Source: https://www.federalregister.gov/documents/2001/07/25/01-18372/highly-enriched-uranium-heu-agreement-assets-control-regulations
Timestamp: 2017-09-23 11:52:03
Document Index: 770523667

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Federal Register :: Highly Enriched Uranium (HEU) Agreement Assets Control Regulations
A Rule by the Foreign Assets Control Office on 07/25/2001
38554-38561 (8 pages)
https://www.federalregister.gov/d/01-18372 https://www.federalregister.gov/d/01-18372
The Office of Foreign Assets Control of the U.S. Department of the Treasury is issuing regulations to implement the President's declaration in Executive Order 13159 of June 21, 2000, of a national emergency and order blocking certain property and interests in property of the Government of the Russian Federation that are directly related to the implementation of the Agreement Between the Government of the United States of America and the Government of the Russian Federation Concerning the Disposition of Highly Enriched Uranium Extracted from Nuclear Weapons, dated February 18, 1993, and related contracts and agreements.
Effective date: July 25, 2001.
Dennis P. Wood, Chief of Compliance Programs, tel.: 202/622-2490, Steve I. Pinter, Acting Chief of Licensing, tel.: 202/622-2480, or Barbara C. Hammerle, Acting Chief Counsel, tel.: 202/622-2410, Office of Foreign Assets Control, Department of the Treasury, Washington, DC 20220.
On June 21, 2000, the President issued Executive Order 13159 (65 FR 39279, June 26, 2000), declaring a national emergency with respect to the risk of nuclear proliferation created by the accumulation of a large volume of weapons-usable fissile material in the territory of the Russian Federation and invoking the authority of, inter alia, the International Emergency Economic Powers Act, 50 U.S.C. 1701 et seq. (“IEEPA”). Pursuant to the Agreement Between the Government of the United States of America and the Government of the Russian Federation Concerning the Disposition of Highly Enriched Uranium Extracted from Nuclear Weapons, dated February 18, 1993, and related contracts and agreements (collectively, the “HEU Agreements”), weapons-grade uranium extracted from Russian nuclear weapons is converted to low enriched uranium (“LEU”) for use in commercial reactors and sold to the United States in the form of LEU. The order blocks and protects from attachment, judgment, decree, lien, execution, garnishment, or other judicial process that property and interests in property of the Government of the Russian Federation that are directly related to the implementation of the HEU Agreements that are in the United States, that are or hereafter come within the United States, or that are or Start Printed Page 38555hereafter come within the possession or control of U.S. persons, including their overseas branches. The order authorizes the Secretary of the Treasury, in consultation with the Secretaries of State and Energy, to take such actions, including the promulgation of rules and regulations, as may be necessary to carry out the purposes of the order. To implement Executive Order 13159 the Office of Foreign Assets Control of the U.S. Department of the Treasury is promulgating the HEU Agreement Assets Control Regulations (the “Regulations”).
Interim rules were published in the Federal Register on January 12, 2001, with an invitation for public comment. Public comments were received and considered and these final rules incorporate certain comments as appropriate.
Section 540.201 of subpart B of the Regulations implements section 2 of Executive Order 13159 (the “Executive Order”) by blocking that property and interests in property of the Government of the Russian Federation that are directly related to the implementation of the HEU Agreements that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of U.S. persons, including their overseas branches. The property covered is defined by the Executive Order and public comments that may have altered or expanded this definition were not adopted. Section 540.201 implements section 2 of the Executive Order by prohibiting U.S. persons from transferring, paying, exporting, withdrawing or otherwise dealing in property blocked pursuant to the Executive Order.
Section 540.202 also implements section 2 of the Executive Order by making null and void any transfer or attempted transfer of blocked property after the effective date of the Executive Order absent a license or other authorization issued pursuant to the Executive Order and this part. Public comments suggesting clarification of the effect of transfers violating the provisions of § 540.202 were adopted.
Subpart C provides definitions of terms used in the Regulations. Public comments suggesting consistency in language and correcting a spelling error are reflected in these final rules. Other public comments suggesting edits to the definitions of the terms entity, 31 CFR 540.303, HEU Agreements, 31 CFR 540.305, Property and property interests, 31 CFR 540.311, and Uranium enrichment, 31 CFR 540.316 were not adopted as they are unnecessary to those definitions.
Subpart D sets forth interpretive guidance for the Regulations. For example, § 540.405 makes clear that any transaction that is ordinarily incident to a licensed transaction and necessary to give effect to the licensed transaction is also authorized, except in the case where such an ordinarily incident transaction involves any attachment, judgment, decree, lien, execution, garnishment, or other judicial process which has the effect of encumbering the property or interest in property of the Government of the Russian Federation directly related to the implementation of the HEU Agreements in any manner that is not explicitly authorized within the terms of the license.
Transactions otherwise prohibited under part 540 but found to be consistent with U.S. policy may be authorized by general licenses contained in subpart E or by a specific license issued pursuant to the procedures described in subpart D of part 501 of 31 CFR chapter V. The general licenses contained in subpart E include an authorization in § 540.504 for U.S. financial institutions to debit blocked accounts for normal service charges. Public comments suggesting inclusion within this general license of authorization for U.S. financial institutions to perform U.S. dollar clearance and exchange transactions were adopted. Public comments suggesting designation of priority license applicants for whom different licensing procedures would be established were not adopted. Similarly, public comments suggesting a regulation identifying specific persons or classes of persons who qualify as license applicants also were not adopted. Penalties for violations of the Regulations are described in subpart G of the Regulations.
Because the Regulations involve a foreign affairs function, the provisions of Executive Order 12866 and the Administrative Procedure Act (5 U.S.C. 553) (the “APA”) requiring notice of proposed rulemaking, opportunity for public participation, and delay in effective date, are inapplicable. However, because of the importance of the issues raised by these regulations, all written public comments received were fully considered.
For the reasons set forth in the preamble, 31 CFR chapter V is amended by revising part 540 to read as follows:
Setoffs prohibited. Start Printed Page 38556
540.501
540.701
540.702
540.703
Authority: 3 U.S.C. 301; 31 U.S.C. 321(b); 50 U.S.C. 1601-1651, 1701-1706; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); E.O. 13159, 65 FR 39279, 3 CFR Comp., p. 277.
§ 540.101
(a) This part is separate from, and independent of, the other parts of this chapter, with the exception of part 501 of this chapter, the recordkeeping and reporting requirements and license application and other procedures of which apply to this part. Actions taken pursuant to part 501 of this chapter with respect to the prohibitions contained in this part are considered actions taken pursuant to this part. Differing foreign policy and national security circumstances may result in differing interpretations of similar language among the parts of this chapter. No license or authorization contained in or issued pursuant to those other parts authorizes any transaction prohibited by this part. No license or authorization contained in or issued pursuant to any other provision of law or regulation authorizes any transaction prohibited by this part.
(b) Nothing contained in these regulations shall relieve a person from any requirement to obtain a license or other authorization from any department or agency of the United States Government in compliance with applicable laws and regulations subject to the jurisdiction of that department or agency, and no license contained in or issued pursuant to this part relieves the involved parties from complying with any other applicable laws or regulations.
(a) Except as otherwise authorized by regulations, orders, directives, rulings, instructions, licenses, or otherwise, the property or property interests of the Government of the Russian Federation that are directly related to the implementation of the Highly Enriched Uranium (HEU) Agreements, that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of U.S. persons are blocked and may not be transferred, paid, exported, withdrawn or otherwise dealt in.
(b) Unless otherwise authorized by this part or by a specific license expressly referring to this part, any attachment, judgment, decree, lien, execution, garnishment, or other judicial process is null and void with respect to any blocked property or interest in blocked property covered by this part.
(a) Any transfer after the effective date (see § 540.302) that is in violation of any provision of this part or of any regulation, order, directive, ruling, instruction, or license issued pursuant to this part, and that involves any property or interest in property blocked pursuant to § 540.201(a) is null and void and shall not be the basis for the assertion or recognition of any interest in or right, remedy, power, or privilege with respect to such property or property interests.
(b) No transfer before the effective date shall be the basis for the assertion or recognition of any right, remedy, power, or privilege with respect to, or any interest in, any property or interest in property blocked pursuant to § 540.201, unless the person with whom such property is held or maintained, prior to that date, had written notice of the transfer or by any written evidence had recognized such transfer.
(c) Unless otherwise provided, an appropriate license or other authorization issued by or pursuant to the direction or authorization of the Director of the Office of Foreign Assets Control before, during, or after a transfer shall validate such transfer or render it enforceable to the same extent that it would be valid or enforceable but for the provisions of the International Emergency Economic Powers Act, this part, and any regulation, order, directive, ruling, instruction, or license issued pursuant to this part.
(d) The Director of the Office of Foreign Assets Control may, in his discretion, retroactively license a transfer of property that is null and void or unenforceable by virtue of the provisions of this section so that such a transfer shall not be deemed to be null and void or unenforceable as to any person with whom such property was held or maintained (and as to such person only) in cases in which such person is able to establish to the satisfaction of the Director of the Office of Foreign Assets Control each of the following:
(2) The person with whom such property was held or maintained did not have reasonable cause to know or suspect, in view of all the facts and circumstances known or available to such person, that such transfer required a license or authorization issued pursuant to this part and was not so licensed or authorized, or if a license or authorization did purport to cover the transfer, that such license or authorization had been obtained by misrepresentation of a third party or withholding of material facts or was otherwise fraudulently obtained; and
(i) Such transfer was in violation of the provisions of this part or any regulation, ruling, instruction, license or other direction, or authorization issued pursuant to this part;
Note to paragraph (d) of § 540.202:
(a) Except as provided in paragraphs (c) or (d) of this section, or as otherwise directed by the Office of Foreign Assets Control, any U.S. person holding funds, such as currency, bank deposits, or liquidated financial obligations subject to § 540.201 shall hold or place such funds in a blocked interest-bearing account located in the United States.
(b)(1) For purposes of this section the term blocked interest-bearing account means a blocked account:
(i) In a federally-insured U.S. bank, thrift institution, or credit union, provided the funds are earning interest at rates which are commercially reasonable; or
(ii) With a broker or dealer registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, provided the funds are invested in a money market fund or U.S. Treasury Bills.
(c) Blocked funds held in instruments the maturity of which exceeds 180 days at the time the funds become subject to § 540.201 may continue to be held until maturity in the original instrument, provided any interest, earnings, or other proceeds derived therefrom are paid into a blocked interest-bearing account in accordance with paragraph (b) or (d) or this section.
(d) Blocked funds held in accounts or instruments outside the United States at the time the funds become subject to § 540.201 may continue to be held in the same type of accounts or instruments, provided the funds earn interest at rates which are commercially reasonable.
(e) This section does not create an affirmative obligation for the holder of blocked tangible property, such as chattels or real estate, or of other blocked property, such as debt or equity securities, to sell or liquidate such property at the time the property becomes subject to § 540.201. However, the Office of Foreign Assets Control may issue licenses permitting or directing such sales in appropriate cases.
(f) Except as otherwise licensed, authorized or directed by OFAC, funds subject to this section may not be invested, used for collateral or reinvested in a manner which provides immediate financial or economic benefit or access to the Government of the Russian Federation or its entities, nor may their holder cooperate in or facilitate the pledging or other attempted use as collateral of blocked funds or other assets.
§ 540.301
The terms blocked account and blocked property shall mean any account or property subject to the prohibition in § 540.201 and with respect to which payments, transfers, exportations, withdrawals, or other dealings may not be made or effected except pursuant to an authorization or license from the Office of Foreign Assets Control expressly authorizing such action.
§ 540.302
The term effective date refers to the effective date of the applicable prohibitions and directives contained in this part which is 12:01 a.m., Eastern Daylight Time, June 22, 2000.
§ 540.303
§ 540.304
(a) The term Government of the Russian Federation means the Government of the Russian Federation, any political subdivision, agency, or instrumentality thereof, and any person owned or controlled by, or acting for or on behalf of, the Government of the Russian Federation.
(b) Any person or entity to the extent such person or entity is or has been, or to the extent that there is reasonable cause to believe that such person or entity is, or has been, since the effective date (see § 540.302), acting or purporting to act directly or indirectly for or on behalf of any of the foregoing.
§ 540.305
The term HEU Agreements means the Agreement Between the Government of the United States of America and the Government of the Russian Federation Concerning the Disposition of Highly Enriched Uranium Extracted from Nuclear Weapons, dated February 18, 1993; the Initial Implementing Contract, Contract Number DE-AC01-93NE50067, dated January 14, 1994; and all current and future amendments thereto; as well as the related current and future implementing agreements, memoranda of understanding, protocols, and contracts, including all current and future amendments thereto, to include without limitation the following:
(a) Memorandum of Agreement Between the United States, Acting By and Through the United States Department of State, and the United States Department of Energy and the United States Enrichment Corporation (USEC), for USEC to Serve as the United States Government's Executive Agent under the Agreement Between the United States and the Russian Federation Concerning the Disposition of Highly Enriched Uranium Extracted from Nuclear Weapons, dated April 18, 1997;
(b) Agreement Between the United States Department of Energy and the Ministry of the Russian Federation for Atomic Energy Concerning the Transfer of Source Material to the Russian Federation signed at Washington on March 24, 1999, with Implementing Agreement and Administrative Arrangement, dated March 24, 1999, and related letter agreements; and
(c) UF6 Feed Component Implementing Contract Among Cameco Europe S.A. and Compagnie Général des Matières Nucléaires and Nukem, Inc. and Nukem Nuklear Gmbh and OAO Techsnabexport, and Tenex Contract # 08843672/90100-02D, dated March 24, 1999.
§ 540.306
The term highly enriched uranium or HEU means uranium enriched to twenty (20) percent or greater in the isotope U235.
§ 540.307
Note to § 540.307.
§ 540.308
The term low enriched uranium or LEU means uranium enriched to less than twenty (20) percent in the isotope U235.
§ 540.309
The term natural uranium means uranium found in nature, with an average concentration of 0.711 percent by weight of the isotope U235.
§ 540.310
§ 540.311
The terms property and property interest include, but are not limited to, money, checks, drafts, bullion, bank deposits, savings accounts, debts, indebtedness, obligations, notes, guarantees, debentures, stocks, bonds, coupons, any other financial instruments, bankers acceptances, mortgages, pledges, liens or other rights in the nature of security, warehouse receipts, bills of lading, trust receipts, bills of sale, any other evidences of title, ownership, or indebtedness, letters of credit and any documents relating to any rights or obligations thereunder, powers of attorney, goods, wares, merchandise, chattels, stocks on hand, ships, goods on ships, real estate mortgages, deeds of trust, vendors' sales agreements, land contracts, leaseholds, ground rents, real estate and any other interest therein, options, negotiable instruments, trade acceptances, royalties, book accounts, accounts payable, judgments, patents, trademarks, copyrights, insurance policies, safe deposit boxes and their contents, annuities, pooling agreements, services of any nature whatsoever, contracts of whatever nature whatsoever, and any other property, real, personal, or mixed, tangible or intangible, or interests therein, present, future, or contingent.
§ 540.312
§ 540.313
§ 540.314
The term United States person or U.S. person means any United States citizen, permanent resident alien, juridical person organized under the laws of the United States or any jurisdiction within the United States, including foreign branches, or any person in the United States.
§ 540.315
The term uranium-235 or U235 means the fissile isotope found in natural uranium.
§ 540.316
The term uranium enrichment means the process of increasing the concentration of the isotope U235 relative to that of the isotope U238.
§ 540.317
The term uranium feed or natural uranium feed means natural uranium in the form of UF6 suitable for uranium enrichment.
§ 540.318
The term uranium hexafluoride or UF6 means a compound of uranium and fluorine.
§ 540.319
§ 540.401
§ 540.402
§ 540.403
(a) Whenever a transaction licensed or authorized by or pursuant to this part results in the transfer of property (including any property interest) away from the Government of the Russian Federation, such property shall no longer be deemed to be property in which the Government of the Russian Federation has or has had an interest unless there exists in the property another interest of the Government of the Russian Federation, the transfer of which has not been effected pursuant to license or other authorization.
(b) Unless otherwise specifically provided in a license or authorization issued pursuant to this part, if property (including any property interest) is transferred or attempted to be transferred to the Government of the Russian Federation, such property shall be deemed to be property in which there exists an interest of the Government of the Russian Federation.
§ 540.404
A setoff against blocked property (including a blocked account), whether by a U.S. bank or other U.S. person, is a prohibited transfer under § 540.201 if effected after the effective date (see § 540.302).
§ 540.405
§ 540.501
(b) No regulation, ruling, instruction, or license authorizes any transaction prohibited under this part unless the regulation, ruling, instruction or license is issued by the Office of Foreign Assets Control and specifically refers to this part. No regulation, ruling, instruction, or license referring to this part shall be deemed to authorize any transaction prohibited by any provision of this chapter unless the regulation, ruling, instruction, or licenses specifically refers to such provision.
§ 540.502
§ 540.503
Note to § 540.503.
Please refer to § 501.603 of this chapter for mandatory reporting requirements regarding financial transfers. See also § 501.203 concerning the obligation to hold blocked funds in interest-bearing accounts.
§ 540.504
§ 540.601
For additional provisions relating to required records and reports, see part 501, subpart C, of this chapter.
(c) Attention is also directed to 18 U.S.C. 1001, which provides that whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully falsifies, conceals, or covers up by any trick, scheme, or device, a material fact, or makes any materially false, fictitious, or fraudulent statement or representation or makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry shall be fined under title 18, United States Code, or imprisoned not more than five years, or both. Start Printed Page 38560
§ 540.702
(2) Right to respond. The prepenalty notice also shall inform the respondent of respondent's right to make a written presentation within the applicable 30 day period set forth in § 540.703 as to why a monetary penalty should not be imposed or why, if imposed, the monetary penalty should be in a lesser amount than proposed.
§ 540.703
(e) Informal settlement. In addition to or as an alternative to a written response to a prepenalty notice, the respondent or respondent's representative may contact the Office of Foreign Assets Control as advised in the prepenalty notice to propose the settlement of allegations contained in the prepenalty notice and related matters. However, the requirements set forth in paragraph (f) of this section as to oral communication by the representative must first be fulfilled. In the event of settlement at the prepenalty stage, the claim proposed in the prepenalty notice will be withdrawn, the respondent will not be required to take a written position on allegations contained in the prepenalty notice, and the Office of Foreign Assets Control will make no final determination as to whether a violation occurred. The amount accepted in settlement of allegations in a prepenalty notice may vary from the civil penalty that might finally be imposed in the event of a formal determination of violation. In the event no settlement is reached, the time limit specified in paragraph (a) of this section for written response to the prepenalty notice remains in effect unless additional time is granted by the Office of Foreign Assets Control.
(f) Representation. A representative of the respondent may act on behalf of the respondent, but any oral communication with the Office of Foreign Assets Control prior to a written submission regarding the specific allegations contained in the prepenalty notice must be preceded by a written letter of representation, unless the Start Printed Page 38561prepenalty notice was served upon the respondent in care of the representative.
§ 540.704
§ 540.705
§ 540.801
§ 540.802
§ 540.901
Approved: June 25, 2001.
[FR Doc. 01-18372 Filed 7-24-01; 8:45 am]