Document ID: BIS-2010-0021-0004
Agency: bis
Document Type: Rule
Title: Defense Priorities and Allocations System Regulations
Posted Date: 2014-08-14T04:00Z

[Federal Register Volume 79, Number 157 (Thursday, August 14, 2014)]
[Rules and Regulations]
[Pages 47560-47573]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-19168]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 700

[Docket No. 0912311453-4308-03]
RIN 0694-AE81

Revisions to Defense Priorities and Allocations System 
Regulations

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

ACTION: Final rule.

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SUMMARY: This rule clarifies 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 sets new standards and 
procedures for such prioritization with respect to contracts or orders 
for emergency preparedness activities. Finally, this rule sets 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 
(September 30, 2009) (herein the Reauthorization Act) 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: Effective Date: September 15, 2014.

FOR FURTHER INFORMATION CONTACT: Liam McMenamin, Defense Programs 
Division, Office of Strategic Industries and Economic Security at (202) 
482-2233, liam.mcmenamin@bis.doc.gov.

SUPPLEMENTARY INFORMATION:

Background

    This rule updates and expands the Defense Priorities and 
Allocations System (DPAS) regulations (15 CFR part 700). BIS relies 
upon and uses the DPAS regulations to implement priority and allocation 
actions involving industrial resources. The DPAS has two principal 
components--priorities and allocations. Under the priorities component, 
contracts needed to support programs that have been approved for 
priorities support are required to be given priority over other 
contracts to facilitate expedited delivery in promotion of the U.S. 
national defense. Such contracts may be between the government and 
private parties or between private parties. 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 (123 Stat. 2006) (Pub. L. 111-67) required 
agencies with priorities and allocations

[[Page 47561]]

authorities to issue rules establishing standards and procedures by 
which those authorities will be used to promote the national defense, 
under both emergency and non-emergency conditions. Pursuant to the 
Reauthorization Act, BIS issued two proposed rules to amend its DPAS 
regulations. The first such proposed rule was published on June 7, 2010 
(75 FR 32122) (herein the first proposed rule). BIS received one 
comment in response to that rule. Based on that comment and on its 
internal deliberations, BIS concluded that sufficient changes would be 
needed from its proposal to require a second proposed rule. 
Accordingly, BIS published a second proposed rule on January 31, 2014 
(79 FR 5332) (herein the second proposed rule). The principal 
differences between the first proposed rule and the second proposed 
rule are summarized in the latter at 79 FR 5332 and not repeated here. 
BIS received no comments on the second proposed rule. Therefore, BIS is 
publishing the text that it proposed in the second proposed rule, 
without substantive change, as this final rule.
    The Reauthorization Act requires each Federal agency that is 
delegated priorities and allocations authority consistent with section 
101 of the Defense Production Act (50 U.S.C. app. 2071, et seq.) 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 authority 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 
regulations promulgated, or to be promulgated, by each Department with 
delegated DPA Title I authority comprise the Federal priorities and 
allocations system.

Summary of Changes to the DPAS Made by This Rule

    The following lists provide highlights of the changes to the DPAS 
implemented by this rule. A more detailed explanation of the changes 
and reasons therefor appears in the preamble to the second proposed 
rule. Because this final rule adopts the changes to the DPAS that were 
in the second proposed rule for the reasons set forth in the preamble 
to that rule without substantive change, BIS is not repeating them in 
full here. Interested persons may read them at 79 FR 5332, 5332-5341, 
January 31, 2014.

Highlights of Changes Related to Priorities

     The scope of reasons for which rated orders may be issued 
has been expanded to include homeland security, emergency preparedness, 
and critical infrastructure protection and restoration activities.
     The definitions section has been expanded to include 
definitions of terms related to allocations and terms related to 
emergency preparedness activities.
     Most rated orders will continue to require acceptance or 
rejection within 10 or 15 days depending on the type of rating; 
however, rated orders for emergency preparedness requirements may 
require acceptance or rejection within a shorter timeframe but no less 
than six hours for emergencies that have occurred, or 12 hours if 
needed to prepare for an imminent hazard.
     Procedures for persons to obtain priority ratings for 
items supporting homeland security, emergency preparedness, critical 
infrastructure protection and restoration, and information about how 
persons in the United States may seek such assistance have been added.
     Procedures for persons in Canada to obtain priority 
ratings for items in the United States and information about how 
persons in the United States may seek assistance in obtaining defense 
items in Canada have been updated and moved into a separate section.
     Procedures for persons in foreign nations other than 
Canada to obtain priority ratings for items in the United States and 
information about how persons in the United States may seek assistance 
in obtaining defense items from Australia, Finland, Italy, the 
Netherlands, Sweden and the United Kingdom have been updated and moved 
into a separate section. This section has been expanded to provide 
procedures for international organizations to obtain priority ratings.
     The table in Schedule I to part 700 has been updated to 
list all programs currently approved for priorities support and the 
delegate agency for each program.

Highlights of Changes Related to Allocations

     The rule provides that allocations will 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 
precludes use of allocations to ration materials or services at the 
retail level.
     No allocation action may be used to control the general 
distribution of a material in the civilian market unless the Department 
of Commerce makes, and the President approves, a finding 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 rule specifies the minimum information that must be 
included in an allocation order and provides for issuing the order 
directly to affected persons or through publication of a constructive 
notice in the Federal Register. All allocation orders must explain the 
relationship between the allocation order and any previously or 
subsequently issued rated or unrated orders and the start and end dates 
of the order.
     Allocation orders must be accepted and complied with. A 
person who is subject to an allocation order who believes that 
compliance is not possible must notify the Office of Strategic 
Industries and Economic Security. An allocation must be complied with 
to the extent possible until the Department of Commerce notifies the 
person that the order has been changed or cancelled.

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'' under Executive Order 12866. Accordingly, the rule has been 
reviewed

[[Page 47562]]

by the Office of Management and Budget (OMB).
    2. Notwithstanding any other provision of law, no person is 
required to respond to, nor shall any person 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. 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 Regulation, 
Department of Commerce, certified to the Chief Counsel for Advocacy, 
Small Business Administration that this rule will not have a 
significant impact on a substantial number of small entities for the 
reasons explained below. No other law requires such an analysis. 
Consequently, no regulatory flexibility analysis is required and none 
has been prepared. 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 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 Classification System Codes 
(Effective January 22, 2014), 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 principal 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

[[Page 47563]]

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 
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.''
    Even a narrower use of allocations authority under this rule will 
be subject to the policy that this rule will set forth in 15 CFR 
700.30, providing 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, 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 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 going forward. 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 amended 
as follows:

PART 700--[AMENDED]

0
1. The authority citation 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

[[Page 47564]]

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. Sec.  700.4, 700.5, 700.6, and 700.7  [Removed and Reserved]

0
5. Sections 700.4, 700.5, 700.6, and 700.7 are removed and reserved.
0
6. 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 
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.

[[Page 47565]]

    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
7. 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 (3 CFR, 2012 Comp., p. 225). The priorities 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 (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 (3 CFR, 2012 Comp., p. 
273).

0
8. 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
9. 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)].''

0
10. 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

[[Page 47566]]

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
11. 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
12. Section 700.15 is amended by revising the second sentence of 
paragraph (a), the example following paragraph (a), the second sentence 
of 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
13. 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
14. 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
15. 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

[[Page 47567]]

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
16. 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;
    (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.

0
17. The heading of subpart F is revised to read as follows:

Subpart F--Allocation Actions

0
18. 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
19. 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
20. In subpart F, add Sec. Sec.  700.32, 700.33, 700.34, 700.35, and 
700.36 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.

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

[[Page 47568]]

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.

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 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.

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.

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
21. 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
22. 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 phrase ``the Department of'' immediately preceding the 
word ``Commerce'' in paragraph (c)(3), introductory text;
0
d. Adding the word ``and'' at the end of paragraph (c)(3)(iv);
0
e. Removing paragraph (c)(3)(v); and
0
f. Redesignating paragraph (c)(3)(vi) as paragraph (c)(3)(v).

Sec.  700.53  [Amended]

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

Sec.  700.54  [Amended]

0
24. Section 700.54 is amended by adding the words ``the Department of'' 
between the word ``and'' and the word ``Commerce'' in the introductory 
text.

0
25. 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
26. In subpart H, Sec. Sec.  700.56, 700.57, and 700.58 are 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

[[Page 47569]]

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 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.

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, 
Room 3B854, 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.

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
27. 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

[[Page 47570]]

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
28. 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
29. Section 700.62 is amended by removing ``Directive'' wherever it 
appears and by adding in its place ``directive''.

Sec.  700.63  [Amended]

0
30. Section 700.63 is amended by:
0
a. Revising the section heading to read ``Letters of understanding'';
0
b. Removing ``Letter of Understanding'' wherever it appears and adding 
in its place ``letter of understanding'';
0
c. Adding the words ``the Department of'' immediately preceding the 
word ``Commerce'' in paragraph (a); and
0
d. Removing ``Letters of Understanding'' and adding in its place 
``letters of understanding'' in paragraph (b).

Sec.  700.70  [Amended]

0
31. 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
32. 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 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
33. 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
34. Section 700.73 is revised to read as follows:

[[Page 47571]]

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
35. Section 700.74 is revised 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) In order to secure the effective enforcement of the Defense 
Production Act, this part, and official actions, the following are 
prohibited (see section 704 of the Defense Production Act; see also, 
for example, sections 2 and 371 of Title 18 United States Code):
    (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 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
36. Section 700.80 is amended by revising paragraphs (a)(1) and (2), 
(b), and (c) 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 
provisions 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.
* * * * *

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

Sec.  700.91  [Amended]

0
39. 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
40. 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).

0
41. 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

[[Page 47572]]

Sec.  700.50, adjustments or exceptions under Sec.  700.80, or appeals 
under Sec.  700.81, must be submitted in the manner specified in those 
sections.

0
42. 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.
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        Department of Defense.
                         supplies.
B8....................  Production equipment     Department of Defense.
                         (for 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,     Department of Defense.
                         and operating supplies
                         (MRO) for Department
                         of Defense facilities.
C9....................  Miscellaneous..........  Department of Defense.
------------------------------------------------------------------------
                      Military Assistance to Canada
------------------------------------------------------------------------
D1....................  Canadian military        Department of Commerce.
                         programs.
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       Departments of Commerce
                         Program.                 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          Department of Energy.
                         facilities.
------------------------------------------------------------------------
                        Domestic Energy Programs
------------------------------------------------------------------------
F1....................  Exploration,             Department of Energy.
                         production, refining,
                         and transportation.
F2....................  Conservation...........  Department of Energy.
F3....................  Construction, repair,    Department of Energy.
                         and 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,     Department of Commerce.
                         and operating supplies
                         (MRO).

[[Page 47573]]

 
H8....................  Designated Programs....  Department of Commerce.
K1....................  Federal supply items...  General Services
                                                  Administration.
------------------------------------------------------------------------
                       Homeland Security Programs
------------------------------------------------------------------------
N1....................  Federal emergency        Department of Homeland
                         preparedness,            Security.
                         mitigation, response,
                         and recovery.
N2....................  State, local, tribal     Department of Homeland
                         government emergency     Security.
                         preparedness,
                         mitigation, response,
                         and recovery.
N3....................  Intelligence and         Department of Homeland
                         warning systems.         Security.
N4....................  Border and               Department of Homeland
                         transportation           Security.
                         security.
N5....................  Domestic counter-        Department of Homeland
                         terrorism, including     Security.
                         law enforcement.
N6....................  Chemical, biological,    Department of Homeland
                         radiological, and        Security.
                         nuclear
                         countermeasures.
N7....................  Critical infrastructure  Department of Homeland
                         protection and           Security.
                         restoration.
N8....................  Miscellaneous..........  Department of Homeland
                                                  Security.
------------------------------------------------------------------------

    Dated: August 8, 2014.
Matthew S. Borman,
Deputy Assistant Secretary for Export Administration.
[FR Doc. 2014-19168 Filed 8-13-14; 8:45 am]
BILLING CODE 3510-JT-P