applications and assist 
BIS and reviewing agencies in evaluating those applications. Provisions 
in other sections of part 742 continue to apply to the review of 
license applications for the export, reexport, or in-country transfer 
of NS controlled items to the PRC, Venezuela or Russia. When an export, 
reexport, or in-country transfer is destined for a civil end user for 
civil end uses in the PRC, Venezuela, or Russia, there is a presumption 
of approval. There is a presumption of denial for license applications 
to export, reexport, or transfer items that would make a material 
contribution to the ``development,'' ``production,'' maintenance, 
repair, or operation of weapons systems, subsystems, and assemblies.
    As required by section 1756(d) of the Export Control Reform Act of 
2018 (50 U.S.C. 4815(d)), the review will also include an assessment of 
the impact of a proposed export of an item on the United States defense 
industrial base and the denial of an application for a license that 
would have a significant negative impact on such defense industrial 
base.

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) (codified, as 
amended, at 50 U.S.C. 4801-4852). ECRA provides the legal basis for 
BIS's principal authorities and serves as the authority under which BIS 
issues this rule.

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 final rule has been designated a ``significant 
regulatory action,'' although not economically significant, under 
section 3(f) of Executive Order 12866. This final rule will support the 
national security and foreign policy objectives of the United States by 
making the license review policy for national security items destined 
to the PRC, Venezuela, or the Russian Federation more restrictive, as 
well as clarifying the license review policy by setting forth and 
making transparent to the public a robust illustrative list of license 
application review factors for such applications.
    2. Notwithstanding any other provision of law, no person may be 
required to respond to or 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 involves a 
collection currently approved by OMB under control number 0694-0088, 
Simplified Network Application Processing System. This collection 
includes, among other things, license applications, and carries a 
burden estimate of 42.5 minutes for a manual or electronic submission 
for a total burden estimate of 31,878 hours. BIS expects that all 
applicants may spend more time gathering information to include in the 
license applications to satisfy the newly added license application 
review factors. However, others will refrain from applying because they 
either cannot satisfy the newly-added license review criteria or know 
that their license would be denied because their item would make a 
`material contribution' to the military capabilities of PRC, Venezuela, 
or the Russian Federation. Therefore, BIS believes that the added hours 
for preparing an application will be offset by the decrease in 
applications and result in no change to the burden hours associated 
with this collection.
    3. This rule does not contain policies with federalism implications 
as that term is defined under Executive Order 13132.
    4. Pursuant to section 1762 of the Export Control Reform Act of 
2018 (50 U.S.C. 4821), which was included in the John S. McCain 
National Defense Authorization Act for Fiscal Year 2019, 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.
    5. 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.
    6. This final rule is not subject to the requirements of Executive 
Order 13771 (82 FR 9339, February 3, 2017) because it is issued with 
respect to a national security function of the United States. The cost-
benefit analysis required pursuant to Executive Orders 12866 and 13563 
indicates that this rule is intended to improve national security as 
its primary direct benefit. Specifically, setting forth a robust 
illustrative list of license application review factors and revising 
the national security license review policy by expanding the meaning of 
what would be considered a national security threat should increase 
license outcome predictability and consistency, as well as increase the 
number of application submissions that include information that 
satisfies the license application review factors, which should reduce 
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, contrary to U.S. national security 
interests. Accordingly, this rule meets the requirements set forth in 
the April 5, 2017 OMB guidance implementing Executive Order 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 is, therefore, exempt from the requirements of Executive 
Order 13771.

List of Subjects in 15 CFR Part 742

    Exports, Terrorism.

    Accordingly, part 742 of the Export Administration Regulations (15 
CFR parts 730-774) is amended as follows:

PART 742--CONTROL POLICY--CCL BASED CONTROLS

0
1. The authority citation for part 742 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. 3201 et seq.; 42 U.S.C. 2139a; 22 
U.S.C. 7201 et seq.; 22 U.S.C. 7210; Sec. 1503, Pub. L. 108-11, 117 
Stat. 559; E.O. 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. 179; E.O.

[[Page 68450]]

12851, 58 FR 33181, 3 CFR, 1993 Comp., p. 608; E.O. 12938, 59 FR 
59099, 3 CFR, 1994 Comp., p. 950; E.O. 13026, 61 FR 58767, 3 CFR, 
1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 
783; Presidential Determination 2003-23, 68 FR 26459, 3 CFR, 2004 
Comp., p. 320; Notice of November 12, 2019, 84 FR 61817 (November 
13, 2019).

0
2. Section 742.4 is amended by revising paragraph (b)(7) to read as 
follows:

Sec.  742.4  National security.

* * * * *
    (b) * * *
    (7)(i) For the People's Republic of China (PRC), Venezuela, and the 
Russian Federation, all applications will be reviewed to determine the 
risk of diversion to a military end user or military end use. There is 
a general policy of approval for license applications to export, 
reexport, or transfer items determined to be for civil end users for 
civil end uses. There is a presumption of denial for license 
applications to export, reexport, or transfer items that would make a 
material contribution to the ``development,'' ``production,'' 
maintenance, repair, or operation of weapons systems, subsystems, and 
assemblies, such as, but not limited to, those described in supplement 
no. 7 to part 742 of the EAR, of the PRC, Venezuela, or the Russian 
Federation.
    (ii) The following factors are among those that will be considered 
in reviewing license applications described in paragraph (b)(7)(i) of 
this section:
    (A) The appropriateness of the export, reexport, or transfer for 
the stated end use;
    (B) The significance of the item for the weapons systems 
capabilities of the importing country;
    (C) Whether any party is a `military end user' as defined in Sec.  
744.21(g) of the EAR;
    (D) The reliability of the parties to the transaction, including 
whether:
    (1) An export or reexport license application has previously been 
denied;
    (2) Any parties are or have been engaged in unlawful procurement or 
diversion activities;
    (3) The parties are capable of securely handling and storing the 
items; and
    (4) End-use checks have been and may be conducted by BIS or another 
U.S. government agency on parties to the transaction;
    (E) The involvement of any party to the transaction in military 
activities, including activities involving the ``development,'' 
``production,'' maintenance, repair, or operation of weapons systems, 
subsystems, and assemblies;
    (F) Government strategies and policies that support the diversion 
of exports from their stated civil end use and redirection towards 
military end use; and
    (G) The scope and effectiveness of the export control system in the 
importing country.
    (iii) The review will also include an assessment of the impact of a 
proposed export of an item on the United States defense industrial base 
and the denial of an application for a license that would have a 
significant negative impact, as defined in section 1756(d)(3) of the 
Export Control Reform Act of 2018 (50 U.S.C. 4815(d)(3)), on such 
defense industrial base.
* * * * *

Matthew S. Borman,
Deputy Assistant Secretary for Export Administration.
[FR Doc. 2020-23962 Filed 10-28-20; 8:45 am]
BILLING CODE 3510-33-P