Document ID: BIS-2012-0017-0001
Agency: bis
Document Type: Proposed Rule
Title: Export Administration Regulations: Unverified List
Posted Date: 2013-09-11T04:00Z

[Federal Register Volume 78, Number 176 (Wednesday, September 11, 2013)]
[Proposed Rules]
[Pages 55664-55671]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-21996]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 730, 740, 744, 756, 758, and 762

[Docket No. 120524116-2116-01]
RIN 0694-AF70

Revisions to the Export Administration Regulations (EAR): 
Unverified List (UVL)

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Proposed rule.

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

SUMMARY: The Bureau of Industry and Security (BIS) proposes to amend 
the Export Administration Regulations (EAR) by: requiring exporters to 
file an Automated Export System (AES) record for all exports subject to 
the EAR involving a party or parties to the transaction who are listed 
on the Unverified List (the ``Unverified List'' or UVL); suspending the 
availability of license exceptions for exports,

[[Page 55665]]

reexports, and transfers (in-country) involving a party or parties to 
the transaction who are listed on the UVL; requiring exporters, 
reexporters, and transferors to obtain a UVL statement from a party or 
parties to the transaction who are listed on the UVL before proceeding 
with exports, reexports, and transfers (in-country) involving items 
subject to the EAR, but where the item does not require a license, 
i.e., No License Required (NLR); publishing the UVL in the EAR; and 
adding to the EAR the procedures to request removal or modification of 
a UVL entry.
    These proposed changes to the UVL enhance the U.S. Government's 
ability to verify the bona fides of parties to exports, reexports, or 
transfers (in-country) of items subject to the EAR and provide the U.S. 
Government increased visibility into such exports, reexports, and 
transfers involving persons whose bona fides could not be verified.

DATES: Comments must be received by BIS no later than October 11, 2013.

ADDRESSES: Comments on this rule may be submitted to the Federal 
rulemaking portal (www.regulations.gov). The regulations.gov Docket ID 
for this rule is: BIS-2012-0017. Comments may also be submitted via 
email to publiccomments@bis.doc.gov or on paper to Regulatory Policy 
Division, Bureau of Industry and Security, Room 2099B, U.S. Department 
of Commerce, 14th St. and Pennsylvania Ave. NW., Washington, DC 20230. 
Please refer to RIN 0694-AF70 in all comments and in the subject line 
of email comments.

FOR FURTHER INFORMATION CONTACT: Kevin Kurland, Director, Office of 
Enforcement Analysis, Bureau of Industry and Security, Department of 
Commerce, Phone: (202) 482-2385 or by email at 
Kevin.Kurland@bis.doc.gov.

SUPPLEMENTARY INFORMATION: 

Background

    On June 14, 2002, the Bureau of Industry and Security (``BIS'') 
published a notice in the Federal Register (67 FR 40910) establishing a 
list of persons in foreign countries who were parties to past export 
transactions with respect to which pre-license checks or post-shipment 
verifications could not be conducted for reasons outside the control of 
the U.S. Government, including lack of cooperation by the host 
government authority, the end user, or the ultimate consignee (the 
``Unverified List'' or ``UVL''). That Federal Register notice also 
indicated that BIS may add to the UVL names of persons that BIS 
discovers are affiliated with a person on the UVL by virtue of 
ownership, control, position of responsibility, or other affiliation or 
connection in the conduct of trade or business. Since that time, BIS 
has issued subsequent notices that added to or removed persons from the 
UVL, as circumstances have warranted. Currently, the UVL is published 
in the Federal Register in its entirety and updated as foreign persons 
are added to or removed from that list. The UVL is also available on 
the BIS Web site at http://www.bis.doc.gov/enforcement/unverifiedlist/unverified_parties.html.
    The participation of a person listed on the UVL in any proposed 
transaction raises a ``red flag'' for purposes of the ``Know Your 
Customer'' guidance set forth in Supplement No. 3 to Part 732 of the 
EAR. See 67 FR 40910 (June 14, 2002) and 69 FR 42562 (July 16, 2004). 
Under that guidance, whenever there is a ``red flag,'' exporters have 
an affirmative duty to inquire, verify, or otherwise satisfy themselves 
that the transaction does not involve a proliferation activity 
prohibited by Part 744 and does not violate other provisions of the 
EAR.
    On July 16, 2004 (69 FR 42652), BIS expanded the criteria for 
adding persons to the UVL to include situations in which BIS is not 
able to verify the existence or authenticity of the end user, 
intermediate consignee, ultimate consignee, or other party to an export 
transaction.
    On August 21, 2008 (73 FR 49311), BIS expanded the scope of reasons 
to add persons to the Entity List. That rule amended Section 744.11 of 
the EAR to provide illustrative examples of the types of conduct that 
the U.S. Government could determine are contrary to U.S. national 
security or foreign policy interests for purposes of changes to the 
Entity List. One example listed in that section is, ``[p]reventing 
accomplishment of an end use check conducted by or on behalf of BIS or 
the Directorate of Defense Trade Controls of the Department of State 
by: precluding access to; refusing to provide information about; or 
providing false or misleading information about parties to the 
transaction or the item to be checked.'' That notice also included a 
discussion of the apparent overlap in criteria for adding foreign 
persons to the Entity List and the Unverified List based on a lack of 
cooperation with an end-use check.
    End-use checks sometimes cannot be completed for reasons unrelated 
to the cooperation of the foreign party subject to the end-use check. 
In such situations, BIS has added parties to the UVL where BIS or 
federal officials acting on BIS's behalf have been unable to verify a 
foreign person's bona fides (i.e., legitimacy and reliability relating 
to the end use and end user of items subject to the EAR), where an end-
use check, such as a pre-license check (PLC) or a post-shipment 
verification (PSV), cannot be completed satisfactorily for such 
purposes for reasons outside the U.S. Government's control. For 
example, BIS sometimes initiates end-use checks and cannot find a 
foreign party at the address indicated on export documents, and cannot 
locate the party by telephone or email. Additionally, BIS sometimes is 
unable to conduct end-use checks when host government agencies do not 
respond to requests to conduct end-use checks or refuse to schedule 
them in a timely manner. Under these circumstances, there may not be a 
basis to add the foreign persons at issue to the Entity List, 
particularly if there is no nexus between the foreign person's conduct 
and the failure to produce a complete, accurate and useful check (see 
Sec.  744.11(b)(4) of the EAR (Criteria for revising the Entity List)).
    Furthermore, BIS sometimes conducts end-use checks but cannot 
verify the bona fides of a foreign party. For example, BIS may be 
unable to verify bona fides if during the conduct of an end-use check a 
recipient of items subject to the EAR is unable to produce those items 
for visual inspection or provide sufficient documentation to confirm 
the disposition of those items. The inability of foreign persons 
subject to end-use checks to demonstrate their bona fides raises 
concerns about the suitability of such persons as participants in 
future exports, reexports, or transfers (in-country) and indicates a 
risk that items subject to the EAR may be diverted to prohibited end 
uses and/or end users. However, BIS may have insufficient information 
to establish that such persons are involved in activities described in 
Section 744.11 of the EAR, preventing the placement of the persons on 
the Entity List. In such circumstances, those foreign persons may be 
added to the Unverified List.

Reasons for This Rule

    This rule proposes to eliminate ambiguity for listing foreign 
persons on the UVL and the Entity List by removing lack of cooperation 
by a foreign party as a basis for revising the UVL. Where the U.S. 
Government determines that the foreign party's lack of cooperation 
prevented the accomplishment of an end-use check, BIS may add such 
parties to the Entity List on the basis of Sec.  744.11(b)(4) of the 
EAR.
    Specifically, BIS is amending the EAR to include the criteria for 
listing persons in the UVL, including examples of actions that could 
result in a person

[[Page 55666]]

being listed on the UVL. These amendments, consistent with past 
practice, will apply to foreign persons who are parties to an export, 
reexport, and transfer (in-country) subject to the EAR if BIS, or 
federal officials acting on BIS's behalf, cannot verify the bona fides 
of such persons because an end-use check, such as a PLC or a PSV, 
cannot be completed satisfactorily for reasons outside of the U.S. 
Government's control. Examples of actions that could result in a person 
being listed on the UVL include: The subject of the check is unable to 
demonstrate the disposition of items during an end-use check; the 
existence or authenticity of the subject of an end-use check cannot be 
verified because, inter alia, the subject of the check cannot be 
located or contacted; or lack of cooperation by the host government 
authority.
    In addition, BIS is no longer considering affiliation with a person 
on the UVL as a basis for adding foreign persons without further 
substantiation (e.g., conduct of an end-use check at the affiliate). A 
determination to list a particular person on the UVL is premised on 
BIS's inability to evaluate the bona fides of that person by conducting 
an end-use check. The fact that another, separate person is affiliated 
with a person on the UVL will no longer be considered a criterion for 
listing the affiliate. If BIS discovers a foreign person may be 
affiliated with a person listed on the UVL, BIS will initiate an end-
use check on an export, reexport, or transfer (in-country) to which 
that person was a party. That person may be listed on the UVL if BIS is 
unable to verify that person's bona fides through an end-use check in 
accordance with the criteria described above.
    BIS is proposing these changes to the UVL to address concerns 
raised by the public in the past about how to address a ``red flag'' 
identified by the U.S. Government. Accordingly, the proposed changes to 
the regulation provide guidance on how exporters can conduct business 
with a UVL person. Any license requirements for exports, reexports, or 
transfers (in-country) of items subject to the EAR continue to apply. 
For items not subject to a license requirement, the exporter, 
reexporter, or transferer (in-country) must receive from the UVL-listed 
person a UVL statement prior to the export, reexport, or transfer (in-
country), in which the UVL-listed party certifies the end use, end 
user, and country of ultimate destination of items subject to the EAR 
and consents to an end-use check by the U.S. Government. The end-use 
check may include checks to any transaction to which that person was a 
party for items subject to the EAR exported, reexported, or transferred 
(in country) in the last five years, to enable the U.S. Government to 
satisfy earlier concerns with the UVL-listed party as well as its 
concerns with the current transaction.

Proposed Changes to the EAR

    BIS proposes to amend the EAR by: (1) Requiring exporters to file 
an AES record for all exports subject to the EAR involving persons 
listed on the UVL; (2) suspending the availability of license 
exceptions for exports, reexports, and transfers (in-country) involving 
persons listed on the UVL; (3) requiring exporters, reexporters and 
transferors (in-country) to obtain a UVL statement from UVL-listed 
persons before proceeding with exports, reexports, and transfers (in-
country) that are not otherwise subject to a license requirement under 
the EAR involving such persons; (4) adding the UVL to Supplement No. 6 
to Part 744; and (5) adding to the EAR procedures to request removal or 
modification of a UVL entry.
    The first of these changes, requiring the filing of an AES record 
for all exports to which a person listed on the UVL is a party, is 
described in Sec.  748.5(d)-(f) of the EAR, and would increase U.S. 
Government awareness of transactions involving U.S.-origin items to 
such persons. Under current regulations, an AES filing is only required 
if an export license is also required or if the transaction is above a 
certain value. This rule proposes an exception to require an AES filing 
regardless of value or destination if a person involved in the 
transaction as described above is listed on the UVL.
    Secondly, this rule's proposed suspension of license exceptions for 
exports, reexports, and transfers (in-country) of U.S.-origin items to 
persons listed on the UVL would increase U.S. Government insight into 
certain transactions involving such persons of items on the Commerce 
Control List (set forth in Supplement No. 1 to Part 774 of the EAR) by 
requiring a license for those transactions. This suspension is also 
consistent with Sec.  740.2(b) of the EAR, which states, ``all License 
Exceptions are subject to revision, suspension, or revocation, in whole 
or in part, without notice.''
    Third, BIS proposes to require exporters to obtain a signed UVL 
statement from UVL-listed persons before proceeding with any export, 
reexport, or transfer (in-country) involving such persons, when such 
persons are parties to a transaction as described in Sec.  748.5 of the 
EAR, and when the item at issue is subject to the EAR but does not 
require a license under the EAR. The rule would require that the 
statement certify the end use, end user, and country of ultimate 
destination of the items, and set forth the person's consent to an end-
use check by the U.S. Government. To facilitate any future end-use 
checks by the U.S. Government, the UVL-listed person would also include 
its complete contact information in the UVL statement, including its 
physical address. Such a statement would, in effect, establish that the 
UVL-listed party knows that it is required to comply with the EAR and 
agrees to an end-use check. The statement would also provide the U.S. 
Government with some assurance that the U.S.-origin item would be 
delivered to an identified end user and end use and that the 
transaction will comply with the EAR. In the absence of such 
compliance, the UVL statement would assist the U.S. Government's 
ability to take enforcement action.
    BIS believes the proposed suspension of license exceptions, which 
would allow pre-shipment review by the U.S. Government of exports, 
reexports, and transfers (in-country) of certain controlled items 
involving persons listed on the UVL, coupled with the proposed 
requirement for exporters to obtain a UVL statement for exports, 
reexports, and transfers (in-country) involving such persons of items 
not subject to a license requirement, provides greater guidance on what 
steps are necessary in order to undertake an export, reexport, or 
transfer (in-country) of items subject to the EAR involving a party to 
the transaction who is listed on the UVL
    Specifically, when an export, reexport, or transfer (in-country) is 
otherwise eligible for a license exception, if a party to the 
transaction as described in Sec.  748.5 of the EAR is listed on the 
UVL, the use of license exceptions is not authorized. Under these 
circumstances, an exporter must apply to BIS for a license. If an 
export, reexport, or transfer (in-country) involving a person listed on 
the UVL is not subject to a license requirement under the EAR, the 
possible availability of a license exception does not arise. In such a 
case, an exporter may proceed with the export, reexport, or transfer 
(in-country) once the exporter obtains the signed UVL statement 
proposed herein and files an AES record in accordance with Sec.  758.1 
of the EAR, as amended. The signed UVL statement is not needed for 
transactions in which a license is required because BIS oversight of 
the transaction resulting from the grant of

[[Page 55667]]

the license renders a UVL statement unnecessary.
    Fourth, BIS proposes to add the UVL to the EAR in Supplement No. 6 
to Part 744. When adding a person to the UVL, BIS would list the 
person's name and address, and the date on which the person was added 
to the UVL by publication in the Federal Register. Updates to the UVL 
would continue to be published in the Federal Register, and would 
remain available on the BIS Web site. The UVL also would continue to be 
included in the Consolidated Screening List, available at 
www.export.gov.
    Once published in the EAR, the UVL shall contain the names and 
addresses of foreign persons who are or have been parties to a 
transaction, as that term is described in Sec.  748.5 of the EAR, 
involving the export, reexport, or transfer (in-country) of items 
subject to the EAR, and whose bona fides BIS has been unable to verify 
through an end-use check. Any changes to the UVL would be published in 
the Federal Register as an amendment to the UVL.
    In addition to adding the UVL to Supplement No. 6 to Part 744, BIS 
proposes adding to the regulations an overview of the UVL, the 
conditions it imposes with respect to exports, reexports, and transfers 
(in-country) to listed persons, the criteria for revising the UVL, and 
the procedures for requesting removal or modification of a UVL entry.
    BIS adds a person to the UVL under certain circumstances. For 
example, in some instances, BIS may not be able to conduct an end-use 
check, such as a PLC or a PSV, at all because, among other potential 
reasons, BIS was unable to locate or contact the subject of the check 
or the host government declined to schedule the check in a timely 
manner. Alternatively, BIS may not be able to complete a satisfactory 
end-use check because, inter alia, the foreign party is unable to 
demonstrate its bona fides or the disposition of the items in question 
during the end-use check. In either circumstance, BIS may determine to 
add the foreign person to the UVL.
    BIS removes a person listed on the UVL using certain procedures. 
The successful completion of an end-use check, or, in the limited 
circumstance where such a check cannot be completed due to lack of host 
government cooperation, a suitable alternative process to verify the 
bona fides of the foreign party at issue would be a prerequisite for 
removing persons from the UVL. One illustrative example of alternative 
authentication could involve the U.S. exporter or license applicant 
visiting the foreign person subject to the end-use check, at that 
person's request, and providing sufficient information to the U.S. 
Government to verify the foreign person's bona fides and satisfy 
questions relating to the end use and end user of the items in 
question. Procedures for requesting an alternative process to verify 
the bona fides of a foreign person in this circumstance are identical 
to the procedures for requesting removal of a UVL listing, set forth in 
Section 744.15 of the EAR.
    If BIS confirms the bona fides of the listed person, any subsequent 
determination to remove the foreign person from the UVL would be 
published in the Federal Register. Once a foreign person is removed 
from the UVL, the provisions in the EAR regarding persons listed on the 
Unverified List will no longer apply to that person, though other 
provisions in the EAR will continue to apply as appropriate. BIS is 
reviewing the entries of those parties who are currently on the UVL and 
will publish its determination of which, if any, of the current UVL-
listed parties will be removed from the UVL at the time that this rule 
is published in final form. Until such time, any parties listed on the 
UVL will remain on the UVL unless separately removed through a Federal 
Register notice. BIS will subsequently regularly review the UVL for the 
purpose of identifying and implementing any needed corrections and 
updates.
    Lastly, this rule proposes to modify the procedures for requesting 
removal of a person listed on the UVL by adding decisions on requests 
to remove or modify a UVL entry to the list of administrative actions 
that are not subject to Part 756 appeals. This would be accomplished 
through the proposed addition of Sec.  744.15(d) of the EAR. Decisions 
regarding the removal or modification of UVL listings would now be made 
by the Deputy Assistant Secretary for Export Enforcement, based on a 
demonstration by the listed person of its bona fides.

Proposed Amendment to Supplement No. 1 to part 730

    Due to changes to Sec.  744.15 of the EAR, which are described 
below, BIS proposes amending Supplement No. 1 to Part 730 of the EAR to 
include references to the two additional information collections 
associated with this proposed rule: (1) The UVL statement and (2) 
requests to remove or modify listings on the UVL. The collection and 
retention of the UVL statement by private parties in connection with 
the export, reexport, or transfer (in-country) to a person listed on 
the UVL of items not subject to a license requirement under the EAR 
shall be made under Office of Management and Budget (OMB) control 
number 0694-0122 (``Licensing Responsibilities and Enforcement''). The 
submission of information to BIS by persons listed on the UVL in 
support of an appeal for removal a UVL listing will be made under OMB 
control number 0694-0134. Accordingly, BIS proposes to amend Supplement 
No. 1 to Part 730 of the EAR by adding a reference to proposed Sec.  
744.15 in connection with existing collection number 0694-0122, and by 
changing the title of existing collection number 0694-0134 to 
``Procedure for parties on the Entity List or Unverified List to 
Request Removal or Modification of their Listing'' and adding a 
reference to proposed Sec.  744.15 in connection with that collection 
number.

Proposed Amendments to Sec.  740.2

    BIS proposes adding a new paragraph (a)(17) to the Sec.  740.2 
``Restrictions on all License Exceptions.'' This paragraph would state 
that license exceptions may not be used where a party to the 
transaction as described in Sec.  748.5 of the EAR is listed on the 
Unverified List.

Proposed New Sec.  744.15 and Amendment to Sec.  756.1

    BIS proposes adding a new section to Part 744 to set forth the new 
provisions pertaining to persons listed on the UVL. New section Sec.  
744.15 would provide an overview of the UVL, the conditions it imposes 
with respect to exports, reexports, and transfers (in-country) to 
listed persons, and the criteria for revising the UVL. This new section 
would also include the procedures for requesting removal or 
modification of a person on the UVL.
    BIS also proposes to exclude appeals for removal of Unverified List 
entries from the provisions of Part 756 of the EAR. Requests for 
removal instead will be made according to the procedures set forth in 
proposed Sec.  744.15 of the EAR. Accordingly, paragraph (a)(3) of 
Sec.  756.1 of the EAR would be amended by adding a reference to 
decisions on requests to remove UVL entries made pursuant to proposed 
Sec.  744.15 of the EAR.

Proposed New Supplement No. 6 to Part 744

    The UVL would be added to the EAR in Supplement No. 6 to Part 744. 
Each listing would be grouped by country, and would be accompanied by 
the person's address(es) as well as the Federal Register citation and 
date the person was added to the UVL. In addition, the UVL would 
include a

[[Page 55668]]

citation to Sec.  744.15, indicating that exports, reexports, and 
transfers (in-country) where parties to the transactions are listed on 
the Unverified List are subject to the provisions of Sec.  744.15.

Proposed Amendment to Sec.  758.1

    BIS proposes adding a new paragraph (b)(8) of Sec.  758.1 of the 
EAR, which would state that filing an AES record is required for all 
exports of items subject to the EAR where a party to the transaction as 
described in Sec.  748.5(d)-(f) is listed on the Unverified List, 
regardless of value or destination.

Proposed Amendment to Sec.  762.2

    Paragraph (b) in Sec.  762.2 of the EAR contains references to 
parts, sections, and supplements of the EAR which require the retention 
of records or contain recordkeeping provisions. Proposed Sec.  744.15 
of the EAR contains a recordkeeping requirement related to the 
retention of UVL statements. Section 762.2(b)(13) of the EAR is 
currently reserved. BIS proposes to modify that paragraph to reference 
the UVL statement recordkeeping requirement in proposed Sec.  744.15 of 
the EAR.

Export Administration Act

    Since August 21, 2001, the Export Administration Act of 1979, as 
amended, has been in lapse. However, 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 8, 2013, 78 FR 49107 
(August 12, 2013) has continued the EAR in effect under the 
International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.). 
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, 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 rule has not been designated a ``significant 
regulatory action,'' under section 3(f) 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 Office 
of Management and Budget (OMB) Control Number. This regulation involves 
collections previously approved by OMB under the following control 
numbers: 0694-0088, 0694-0122, 0694-0134, and 0694-0137. Specifically, 
BIS would be requesting a revision and extension of existing collection 
OMB 0694-0134 (Procedure for parties on the Entity List to Request 
Removal or Modification of their Listing) and non-substantive changes 
to OMB Control Numbers 0694-0088 (Simplified Network Application 
Processing and Multipurpose Application Form), 0694-0122 (Licensing 
Responsibilities and Enforcement), and 0694-0137 (License Exemptions 
and Exclusions).
    This proposed rule, if published in final form, would slightly 
increase public burden in a collection of information approved by OMB 
under control number 0694-0088, which authorizes, among other things, 
export license applications. The removal of license exceptions for 
listed parties on the Unverified List would result in increased license 
applications being submitted to BIS by exporters. Total burden hours 
associated with the Paperwork Reduction Act and OMB control number 
0694-0088 are expected to increase minimally, as the suspension of 
license exceptions will only affect transactions involving parties 
listed on the Unverified List and not all export transactions. If 
license exceptions are restricted from use, this rule will decrease 
public burden in a collection of information approved by OMB under 
control number 0694-0137 minimally, as this will only affect a very 
small number of individual listed parties. The increased burden under 
0694-0088 would be reciprocal to the decrease of burden under 0694-
0137, which would result in no change of burden to the public. This 
proposed rule would also increase public burden in a collection of 
information under OMB control number 0694-0122, as a result of the 
exchange of UVL statements between private parties, and under OMB 
control number 0694-0134 as a result of appeals from persons listed on 
the UVL for removal of their listing. The total increase in burden 
hours associated with both of these collections is expected to be 
minimal, as they involve a limited number of persons listed on the UVL.
    3. This proposed rule does not contain policies with Federalism 
implications as that term is defined in Executive Order 13132.
    4. The Chief Counsel for Regulation of the Department of Commerce 
has certified to the Chief Counsel for Advocacy of the Small Business 
Administration that this proposed rule, if adopted in final form, would 
not have a significant economic impact on a substantial number of small 
entities.

Number of Small Entities

    Currently, 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 impacted by 
this rule, it acknowledges that this rule would impact some unknown 
number. This rule would affect exporters and freight forwarders, with 
obligations to apply for export licenses, obtain and retain UVL 
statements, and/or file AES records in connection with exports, 
reexports, or transfers (in-country) in which a person listed on the 
UVL is a party to the transaction. These requirements would apply to 
all entities proceeding with such transactions, regardless of size.

Conclusion

    BIS is unable to determine whether there are a substantial number 
of small entities affected by this rule. However, this rule is not 
expected to affect a disproportionate number of small entities because 
it is directed at a limited number of foreign persons and will impact 
all export transactions to these persons, regardless of whether the 
exports are made or intended to be made by small, medium, or large 
entities. BIS has administered the UVL based on listing criteria 
similar to those proposed in this rule since 2002. This rule would 
impact transactions involving persons listed on the UVL, which 
currently has 36 persons listed. Due to the limited number of persons 
expected to be maintained on the UVL, BIS estimates that the number of 
transactions involving these persons represents only a small fraction 
of the total number of transactions recorded in AES. BIS estimates that 
regulated entities would incur minimal economic burdens on transactions 
involving UVL persons as a result of this rule because there are few 
transactions involving such persons and for those transactions where 
they are involved, there is no monetary fee to apply for a BIS license 
or file a record in AES. Moreover,

[[Page 55669]]

obtaining a signed UVL statement from UVL persons for items not subject 
to a license requirement will result in minimal burden to U.S. 
exporters, as the statement can simply be copied from the EAR and 
forwarded to the UVL person for review and signature. The maintenance 
of any such UVL statement also will have minimal burden on U.S. 
exporters as the EAR already has similar recordkeeping requirements 
under Section 762.2 of the EAR. As a result, the requirements proposed 
by this rule would amount to very little economic burden.
    For the reasons above, the Chief Counsel for Regulation certified 
that this proposed rule would not have a significant economic impact on 
a substantial number of small entities.

List of Subjects

15 CFR Part 730

    Administrative practice and procedure, Advisory committees, 
Exports, Reporting and recordkeeping requirements, Strategic and 
critical materials

15 CFR Part 740

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

15 CFR Part 744

    Exports, Reporting and recordkeeping requirements, Terrorism.

15 CFR Part 756

    Appeals.

15 CFR Part 758

    Export Clearance Requirements.

15 CFR Part 762

    Recordkeeping.

    Accordingly, 15 CFR Parts 730, 740, 744, 756, 758, and 762 of the 
Export Administration Regulations are proposed to be amended as 
follows:

PART 730--[AMENDED]

0
1. The authority citation for 15 CFR part 730 continues to read as 
follows:

    Authority:  50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
10 U.S.C. 7420; 10 U.S.C. 7430(e); 22 U.S.C. 287c; 22 U.S.C. 2151 
note; 22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; 30 U.S.C. 185(s), 
185(u); 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. 1354; 15 U.S.C. 
1824a; 50 U.S.C. app. 5; 22 U.S.C. 7201 et seq.; 22 U.S.C. 7210; 
E.O. 11912, 41 FR 15825, 3 CFR, 1976 Comp., p. 114; E.O. 12002, 42 
FR 35623, 3 CFR, 1977 Comp., p. 133; E.O. 12058, 43 FR 20947, 3 CFR, 
1978 Comp., p. 179; E.O. 12214, 45 FR 29783, 3 CFR, 1980 Comp., p. 
256; E.O. 12851, 58 FR 33181, 3 CFR, 1993 Comp., p. 608; E.O. 12854, 
58 FR 36587, 3 CFR, 1993 Comp., p. 179; E.O. 12918, 59 FR 28205, 3 
CFR, 1994 Comp., p. 899; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., 
p. 950; E.O. 12947, 60 FR 5079, 3 CFR, 1995 Comp., p. 356; E.O. 
12981, 60 FR 62981, 3 CFR, 1995 Comp., p. 419; E.O. 13020, 61 FR 
54079, 3 CFR, 1996 Comp., p. 219; E.O. 13026, 61 FR 58767, 3 CFR, 
1996 Comp., p. 228; E.O. 13099, 63 FR 45167, 3 CFR, 1998 Comp., p. 
208; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; E.O. 13224, 
66 FR 49079, 3 CFR, 2001 Comp., p. 786; E.O. 13338, 69 FR 26751, 3 
CFR, 2004 Comp., p 168; Notice of May 9, 2012, 77 FR 27559 (May 10, 
2012); Notice of August 15, 2012, 77 FR 49699 (August 16, 2012); 
Notice of September 11, 2012, 77 FR 56519 (September, 12, 2012) ; 
Notice of November 1, 2012, 77 FR 66513 (November 5, 2012); Notice 
of January 17, 2013, 78 FR 4303 (January 22, 2013).

0
2. Supplement No. 1 to part 730 is amended by:
0
a. Removing the phrase ``Part 758, and Sec.  748.4'' and adding in its 
place ``Sec. Sec.  744.15(b) and 748.4 and Part 758'' in the 
``Reference in the EAR'' column of 0694-0122 row;
0
b. Removing the Title ``Procedure for parties on the Entity List to 
Request Removal or Modification of their Listing'' and adding in its 
place ``Procedure for parties on the Entity List or the Unverified List 
to Request Removal or Modification of their Listing'' in the Title 
Column of the 0694-0134 row; and
0
c. Removing the reference ``Sec.  744.16'' and adding in its place 
``Sec. Sec.  744.15 and 744.16'' in the Reference in the EAR column of 
the 0694-0134 row.

PART 740--[AMENDED]

0
3. The authority citation for 15 CFR Part 740 continues to read as 
follows:

    Authority:  50 U.S.C. app. 2401 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; Notice 
of August 15, 2012, 77 FR 49699 (August 16, 2012).

0
4. Section 740.2 is amended by adding paragraph (a)(17) to read as 
follows:

Sec.  740.2  Restrictions on all License Exceptions.

    (a) * * *
    (17) A party to the transaction, as described in Sec.  748.5 of the 
EAR, is listed on the Unverified List in Supplement No. 6 to Part 744, 
see Sec.  744.15 of the EAR.
* * * * *

PART 744--[AMENDED]

0
5. The authority citation for 15 CFR Part 744 continues to read as 
follows:

    Authority:  50 U.S.C. app. 2401 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; E.O. 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. 179; 
E.O. 12851, 58 FR 33181, 3 CFR, 1993 Comp., p. 608; E.O. 12938, 59 
FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 12947, 60 FR 5079, 3 CFR, 
1995 Comp., p. 356; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 
228; E.O. 13099, 63 FR 45167, 3 CFR, 1998 Comp., p. 208; E.O. 13222, 
66 FR 44025, 3 CFR, 2001 Comp., p. 783; E.O. 13224, 66 FR 49079, 3 
CFR, 2001 Comp., p. 786; Notice of August 15, 2012, 77 FR 49699 
(August 16, 2012); Notice of September 11, 2012, 77 FR 56519 
(September, 12, 2012) ; Notice of November 1, 2012, 77 FR 66513 
(November 5, 2012); Notice of January 17, 2013, 78 FR 4303 (January 
22, 2013).

0
6. Part 744 is amended by adding Sec.  744.15 to read as follows:

Sec.  744.15  Restrictions on Exports, Reexports and Transfers (in-
country) to Persons Listed on the Unverified List.

    (a) General requirement. In addition to the requirements set forth 
elsewhere in the EAR, exports, reexports, or transfers (in-country) of 
item(s) subject to the EAR involving parties to the transaction who are 
listed on the Unverified List may be made only in accordance with 
paragraph (b) of this section. The names and addresses of foreign 
persons subject to end-user controls based on the criteria described in 
paragraph (c) of this section are identified in the Unverified List 
found in Supplement No. 6 to this part. Requirements found elsewhere in 
the EAR also apply, including but not limited to any license 
requirements, the record filing requirements pursuant to Sec.  
758.1(b)(8), and the restrictions on license exceptions described in 
Sec.  740.2(a)(17).
    (b) UVL Statement. Before proceeding with any export, reexport, or 
transfer (in-country) subject to the EAR that is not subject to a 
license requirement, involving a person listed on the Unverified List 
as a party described in Sec.  748.5 of the EAR, an exporter, 
reexporter, or transferor (in-country) must obtain a UVL statement from 
such person, according to the provisions set forth in this section. The 
statement must be retained in accordance with Part 762 of the EAR.
    (1) One UVL statement may be used for multiple shipments of the 
same items between the same parties, so long as the party names, the 
description(s) of the items and the ECCNs are correct. If one UVL 
statement is used for multiple shipments, the exporter, reexporter, and 
transferor (in-country) must maintain a log or other record that 
identifies each shipment made pursuant to this section and the specific 
UVL statement that is associated with each shipment. The log or record 
must be retained in accordance with Part 762 of the EAR.
    (2) The UVL statement must be in writing, signed by an individual 
of

[[Page 55670]]

sufficient authority to legally bind the UVL party, and state the 
following:
    (i) Name of UVL party; complete physical address (simply listing a 
post office is insufficient); telephone number; fax number; email 
address; Web site (if available); and name of individual signing the 
UVL statement.
    (ii) Agrees not to use the item(s) for any use prohibited by the 
United States Export Administration Regulations (EAR), 15 CFR Parts 
730-772, and agrees not to reexport or transfer (in-country) the 
item(s) to any destination, use or user prohibited by the EAR.
    (iii) Declares that the end use, end user, and country of ultimate 
destination of the item(s) subject to the EAR are as follows: [INSERT 
END USE, END USER, AND COUNTRY OF ULTIMATE DESTINATION].
    (iv) Agrees to cooperate with end-use checks, including a Pre-
License Check or a Post-Shipment Verification, conducted by or on 
behalf of the Bureau of Industry and Security, U.S. Department of 
Commerce, for any item subject to the EAR in transactions to which they 
were a party in the last five years. This cooperation includes 
facilitating the timely conduct of the check and providing full and 
accurate information concerning the disposition of items subject to the 
EAR.
    (v) Agrees to provide copies of this document and all other export, 
reexport or transfer (in-country) records required to be retained in 
Part 762 of the EAR.
    (vi) Certifies that the individual signing the UVL Statement has 
sufficient authority to legally bind the party.
    (c) Criteria for revising the Unverified List. (1) Foreign persons 
who are parties to an export, reexport, and transfer (in-country) 
subject to the EAR may be added to the Unverified List if BIS or 
federal officials acting on BIS's behalf cannot verify the bona fides 
(i.e., legitimacy and reliability relating to the end use and end user 
of items subject to the EAR) of such persons because an end-use check, 
such as a pre-license check (PLC) or a post-shipment verification 
(PSV), cannot be completed satisfactorily for reasons outside of the 
U.S. Government's control. The examples in paragraphs (c)(1)(i) through 
(iii) of this section provide an illustrative list of those 
circumstances.
    (i) During the conduct of an end-use check, the subject of the 
check is unable to demonstrate the disposition of items subject to the 
EAR.
    (ii) The existence or authenticity of the subject of an end-use 
check cannot be verified (e.g., the subject of the check cannot be 
located or contacted).
    (iii) Lack of cooperation by the host government authority prevents 
an end-use check from being conducted.
    (2) BIS may remove a person from the Unverified List when BIS is 
able to verify the bona fides of the listed person as an end user, 
consignee, or other party to exports, reexports, or transfers (in-
country) involving items subject to the EAR by completing a PLC or PSV. 
In the limited circumstance involving a PLC or PSV that cannot be 
completed due to lack of host government cooperation, an alternative 
bona fides verification process may be determined by BIS to be 
sufficient. Such a determination is separate from those made by BIS 
pursuant to Sec.  744.11(b) of the EAR, and should be requested through 
paragraph (d) of this section.
    (d) Procedure for requesting removal of a person on the Unverified 
List. Any person listed on the Unverified List may request that its 
listing be amended or removed.
    (1) All such requests, including reasons therefor and information 
that would verify the bona fides, i.e., legitimacy and reliability of 
the person listed on the Unverified List as an end user, consignee or 
other party to exports, reexports, and transfers (in-country) of items 
subject to the EAR, must be in writing and sent to: Director, Office of 
Enforcement Analysis, Bureau of Industry and Security, U.S. Department 
of Commerce, 14th Street and Pennsylvania Avenue NW., Room 4065, 
Washington, DC 20230, via fax to (202) 482-0971, or by email to [insert 
email address].
    (2) The Deputy Assistant Secretary for Export Enforcement will 
review such requests and will convey the decision on the request to the 
requester in writing based on an assessment of the listed person's bona 
fides as a party to exports, reexports, and transfers (in-country) 
subject to the EAR. That decision will be the final agency action on 
the request.
0
7. Part 744 is amended by adding Supplement No. 6 to read as follows:

Supplement No. 6 to Part 744--Unverified List

    Exports, reexports, and transfers (in-country) involving parties to 
the transaction who are listed in this supplement are subject to the 
restrictions outlined in Sec.  744.15 of the EAR.

------------------------------------------------------------------------
                                                       Federal Register
             Country               Listed person and   citation and date
                                        address         of publication
------------------------------------------------------------------------
Reserved........................  Reserved..........  Reserved.
------------------------------------------------------------------------

PART 756--[AMENDED]

0
8. The authority citation for 15 CFR Part 756 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 
15, 2012, 77 FR 49699 (August 16, 2012).

0
9. Section 756.1 is amended by revising paragraph (a)(3) to read as 
follows:

Sec.  756.1  Introduction.

    (a) * * *
    (3) A decision on a request to remove or modify an Entity List 
entry made pursuant to Sec.  744.16 of the EAR or a decision on a 
request to remove an Unverified List entry made pursuant to Sec.  
744.15 of the EAR.

PART 758--[AMENDED]

0
10. 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 
15, 2012, 77 FR 49699 (August 16, 2012).

0
11. Section 758.1 is amended by adding paragraph (b)(8) to read as 
follows:

Sec.  758.1  The Shipper's Export Declaration (SED) or Automated Export 
System (AES) record.

* * * * *
    (b) * * *
    (8) For all exports of items subject to the EAR where parties to 
the transaction, as described in Sec.  748.5(d)-(f) of the EAR, are 
listed on the Unverified List (Supplement 6 to Part 744 of the EAR), 
regardless of value or destination.

PART 762--[AMENDED]

0
12. The authority citation for 15 CFR Part 762 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 
15, 2012, 77 FR 49699 (August 16, 2012).

[[Page 55671]]

0
13. Section 762.2 is amended by revising paragraph (b)(13) to read as 
follows:

Sec.  762.2  Records to be retained.

* * * * *
    (b) * * *
    (13) Sec.  744.15(b), UVL statement as well as any logs or records 
created for multiple shipments;
* * * * *

    Dated: September 3, 2013.
Kevin J. Wolf,
Assistant Secretary for Export Administration.
[FR Doc. 2013-21996 Filed 9-10-13; 8:45 am]
BILLING CODE 3510-33-P