Document ID: BIS-2010-0021-0003
Agency: bis
Document Type: Proposed Rule
Title: Revisions to Defense Priorities and Allocations System Regulations
Posted Date: 2014-01-31T05:00Z

[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Proposed Rules]
[Pages 5332-5353]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01613]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 700

[Docket No. 0912311453-0016-01]
RIN 0694-AE81

Revisions to Defense Priorities and Allocations System 
Regulations

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would clarify existing standards and 
procedures by which the Bureau of Industry and Security (BIS) may 
require that certain contracts or orders that promote the national 
defense be given priority over other contracts or orders. It also 
proposes new standards and procedures for such prioritization with 
respect to contracts or orders for emergency preparedness activities. 
Finally, this rule proposes new standards and procedures by which BIS 
may allocate materials, services and facilities to promote the national 
defense. This rule implements provisions in the Defense Production Act 
Reauthorization of 2009 (123 Stat. 2006) (111 Pub. L. 67) (September 
30, 2009) regarding publication of regulations providing standards and 
procedures for prioritization of contracts and orders and for 
allocation of materials, services, and facilities to promote the 
national defense under emergency and non-emergency conditions.

DATES: Comments must be received by April 1, 2014.

ADDRESSES: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
The ID number for this rulemaking is BIS-2010-0021.
     By email directly to publiccomments@bis.doc.gov. Include 
RIN 0694-AE81 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-AE81.

FOR FURTHER INFORMATION CONTACT: Liam McMenanim at (202) 482-2233, 
liam.mcmenamin@bis.doc.gov.

SUPPLEMENTARY INFORMATION: 

Executive Summary

Purpose of the Regulatory Action

    This proposed rule would update the priorities and allocations 
provisions set

[[Page 5333]]

forth in the Defense Priorities and Allocations System regulations (15 
CFR part 700) (DPAS) and implemented by the Bureau of Industry and 
Security (BIS) consistent with its authorities under Title I of the 
Defense Production Act of 1950 (as amended) (DPA). This rule also would 
establish certain new administrative procedures through which BIS will 
implement the allocations provisions of the DPA. In addition, this 
proposed rule would revise definitions found in Sec.  700.8 of the DPAS 
regulations.
    This rule implements the provisions in the Defense Production Act 
Reauthorization of 2009 (Pub. L. 111-67, 123 Stat. 2006, September 30, 
2009) (Reauthorization Act), which require agencies with priorities and 
allocations authorities to issue rules establishing standards and 
procedures by which those authorities shall be used to promote the 
national defense, under both emergency and non-emergency conditions. 
This rule is part of a multi-agency effort that forms the Federal 
priorities and allocations system.

Background

    The Reauthorization Act requires each Federal agency delegated 
priorities and allocations authority consistent with section 101 of the 
DPA to issue final rules establishing standards and procedures by which 
that authority is used to promote the national defense, during both 
emergency and non-emergency conditions. In the Reauthorization Act, 
Congress further directed that, to the extent practicable, the Federal 
agencies with priorities and allocations authoritiy should work 
together to develop a consistent and unified Federal priorities and 
allocations system.
    In order to meet this mandate, BIS worked in conjunction with the 
Departments of Agriculture (USDA), Defense (DoD), Energy (DOE), Health 
and Human Services (HHS), Homeland Security (DHS), and Transportation 
(DOT) to develop common provisions based on the DPAS that can be used 
by each Department in its own regulation. The six regulations to be 
promulgated, one by each Department with delegated DPA Title I 
authority, comprise the Federal priorities and allocations system.
    This proposed rule would update and expand the DPAS. BIS relies 
upon and uses the DPAS to implement priority and allocation actions 
involving industrial resources. BIS administers the DPAS pursuant to 
authority under Title I of the DPA (50 U.S.C. app. 2071, et seq.) as 
delegated by Executive Order 13603, March 16, 2012 (77 FR 16651, 3 CFR, 
2012 Comp., p. 225). The DPAS has two principal components--priorities 
and allocations. Under the priorities component, certain contracts 
between the government and private parties or between private parties 
for the production or delivery of industrial resources are required to 
be given priority over other contracts to facilitate expedited delivery 
in promotion of the U.S. national defense. Under the allocations 
component, materials, services, and facilities may be allocated to 
promote the national defense. For both components, the term ``national 
defense'' means programs for military and energy production or 
construction, homeland security, stockpiling, space, emergency 
preparedness, and critical infrastructure protection and restoration. 
The term also includes foreign military and critical infrastructure 
assistance.
    The Reauthorization Act required that within 270 days of its 
enactment, all agencies to which the President has delegated priorities 
and allocations authority under Title I of the DPA must publish final 
rules establishing standards and procedures by which that authority 
will be used to promote the national defense in both emergency and non-
emergency situations. The act also required all such agencies to 
consult ``as appropriate and to the extent practicable to develop a 
consistent and unified Federal priorities and allocations system.'' 
(123 Stat. 2006, at 2009). This rule is one of several rules that have 
been or will be published to implement the provisions of the 
Reauthorization Act. The final rules of the agencies with 
Reauthorization Act authorities, which are the USDA, DOE, HHS, DOT, 
DoD, and DOC, will comprise the Federal priorities and allocations 
system.

June 2010 Proposed Rule, Comment and Response.

Proposed Rule and Comment

    On June 7, 2010, BIS published a proposed rule to update and expand 
15 CFR part 700 (75 FR 32122, June 7, 2010). BIS received one comment 
on that proposed rule. The commenter noted that Section 700.11 of the 
proposed rule discussed prioritization directives and referred to 
Section 700.12. The commenter noted that Section 700.12 stated that 
prioritization directives take precedence over all DX rated orders, DO 
rated orders, and unrated orders but that allocation orders take 
precedence over all. The commenter also noted the inference that 
prioritization directives may be different from DX rated orders. The 
commenter stated that he could find no provision that told how to mark 
an order as a prioritization directive so that the contractor could 
clearly tell that it was dealing with a prioritization directive.

Response

    The June 7, 2010, proposed rule, the existing DPAS, and this 
proposed rule contemplate that directives will be issued by BIS to 
specific persons. BIS will provide the directive to the person to whom 
it applies. To the extent that directives modify or conflict with a DO 
or DX rated order or unrated order, the directive takes precedence. As 
will be further discussed below, this proposed rule does not draw a 
distinction between prioritization directives and allocation 
directives.
    Due to the limited response to the June 2010 proposed rule and 
because BIS has reassessed some aspects of the June 2010 proposed rule, 
BIS has made several amendments and issued this second proposed rule 
for public consideration.

Summary of Principal Differences Between This Proposed Rule and the 
June 2010 Proposed Rule

Retention of Existing DPAS Format

    The June 2010 proposed rule would have substantially reorganized 
the format of the DPAS. This proposed rule would largely retain the 
existing format. Upon reconsideration, BIS has concluded that the 
benefits of the revised format did not outweigh its drawbacks. 
Companies and government agencies that use the current DPAS are 
familiar with the current regulatory structure. They would have to 
incur the cost of learning any new structure that might be imposed. For 
example, the Department of Defense uses DPAS authority delegated to it 
by the Department of Commerce to place ratings on approximately 300,000 
contracts annually. The Departments of Commerce and Defense estimate 
that, in addition, approximately 400,000 rated contracts are placed 
annually to satisfy national defense requirements. Parties who receive 
these rated contracts have not expressed to BIS any desire to reformat 
the regulations.
    In addition to familiarity by current users, retaining the existing 
DPAS format simplifies identifying the substantive and procedural 
changes that this proposed rule would make and distinguishing those 
changes from the editorial changes that this proposed rule would also 
make.

Complementary Roles of Priorities and Allocations and Single Set of 
Deadlines

    Although the June 2010 proposed rule did not explicitly state that 
priority

[[Page 5334]]

authority and allocations authority were mutually exclusive, it 
strongly implied that such was the case. For example, Sec.  700.62 in 
the June 2010 proposed rule indicated that allocation orders would take 
precedent over priority ratings. BIS does not intend to issue 
conflicting orders or ratings. Currently, BIS issues only priority 
ratings. However, BIS can envision situations in which some combination 
of priorities and allocations would be needed. Accordingly, this 
proposed rule would not assign precedence between priorities and 
allocations by regulation. Instead, it would opt for flexibility when 
dealing with the situations that call for allocation orders. A 
description of the relationship between allocation orders and 
previously or subsequently received rated orders and unrated orders 
would be included in any allocation orders issued.
    In connection with BIS' judgment that priorities authority and 
allocations authority might be used in a complementary manner, BIS has 
now concluded that shorter time limits than what the June 2010 proposed 
rule would have imposed with respect to filing requests for exception 
or adjustment of allocation orders, appeals of decisions denying those 
requests and BIS responses to those filings are not necessary. 
Therefore this proposed rule would apply, to both priorities and 
allocations, the time limits that the current DPAS applies to filing 
requests for exception or adjustment of priority rated orders, appeals 
of decisions denying those requests, and BIS responses to those 
filings. Although allocations would be used only in the circumstances 
described in the paragraph immediately below, BIS does not believe that 
such circumstances would necessarily require shorter time limits for 
the above-noted actions.
    BIS does not intend or expect that allocations will be issued 
routinely or frequently. Under this proposed rule, allocations may be 
used to control the distribution of a material in the civilian market 
only upon approval by the President of a finding by the Secretary of 
Commerce or his or her designee that such material is a scarce and 
critical material essential to the national defense, and that the 
requirements of the national defense for such material cannot otherwise 
be met without creating a significant dislocation of the normal 
distribution of such material in the civilian market to such a degree 
as to create appreciable hardship. The June 2010 rule proposed that 
such findings be made by the Secretary of Commerce. This proposed rule 
adds language that would allow the Secretary or a designee of the 
Secretary to make such findings. This change recognizes that a 
Department Organization Order of the Department of Commerce delegates 
to the Under Secretary for Industry and Security those DPA authorities 
that have been delegated to the Secretary of Commerce. Even a narrower 
use of allocations authority under this proposed rule would also be 
subject to the policy set forth in Sec.  700.30 which provides that 
allocations will be used only when there is insufficient supply of a 
material, service, or facility to satisfy national defense requirements 
through use of priorities authority or when the use of priorities 
authority would cause a severe and prolonged disruption in the supply 
of materials, services or facilities available to support normal U.S. 
economic activity. Given these requirements and its past practice, BIS 
anticipates that use of allocations will be a rare event.

Reduced Time for Written Follow-Up of Verbal Notice That a Party is 
Unable To Comply With An Order

    Under the current DPAS, a party who gives verbal notice that 
performance of a priority rated order will be delayed must provide a 
written confirmation within five working days. The June 2010 proposed 
rule would have retained this provision and would have imposed the same 
time limit for written confirmation that a party is unable to comply 
with an allocation order. Upon further consideration, BIS has concluded 
that such written confirmation should be transmitted within one working 
day of the verbal notice. A party making such a notice would know at 
the time of the verbal notice the reasons that it cannot meet the 
specified delivery date or comply with the order. Rated orders are 
issued to satisfy requirements related to military and energy 
production or construction, military or critical infrastructure 
assistance to any foreign nation, homeland security, stockpiling, 
space, emergency preparedness, and critical infrastructure protection 
and restoration. Reducing the reason to writing should not take longer 
than one working day and the nature of these orders justifies requiring 
expeditious communication.

Issuance of Allocations Orders by an Authorized Employee or Official 
Other Than the Secretary

    The June 2010 proposed rule stated that allocations orders would be 
signed by or include the name of the Secretary of Commerce and be 
addressed to the person to whom the order applies. This proposed rule 
would provide that an authorized official or employee sign allocations 
orders, consistent with existing practices. Both the June 2010 proposed 
rule and this proposed rule would require the President's approval of 
the finding before allocations could be used to control the general 
distribution of a material in the civilian market. BIS believes that, 
given this requirement, a requirement that the Secretary sign every 
order that may be issued to implement an allocation decision would 
serve no purpose.

Constructive Notice of Allocations Orders Through Federal Register 
Publication

    The June 2010 proposed rule would have required that allocations 
orders (and modifications or cancellations of such orders) be issued 
directly to affected persons. This proposed rule would permit such 
orders to be issued directly to affected persons or by constructive 
notice through publication in the Federal Register. The Federal 
Register notice might apply to a specified class of persons rather than 
naming all affected persons. For example, an allocation order published 
in the Federal Register might apply to all manufacturers of a specified 
product but not name every manufacturer of that product in the order. 
BIS believes that situations might arise in which allocations are 
justified and that, although BIS would be able to identify the material 
to be allocated, it would not be able to identify all of the suppliers 
of that material. In such situations, constructive notice to the 
affected class of persons by publication in the Federal Register would 
be consistent with the procedure that the government uses generally 
when notice must be given to large numbers of persons or to persons not 
all of whom can be individually identified.

Use of Rated Orders for Emergency Preparedness Activities

    This proposed rule would authorize use of rated orders for 
emergency preparedness activities and would authorize such orders to 
require acceptance or rejection within a shorter time than the 10 or 15 
working days required for acceptance or rejection of other DX and DO 
rated orders. Emergency preparedness rated orders may require 
acceptance or rejection in as little as six hours after receipt of the 
order if the order is in response to a hazard that has occurred or 12 
hours if the order is to prepare for an imminent hazard. This proposed 
rule would also require use of rated orders to obtain items needed to 
fill an emergency preparedness rated order and would require use of the 
reduced times for

[[Page 5335]]

acceptance or rejection noted above. The June 2010 proposed rule did 
not provide the option of imposing a shorter timeframe for acceptance 
or rejection of rated orders for emergency preparedness activities 
issued by the Department of Commerce, although it did note that rated 
orders issued by other agencies that are delegated authority by the 
Department of Commerce might have shorter timeframes for acceptance or 
rejection. This proposed rule provides for the option of shorter 
timeframes for all orders issued for emergency preparedness activities.

Removal of Limits on Use of do Rated Orders for the Metalworking 
Machine Industry

    As discussed more fully in the description of the proposed changes 
to Sec.  700.31 below, this proposed rule would remove completely the 
special treatment of the metalworking machine industry currently found 
in Sec.  700.31. That section limits the amount of DO rated orders that 
metal working machine producers are required to accept. In recent 
years, there have been so few DO rated orders for metalworking machines 
that the maximum set by Sec.  700.31 has never been met. Therefore, BIS 
believes that the maximum limitation is not needed. The June 2010 
proposed rule made no changes to these limits.

Removal of Mandatory Criteria for Evaluating Whether Certain Materials, 
Equipment, and Services Used To Maximize Energy Supplies Are ``Scarce''

    As discussed more fully in the description of the proposed changes 
to Sec.  700.21 below, this proposed rule would clarify that the 
criteria listed for determining whether certain materials, equipment, 
and services related to energy production are ``scarce'' and whether 
priorities authority is needed are illustrative lists of criteria that 
the Department of Commerce may use. The June 2010 proposed rule would 
have retained the language currently in Sec.  700.21.

Procedure for Requesting Assistance in Obtaining Rated Items or 
Priority Rating Authority for Homeland Security, Emergency 
Preparedness, and Critical Infrastructure Protection and Restoration 
Assistance Programs Within the United States

    As discussed more fully in the description of proposed Sec.  700.55 
below, this proposed rule would provide a procedure for requesting 
assistance in obtaining rated items or priority rating authority for 
homeland security, emergency preparedness, and critical infrastructure 
protection and restoration assistance programs within the United 
States.

Revision to Schedule I

    This proposed rule would revise Schedule I to part 700 to provide a 
program symbol for programs intended to provide critical infrastructure 
assistance to foreign nations. Additionally, this proposed rule would 
make format changes and a clarification, both of which are more fully 
described below.

Section-by-Section Analysis of the Changes That This Proposed Rule 
Would Make to the Existing DPAS

    The following discussion explains the changes that this proposed 
rule would make to the existing DPAS.

Revisions to Subpart A--Purpose

    Proposed Sec.  700.1--Purpose of this part. The header of this 
section would be changed from ``Purpose'' to ``Purpose of this part'' 
to be more specific. This section would state the purpose of the DPAS 
in general terms and would largely restate information that appears at 
15 CFR 700.1 in the existing regulations. However, extensive language 
about the source of BIS' legal authority would not be incorporated into 
the proposed Sec.  700.1 on the grounds that such language is not 
regulatory in nature. BIS believes that the language regarding the 
DPAS's purpose would be clearer if it is not submerged in extensive 
discussions of legal authority.

Revisions to Subpart B--Overview

    Section 700.2--Introduction. This rule would add references to 
homeland security and critical infrastructure protection and 
restoration activities to paragraph (a) to conform to the current 
definition of national defense in the DPA. Paragraph (b) would 
explicitly state that the Department of Commerce may exercise 
priorities and allocations authority. Paragraph (c) would state that 
recipients of rated orders have authority to place ratings on contracts 
with contractors, subcontractors, or suppliers. BIS is proposing to 
make these changes so that the introductory paragraph will give a more 
complete description of the DPAS and will reflect changes brought about 
by the 2009 amendments to the DPA under the Reauthorization Act. BIS 
believes that these changes would make this introduction more 
descriptive and useful.
    Section 700.3--Priority ratings and rated orders. This section 
would be shortened to remove material that is covered elsewhere in 15 
CFR part 700. References to ``these regulations'' would be changed to 
``this part'' to make clear that the regulations referred to are 15 CFR 
part 700.
    Sections 700.4, 700.5, 700.6 and 700.7 would be removed because the 
information that they contain is duplicated elsewhere the DPAS.

Revisions to Subpart C--Definitions

    Section 700.8--Definitions. This rule would remove the reference to 
definitions in the DPA and Stafford Act. Definitions from those acts 
that also apply to the DPAS would be set forth separately in this 
section.
    New definitions would be added for ``allocation,'' ``allocation 
order'' and ``allotment.'' These definitions relate to the expanded 
allocations provisions in Subpart F, which is needed to implement the 
amendments set forth in the Reauthorization Act.
    A new definition for ``working day'' also would be added. This term 
currently is in the DPAS, but is not defined. The term would be defined 
as ``any day that the recipient of an order is open for business.''
    As newly defined, this term would apply to time limits for 
acceptance or rejection of rated orders (other than orders placed for 
emergency preparedness activities), written confirmation of verbal 
notice that delivery or performance of a rated order will be delayed, 
and written confirmation of verbal notice of inability to comply with 
an allocation order.
    The definitions of ``critical infrastructure,'' ``homeland 
security'' and ``national defense'' that appear in the DPA would be 
added so that readers would not need to refer to the statute for the 
definitions.
    The definition of ``Maintenance, repair and operating supplies 
(MRO)'' would be amended by replacing the term ``Maintenance, repair 
and operating supplies'' with the term ``Maintenance, repair and/or 
operating supplies.'' For years, BIS has interpreted the term MRO to 
apply to maintenance, to repair, to operating supplies, to any 
combination of two of the three, or to all three. BIS is proposing to 
revise the language because it believes that the proposed language more 
clearly expresses the meaning that BIS has applied for years. In other 
respects, the definition is unchanged.
    The new definitions of ``emergency preparedness'' and ``hazard'' 
relate primarily to the issuance of rated orders for emergency 
preparedness requirements, a topic addressed in Sec. Sec.  700.13 and 
700.15 of this proposed rule. The definitions of ``emergency

[[Page 5336]]

preparedness'' and ``hazard'' are taken from the Stafford Act.
    The definition of ``official action'' would be changed to cover 
actions related to allocations as well as priorities. This change is 
needed to address the expanded material regarding allocations in 
Sec. Sec.  700.30 through 700.34 and references to allocations in other 
sections of this proposed rule.
    New definitions would be added for the terms ``priority rating'' 
and ``program identification symbols.'' These definitions are not 
substantively different than the descriptions of priority ratings and 
program identification symbols that currently appear in Sec.  700.11 of 
the DPAS. BIS believes that priority ratings and program identification 
symbols are sufficiently central to the concept of priorities under the 
DPAS to warrant inclusion in the definitions section.
    The definition of ``person'' would be expanded to include 
international organizations to conform to proposed new Sec. Sec.  
700.57 and 700.58, which address military and critical infrastructure 
assistance to international organizations as well as to foreign 
governments.
    The definition of ``set-aside'' would be revised to match the text 
of the definition of this term in each agency's regulations (noted 
above) that together will comprise the Federal priorities and 
allocations system.
    This proposed rule would remove the text currently at the beginning 
of the first sentence in Sec.  700.8, which reads ``In addition to the 
definitions provided in Section 702 of the Defense Production Act 
(excepting the definition of ``industrial resources'' and Section 
602(a) of the Stafford Act) . . .'' because the relevant definitions 
from those Acts would be added to Sec.  700.8 of the DPAS under this 
proposed rule. This change would spare readers of the DPAS from the 
need to consult those two statutes to understand the meaning of terms 
used in 15 CFR part 700.

Revisions to Subpart D--Industrial Priorities

    Section 700.10--Authority. Paragraph (a) would be revised to 
replace the reference to Executive Order 12919 with a reference 
Executive Order 13603, which revoked and superseded Executive Order 
12919. Paragraph (b) would be revised to remove a reference to an 
internal delegation by the Department of Commerce, because that 
reference is unnecessary. The description of the priorities and 
allocations authority conveyed by statute or executive order to other 
government agencies currently found in Sec.  700.18(b)(1) would be 
moved to a new paragraph (c) of Section 700.10. The language describing 
the authority of the Department of Agriculture would be revised to 
conform to the language in Executive Order 13603. The information 
currently in Sec.  700.18(b)(2) would be removed because it merely 
describes an internal government procedure. The text regarding 
communications services would be revised to cite Executive Order 13618 
of July 6, 2012. That executive order revoked Executive Order 12472, 
which currently is cited in Sec.  700.18(b)(2). BIS believes that 
placing all of the statements of agency authority in a single section 
would aid understanding of the Defense Priorities and Allocations 
System Regulations.
    700.11--Priority ratings. The phrase ``to this part'' would be 
added immediately following ``Schedule I'' in the second sentence of 
paragraph (b) to precisely identify the schedule. This is not a 
substantive change.
    700.12--Elements of a rated order. Revised paragraph (a) of this 
section would be headed ``Elements required for all rated orders'' and 
would incorporate all of the elements of current paragraphs (a), (b) 
and (c) of Sec.  700.12. In addition, in paragraph (a), this proposed 
rule would revise the parenthetical listing of rated order symbol 
examples by replacing ``DO-H1'', which is rarely used, with ``DO-N1'', 
which is more commonly used and which indicates a Federal emergency 
preparedness, mitigation, response and recovery action approved for 
DPAS support by the Department of Homeland Security.
    Paragraph (b), headed ``Additional element required for certain 
emergency preparedness rated orders,'' would be added. This new 
paragraph would provide that if a rated order is placed for the purpose 
of emergency preparedness requirements, and if expedited action is 
necessary or appropriate to meet those requirements, the order must 
include a statement informing the recipient that the order is for the 
purpose of emergency preparedness and of the amount of time within 
which the recipient must accept or reject the order. The minimum amount 
of time that must be allowed for acceptance or rejection would be 
governed by proposed Sec.  700.13(d)(2).
    Section 700.13--Acceptance and rejection of rated orders. In 
paragraph (c), introductory text, the word ``Commerce'' would be 
replaced with the phrase ``the Department of Commerce.''
    Paragraph (d)--Customer notification requirements. This paragraph 
would be changed in the following manner. Paragraph (d)(1) would 
continue to apply to most rated orders and would be substantively 
unchanged from existing paragraph (d)(1). The currently undefined term 
``working days'' would be subject to the definition proposed in Sec.  
700.8 of this proposed rule. DO rated orders would have to be accepted 
or rejected within 15 working days after receipt, and DX rated orders 
would have to be accepted or rejected within 10 working days after 
receipt. Paragraph (d)(2) would be revised to address customer 
notification requirements for orders placed for emergency preparedness 
requirements where expedited action is necessary or appropriate to meet 
those requirements. Such orders would have to be accepted or rejected 
in the time frame noted in the order. That time frame could be as short 
as six hours if the order is issued by an authorized person in response 
to a hazard that has occurred, or 12 hours if the order is issued by an 
authorized person in response to an imminent hazard. Existing paragraph 
(d)(2), which requires persons who have accepted rated orders to give 
notice if performance will be delayed, would become paragraph (d)(3). 
The time limit in which to provide written confirmation of a verbal 
notice would be changed from five working days to one working day. BIS 
believes that the nature of rated orders, supporting national defense 
requirements, justifies expeditious communications and that once a 
verbal notice of delayed performance has been given, putting that 
notice into writing should not take more than one working day.
    Section 700.14--Preferential scheduling. The proposed changes to 
this section are all non-substantive. To enhance clarity, an additional 
sentence emphasizing the priority of DX rated orders over DO rated 
orders would be added to the example at the end of paragraph (b). 
Paragraph (c) which addresses conflicting rated orders would be amended 
by changing references to ``Sec. Sec.  700.50 through 700.54'' to 
``Subpart H of this part'' to more completely state the provisions that 
deal with resolution of conflicting rated orders.
    Section 700.15--Extension of priority ratings. This section 
requires persons who receive rated orders to use rated orders with 
suppliers to obtain items needed to fill a rated order. This proposed 
rule makes non-substantive changes to paragraphs (a) and (b). The term 
``this regulation'' in paragraph (a) is replaced with ``this part'' to 
make clear that the regulation to which the sentence refers is 15 CFR 
part 700. The second sentence of paragraph (b) is revised to state 
expressly that the rating

[[Page 5337]]

continues throughout the entire supply chain.
    Paragraph (c) would be added. The new paragraph would require use 
of rated orders to obtain items needed to fill an emergency 
preparedness rated order. It would require persons who have received 
emergency preparedness rated orders that have shortened timeframes for 
acceptance or rejection to impose shortened time frames for 
transmission of acceptance or rejection on rated orders placed with 
suppliers.
    Section 700.16--Changes or cancellations of priority ratings and 
rated orders.
    A substantive change would be made to paragraph (d), which lists 
amendments to a rated order that do not constitute a new rated order. 
The phrase ``prior to the start of production'' would be added 
immediately following the phrase ``a minor variation in size or 
design.'' Once production of an item is commenced, changes in design 
that would be minor prior to production can become significant. 
Therefore, BIS believes that the rule should allow for only changes in 
size or design that are specified before production starts to be 
considered merely an amendment to an existing rated order rather than a 
new rated order.
    Paragraph (e), which imposes a duty to cancel rated orders that 
have been placed with suppliers, or to cancel the ratings on those 
orders if the items so ordered are no longer needed to fill a rated 
order, would be modified. This rule would amend this paragraph to make 
it clear that the person who placed the rated orders with the suppliers 
(or that person's successor in interest) has the duty to cancel them.
    Paragraph (f), which imposes a duty to inform suppliers when a 
priority rating is placed on an order or when a priority rating is 
changed or cancelled, would be modified to make clear that the person 
who placed the rating on the order or who changed or cancelled the 
rating has the duty to inform the suppliers of the priority rating 
activity.
    Section 700.17--Use of rated orders. Currently Sec.  700.17(f) 
provides that a person is not required to place a priority rating on an 
order for items with a value of less than $50,000 or one half the 
Federal Acquisition Regulation (FAR) Simplified Acquisition Threshold, 
whichever is larger, if delivery can be obtained in a timely fashion 
without the priority rating. This proposed rule would raise the 
threshold from the current value of $50,000 to a new value of $75,000--
which is one half the FAR Simplified Acquisition Threshold. None of the 
other changes to this section are substantive. Paragraph (d) describes 
combining rated and unrated orders. In paragraph (d)(1)(ii), which 
refers to the elements of a rated order as set forth in Sec.  700.12, 
the word ``four'' would be removed because under this proposed rule, a 
rated order could have either four or five elements depending on 
whether or not the order is for certain emergency preparedness 
activities
    Section 700.18--Limitations on placing rated orders. This proposed 
rule would make several clarifying and stylistic changes to this 
section. Paragraph (a)(1) would be revised to apply only to rated 
orders that are made pursuant to 15 CFR part 700 because some rated 
orders may be issued pursuant to regulations of other agencies. A more 
explicit description of the authorizations to place rated orders would 
be added.
    The sentence in paragraph (a)(1)(ii), which begins: ``Separate 
rated orders . . .'' would be moved to a separate paragraph (a)(3) and 
revised to read: ``Separate rated orders may not be placed solely for 
obtaining minimum procurable quantities on each order if the minimum 
procurable quantity would be sufficient to cover more than one rated 
order.'' BIS believes that this change improves syntax and more clearly 
expresses the intent behind the sentence.
    Existing paragraph (b)(1) would be moved to a new paragraph (c) in 
section 700.10 as discussed above.
    Existing paragraph (b)(2) would be eliminated entirely because it 
refers to internal government documents and does not provide any useful 
information to the public.
    Existing paragraph (b)(3) would become paragraph (b). The first 
clause in this new paragraph (b) would be revised to state more clearly 
the policy regarding the items listed in paragraph (b), which are: 
Copper raw materials, crushed stone, gravel, scrap, slag, central steam 
heat and waste paper. The new language would be: ``Notwithstanding 
language authorizing or requiring the placement of rated orders found 
elsewhere in this part, no person may place a rated order to obtain the 
following items unless such order is authorized by an official action 
of the Department of Commerce.'' BIS believes that the foregoing 
proposed language is clearer than the corresponding language currently 
in Sec.  700.18(b)(3), which reads: ``The following items under the 
jurisdiction of Commerce are currently excluded from the rating 
provisions of this regulation; however, these items are subject to 
Commerce Directives.'' BIS does not regard this change as substantive.

Revisions to Subpart E--Industrial Priorities for Energy Programs

    Section 700.21--Application for priority rating authority. This 
section sets forth the procedures to be used when applying for priority 
rating authority and provides information about the criteria considered 
by BIS in approving such applications. The proposed rule would make 
three changes. First, the rule would remove existing paragraph (b), 
which describes activities of the Department of Energy. BIS believes 
that this information is unnecessary.
    Second, existing paragraph (c) would be the basis for new paragraph 
(b). The rule would rephrase proposed new paragraph (b) to emphasize 
that two Department of Commerce findings are needed to authorize 
priorities authority. Those findings are whether the items in question 
are scarce, and whether there is a need to use the priorities 
authority. The rule would add language emphasizing that the list of 
factors that the Department of Commerce may use in making those two 
findings is illustrative. This proposed rule also would add language to 
paragraph (b) making clear that if scarcity is not found, the 
Department of Commerce will not consider whether priority authority is 
needed. Applications for priority rating authority to maximize domestic 
energy supplies are rare. BIS has not received one in more than a 
decade. BIS recognizes that it must make fact-based decisions on these 
applications in a consistent manner. However, the rarity of these 
applications makes devising a list of all of the factors that could be 
relevant to every application impossible. Therefore, BIS believes that 
the list of factors in the rule must be illustrative and that the 
actual relevant factors must be determined on a case-by-case basis.
    The proposed rule also would remove existing paragraph (d), which 
provides that if the Department of Commerce does not find the items to 
be scarce, it will not analyze the need for priorities and allocations 
authorities because the concept would addressed in paragraph (b).
    Existing paragraph (e) would become paragraph (c) with minor 
changes to add clarity and precision. Existing paragraph (f) would 
become paragraph (d). The word ``Commerce'' would be replaced by ``the 
Department of Commerce'' throughout the section.

[[Page 5338]]

Revisions to Subpart F--National Emergency Preparedness and Critical 
Items. Subpart F Would Be Retitled Allocation Actions

    Section 700.30--Policy. This section would be rewritten. The 
current heading, ``Priorities and allocations in a national emergency'' 
would be revised to ``Policy''.
    The section would state that allocations authority would be used 
only when priority authority is unable to provide a sufficient supply 
of a material, service, or facility to meet the national defense, or 
when the use of priority authority would cause a severe and prolonged 
disruption in the supply of materials, services, or facilities 
available to support normal U.S. economic activities. This policy does 
not mean that priorities and allocations would, in all instances, be 
mutually exclusive. In some circumstances, the best course may be to 
use priority authority and allocations authority in a complementary 
manner. An example of such a situation is one in which national defense 
activities need less than the entire supply of a particular material, 
service or facility and priority authority could provide a sufficient 
supply to meet that need but only by causing a severe and prolonged 
disruption in the supply to support normal U.S. economic activities. If 
the national defense need were sufficiently critical, the best course 
overall might be to use priority authority to meet the national defense 
need and use allocation authority to distribute the remaining supply 
among other economic activities. Throughout this section, the 
definition of ``national defense'' in Sec.  700.8 of this proposed rule 
would apply. Allocation authority would not be used to ration materials 
or services at the retail level.
    Section 700.31--General procedures. This section also would be 
rewritten. The heading would be changed from ``Metalworking machines'' 
to ``General procedures.'' The proposed procedures set out in this 
section and in proposed Sec.  700.32 are intended to provide a 
reasonable assurance that allocations authority would be used only in 
situations where use of such authority is justified. Section 700.31 
would set a list of the elements that must be in a plan that the 
Department of Commerce would be required to develop before using its 
allocations authority to address a supply problem in all instances, 
whether or not the allocation would control the general distribution of 
a material in the civilian market. The section would not preclude the 
Department of Commerce from including additional elements in the plan; 
it would merely require that the following elements be included.
     A copy of the written determination made in accordance 
with section 202 of Executive Order 13603, that the program or programs 
that would be supported by the allocation action are necessary or 
appropriate to promote the national defense;
     A detailed description of the situation to include any 
unusual events or circumstances that have created the requirement for 
an allocation action;
     A statement of the specific objective(s) of the allocation 
action;
     A list of the materials, services, or facilities to be 
allocated;
     A list or description of the sources of the materials, 
services, or facilities that will be subject to the allocation action;
     A detailed description of the provisions that will be 
included in the allocation order, including the type(s) of allocation 
orders, the percentages or quantity of capacity or output to be 
allocated for each purpose, the relationship with previously or 
subsequently received priority rated and unrated contracts and orders, 
and the duration of the allocation action (e.g., anticipated start and 
end dates);
     An evaluation of the impact of the proposed allocation 
action on the civilian market; and
     Proposed actions, if any, to mitigate disruptions to 
civilian market operations.
    The text of existing Sec.  700.31--``Metalworking machines'' would 
be removed from the DPAS. Section 700.31 of the DPAS applies only when 
the metalworking machines that would be the subjects of a rated order 
have a list price in excess of $2,500. Section 700.13 currently allows 
any metalworking machine producer to reject any DO rated order that 
calls for delivery in any one month of more than 60 percent of that 
month's scheduled production of machines of the size called for in the 
order. Section 700.13 also currently allows any metalworking machine 
producer to reject any DO rated order that it receives less than three 
months prior to the beginning of the month for which delivery is 
requested.
    BIS previously published a notice of inquiry seeking comments on 
the effects of eliminating this provision (73 FR 19666, April 17, 
2006). BIS received no comments. Section 700.31, in effect, sets a 
limit on the amount of production capacity that a producer of 
metalworking machines could be required to set-aside in anticipation of 
rated orders. BIS has issued no directives or other official actions 
requiring such set-asides in many years. BIS believes that priority 
ratings affect an insignificant portion of the metalworking machine 
industry output. On that basis, BIS believes that a special provision 
that sets, by regulation, the maximum allocation that may be applied to 
this one industry, while allocations would be set for all other 
industries through fact-based, case-by-case basis determinations, is 
unwarranted.
    Section 700.32--Controlling the general distribution of a material 
in the civilian market. This section would be new. It would set forth 
the findings that the Secretary of Commerce (or the Secretary's 
designee) must make and that the President must approve before the 
Department of Commerce may use allocations to control the distribution 
of a material in the civilian market. Those findings, which are 
required by Sec.  101(b) of the DPA, are: Such material is a scarce and 
critical material essential to the national defense, and the 
requirements of the national defense for such material cannot otherwise 
be met without creating a significant dislocation of the normal 
distribution of such material in the civilian market to such a degree 
as to create appreciable hardship. Section 201(e) of Executive Order 
13603 directs each agency with delegated authority under section 101 of 
the DPA to make the finding required by section 101(b) and submit the 
finding for the President's approval through the Assistant to the 
President and National Security Advisor and the Assistant to the 
President for Homeland Security and Counterterrorism.
    Section 700.33--Types of allocation orders. This new section 
proposes to describe the three types of allocations orders the 
Department of Commerce might issue: A set-aside; a directive; or an 
allotment. A set-aside is an official action that would require a 
person to reserve a resource capacity in anticipation of receipt of 
rated orders. A directive is an official action that would require a 
person to take or refrain from taking certain actions in accordance 
with its provisions. For example, a directive could require a person to 
stop or reduce production of an item or service; prohibit the use of 
selected materials, services or facilities; divert supply of one type 
of material, service or facility to another; or to supply a specific 
quantity, size, shape, and type of an item or service within a specific 
time period. An allotment is an official action that would specify the 
maximum quantity of a material, service, or facility authorized for use 
in a specific program or application.

[[Page 5339]]

    Section 700.34--Elements of an allocation order. This section sets 
forth certain elements that would be required in allocations orders 
issued by the Department of Commerce. Two elements would be required 
for all allocations orders: An explanation of the relationship between 
the allocation order and any previously or subsequently issued rated or 
unrated orders; and the specific start and end dates of each required 
allocation action. If an order is issued directly to the person to whom 
it applies, it must contain the written signature or name of an 
authorized official or employee of the Department of Commerce and a 
statement identifying the person to whom it applies by name. The order 
must state that it is for national defense and state the obligation to 
comply with the order and with the DPAS. If the order provides 
constructive notice through publication in the Federal Register, the 
order must be signed by an authorized official or employee of the 
Department of Commerce and the statement may either refer to the 
party(ies) to which the order applies by name or specify the class of 
persons to whom the order applies. The order must state the requirement 
to comply with the order itself and with the DPAS. Original signatures 
are not reproduced in the Federal Register.
    Section 700.35--Mandatory acceptance of an allocation order. 
Paragraph (a) of this section would require a person to accept and 
comply with allocations orders. Paragraph (b) would state that a person 
may not discriminate against an allocation order in any manner, such as 
by charging higher prices or imposing terms and conditions on 
allocations orders that are different from what the person imposed on 
contracts or orders for the same resource prior to receiving the 
allocation order. Paragraph (c) would provide that a person who is 
unable to comply fully with the required actions specified in an 
allocation order must notify the Office of Strategic Industries and 
Economic Security immediately, explain the extent to which compliance 
is possible, and give reasons why full compliance is not possible. Such 
notice would not release the person from complying with the allocation 
order to the fullest extent possible until notified by the Department 
of Commerce that the order has been changed or cancelled. If the notice 
is given verbally, written or electronic confirmation must be provided 
within one working day.
    Section 700.36--Changes or cancellations of allocation orders. This 
section would state that the Department of Commerce may change or 
cancel an allocation order through an official action. Notice of such 
changes or cancellations may be provided directly to persons to whom 
the order being cancelled or modified applies or constructive notice 
may be provided by publication in the Federal Register.

Revisions to Subpart H--Special Priorities Assistance

    Section 700.50--General Provisions. No substantive changes would be 
made to this section. The first sentence of paragraph (a) would be 
revised from ``The DPAS is designed to be largely self-executing'' to 
``Once a priority rating has been authorized pursuant to this part, 
further action by the Department of Commerce generally is not needed.'' 
BIS believes that the proposed revised sentence is a more precise 
introduction to paragraph (a) because Sec.  700.50 applies to priority 
ratings and not to the DPAS as a whole, which would include 
allocations. In addition, the priority rating process is not truly 
self-executing. A person must place ratings on orders and respond to 
rated orders within the specified time limits. However, once the rating 
is authorized, in most instances no further action by the Department of 
Commerce or a Delegate Agency is needed.
    Paragraph (b) would be revised to replace the phrase ``in support 
of this regulation'' with the phrase ``consistent with this part'' to 
more precisely state the purposes of special priorities assistance. In 
addition the phrase ``not automatically ratable under this regulation'' 
would be replaced with ``not otherwise ratable under this part'' 
because ratings do not occur automatically and to make clear that the 
regulation referred to is 15 CFR Part 700. A new sentence would be 
added to this paragraph to inform the public that if the Department of 
Commerce is unable to resolve the problem or to authorize the use of a 
priority rating and believes additional assistance is warranted, the 
Department of Commerce may forward the request for assistance to 
another resource agency, as appropriate, for action.
    Section 700.51--Requests for priority rating authority. This 
proposed rule would remove one factor from the non-exclusive list of 
factors that the Department of Commerce will consider in evaluating 
requests for priority rating authority. The factor proposed for removal 
is ``the political sensitivity of the project.'' BIS believes that 
considering such a factor when evaluating a request for priority rating 
authority is an extremely unlikely possibility and should be removed 
from the list. This proposed rule also makes two non-substantive 
editorial changes to Sec.  700.51. It changes ``Commerce'' to ``the 
Department of Commerce'' and changes the phrase ``this regulation'' to 
``this part'' to make clear that the regulation being referred to is 15 
CFR part 700.
    Sections 700.53--Criteria for assistance, and 700.54 Instances 
where assistance will not be provided. This proposed rule would make 
only the non-substantive editorial revision of changing ``Commerce'' to 
read ``the Department of Commerce'' in these two sections.
    Section 700.55--Homeland security, emergency preparedness, and 
critical infrastructure protection and restoration assistance programs 
within the United States. The text of this proposed section is entirely 
new. The topic covered by Sec.  700.55 in the existing DPAS 
``Assistance programs with Canada and other nations'' would be dealt 
with in the new Sec. Sec.  700.56 and 700.57.
    Proposed Sec.  700.55 would direct persons seeking priority rating 
authority or assistance in obtaining rated items supporting homeland 
security, emergency preparedness and critical infrastructure protection 
and restoration related activities, to direct their requests to the 
Federal Emergency Management Agency. This section is in accordance with 
Section 202(c) of Executive Order 13603, which authorizes the Secretary 
of Homeland Security to determine whether ``all other defense programs, 
including civil defense and continuity of Government'' are ``necessary 
or appropriate to promote the national defense.'' A determination that 
a program is necessary or appropriate to promote the national defense 
must be made before the Department of Commerce may authorize issuance 
of priority ratings for contracts in support of that program.
    Section 700.56--Military assistance programs with Canada. Proposed 
section 700.56 addresses situations in which a person in Canada, 
producing items for the Canadian government, seeks priorities 
assistance for items produced in the United States. BIS is proposing to 
create a new section that speaks only to military assistance with 
respect to Canada because the Canadian Government has been authorized 
to place priority ratings in the United States to support approved 
defense programs. Persons in other foreign countries may place priority 
ratings in the United States if their requests for military assistance 
are sponsored by their government and have DOD approval and 
endorsement. The existing DPAS address military assistance programs in 
Canada and other foreign nations in a single section. However,

[[Page 5340]]

BIS believes that the unique procedures that apply to requesting 
military assistance in Canada justify a separate section. Proposed 
Sec.  700.56 also would update the contact information that applies to 
the government of Canada.
    Section 700.57--Military assistance programs with other nations and 
international organizations. Proposed Sec.  700.57 is little changed 
from Sec.  700.55(c) and (d) of the existing DPAS. Contact information 
for the Department of Defense would be updated. Also, this section 
would expressly recognize that persons in international organizations 
may seek assistance in obtaining items in the United States or priority 
ratings for items to be purchased in the United States. BIS has 
provided assistance to international organizations in the past and 
believes that adding a reference to international organizations in 
proposed Sec.  700.57 would merely codify existing agency practice and 
would not represent a change in policy. Proposed Sec.  700.57(c) would 
add Australia and Finland to the listing of countries that have entered 
into bilateral security of supply arrangements with the United States 
Department of Defense and revise Department of Defense contact 
information to make both current.
    Section 700.58--Critical infrastructure assistance programs to 
foreign nations and international organizations. This section directs 
persons in foreign nations and international organizations who are 
seeking assistance in obtaining items to be purchased in the United 
States for support of critical infrastructure protection or restoration 
to contact the Federal Emergency Management Agency. This section is 
included in accordance with Section 202(c) of Executive Order 13603, 
which authorizes the Secretary of Homeland Security to determine 
whether ``all other defense programs, including civil defense and 
continuity of Government'' are ``necessary or appropriate to promote 
the national defense.'' A determination that a program is necessary or 
appropriate to promote the national defense must be made before the 
Department of Commerce may authorize issuance of priority ratings for 
contracts in support of that program.

Revisions to Subpart I--Official Actions

    Section 700.60--General provisions. Only non-substantive changes 
would be made to this section. References to ``Commerce'' would be 
changed to ``the Department of Commerce'' and references to ``this 
regulation'' would be changed to ``this part'' to make clear that the 
regulation referred to is 15 CFR part 700. This section of the proposed 
rule also would notify readers that directives are discussed in Sec.  
700.62.
    Sections 700.61--Rating authorizations, 700.62 Directories, and 
700.63 Letters of understanding. These sections would receive only non-
substantive editorial changes. The rule would correct capitalizations 
and replace ``Commerce'' with ``the Department of Commerce.''

Revisions to Subpart J--Compliance

    Section 700.70--General provisions. This proposed rule would remove 
paragraph (b) of the existing DPAS from this section. Paragraph (b) 
provides that persons who place rated orders ``should'' be familiar 
with the DPAS and must comply with its provisions. BIS believes that 
the former is aspirational rather than mandatory, and that the latter 
is redundant of specific language setting forth violations in section 
700.74. This proposed rule would also make non-substantive editorial 
changes to section 700.70 by replacing reference to ``this regulation'' 
with references to ``this part'' to make clear that the regulation 
referred to is 15 CFR part 700.
    Section 700.71--Investigations and audits. This section would be 
revised in several ways. The requirement for personal service of an 
administrative subpoena would be revised to allow leaving a copy of the 
document with someone at least 18 years old at the person's last known 
dwelling or place of business. Currently, section 700.70 allows leaving 
the document with a ``person of suitable age and discretion.'' BIS 
believes that setting a minimum age is more precise and will help to 
prevent misunderstandings about who is authorized to receive service. 
This proposed rule would remove the term ``official action'' from 
paragraphs (a), (c)(1), (c)(2) and (c)(3), because, as used in those 
paragraphs, compliance with an ``official action'' would be subsumed by 
a requirement to comply with the DPAS. References to ``this 
regulation'' would be replaced with references to ``this part'' to make 
clear that the regulation referred to is 15 CFR part 700.
    Section 700.72--Compulsory process. This section would be revised 
to make clear that if a representative of the Department of Commerce is 
denied access to premises or sources of information necessary to the 
administration or for enforcement of the DPA or the DPAS, the 
Department of Commerce may seek compulsory process. The current 
language of Sec.  700.72 could be read as stating that only the 
representative who was denied access may seek compulsory process. BIS 
believes that such a reading would be erroneous. However, in an effort 
to prevent confusion, the proposed rule would state that ``the 
Department of Commerce may seek compulsory process. . . .'' This 
proposed rule also would revise the word ``Commerce'' to read ``the 
Department of Commerce'' and would replace the reference to ``this 
regulation or official actions'' with ``this part.''
    Section 700.73--Notification of failure to comply. The phrase 
``this regulation'' would be changed to read ``this part'' to make 
clear that the regulation referred to is 15 CFR part 700.
    Section 700.74--Violations, penalties, and remedies. Only minor 
changes would be made to this section. The phrase ``this regulation or 
an official action,'' would be replaced with the phrase ``of this 
part.'' In five additional places the word ``regulation'' would be 
replaced with the word ``part'' to make clear that the regulation 
referred to is 15 CFR part 700. The phrase ``this provision'' would be 
replaced with ``this section'' to make clear that the provision 
referred to is Sec.  700.74.

Revisions to Subpart K--Adjustments, Exceptions, and Appeals

    Section 700.80--Adjustments or exceptions. This proposed rule would 
add a requirement that the Office of Strategic Industries and Economic 
Security respond to requests for exceptions to or adjustments of the 
requirements of 15 CFR part 700, or of any official action taken by the 
Department of Commerce in connection with that part, within 25 days, 
not including Saturdays, Sundays, or government holidays. All other 
proposed changes to this section are non-substantive.
    Section 700.81--Appeals. Non-substantive changes would be made to 
this section. The address to which appeals must be sent would be 
updated and moved from paragraph (b) to paragraph (a). The phrase ``for 
good cause shown'' currently at the end of last sentence of paragraph 
(b) would be removed. That sentence addresses when, at the discretion 
of the Assistant Secretary for Export Administration, appeals may be 
accepted after the 45 day deadline. BIS believes that the phrase adds 
nothing of substance to the rule. In paragraph (g) the phrase ``this 
regulation'' would be replaced by ``this part'' to clarify that the 
regulation referred to is 15 CFR part 700.

Revisions to Subpart L--Miscellaneous Provisions

    Section 700.90--Protection against claims. One non-substantive 
change

[[Page 5341]]

would be made to this section. The phrase ``this regulation'' would be 
replaced with ``this part'' to make clear that the regulation referred 
to is 15 CFR part 700.
    Section 700.91--Records and reports. Only non-substantive changes 
would be made to this section. The phrase ``this regulation'' would be 
replaced with the phrase ``this part'' in four places to make clear 
that the regulation referred to is 15 CFR part 700. The word 
``Commerce'' would be replaced with ``the Department of Commerce.'' In 
paragraph (e), which quotes the confidentiality provision of the DPA, 
the references to Section 705(e) of the DPA would be corrected to read 
Section 705(d), which is the section quoted.
    Section 700.92--Applicability of this part and official actions. 
Only non-substantive changes would be made to Sec.  700.92. The phrase 
``this regulation'' would be replaced with ``this part'' in the heading 
and in paragraphs (a), (b) and (c) to clarify that the regulation 
referred to is 15 CFR part 700. The phrase ``the Department of'' would 
be added immediately preceding the word ``Commerce'' at both places 
where the later appears in paragraph (c). The phrase ``the 
regulations'' would be replaced with the phrase ``any provision of this 
part'' in paragraph (d).
    Section 700.93--Communications. This section would be revised to 
add an email address, delete the facsimile number, and clarify that the 
email address and telephone number listed in Sec.  700.93 apply to 
requests for general information such as how to obtain copies of the 
DPAS, explanatory information, and requests for guidance or 
clarification. The section would expressly state that requests for 
special priorities assistance, adjustments, exceptions or appeals must 
be submitted in the matter specified in the sections governing those 
activities. The phrase ``this regulation'' would be replaced with the 
phrase ``this part'' to make clear that the regulation referred to is 
15 CFR part 700.

Schedule I to Part 700--Approved Programs and Delegate Agencies

    This proposed rule would revise the table in Schedule I to provide 
a new program symbol ``G4'' for a new topic heading ``Critical 
Infrastructure Assistance to Other Nations.'' To improve readability, 
the proposed rule would reformat the table by centering the topic 
headings and revising the headings for ``Military Assistance to 
Canada,'' ``Military Assistance to Other Foreign Nations'' and ``Co-
production'' into full stand-alone topic headings rather than 
subheadings under the heading ``International Defense Programs.'' This 
rule would spell out the name of the approving agency on each line that 
identifies a program for which that agency has approval authority 
rather than use the abbreviation ``Do.,'' which stands for ``ditto,'' 
and would revise the term ``this regulation'' that appears in the 
footnote to read ``this part'' to make clear that the regulation 
referred to is 15 CFR part 700. Additionally, a footnote would be added 
to explain that program entries where the ``Department of Commerce'' 
appears in the third column require Department of Commerce 
authorization even though strictly speaking, the Department of Commerce 
is not a delegate agency.

Request for Comments

    BIS seeks comments on all aspects of this proposed rule. BIS will 
consider all comments received on or before April 1, 2014. Comments 
received after that date will be considered if feasible, but 
consideration cannot be assured. All comments (including any personally 
identifying information that those comments or transmittal emails 
contain) will be made available for public inspection and copying. 
Parties who wish to comment anonymously may do so by submitting their 
comments via Regulations.gov, leaving the fields that would identify 
the commenter blank and including no identifying information in the 
comment itself.

Regulatory 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 rule has been designated a ``significant regulatory 
action,'' although not economically significant, under section 3(f) of 
Executive Order 12866. Accordingly, the rule has been reviewed by the 
Office of Management and Budget (OMB).
    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 contains two collections previously 
approved by OMB. OMB control number 0694-0053 authorizes the 
requirement that recipients of rated orders notify the party placing 
the order whether or not they will fulfill the rated order. BIS 
believes that this rule will not materially change the burden imposed 
by this collection. OMB control number 0694-0057 authorizes the 
collection of information that parties must send to BIS when seeking 
special priorities assistance or priority rating authority. BIS 
believes that this rule will not materially change the burden imposed 
by this collection. Send comments regarding this burden estimate or any 
other aspect of these collections of information, including suggestions 
for reducing the burden, to Jasmeet K. Seehra, Office of Management and 
Budget, by email at jseehra@omb.eop.gov or by fax to (202) 395-7285 and 
to Liam McMenamin, liam.mcmenamin@bis.doc.gov.
    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. 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 
Regulations, Department of Commerce, certified to the Chief Counsel for 
Advocacy, Small Business Administration that this proposed rule, if 
promulgated, will not have a significant impact on a substantial number 
of small entities for the reasons explained below. Consequently, BIS 
has not prepared a regulatory flexibility analysis. The factual support 
for this certification is provided below.

Number of Small Entities

    Small entities include small businesses, small organizations and 
small governmental jurisdictions. For purposes of assessing the impacts 
of this proposed rule on small entities, a small business, as described 
in the Small Business Administration's Table of Small Business Size 
Standards Matched to North American Industry

[[Page 5342]]

Classification System Codes (Effective March 26, 2012), has a maximum 
annual revenue of $35.5 million and a maximum of 1,500 employees (for 
some business categories, these numbers are lower). A small 
governmental jurisdiction is a government of a city, town, school 
district or special district with a population of less than 50,000. A 
small organization is any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.
    This rule sets criteria under which BIS (or agencies to which BIS 
delegates authority) will authorize prioritization of certain orders or 
contracts as well as criteria under which BIS would issue orders 
allocating resources or production facilities. This rule would affect 
organizations that enter into contracts to supply materials, services 
and facilities that are necessary for the national defense (broadly 
defined to include ``Programs for military and energy production or 
construction, military or critical infrastructure assistance to any 
foreign nation, homeland security, stockpiling, space, and any directly 
related activity''). BIS's experience in administering its priorities 
authority indicates that for-profit businesses are the organizations 
that provide such materials, services and facilities. If it becomes 
necessary to exercise allocations authority, the same types of 
materials, services and facilities and the same types of providers are 
the ones likely to be affected. Therefore, BIS believes that two of the 
categories of small entities identified by the RFA, small organizations 
and small government jurisdictions, are unlikely to experience any 
economic impact as a result of this rule. However, BIS has no basis on 
which to estimate the number of small businesses that are likely to be 
affected by this rule.

Impact

    BIS believes that any impact that this rule might have on small 
businesses would be minor. The rule has two principle components: 
prioritization and allocation. Prioritization is the process that is, 
by far, more likely to be used. Under prioritization, BIS designates 
certain orders, which may be placed by Government or by private 
entities, and assigned under one of two possible priority levels. Once 
so designated, such orders are referred to as ``rated orders.'' The 
recipient of a rated order must give it priority over an unrated order. 
The recipient of a rated order with the higher priority rating must 
give that order priority over any rated orders with the lower priority 
rating and over unrated orders. A recipient of a rated order may place 
one or more orders at the same priority level with suppliers and 
subcontractors for supplies and services necessary to fulfill the 
recipient's rated order and the suppliers and subcontractors must treat 
the request from the rated order recipient as a rated order with the 
same priority level as the original rated order. The rule does not 
require recipients to fulfill rated orders if the price or terms of 
sale are not consistent with the price or terms of sale of similar non-
rated orders. The rule provides a defense from liability for damages or 
penalties for actions or inactions made in compliance with the rule. 
BIS expects that this rule will not result in any increase in the use 
of rated orders. The changes to the provisions of 15 CFR part 700 that 
apply to rated orders are primarily simplifications and clarifications. 
The standards under which a rated order would be issued are not changed 
by this rule.
    Although rated orders could require a firm to fill one order prior 
to filling another, they would not require a reduction in the total 
volume of orders nor would they require the recipient to reduce prices 
or provide rated orders with more favorable terms than a similar non-
rated order. Under these circumstances, the economic effects on the 
rated order recipient of substituting one order for another are likely 
to be offsetting, resulting in no net loss.
    Allocations could be used to control the general distribution of 
materials or services in the civilian market. Specific allocation 
actions that BIS might take are set-asides, directives and allotments. 
A set-aside is an official action that requires a person to reserve 
resource capacity in anticipation of receipt of rated orders. A 
directive is an official action that requires a person to take or 
refrain from taking certain actions in accordance with its provisions. 
A directive can require a person to stop or reduce production of an 
item, prohibit the use of selected items, or divert supply of one type 
of product to another, or to supply a specific quantity, size, shape, 
and type of an item within a specific time period. An allotment is an 
official action that specifies the maximum quantity of a material, 
service or facility authorized for use in a specific program or 
application.
    According to available records, BIS has not taken any actions under 
its existing allocations authority in decades and any future 
allocations actions would be used only in extraordinary circumstances. 
As required by section 101(b) of the Defense Production Act of 1950, as 
amended, (50 U.S.C. app. 2071), hereinafter ``DPA,'' and by Section 
201(e) of Executive Order 13603 of March 16, 2012, BIS may implement 
allocations to control the general distribution of a material in the 
civilian market only if the Department of Commerce made, and the 
President approved, a finding (1) that the material [or service] is a 
scarce and critical material [or service] essential to the national 
defense, and (2) that the requirements of the national defense for such 
material [or service] cannot otherwise be met without creating a 
significant dislocation of the normal distribution of such material [or 
service] in the civilian market to such a degree as to create 
appreciable hardship. The term ``national defense'' is defined to mean 
``programs for military and energy production or construction, military 
or critical infrastructure assistance to any foreign nation, homeland 
security, stockpiling, space, and any related activity. Such term 
includes emergency preparedness activities conducted pursuant to title 
IV of the Robert T. Stafford Disaster Relief and Emergency Assistance 
Act (42 U.S.C. 5195 et seq.) and critical infrastructure protection and 
restoration.''
    Even a narrower use of allocations authority under this proposed 
rule would be subject to the policy set forth in Sec.  700.30 which 
provides that allocations will be used only when there is insufficient 
supply of a material, service, or facility to satisfy national defense 
requirements through use of priorities authority or when the use of 
priorities authority would cause a severe and prolonged disruption in 
the supply of materials, services or facilities available to support 
normal U.S. economic activity.
    Any allocation actions taken by BIS would also have to comply with 
Section 701(e) of the DPA (50 U.S.C. app. 2151(e)), which provides that 
``small business concerns shall be accorded, to the extent practicable, 
a fair share of the such material [including services] in proportion to 
the share received by such business concerns under normal conditions, 
giving such special consideration as may be possible to emerging 
business concerns.''

Conclusion

    Although BIS cannot determine precisely the number of small 
entities that would be affected by this rule, BIS believes that the 
overall impact on such entities would not be significant. With respect 
to priorities authority, this rule is not likely to increase the number 
of priority rated contracts compared to the number being issued 
currently. Therefore the priorities authorities' provisions of this 
rule are unlikely to

[[Page 5343]]

have any economic impact. BIS's lack of recent experience with 
allocations makes gauging the impact of an allocation, should one 
occur, difficult. However, because (1) all allocation actions require 
planning that includes evaluation of the impact on the civilian market, 
(2) allocations to control the general distribution of a material in 
the civilian market may be imposed only after a determination by the 
President, and (3) BIS has taken no allocation actions in decades, one 
can expect allocations will be a rare occurrence. BIS believes that the 
expected unchanged level of contract prioritizations, planning and 
review requirements and requirements of section 701 of the DPA, which 
are directed at protecting the interests of small businesses provide 
reasonable assurance that any impact on small business will not be 
significant. For the reasons set forth above, the Chief Counsel for 
Regulations at the Department of Commerce certified that this action 
would not have a significant impact on a substantial number of small 
entities.

List of Subjects in 15 CFR Part 700

    Administrative practice and procedure, Business and industry, 
Government contracts, National defense, Reporting and recordkeeping 
requirements, Strategic and critical materials.

    For the reasons stated in the preamble, 15 CFR part 700 is proposed 
to be amended as follows:

PART 700--[AMENDED]

0
1. The authority citations paragraph for part 700 is revised to read as 
follows:

    Authority:  50 U.S.C. App. 2061, et seq.; 42 U.S.C. 5195, et 
seq.; 50 U.S.C. App 468; 10 U.S.C. 2538; 50 U.S.C. 82; E.O. 12656, 
53 FR 226, 3 CFR, 1988, Comp. 585; E.O. 12742, 56 FR 1079, 3 CFR, 
1991 Comp. 309; E.O. 13603, 77 FR 16651, 3 CFR, 2012 Comp., p. 225.

0
2. Section 700.1 is revised to read as follows:

Sec.  700.1  Purpose of this part.

    This part implements the Defense Priorities and Allocations System 
(DPAS) that is administered by the Department of Commerce, Bureau of 
Industry and Security. The DPAS implements the priorities and 
allocations authority of the Defense Production Act, including use of 
that authority to support emergency preparedness activities pursuant to 
Title VI of the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act (42 U.S.C. 5195 et seq.), and the priorities authority 
of the Selective Service Act and related statutes, all with respect to 
industrial resources. The DPAS establishes procedures for the 
placement, acceptance, and performance of priority rated contracts and 
orders and for the allocation of materials, services, and facilities. 
The guidance and procedures in this part are generally consistent with 
the guidance and procedures provided in other regulations issued under 
Executive Order 13603 authority.
0
3. Section 700.2 is revised to read as follows:

Sec.  700.2  Introduction.

    (a) Certain national defense and energy programs (including 
military, emergency preparedness, homeland security, and critical 
infrastructure protection and restoration activities) are approved for 
priorities and allocations support. A complete list of currently 
approved programs is provided at Schedule I to this part.
    (b) The Department of Commerce administers the DPAS and may 
exercise priorities and allocations authority to ensure the timely 
delivery of industrial items to meet approved program requirements.
    (c) The Department of Commerce has delegated authority to place 
priority ratings on contracts or orders necessary or appropriate to 
promote the national defense to certain government agencies that issue 
such contracts or orders. Such delegations include authority to 
authorize recipients of rated orders to place ratings on contracts or 
orders to contractors, subcontractors, and suppliers. Schedule I to 
this part includes a list of agencies to which the Department of 
Commerce has delegated authority.
0
4. In Sec.  700.3, paragraphs (a), (b), and (e) are revised to read as 
follows:

Sec.  700.3  Priority ratings and rated orders.

    (a) Rated orders are identified by a priority rating and a program 
identification symbol. Rated orders take precedence over all unrated 
orders as necessary to meet required delivery dates. Among rated 
orders, DX rated orders take precedence over DO rated orders. Program 
identification symbols indicate which approved program is attributed to 
the rated order.
    (b) Persons receiving rated orders must give them preferential 
treatment as required by this part.
* * * * *
    (e) Persons may place a priority rating on orders only when they 
are in receipt of a rated order, have been explicitly authorized to do 
so by the Department of Commerce or a Delegate Agency, or are otherwise 
permitted to do so by this part.

Sec.  700.4  [Removed and Reserved]

0
5. Section 700.4 is removed and reserved.

Sec.  700.5  [Removed and Reserved]

0
6. Section 700.5 is removed and reserved.

Sec.  700.6  [Removed and Reserved]

0
7. Section 700.6 is removed and reserved.

Sec.  700.7  [Removed and Reserved]

0
8. Section 700.7 is removed and reserved.
0
9. Section 700.8 is revised to read as follows:

Sec.  700.8  Definitions.

    The definitions in this section apply throughout this part:
    Allocation. The control of the distribution of materials, services 
or facilities for a purpose deemed necessary or appropriate to promote 
the national defense.
    Allocation order. An official action to control the distribution of 
materials, services, or facilities for a purpose deemed necessary or 
appropriate to promote the national defense.
    Allotment. An official action that specifies the maximum quantity 
of a material, service, or facility authorized for a specific use to 
promote the national defense.
    Approved program. A program determined as necessary or appropriate 
for priorities and allocations support to promote the national defense 
by the Secretary of Defense, the Secretary of Energy, or the Secretary 
of Homeland Security, under the authority of the Defense Production Act 
and Executive Order 13603, or the Selective Service Act and Executive 
Order 12742.
    Construction. The erection, addition, extension, or alteration of 
any building, structure, or project, using materials or products which 
are to be an integral and permanent part of the building, structure, or 
project. Construction does not include maintenance and repair.
    Critical infrastructure. Any systems and assets, whether physical 
or cyber-based, so vital to the United States that the degradation or 
destruction of such systems and assets would have a debilitating impact 
on national security, including, but not limited to, national economic 
security and national public health or safety.
    Defense Production Act. The Defense Production Act of 1950, as 
amended (50 U.S.C. App. 2061, et seq.)
    Delegate Agency. A government agency authorized by delegation from

[[Page 5344]]

the Department of Commerce to place priority ratings on contracts or 
orders needed to support approved programs.
    Directive. An official action which requires a person to take or 
refrain from taking certain actions in accordance with its provisions.
    Emergency preparedness. All activities and measures designed or 
undertaken to prepare for or minimize the effects of a hazard upon the 
civilian population, to deal with the immediate emergency conditions 
which would be created by the hazard, and to effectuate emergency 
repairs to, or the emergency restoration of, vital utilities and 
facilities destroyed or damaged by the hazard. Emergency preparedness 
includes the following:
    (1) Measures to be undertaken in preparation for anticipated 
hazards (including the establishment of appropriate organizations, 
operational plans, and supporting agreements, the recruitment and 
training of personnel, the conduct of research, the procurement and 
stockpiling of necessary materials and supplies, the provision of 
suitable warning systems, the construction or preparation of shelters, 
shelter areas, and control centers, and, when appropriate, the 
nonmilitary evacuation of the civilian population);
    (2) Measures to be undertaken during a hazard (including the 
enforcement of passive defense regulations prescribed by duly 
established military or civil authorities, the evacuation of personnel 
to shelter areas, the control of traffic and panic, and the control and 
use of lighting and civil communications); and
    (3) Measures to be undertaken following a hazard (including 
activities for firefighting, rescue, emergency medical, health and 
sanitation services, monitoring for specific dangers of special 
weapons, unexploded bomb reconnaissance, essential debris clearance, 
emergency welfare measures, and immediately essential emergency repair 
or restoration of damaged vital facilities).
    Hazard. An emergency or disaster resulting from:
    (1) A natural disaster, or
    (2) An accidental or man-caused event.
    Homeland security. Includes efforts:
    (1) To prevent terrorist attacks within the United States;
    (2) To reduce the vulnerability of the United States to terrorism;
    (3) To minimize damage from a terrorist attack in the United 
States; and
    (4) To recover from a terrorist attack in the United States.
    Industrial resources. All materials, services, and facilities, 
including construction materials, the authority for which has not been 
delegated to other agencies under Executive Order 13603. This term also 
includes the term ``item'' as defined and used in this part.
    Item. Any raw, in process, or manufactured material, article, 
commodity, supply, equipment, component, accessory, part, assembly, or 
product of any kind, technical information, process, or service.
    Maintenance and repair and/or operating supplies (MRO):
    (1) Maintenance is the upkeep necessary to continue any plant, 
facility, or equipment in working condition.
    (2) Repair is the restoration of any plant, facility, or equipment 
to working condition when it has been rendered unsafe or unfit for 
service by wear and tear, damage, or failure of parts.
    (3) Operating supplies are any items carried as operating supplies 
according to a person's established accounting practice. Operating 
supplies may include hand tools and expendable tools, jigs, dies, 
fixtures used on production equipment, lubricants, cleaners, chemicals 
and other expendable items.
    (4) MRO does not include items produced or obtained for sale to 
other persons or for installation upon or attachment to the property of 
another person, or items required for the production of such items; 
items needed for the replacement of any plant, facility, or equipment; 
or items for the improvement of any plant, facility, or equipment by 
replacing items which are still in working condition with items of a 
new or different kind, quality, or design.
    National defense. Programs for military and energy production or 
construction, military or critical infrastructure assistance to any 
foreign nation, homeland security, stockpiling, space, and any directly 
related activity. Such term includes emergency preparedness activities 
conducted pursuant to Title VI of The Robert T. Stafford Disaster 
Relief and Emergency Assistance Act (42 U.S.C. 5195 et seq.) and 
critical infrastructure protection and restoration.
    Official action. An action taken by the Department of Commerce 
under the authority of the Defense Production Act, the Selective 
Service Act and related statutes, and this part. Such actions include 
the issuance of rating authorizations, directives, letters of 
understanding, demands for information, inspection authorizations, 
administrative subpoenas and allocation orders.
    Person. Any individual, corporation, partnership, association, or 
any other organized group of persons, or legal successor or 
representative thereof; or any authorized State or local government or 
agency thereof; and for purposes of administration of this part, 
includes the United States Government and any authorized foreign 
government or international organization or agency thereof, delegated 
authority as provided in this part.
    Priorities authority. The authority of the Department of Commerce, 
pursuant to Section 101 of the Defense Production Act, to require 
priority performance of contracts and orders for industrial resource 
items for use in approved programs.
    Priority rating. An identifying code assigned by a Delegate Agency 
or authorized person placed on all rated orders and consisting of the 
rating symbol and the program identification symbol.
    Production equipment. Any item of capital equipment used in 
producing materials or furnishing services that has a unit acquisition 
cost of $2,500 or more, an anticipated service life in excess of one 
year, and the potential for maintaining its integrity as a capital 
item.
    Program identification symbols. Abbreviations used to indicate 
which approved program is supported by a rated order.
    Rated order. A prime contract, a subcontract, or a purchase order 
in support of an approved program issued in accordance with the 
provisions of this part.
    Selective Service Act. Section 18 of the Selective Service Act of 
1948 (50 U.S.C. app. 468).
    Set-aside. An official action that requires a person to reserve 
materials, services, or facilities capacity in anticipation of the 
receipt of rated orders.
    Stafford Act. Title VI (Emergency Preparedness) of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act, as amended (42 
U.S.C. 5195, et seq.).
    Working day. Any day that the recipient of an order is open for 
business.
0
10. Section 700.10 is revised to read as follows:

Sec.  700.10  Authority.

    (a) Delegations to the Department of Commerce. The priorities and 
allocations authorities of the President under Title I of the Defense 
Production Act with respect to industrial resources have been delegated 
to the Secretary of Commerce under Executive Order 13603 of March 16, 
2012 (77 FR 16651, 3 CFR, 2012 Comp., p. 225). The priorities

[[Page 5345]]

authorities of the President under the Selective Service Act and 
related statutes with respect to industrial resources have also been 
delegated to the Secretary of Commerce under Executive Order 12742 of 
January 8, 1991 (56 FR 1079, 3 CFR, 1991 Comp. 309).
    (b) Delegations by the Department of Commerce. The Department of 
Commerce has authorized the Delegate Agencies to assign priority 
ratings to orders for industrial resources needed for use in approved 
programs.
    (c) Jurisdiction limitations. (1) The priorities and allocations 
authority for certain items have been delegated under Executive Order 
13603, other executive orders, or Interagency Memoranda of 
Understanding between other agencies. Unless otherwise agreed to by the 
concerned agencies, the provisions of this part are not applicable to 
those other items which include:
    (i) Food resources, food resource facilities, livestock resources, 
veterinary resources, plant health resources, and the domestic 
distribution of farm equipment and commercial fertilizer (delegated to 
the Department of Agriculture);
    (ii) All forms of energy (delegated to the Department of Energy);
    (iii) Health resources (delegated to the Department of Health and 
Human Services);
    (iv) All forms of civil transportation (delegated to the Department 
of Transportation); and
    (v) Water resources (delegated to the Department of Defense/U.S. 
Army Corps of Engineers).
    (2) The priorities and allocations authority set forth in this part 
may not be applied to communications services subject to Executive 
Order 13618 of July 6, 2012--Assignment of National Security and 
Emergency Preparedness Communications Functions (77 FR 40779, 3 CFR, 
2012 Comp., p. 273).
0
11. Section 700.11 is amended by revising the second sentence of 
paragraph (b) to read as follows:

Sec.  700.11  Priority ratings.

* * * * *
    (b) Program identification symbols. * * * The list of approved 
programs and their identification symbols is found in Schedule I to 
this part. * * *
* * * * *
0
12. Section 700.12 is revised to read as follows:

Sec.  700.12  Elements of a rated order.

    (a) Elements required for all rated orders. (1) The appropriate 
priority rating and program identification symbol (e.g., DO-A1, DX-A4, 
DO-N1).
    (2) A required delivery date or dates. The words ``immediately'' or 
``as soon as possible'' do not constitute a delivery date. When a 
``requirements contract,'' ``basic ordering agreement,'' ``prime vendor 
contract,'' or similar procurement document bearing a priority rating 
contains no specific delivery date or dates, but provides for the 
furnishing of items from time-to-time or within a stated period against 
specific purchase orders, such as ``calls,'' ``requisitions,'' and 
``delivery orders,'' the purchase orders supporting such contracts or 
agreements must specify a required delivery date or dates and are to be 
considered as rated as of the date of their receipt by the supplier and 
not as of the date of the original procurement document.
    (3) The written signature on a manually placed order, or the 
digital signature or name on an electronically placed order, of an 
individual authorized to sign rated orders for the person placing the 
order. The signature, manual or digital, certifies that the rated order 
is authorized under this part and that the requirements of this part 
are being followed.
    (4) A statement that reads in substance: This is a rated order 
certified for national defense use and you are required to follow all 
the provisions of the Defense Priorities and Allocations System 
regulations (15 CFR part 700).
    (b) Additional element required for certain emergency preparedness 
rated orders. If a rated order is placed for the purpose of emergency 
preparedness requirements and expedited action is necessary or 
appropriate to meet these requirements, the following statement must be 
included in the order. ``This rated order is placed for the purpose of 
emergency preparedness. It must be accepted or rejected within [Insert 
a time limit no less than the minimum applicable time limit specified 
in Sec.  700.13(d)(2)t.].''
0
13. Section 700.13 is amended by revising paragraph (d) to read as 
follows:

Sec.  700.13  Acceptance and rejection of rated orders.

* * * * *
    (d) Customer notification requirements. (1) Except as provided in 
paragraph (d)(2) of this section, a person must accept or reject a 
rated order in writing (hard copy), or in electronic format, within 
fifteen (15) working days after receipt of a DO rated order and within 
ten (10) working days after receipt of a DX rated order. If the order 
is rejected, the person must give reasons in writing or electronically 
for the rejection.
    (2) If a rated order is placed for the purpose of emergency 
preparedness requirements and expedited action is necessary or 
appropriate to meet these requirements and the order includes the 
statement set forth in Sec.  700.12(b), a person must accept or reject 
the rated order and transmit the acceptance or rejection in writing or 
in an electronic format within the time specified in the rated order. 
The minimum times for acceptance or rejection that such orders may 
specify are six (6) hours after receipt of the order if the order is 
issued by an authorized person in response to a hazard that has 
occurred, or twelve (12) hours after receipt if the order is issued by 
an authorized person to prepare for an imminent hazard.
    (3) If a person has accepted a rated order and subsequently finds 
that shipment or performance will be delayed, the person must notify 
the customer immediately, give the reasons for the delay, and advise of 
a new shipment or performance date. If notification is given verbally, 
written (hard copy) or electronic confirmation must be provided within 
one working day of the verbal notice.
* * * * *
0
14. Section 700.14 is amended by adding a sentence at the end of the 
examples paragraph in paragraph (b) and by revising paragraph (c)(2) to 
read as follows:

Sec.  700.14  Preferential scheduling.

* * * * *
    (b) * * *

    Examples:  * * * However, if business operations cannot be 
altered to meet both the June 3 and July 15 delivery dates, then the 
DX rated order must be given priority over the DO rated order.

    (c) * * *
    (2) If a person is unable to resolve rated order delivery or 
performance conflicts under this section, the person should promptly 
seek special priorities assistance as provided in Subpart H of this 
part. If the person's customer objects to the rescheduling of delivery 
or performance of a rated order, the customer should promptly seek 
special priorities assistance as provided in Subpart H of this part. 
For any rated order against which delivery or performance will be 
delayed, the person must notify the customer as provided in Sec.  
700.13(d)(3).
* * * * *
0
15. Section 700.15 is amended by revising the second sentence of 
paragraph (a), the undesignated paragraph following paragraph (a), 
revising the second sentence of

[[Page 5346]]

paragraph (b), and by adding paragraph (c) to read as follows:

Sec.  700.15  Extension of priority ratings.

    (a) * * * The person must use the priority rating indicated on the 
customer's rated order, except as otherwise provided in this part or as 
directed by the Department of Commerce. * * *

    Example:  If a person is in receipt of a DO-A3 rated order for a 
navigation system and needs to purchase semiconductors for its 
manufacture, that person must use a DO-A3 rated order to obtain the 
needed semiconductors.

    (b) * * * Therefore, the inclusion of the rating will continue from 
contractor to subcontractor to supplier throughout the entire supply 
chain.
    (c) A person must use rated orders with suppliers to obtain items 
needed to fill an emergency preparedness rated order. That person must 
require acceptance or rejection, and transmission of that acceptance or 
rejection by the supplier within the time limit stated in the rated 
order that is being filled.
0
16. Section 700.16 is amended by revising paragraphs (d), (e) and (f) 
to read as follows:

Sec.  700.16  Changes or cancellations of priority ratings and rated 
orders.

* * * * *
    (d) The following amendments do not constitute a new rated order: a 
change in shipping destination; a reduction in the total amount of the 
order; an increase in the total amount of the order which has 
negligible impact upon deliveries; a minor variation in size or design 
(prior to the start of production); or a change which is agreed upon 
between the supplier and the customer. (e) A person must cancel any 
rated orders that the person (or a predecessor in interest) has placed 
with suppliers or cancel the priority ratings on those orders if the 
person no longer needs the items in those orders to fill a rated order.
    (f) A person adding a rating to an unrated order, or changing or 
cancelling a priority rating must promptly notify all suppliers to whom 
the order was sent of the addition, change or cancellation.
0
17. Section 700.17 is amended by revising paragraphs (d)(1)(ii) and (f) 
to read as follows:

Sec.  700.17  Use of rated orders.

* * * * *
    (d) * * *
    (1) * * *
    (ii) The elements of a rated order, as required by Sec.  700.12, 
are included on the order with the statement required in Sec.  
700.12(a)(4) modified to read in substance: ``This purchase order 
contains rated order quantities certified for national defense use, and 
you are required to follow all the provisions of the Defense Priorities 
and Allocations System regulations (15 CFR part 700) as it pertains to 
the rated quantities.''
* * * * *
    (f) A person is not required to place a priority rating on an order 
for less than $75,000, or one half of the Simplified Acquisition 
Threshold (as established in the Federal Acquisition Regulation (FAR) 
(see FAR section 2.101), whichever amount is greater, provided that 
delivery can be obtained in a timely fashion without the use of the 
priority rating.
0
18. Section 700.18 is revised to read as follows:

Sec.  700.18  Limitations on placing rated orders.

    (a) General limitations. (1) A person may not place a rated order 
pursuant to this part unless the person is in receipt of a rated order, 
has been explicitly authorized to do so by the Department of Commerce 
or a Delegate Agency or is otherwise permitted to do so by this part.
    (2) Rated orders may not be used to obtain:
    (i) Delivery on a date earlier than needed;
    (ii) A greater quantity of the item than needed, except to obtain a 
minimum procurable quantity;
    (iii) Items in advance of the receipt of a rated order, except as 
specifically authorized by the Department of Commerce (see Sec.  
700.41(c) for information on obtaining authorization for a priority 
rating in advance of a rated order); or
    (iv) Any of the following items unless specific priority rating 
authority has been obtained from a Delegate Agency or the Department of 
Commerce:
    (A) Items for plant improvement, expansion or construction, unless 
they will be physically incorporated into a construction project 
covered by a rated order; or
    (B) Production or construction equipment or items to be used for 
the manufacture of production equipment (for information on requesting 
priority rating authority, see Sec.  700.41).
    (v) Any items related to the development of chemical or biological 
warfare capabilities or the production of chemical or biological 
weapons, unless such development or production has been authorized by 
the President or the Secretary of Defense.
    (3) Separate rated orders may not be placed solely for obtaining 
minimum procurable quantities on each order if the minimum procurable 
quantity would be sufficient to cover more than one rated order.
    (b) Specific item limitations. Notwithstanding any authorization or 
requirement to place a rated order stated elsewhere in this part, no 
person may place a rated order to obtain the following items unless 
such order is authorized by an official action of the Department of 
Commerce.
    (1) Copper raw materials.
    (2) Crushed stone.
    (3) Gravel.
    (4) Sand.
    (5) Scrap.
    (6) Slag.
    (7) Steam heat, central.
    (8) Waste paper.
0
19. Section 700.21 is revised to read as follows:

Sec.  700.21  Application for priority rating authority.

    (a) For projects believed to maximize domestic energy supplies, a 
person may request priority rating authority for scarce, critical, and 
essential supplies of materials, equipment, and services (related to 
the production of materials or equipment, or the installation, repair, 
or maintenance of equipment) by submitting a request to the Department 
of Energy. Further information may be obtained from the Department of 
Energy, Office of Electricity Delivery and Energy Reliability, 1000 
Independence Avenue SW., Washington, DC 20585.
    (b) If the Department of Energy notifies the Department of Commerce 
that the project maximizes domestic energy supplies and that the 
materials, equipment, or services are critical and essential, the 
Department of Commerce will determine whether the items in question are 
scarce, and, if they are scarce, whether there is a need to use the 
priorities authority.
    (1) Scarcity implies an unusual difficulty in obtaining the 
materials, equipment, or services in a time frame consistent with the 
timely completion of the energy project. In determining scarcity, the 
Department of Commerce may consider factors such as the following:
    (i) Value and volume of material or equipment shipments;
    (ii) Consumption of material and equipment;
    (iii) Volume and market trends of imports and exports;
    (iv) Domestic and foreign sources of supply;
    (v) Normal levels of inventories;

[[Page 5347]]

    (vi) Rates of capacity utilization;
    (vii) Volume of new orders; and
    (viii) Lead times for new orders.
    (2) In finding whether there is a need to use the priorities 
authority, the Department of Commerce may consider alternative supply 
solutions and other measures.
    (c) After the Department of Commerce has conducted its analysis, it 
will advise the Department of Energy whether the two findings have been 
satisfied. If the findings are satisfied, the Department of Commerce 
will authorize the Department of Energy to grant the use of a priority 
rating to the applicant.
    (d) Schedule I to this part includes a list of approved programs to 
support the maximization of domestic energy supplies. A Department of 
Energy regulation setting forth the procedures and criteria used by the 
Department of Energy in making its determination and findings is 
published in 10 CFR part 216.

Subpart F--Allocation Actions

0
20. The heading of Subpart F is revised to read as set forth above.
0
21. Section 700.30 is revised to read as follows:

Sec.  700.30  Policy.

    (a) Allocation orders will:
    (1) Be used only when there is insufficient supply of a material, 
service, or facility to satisfy national defense requirements through 
the use of the priorities authority or when the use of the priorities 
authority would cause a severe and prolonged disruption in the supply 
of materials, services, or facilities available to support normal U.S. 
economic activities; and
    (2) Not be used to ration materials or services at the retail 
level.
    (b) Allocation orders, when used, will be distributed equitably 
among the suppliers of the materials, services, or facilities being 
allocated and not require any person to relinquish a disproportionate 
share of the civilian market.
0
22. Section 700.31 is revised to read as follows:

Sec.  700.31  General procedures.

    Before the Department of Commerce uses its allocations authority to 
address a supply problem within its resource jurisdiction, it will 
develop a plan that includes:
    (a) A copy of the written determination made in accordance with 
section 202 of Executive Order 13603, that the program or programs that 
would be supported by the allocation action are necessary or 
appropriate to promote the national defense;
    (b) A detailed description of the situation to include any unusual 
events or circumstances that have created the requirement for an 
allocation action;
    (c) A statement of the specific objective(s) of the allocation 
action;
    (d) A list of the materials, services, or facilities to be 
allocated;
    (e) A list or description of the sources of the materials, 
services, or facilities that will be subject to the allocation action;
    (f) A detailed description of the provisions that will be included 
in the allocations orders, including the type(s) of allocations orders, 
the percentages or quantity of capacity or output to be allocated for 
each purpose, the relationship with previously or subsequently received 
priority rated and unrated contracts and orders, and the duration of 
the allocation action (e.g., anticipated start and end dates);
    (g) An evaluation of the impact of the proposed allocation action 
on the civilian market; and
    (h) Proposed actions, if any, to mitigate disruptions to civilian 
market operations.
0
23. In Subpart F, add Sec.  700.32 to read as follows:

Sec.  700.32  Controlling the general distribution of a material in the 
civilian market.

    No allocation action by the Department of Commerce may be used to 
control the general distribution of a material in the civilian market 
unless the conditions of paragraphs (a), (b) and (c) of this section 
are met.
    (a) The Secretary has made a written finding that:
    (1) Such material is a scarce and critical material essential to 
the national defense, and
    (2) The requirements of the national defense for such material 
cannot otherwise be met without creating a significant dislocation of 
the normal distribution of such material in the civilian market to such 
a degree as to create appreciable hardship.
    (b) The Secretary has submitted the finding for the President's 
approval through the Assistant to the President and National Security 
Advisor and the Assistant to the President for Homeland Security and 
Counterterrorism.
    (c) The President has approved the finding.
    (d) In this section, the term, ``Secretary'' means the Secretary of 
Commerce or his or her designee.
0
24. In Subpart F, add Sec.  700.33 to read as follows:

Sec.  700.33  Types of allocations orders.

    There are three types of allocations orders available for 
communicating allocation actions.
    (a) Set-aside. A set-aside is an official action that requires a 
person to reserve materials, services, or facilities capacity in 
anticipation of the receipt of rated orders.
    (b) Directive. A directive is an official action that requires a 
person to take or refrain from taking certain actions in accordance 
with its provisions. For example, a directive can require a person to: 
Stop or reduce production of an item; prohibit the use of selected 
materials, services, or facilities; or divert the use of materials, 
services, or facilities from one purpose to another.
    (c) Allotment. An allotment is an official action that specifies 
the maximum quantity of a material, service, or facility authorized for 
a specific use to promote the national defense.
0
25. In Subpart F, add Sec.  700.34 to read as follows:

Sec.  700.34  Elements of an allocation order.

    Allocation orders may be issued directly to the affected persons or 
by constructive notice to the parties through publication in the 
Federal Register. This section describes the elements that each order 
must include.
    (a) Elements to be included in all allocation orders.
    (1) A detailed description of the required allocation action(s), 
including its relationship to previously or subsequently received DX 
rated orders, DO rated orders and unrated orders.
    (2) Specific start and end calendar dates for each required 
allocation action.
    (b) Elements to be included in orders issued directly to affected 
persons.
    (1) A statement that reads in substance: ``This is an allocation 
order certified for national defense use. [Insert the name of the 
person receiving the order] is required to comply with this order, in 
accordance with the provisions of the Defense Priorities and 
Allocations System regulations (15 CFR part 700).''
    (2) The written signature on a manually placed order, or the 
digital signature or name on an electronically placed order, of an 
authorized official or employee of the Department of Commerce.
    (c) Elements to be included in an allocation order that gives 
constructive notice through publication in the Federal Register.
    (1) A statement that reads in substance: ``This is an allocation 
order certified for national defense use. [Insert the name(s) of the 
person(s) to whom

[[Page 5348]]

the order applies or a description of the class of persons to whom the 
order applies] is (are) required to comply with this order, in 
accordance with the provisions of the Defense Priorities and 
Allocations System regulations (15 CFR part 700).''
    (2) The order must be signed by an authorized official or employee 
of the Department of Commerce.
0
26. In Subpart F, add Sec.  700.35 to read as follows:

Sec.  700.35  Mandatory acceptance of an allocation order.

    (a) Except as otherwise specified in this section, a person shall 
accept and comply with every allocation order received.
    (b) A person shall not discriminate against an allocation order in 
any manner such as by charging higher prices for materials, services, 
or facilities covered by the order or by imposing terms and conditions 
for contracts and orders involving allocated materials, services, or 
facilities that differ from the person's terms and conditions for 
contracts and orders for the materials, services, or facilities prior 
to receiving the allocation order.
    (c) If a person is unable to comply fully with the required 
action(s) specified in an allocation order, the person must notify the 
Office of Strategic Industries and Economic Security immediately, 
explain the extent to which compliance is possible, and give the 
reasons why full compliance is not possible. If notification is given 
verbally, written or electronic confirmation must be provided within 
one working day. Such notification does not release the person from 
complying with the order to the fullest extent possible, until the 
person is notified by the Department of Commerce that the order has 
been changed or cancelled.
0
27. In Subpart F, add Sec.  700.36 to read as follows:

Sec.  700.36  Changes or cancellations of allocation orders.

    An allocation order may be changed or cancelled by an official 
action from the Department of Commerce. Notice of such changes or 
cancellations may be provided directly to persons to whom the order 
being cancelled or modified applies or constructive notice may be 
provided by publication in the Federal Register.
0
28. Section 700.50 is amended by revising the first sentence of 
paragraph (a) and revising paragraph (b) to read as follows:

Sec.  700.50  General provisions.

    (a) Once a priority rating has been authorized pursuant to this 
part, further action by the Department of Commerce generally is not 
needed. * * *
    (b) Special priorities assistance can be provided for any reason 
consistent with this part, such as assisting in obtaining timely 
deliveries of items needed to satisfy rated orders or authorizing the 
use of priority ratings on orders to obtain items not otherwise ratable 
under this part. If the Department of Commerce is unable to resolve the 
problem or to authorize the use of a priority rating and believes 
additional assistance is warranted, the Department of Commerce may 
forward the request to another agency, identified in Sec.  700.10(c), 
as appropriate, for action.
* * * * *

Sec.  700.51  [Amended]

0
29. Section 700.51 is amended by:
0
a. Removing the word ``regulation'' and adding in its place the word 
``part'' in paragraph (a), introductory text;
0
b. Adding the phrase ``the Department of'' immediately preceding the 
word ``Commerce'' in the first sentence of paragraph (c)(1);
0
c. Adding the word ``and'' at the end of paragraph (c)(3)(iv);
0
d. Removing paragraph (c)(3)(v); and
0
e. Redesignating paragraph (c)(3)(vi) as (c)(3)(v).

Sec.  700.53  [Amended]

0
30. Section 700.53 is amneded by adding the words ``the Department of'' 
between the word ``or'' and the word ``Commerce'' in the introductory 
text.

Sec.  700.54  [Amended]

0
31. Section 700.54 is amended by adding the words ``the Department of'' 
between the word ``or'' and the word ``Commerce'' in the introductory 
text.
0
32. Section 700.55 is revised to read as follows:

Sec.  700.55  Homeland security, emergency preparedness, and critical 
infrastructure protection and restoration assistance programs within 
the United States.

    Any person requesting priority rating authority or requiring 
assistance in obtaining rated items supporting homeland security, 
emergency preparedness, and critical infrastructure protection and 
restoration related activities should submit a request for such 
assistance or priority rating authority to the Office of Policy and 
Program Analysis, Federal Emergency Management Agency, Department of 
Homeland Security, 500 C Street SW., Washington, DC, 20472; telephone: 
(202) 646-3520; Fax: (202) 646-4060; Email: fema-dpas@dhs.gov, Web 
site: http://www.fema.gov/defense-production-act-program-division.
0
33. In Subpart H, Sec.  700.56 is added to read as follows:

Sec.  700.56  Military assistance programs with Canada.

    (a) To promote military assistance to Canada, this section provides 
for authorizing priority ratings to persons in Canada to obtain items 
in the United States in support of approved programs. Although priority 
ratings have no legal authority outside of the United States, this 
section also provides information on how persons in the United States 
may obtain informal assistance in Canada in support of approved 
programs.
    (b) The joint United States-Canadian military arrangements for the 
defense of North America and the integrated nature of the United States 
and Canadian defense industries require close coordination and the 
establishment of a means to provide mutual assistance to the defense 
industries located in both countries.
    (c) The Department of Commerce coordinates with the Canadian Public 
Works and Government Services Canada on all matters of mutual concern 
relating to the administration of this part.
    (d) Any person in the United States ordering defense items in 
Canada in support of an approved program should inform the Canadian 
supplier that the items being ordered are to be used to fill a rated 
order. The Canadian supplier should be informed that if production 
materials are needed from the United States by the supplier or the 
supplier's vendor to fill the order, the supplier or vendor should 
contact the Canadian Public Works and Government Services Canada for 
authority to place rated orders in the United States: Public Works and 
Government Services Canada, Acquisitions Branch, Business Management 
Directorate, Phase 3, Place du Portage, Level 0A1, 11 Laurier Street, 
Gatineau, Quebec, K1A 0S5, Canada; Telephone: (819) 956-6825; Fax: 
(819) 956-7827, or electronically at 
pwgsc.gc.ca">DGAPrioritesdedefense.ACQBDefencePriorities@tpsgc-pwgsc.gc.ca.
    (e) Any person in Canada producing defense items for the Canadian 
government may also obtain priority rating authority for items to be 
purchased in the United States by applying to the Canadian Public Works 
and Government Services Canada, Acquisitions Branch, Business 
Management Directorate, in accordance with its procedures. (f) Persons 
in Canada needing special priorities

[[Page 5349]]

assistance in obtaining defense items in the United States may apply to 
the Canadian Public Works and Government Services Canada, Acquisitions 
Branch, Business Management Directorate, for such assistance. Public 
Works and Government Services Canada will forward appropriate requests 
to the Department of Commerce.
    (g) Any person in the United States requiring assistance in 
obtaining items in Canada must submit a request through the Delegate 
Agency to the Office of Strategic Industries and Economic Security, 
U.S. Department of Commerce on Form BIS-999. The Department of Commerce 
will forward appropriate requests to the Canadian Public Works and 
Government Services Canada.
0
34. In Subpart H, Sec.  700.57 is added to read as follows:

Sec.  700.57   Military assistance programs with other nations and 
international organizations.

    (a) Scope. To promote military assistance to foreign nations and 
international organizations (for example the North Atlantic Treaty 
Organization or the United Nations), this section provides for 
authorizing priority ratings to persons in foreign nations or 
international organizations to obtain items in the United States in 
support of approved programs. Although priority ratings have no legal 
authority outside of the United States, this section also provides 
information on how persons in the United States may obtain informal 
assistance in Australia, Finland, Italy, The Netherlands, Sweden, and 
the United Kingdom in support of approved programs. (b) Foreign nations 
and international organizations. (1) Any person in a foreign nation 
other than Canada, or any person in an international organization, 
requiring assistance in obtaining items in the United States or 
priority rating authority for items to be purchased in the United 
States, should submit a request for such assistance or priority rating 
authority to: The Department of Defense DPAS Lead in the Office of the 
Deputy Assistant Secretary of Defense for Manufacturing and Industrial 
Base Policy, 3330 Defense Pentagon, Washington, DC 20301; Telephone: 
(703) 697-0051; Fax: (703) 695-4885; Email: MIBP@osd.mil, Web site: 
http://www.acq.osd.mil/mibp.
    (i) If the end product is being acquired by a U.S. Government 
agency, the request should be submitted to the Department of Defense 
DPAS Lead through the U.S. contract administration representative.
    (ii) If the end product is being acquired by a foreign nation or 
international organization, the request must be sponsored prior to its 
submission to the Department of Defense DPAS Lead by the government of 
the foreign nation or the international organization that will use the 
end product.
    (2) If the Department of Defense endorses the request, it will be 
forwarded to the Department of Commerce for appropriate action.
    (c) Requesting assistance in Australia, Finland, Italy, The 
Netherlands, Sweden, and the United Kingdom.
    (1) The Department of Defense has entered into bilateral security 
of supply arrangements with Australia, Finland, Italy, The Netherlands, 
Sweden, and the United Kingdom that allow the Department of Defense to 
request the priority delivery for Department of Defense contracts, 
subcontracts, and orders from companies in these countries.
    (2) Any person in the United States requiring assistance in 
obtaining the priority delivery of a contract, subcontract, or order in 
Australia, Finland, Italy, The Netherlands, Sweden, or the United 
Kingdom to support an approved program should contact the Department of 
Defense DPAS Lead in the Office of the Deputy Assistant Secretary of 
Defense for Manufacturing and Industrial Base Policy for assistance. 
Persons in Australia, Finland, Italy, The Netherlands, Sweden, and the 
United Kingdom should request assistance in accordance with paragraph 
(b)(1) of this section.
0
35. In Subpart H, Sec.  700.58 is added to read as follows:

Sec.  700.58  Critical infrastructure assistance programs to foreign 
nations and international organizations.

    (a) Scope. To promote critical infrastructure assistance to foreign 
nations, this section provides for authorizing priority ratings to 
persons in foreign nations or international organizations (for example 
the North Atlantic Treaty Organization or the United Nations) to obtain 
items in the United States in support of approved programs.
    (b) Foreign nations or international organizations. Any person in a 
foreign nation or representing an international organization requiring 
assistance in obtaining items to be purchased in the United States for 
support of critical infrastructure protection and restoration should 
submit a request for such assistance or priority rating authority to 
the Office of Policy and Program Analysis, Federal Emergency Management 
Agency, Department of Homeland Security, 500 C Street SW., Washington, 
DC 20472; telephone: (202) 646-3520; Fax: (202) 646-4060; Email: fema-dpas@dhs.gov, Web site: http://www.fema.gov/defense-production-act-program-division.
0
36. Section 700.60 is revised to read as follows:

Sec.  700.60  General provisions.

    (a) The Department of Commerce may, from time-to-time, take 
specific official actions to implement or enforce the provisions of 
this part.
    (b) Some of these official actions (rating authorizations and 
letters of understanding) are discussed in this subpart. Official 
actions that pertain to compliance (administrative subpoenas, demands 
for information, and inspection authorizations) are discussed in Sec.  
700.71(c). Directives are discussed in Sec.  700.62.
0
37. Section 700.61 is amended by revising the heading and paragraph (a) 
introductory text to read as follows:

Sec.  700.61  Rating authorizations.

    (a) A rating authorization is an official action granting specific 
priority rating authority that:
* * * * *

Sec.  700.62  [Amended]

0
38. Section 700.62 is amended by removing ``Directive'' wherever it 
appears and by adding in its place ``directive''.

Sec.  700.63  [Amended]

0
39. Section 700.63 is amended by:
0
a. Removing ``Letter of Understanding'' wherever it appears and adding 
in its place ``letter of understanding''; and
0
b. Adding the words ``the Department of'' immediately preceding the 
word ``Commerce''.

Sec.  700.70  [Amended]

0
40. Section 700.70 is amended by:
0
a. Removing paragraph (b);
0
b. Redesignating paragraph (c) as paragraph (b); and
0
c. Removing the word ``regulation'' wherever it appears and adding in 
its place the word ``part''.
0
41. Section 700.71 is revised to read as follows:

Sec.  700.71  Audits and investigations.

    (a) Audits and investigations are official actions involving the 
examination of books, records, documents, other writings and 
information to ensure that the provisions of the Defense Production 
Act, the Selective Service Act and

[[Page 5350]]

related statutes, and this part have been properly followed. An audit 
or investigation may also include interviews and a systems evaluation 
to detect problems or failures in the implementation of this part.
    (b) When undertaking an audit, investigation, or other inquiry, the 
Department of Commerce shall:
    (1) Define the scope and purpose in the official action given to 
the person under investigation, and
    (2) Have ascertained that the information sought or other adequate 
and authoritative data are not available from any Federal or other 
responsible agency.
    (c) In administering this part, the Department of Commerce may 
issue the following documents, which constitute official actions:
    (1) Administrative subpoenas. An administrative subpoena requires a 
person to appear as a witness before an official designated by the 
Department of Commerce to testify under oath on matters of which that 
person has knowledge relating to the enforcement or the administration 
of the Defense Production Act, the Selective Service Act and related 
statutes, or this part. An administrative subpoena may also require the 
production of books, papers, records, documents and physical objects or 
property.
    (2) Demand for information. A demand for information requires a 
person to furnish to a duly authorized representative of the Department 
of Commerce any information necessary or appropriate to the enforcement 
or the administration of the Defense Production Act, the Selective 
Service Act, or this part.
    (3) Inspection authorizations. An inspection authorization requires 
a person to permit a duly authorized representative of the Department 
of Commerce to interview the person's employees or agents, to inspect 
books, records, documents, other writings and information in the 
person's possession or control at the place where that person usually 
keeps them, and to inspect a person's property when such interviews and 
inspections are necessary or appropriate to the enforcement or the 
administration of the Defense Production Act, the Selective Service 
Act, or this part.
    (d) The production of books, records, documents, other writings and 
information will not be required at any place other than where they are 
usually kept if, prior to the return date specified in the 
administrative subpoena or demand for information, a duly authorized 
official of the Department of Commerce is furnished with copies of such 
material that are certified under oath to be true copies. As an 
alternative, a person may enter into a stipulation with a duly 
authorized official of the Department of Commerce as to the content of 
the material.
    (e) An administrative subpoena, demand for information, or 
inspection authorization shall include the name, title or official 
position of the person to be served, the evidence sought to be adduced, 
and its general relevance to the scope and purpose of the audit, 
investigation, or other inquiry. If employees or agents are to be 
interviewed; if books, records, documents, other writings, or 
information are to be produced; or if property is to be inspected; the 
administrative subpoena, demand for information, or inspection 
authorization will describe them with particularity.
    (f) Service of documents shall be made in the following manner:
    (1) Service of a demand for information or inspection authorization 
shall be made personally, or by certified mail--return receipt 
requested at the person's last known address. Service of an 
administrative subpoena shall be made personally. Personal service may 
also be made by leaving a copy of the document with someone at least 18 
years of age at the person's last known dwelling or place of business.
    (2) Service upon other than an individual may be made by serving a 
partner, corporate officer, or a managing or general agent authorized 
by appointment or by law to accept service of process. If an agent is 
served, a copy of the document shall be mailed to the person named in 
the document.
    (3) Any individual 18 years of age or older may serve an 
administrative subpoena, demand for information, or inspection 
authorization. When personal service is made, the individual making the 
service shall prepare an affidavit as to the manner in which service 
was made and the identity of the person served, and return the 
affidavit, and in the case of subpoenas, the original document, to the 
issuing officer. In case of failure to make service, the reasons for 
the failure shall be stated on the original document.
0
42. Section 700.72 is amended by revising the first sentence of 
paragraph (a) to read as follows:

Sec.  700.72  Compulsory process.

    (a) If a person refuses to permit a duly authorized representative 
of the Department of Commerce to have access to any premises or source 
of information necessary to the administration or enforcement of the 
Defense Production Act or this part, the Department of Commerce may 
seek compulsory process. * * *
* * * * *
0
43. Section 700.73 is revised to read as follows:

Sec.  700.73  Notification of failure to comply.

    (a) At the conclusion of an audit, investigation, or other inquiry, 
or at any other time, the Department of Commerce may inform the person 
in writing where compliance with the requirements of the Defense 
Production Act, the Selective Service Act and related statutes, or this 
part were not met.
    (b) In cases where the Department of Commerce determines that 
failure to comply with the provisions of the Defense Production Act, 
the Selective Service Act and related statutes, or this part was 
inadvertent, the person may be informed in writing of the particulars 
involved and the corrective action to be taken. Failure to take 
corrective action may then be construed as a willful violation of the 
Defense Production Act, this part, or an official action.
0
44. Section 700.74 is amended by revising paragraphs (a), (b), (c)(1), 
(c)(2) and (c)(3) to read as follows:

Sec.  700.74  Violations, penalties, and remedies.

    (a) Willful violation of the provisions of Title I or Sections 705 
or 707 of the Defense Production Act, the priorities provisions of the 
Selective Service Act and related statutes or this part is a crime and 
upon conviction, a person may be punished by fine or imprisonment, or 
both. The maximum penalty provided by the Defense Production Act is a 
$10,000 fine, or one year in prison, or both. The maximum penalty 
provided by the Selective Service Act is a $50,000 fine, or three years 
in prison, or both.
    (b) The government may also seek an injunction from a court of 
appropriate jurisdiction to prohibit the continuance of any violation 
of, or to enforce compliance with, the Defense Production Act, this 
part, or an official action.
    (c) * * *
    (1) No person may solicit, influence or permit another person to 
perform any act prohibited by, or to omit any act required by, the 
Defense Production Act, this part, or an official action.
    (2) No person may conspire or act in concert with any other person 
to perform any act prohibited by, or to omit any act required by, the 
Defense Production Act, this part, or an official action.
    (3) No person shall deliver any item if the person knows or has 
reason to

[[Page 5351]]

believe that the item will be accepted, redelivered, held, or used in 
violation of the Defense Production Act, this part, or an official 
action. In such instances, the person must immediately notify the 
Department of Commerce that, in accordance with this section, delivery 
has not been made.
0
45. Section 700.80 is amended by revising paragraphs (a)(1) and (2), 
(b), and (c), and by revising the parenthetical sentence at the end of 
paragraph (d) to read as follows:

Sec.  700.80  Adjustments or exceptions.

    (a) * * *
    (1) A provision of this part or an official action results in an 
undue or exceptional hardship on that person not suffered generally by 
others in similar situations and circumstances; or
    (2) The consequence of following a provision of this part or an 
official action is contrary to the intent of the Defense Production 
Act, the Selective Service Act and related statutes, or this part.
    (b) Each request for adjustment or exception must be in writing and 
contain a complete statement of all the facts and circumstances related 
to the provision of this part or official action from which adjustment 
is sought and a full and precise statement of the reasons why relief 
should be provided.
    (c) The submission of a request for adjustment or exception shall 
not relieve any person from the obligation of complying with the 
provision of this part or official action in question while the request 
is being considered unless such interim relief is granted in writing by 
the Office of Strategic Industries and Economic Security. The Office of 
Strategic Industries and Economic Security shall respond to requests 
for adjustment of or exceptions to compliance with the provisions of 
this part or an official action within 25 (twenty-five) days, not 
including Saturdays, Sundays or Government holidays, of the date of 
receipt.
    (d) * * * (For information on the appeal procedure, see Sec.  
700.81.)
0
46. Section 700.81 is amended by revising paragraphs (a), (b), and (g), 
to read as follows:

Sec.  700.81  Appeals.

    (a) Any person who has had a request for adjustment or exception 
denied by the Office of Strategic Industries and Economic Security 
under Sec.  700.80, may appeal to the Assistant Secretary for Export 
Administration, Department of Commerce, who shall review and reconsider 
the denial. Such appeals should be submitted to the Office of the 
Assistant Secretary for Export Administration, Bureau of Industry and 
Security, Department of Commerce, Room 3886, Washington, DC 20230, Ref: 
DPAS Appeals.
    (b) Appeals of denied requests for exceptions from or adjustments 
to compliance with the provisions of this part or an official action 
must be received by the Assistant Secretary for Export Administration 
no later than 45 days after receipt of a written notice of denial from 
the Office of Strategic Industries and Economic Security. After this 
45-day period, an appeal may be accepted at the discretion of the 
Assistant Secretary for Export Administration.
* * * * *
    (g) The submission of an appeal under this section shall not 
relieve any person from the obligation of complying with the provision 
of this part or official action in question while the appeal is being 
considered, unless such relief is granted in writing by the Assistant 
Secretary for Export Administration.
* * * * *

Sec.  700.90  [Amended]

0
47. Section 700.90 is amended by removing the word ``regulation'' and 
adding in its place the word ``part''.

Sec.  700.91  [Amended]

0
48. Section 700.91 is amended by:
0
a. Removing the word ``regulation'' wherever it appears and adding in 
its place the word ``part'';
0
b. Adding the phrase ``the Department of'' immediately preceding the 
word ``Commerce'' wherever it appears; and
0
c. Removing ``705(e)'' and adding in its place ``705(d)'' wherever it 
appears.

Sec.  700.92  [Amended]

0
49. Section 700.92 is amended by:
0
a. Removing the word ``regulation'' wherever it appears in the heading 
and in paragraphs (a), (b) and (c) and adding in its place the word 
``part'';
0
b. Adding the phrase ``the Department of'' immediately preceding the 
word ``Commerce'' wherever it appears; and
0
c. Removing the phrase ``the regulations'' and adding in its place 
``any provision of this part'' in the first sentence of paragraph (d).

Sec.  700.93  [Amended]

0
50. Section 700.93 is revised to read as follows:

Sec.  700.93  Communications.

    General communications concerning this part, including how to 
obtain copies of this part and explanatory information, requests for 
guidance or clarification, may be addressed to the Office of Strategic 
Industries and Economic Security, Room 3876, Department of Commerce, 
Washington, DC 20230, Ref: DPAS; telephone (202) 482-3634, email 
DPAS@bis.doc.gov. Request for priorities assistance under Sec.  700.50, 
adjustments or exceptions under Sec.  700.80 of this part or appeals 
under Sec.  700.81, must be submitted in the manner specified in those 
sections.
0
51. Schedule I to part 700 is revised to read as follows:

Schedule I to Part 700--Approved Programs and Delegate Agencies

    The programs listed in this schedule have been approved for 
priorities support under this part by the Department of Defense,\1\ the 
Department of Energy or the Department of Homeland Security, in 
accordance with section 202 of Executive Order 13603. They have equal 
preferential status. The Department of Commerce has authorized the 
delegate agencies listed in the third column to use this part in 
support of those programs assigned to them, as indicated below.\2\
---------------------------------------------------------------------------

    \1\ Department of Defense includes: The Office of the Secretary 
of Defense, the Military Departments, the Joint Staff, the Combatant 
Commands, the Defense Agencies, the Defense Field Activities, all 
other organizational entities in the Department of Defense, and, for 
purposes of this part, the Central Intelligence Agency and the 
National Aeronautics and Space Administration as associated 
agencies.
    \2\ The Department of Commerce is also listed as an agency in 
the third column for programs where its authorization is necessary 
to place rated orders.

----------------------------------------------------------------------------------------------------------------
  Program  identification
          symbol                 Approved program                              Agency(ies)
----------------------------------------------------------------------------------------------------------------
                                                Defense Programs
----------------------------------------------------------------------------------------------------------------
A1........................  Aircraft..................  Department of Defense.
A2........................  Missiles..................  Department of Defense.
A3........................  Ships.....................  Department of Defense.

[[Page 5352]]

 
A4........................  Tank--Automotive..........  Department of Defense.
A5........................  Weapons...................  Department of Defense.
A6........................  Ammunition................  Department of Defense.
A7........................  Electronic and              Department of Defense.
                             communications equipment.
B1........................  Military building supplies  Department of Defense.
B8........................  Production equipment (for   Department of Defense.
                             defense contractor's
                             account).
B9........................  Production equipment        Department of Defense.
                             (Government owned).
C1........................  Food resources (combat      Department of Defense.
                             rations).
C2........................  Department of Defense       Department of Defense.
                             construction.
C3........................  Maintenance, repair, and    Department of Defense.
                             operating supplies (MRO)
                             for Department of Defense
                             facilities.
C9........................  Miscellaneous.............  Department of Defense
----------------------------------------------------------------------------------------------------------------
                                          Military Assistance to Canada
----------------------------------------------------------------------------------------------------------------
D1........................  Canadian military programs  Department of Commerce.
D2........................  Canadian production and     Department of Commerce.
                             construction.
D3........................  Canadian atomic energy      Department of Commerce.
                             program.
----------------------------------------------------------------------------------------------------------------
                                  Military Assistance to Other Foreign Nations
----------------------------------------------------------------------------------------------------------------
G1........................  Certain munitions items     Department of Commerce.
                             purchased by foreign
                             governments through
                             domestic commercial
                             channels for export.
G2........................  Certain direct defense      Department of Commerce.
                             needs of foreign
                             governments other than
                             Canada.
G3........................  Foreign nations (other      Department of Commerce.
                             than Canada) production
                             and construction.
----------------------------------------------------------------------------------------------------------------
                              Critical Infrastructure Assistance to Foreign Nations
----------------------------------------------------------------------------------------------------------------
G4........................  Foreign critical            Department of Commerce.
                             infrastructure programs.
----------------------------------------------------------------------------------------------------------------
                                                  Co-Production
----------------------------------------------------------------------------------------------------------------
J1........................  F-16 Co-Production Program  Departments of Commerce and Defense.
----------------------------------------------------------------------------------------------------------------
                                             Atomic Energy Programs
----------------------------------------------------------------------------------------------------------------
E1........................  Construction..............  Department of Energy.
E2........................  Operations--including       Department of Energy.
                             maintenance, repair, and
                             operating supplies (MRO).
E3........................  Privately owned facilities  Department of Energy.
----------------------------------------------------------------------------------------------------------------
                                            Domestic Energy Programs
----------------------------------------------------------------------------------------------------------------
F1........................  Exploration, production,    Department of Energy.
                             refining, and
                             transportation.
F2........................  Conservation..............  Department of Energy.
F3........................  Construction, repair, and   Department of Energy.
                             maintenance.
----------------------------------------------------------------------------------------------------------------
                                   Other Defense, Energy, and Related Programs
----------------------------------------------------------------------------------------------------------------
H1........................  Certain combined orders     Department of Commerce.
                             (see section 700.17(c)).
H5........................  Private domestic            Department of Commerce.
                             production.
H6........................  Private domestic            Department of Commerce.
                             construction.
H7........................  Maintenance, repair, and    Department of Commerce.
                             operating supplies (MRO).
H8........................  Designated Programs.......  Department of Commerce.
K1........................  Federal supply items......  General Services Administration.
----------------------------------------------------------------------------------------------------------------
                                           Homeland Security Programs
----------------------------------------------------------------------------------------------------------------
N1........................  Federal emergency           Department of Homeland Security.
                             preparedness, mitigation,
                             response, and recovery.
N2........................  State, local, tribal        Department of Homeland Security.
                             government emergency
                             preparedness, mitigation,
                             response, and recovery.
N3........................  Intelligence and warning    Department of Homeland Security.
                             systems.
N4........................  Border and transportation   Department of Homeland Security.
                             security.
N5........................  Domestic counter-           Department of Homeland Security.
                             terrorism, including law
                             enforcement.
N6........................  Chemical, biological,       Department of Homeland Security.
                             radiological, and nuclear
                             countermeasures.
N7........................  Critical infrastructure     Department of Homeland Security.
                             protection and
                             restoration.
N8........................  Miscellaneous.............  Department of Homeland Security.
----------------------------------------------------------------------------------------------------------------

[[Page 5353]]

    Dated: January 21, 2014.
Kevin J. Wolf,
Assistant Secretary for Export Administration.
[FR Doc. 2014-01613 Filed 1-30-14; 8:45 am]
BILLING CODE 3510-JT-P