Document ID: BIS-2010-0036-0001
Agency: bis
Document Type: Rule
Title: Amendment to Existing Validated End-User Authorization in the People's Republic of China: Semiconductor Manufacturing International Corp.
Posted Date: 2010-11-01T04:00Z

[Federal Register: November 1, 2010 (Volume 75, Number 210)]
[Rules and Regulations]               
[Page 67029-67031]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01no10-1]                         

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                                                Federal Register
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[[Page 67029]]

DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 748

[Docket No. 101006492-0494-02 ]
RIN 0694-AF02

 
Amendment to Existing Validated End-User Authorization in the 
People's Republic of China: Semiconductor Manufacturing International 
Corporation

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Final rule.

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SUMMARY: In this action, the Bureau of Industry and Security (BIS) 
amends the Export Administration Regulations (EAR) to remove one 
facility from the list of Semiconductor Manufacturing International 
Corporation (SMIC) facilities that are authorized to receive certain 
items in the People's Republic of China (PRC) under SMIC's validated 
end-user (VEU) authorization. Specifically, BIS removes Cension 
Semiconductor Manufacturing Corporation (Cension) from SMIC's list of 
approved VEU facilities in the PRC due to a material change at SMIC. 
This amendment is not the result of prohibited activities by Cension or 
by SMIC, nor does it establish any new license requirements or more 
restrictive licensing policies for exports, reexports or transfers (in-
country) of items to the facility identified in this rule; license 
requirements set forth in the EAR continue to apply to this facility.

DATES: This rule is effective November 1, 2010. Although there is no 
formal comment period, public comments on this regulation are welcome 
on a continuing basis.

ADDRESSES: You may submit comments, identified by RIN 0694-AF02 by any 
of the following methods:
    E-mail: publiccomments@bis.doc.gov. Include ``RIN 0694-AF02'' in 
the subject line of the message.
    Fax: (202) 482-3355. Please alert the Regulatory Policy Division, 
by calling (202) 482-2440, if you are faxing comments.
    Mail or Hand Delivery/Courier: Sheila Quarterman, U.S. Department 
of Commerce, Bureau of Industry and Security, Regulatory Policy 
Division, 14th Street & Pennsylvania Avenue, NW., Room 2705, 
Washington, DC 20230, Attn: RIN 0694-AF02.
    Send comments regarding the collection of information associated 
with this rule, including suggestions for reducing the burden, to 
Jasmeet Seehra, Office of Management and Budget (OMB), by e-mail to 
Jasmeet_K._Seehra@omb.eop.gov or by fax to (202) 395-7285. Comments 
on this collection of information should be submitted separately from 
comments on the final rule (i.e., RIN 0694-AF02)--all comments on the 
latter should be submitted by one of the three methods outlined above.

FOR FURTHER INFORMATION CONTACT: Karen Nies-Vogel, Chairman, End-User 
Review Committee, Bureau of Industry and Security, U.S. Department of 
Commerce, 14th Street & Pennsylvania Avenue, NW., Washington, DC 20230; 
by telephone (202) 482-3811, or by e-mail to kniesv@bis.doc.gov.

SUPPLEMENTARY INFORMATION: 

Authorization Validated End-User

    Consistent with U.S. Government policy to facilitate trade for 
civilian end-users in the PRC, on June 19, 2007 BIS amended the EAR in 
a final rule (72 FR 33646) to create a new authorization to allow 
``validated end-users'' (VEUs) located in eligible destinations to 
receive certain items through export, reexport or transfer (in-country) 
under a general authorization rather than requiring a license. 15 CFR 
748.15. Companies listed as VEUs may obtain eligible items that are on 
the Commerce Control List, set forth in Supplement No. 1 to part 774 of 
the EAR, without having to wait for their suppliers to obtain export 
licenses from BIS. Eligible items may include commodities, software and 
technology, except for those items that are controlled for missile 
technology or crime control reasons.
    Authorization VEU is a mechanism to facilitate increased high-
technology exports to companies in eligible destinations that have a 
verifiable record of civilian uses for such items. The validated end-
users listed in Supplement No. 7 to Part 748 of the EAR were reviewed 
and approved by the U.S. Government in accordance with the provisions 
of Section 748.15 and Supplement Nos. 8 and 9 to Part 748 of the EAR. 
In addition to U.S. exporters, Authorization VEU may be used by foreign 
reexporters and persons transferring in-country, and does not have an 
expiration date. Currently, VEUs are located in the PRC and India.

Removal of Cension Semiconductor Manufacturing Corporation (Cension) 
From the List of Validated End-User Semiconductor Manufacturing 
International Corporation's (SMIC's) Approved Facilities in the PRC

    In a rule published in the Federal Register on October 19, 2007 (72 
FR 59231), BIS designated SMIC as a VEU, thus authorizing certain 
specific exports, reexports and transfers (in-country) to the five 
listed facilities of the company, including Cension. Due to a material 
change at the Cension facility of SMIC, and consistent with section 
748.15 of the EAR, BIS now amends Supplement No. 7 to Part 748 of the 
EAR to remove the Cension facility from that list of SMIC's approved 
VEU facilities. This change leaves four SMIC facilities that are 
approved to receive eligible items under SMIC's VEU authorization. 
Cension's address (i.e., 3/F, 8-1 Kexin Road, Export Processing Zone 
(West Area), Chengdu, China 611731) will also be removed from the list 
of SMIC's authorized VEU facilities. As a result of this rule, the 
Cension facility will no longer be authorized to receive items through 
Authorization VEU. Thus, parties seeking to export, reexport or 
transfer (in-country) items under the EAR to the Cension facility may 
now have to obtain a license to do so, depending on the item at issue.
    This amendment is not the result of prohibited activities by 
Cension or SMIC. SMIC remains a qualified participant in the VEU 
program and exports, reexports and transfers (in-country) of the items 
controlled under the export control classification numbers listed in 
SMIC's entry in Supplement No. 7 to Part 748 of the

[[Page 67030]]

EAR to the SMIC facilities listed in the same part may continue to be 
made under Authorization VEU. Nor does this action establish any new 
license requirements, or more restrictive licensing policies, for 
exports, reexports or transfers (in-country) of items to the Cension 
facility. Rather, the license requirements set forth in the EAR 
continue to apply to this facility.
    Note that this amendment applies only to transactions under 
Authorization VEU involving SMIC's Cension facility. All conditions and 
restrictions that applied to transactions that were undertaken pursuant 
to Authorization VEU prior to the effective date of this amendment, and 
that involve the Cension facility, continue to apply to those 
transactions. These restrictions and conditions include any that were 
imposed on this facility in connection with its eligibility for 
Authorization VEU, as established by BIS in its communications 
authorizing the Cension facility's participation in the VEU program.

Saving Clause

    Shipments of items removed from eligibility for export, reexport or 
transfer (in-country) under Authorization VEU (i.e., under the 
designator VEU) as a result of this regulatory action that were on dock 
for loading, on lighter, laden aboard an exporting carrier, or en route 
aboard a carrier to a port of export, on November 1, 2010, pursuant to 
actual orders for export, reexport or transfer (in-country) to an 
eligible destination, may proceed to that destination under the 
previously applicable Authorization so long as they are exported, 
reexported or transferred (in-country) before November 16, 2010. Any 
such items not actually exported, reexported or transferred (in-
country) before midnight, on November 16, 2010, require an individual 
license or other applicable authorization under the EAR.
    Since August 21, 2001, the Export Administration Act has been in 
lapse and the President, through Executive Order 13222 of August 17, 
2001 (3 CFR, 2001 Comp., p. 783 (2002)), as extended most recently by 
the Notice of August 12, 2010 (75 FR 50681) (August 16, 2010), has 
continued the EAR in effect under the International Emergency Economic 
Powers Act. BIS continues to carry out the provisions of the Act, as 
appropriate and to the extent permitted by law, pursuant to Executive 
Order 13222.

Rulemaking Requirements

    1. This final rule has been determined to be not significant for 
the purposes of Executive Order 12866.
    2. This rule involves information collections previously approved 
by OMB under control number 0694-0088, ``Multi-Purpose Application'' 
(Form BIS 748). This collection has a burden hour estimate of 58 
minutes for the preparation and submission of the form, and an 
estimated burden of 30 minutes per submission for recordkeeping, 
reporting and review requirements in connection with the Authorization 
VEU program. Although this rule may result in a slight increase in 
license applications, this rule is not expected to impact the 
information collection request previously approved by OMB under control 
number 0694-0088.
    Notwithstanding any other provisions of law, no person is required 
to respond to nor be subject to a penalty for failure to comply with a 
collection of information, subject to the requirements of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), unless that 
collection of information displays a currently valid OMB Control 
Number.
    3. This rule does not contain policies with Federalism implications 
as that term is defined under Executive Order 13132.
    4. There is good cause under 5 U.S.C. 553(b)(B) to waive the 
provisions of the Administrative Procedure Act (APA) requiring prior 
notice and the opportunity for public comment because, specific to this 
rule, they are unnecessary, impracticable and contrary to the public 
interest.
    In determining whether to grant or revoke validated end-user 
designations, a committee of U.S. Government agencies evaluates a 
variety of information, the nature and terms of which are set forth in 
15 CFR part 748, Supplement No. 8. The criteria for evaluation by the 
committee are set forth in 15 CFR 748.15(a)(2). The information, 
commitments and criteria for this extensive review were all established 
through the notice of proposed rulemaking and public comment process 
(71 FR 38313, July 2, 2006 and 72 FR 33646, June 19, 2007). Thus, 
authorization of a VEU is similar to granting a license: To receive 
Authorization VEU, an application must be submitted on behalf of an 
entity; the entity must be found to meet certain previously identified 
criteria; and the application must be approved. Because the 
authorization granted by BIS pursuant to 15 CFR Sec.  748.15 is similar 
to that granted to exporters for individual licenses, which do not 
undergo public review when they are approved, denied, revoked, or 
amended, allowing public review and comments to this rule is 
unnecessary.
    The procedure for revocation of a facility from the Authorized VEU 
list is similar to the license revocation procedure, and because this 
rule involves revocation, public comment on it is unnecessary. During 
the revocation procedure, the U.S. Government analyzes confidential 
business information according to set criteria to determine whether a 
given authorized VEU entity remains eligible for VEU status. Revocation 
may, as in this case, be the result of a material change in 
circumstance at the authorized facility. Examples of such a material 
change include changes in the operational status of a VEU facility or 
changes in the end-use of the products produced at the facility. Such 
changes may result in a VEU or a VEU facility no longer meeting the 
eligibility criteria for Authorization VEU, and thus may lead the U.S. 
Government to modify or revoke VEU authorization. Facilities that 
undergo material changes that result in their no longer meeting the 
criteria to be eligible VEUs must, according to the VEU program, have 
their VEU status revoked. Here, the Cension facility is no longer 
eligible to be an Authorized VEU, and so, by the terms of the EAR and 
the VEU program, the facility's VEU status must be revoked; thus public 
comments on whether to revoke this status are unnecessary.
    Additionally, allowing for prior public notice and comment on this 
rule may be impracticable and contrary to the public interest. The EAR 
advance U.S. national security, foreign policy, and economic objectives 
by ensuring an effective export control system. In accordance with the 
pre-set criteria, the U.S. Government reviews each VEU and its 
facilities to ensure that exports, reexports and transfers (in-country) 
of specified items to these entities are consistent with such 
objectives. Accordingly, VEUs and their facilities may receive through 
export, reexport or transfer (in-country) items that would otherwise 
require a license and transaction-specific review, in part due to 
national security concerns. However, the listed facility here is no 
longer eligible to be an Authorized VEU facility, and in order to 
protect national security, the restrictions of the EAR must be in place 
as soon as possible. Allowing public comments to this rule would hinder 
the ability of BIS to enforce the EAR's restrictions on exports without 
a license to the listed facility, and therefore public comment on this 
rule is both impracticable, because allowing such comment would prevent 
BIS from undertaking its

[[Page 67031]]

statutory duties, and contrary to the public's national security 
interests.
    In addition, BIS finds good cause to waive the requirement of 5 
U.S.C. 553(d)(3) to delay the effectiveness of this regulation, because 
such a delay is contrary to the public's interest. When the U.S. 
Government has been notified of or has identified a material change in 
circumstances that warrants revocation or modification of VEU status 
for an end-user or a facility of an end-user, there is a need to 
quickly alert the public that the facility is no longer authorized as a 
recipient of items under Authorization VEU. Delaying this action's 
effectiveness could result in items that otherwise require licenses 
being exported, reexported or transferred (in-country), license-free, 
to an ineligible facility. Accordingly, it would be contrary to the 
public interest to delay this rule's effectiveness.
    No other law requires that a notice of proposed rulemaking and an 
opportunity for public comment be given for this final rule. Because a 
notice of proposed rulemaking and an opportunity for public comment are 
not required to be given for this rule under the Administrative 
Procedure Act or by any other law, the analytical requirements of the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) are not applicable 
and no regulatory flexibility analysis has been prepared.

List of Subjects in 15 CFR Part 748

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

0
Accordingly, part 748 of the Export Administration Regulations (15 CFR 
parts 730-774) is amended as follows:

PART 748--[AMENDED]

0
1. The authority citation for part 748 continues to read as follows:

    Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 
E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 
FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 12, 2010 (75 
FR 50681) (August 16, 2010).

0
2. Supplement No. 7 to part 748 is amended by removing ``Cension 
Semiconductor Manufacturing Corporation'' and its address ``(3/F, 8-1 
Kexin Road, Export Processing Zone (West Area), Chengdu, China 
611731)'' from the list of ``Eligible Destinations'' for ``Validated 
End-User'' ``Semiconductor Manufacturing International Corporation'' in 
``China (People's Republic of)''.

    Dated: October 26, 2010.
Kevin J. Wolf,
Assistant Secretary for Export Administration.
[FR Doc. 2010-27517 Filed 10-29-10; 8:45 am]
BILLING CODE 3510-33-P