Identification Markings Placed on Imported Explosive Materials and Miscellaneous Amendments (2000R-238P), 30626-30634 [05-10618]

Agencies

• Department of Justice
• Bureau of Alcohol, Tobacco, Firearms and Explosives
• Alcohol, Tobacco, Firearms, and Explosives Bureau
• Bureau of Alcohol, Tobacco, Firearms, and Explosives

[Federal Register Volume 70, Number 102 (Friday, May 27, 2005)]
[Rules and Regulations]
[Pages 30626-30634]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-10618]


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DEPARTMENT OF JUSTICE

Bureau of Alcohol, Tobacco, Firearms, and Explosives

27 CFR Part 555

[Docket No. ATF 5F; AG Order No. 2766-2005]
RIN 1140-AA02


Identification Markings Placed on Imported Explosive Materials 
and Miscellaneous Amendments (2000R-238P)

AGENCY: Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF), 
Department of Justice.

ACTION: Final rule.

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SUMMARY: The Department of Justice is amending the current regulations 
of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) to 
require licensed importers to identify by marking all explosive 
materials they import for sale or distribution. Licensed manufacturers 
currently are required to place identification markings on explosive 
materials manufactured in the United States. Similar marking 
requirements, however, do not currently exist for imported explosive 
materials. Identification markings are needed on explosives to help 
ensure that these materials can be effectively traced for criminal 
enforcement purposes. Although ATF does not have regulatory oversight 
over foreign manufacturers, it does have authority over licensed 
importers of explosive materials. This rule will impose identification 
requirements on licensed importers of explosive materials that are 
substantially similar to the marking requirements imposed on domestic 
manufacturers.
    In addition, the final rule incorporates into the regulations the 
provisions of ATF Ruling 75-35, relating to methods of marking 
containers of explosive materials. This final rule also amends the 
regulations to remove the requirement that a licensee or permittee file 
for an amended license or permit in order to change the class of 
explosive materials described in their license or permit from a lower 
to a higher classification.

DATES: This rule is effective July 26, 2005.

FOR FURTHER INFORMATION CONTACT: James P. Ficaretta; Enforcement 
Programs and Services; Bureau of Alcohol, Tobacco, Firearms, and 
Explosives; U.S. Department of Justice; 650 Massachusetts Avenue, NW., 
Washington, DC 20226, telephone (202) 927-8203.

SUPPLEMENTARY INFORMATION:

I. Background

    The Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) is 
responsible for implementing Title XI, Regulation of Explosives (18 
United States Code (U.S.C.) Chapter 40), of the Organized Crime Control 
Act of 1970. One of the stated purposes of the Act is to reduce the 
hazards to persons and property arising from the misuse of explosive 
materials. Under section 847 of title 18, U.S.C., the Attorney General 
``may prescribe such rules and regulations as he deems reasonably 
necessary to carry out the provisions of this chapter.'' Regulations 
that implement the provisions of chapter 40 are contained in title 27, 
Code of Federal Regulations (CFR), part 555 (``Commerce in 
Explosives'').
    The term ``explosive materials,'' as defined in 27 CFR 555.11, 
means explosives, blasting agents, water gels, and detonators. The term 
includes, but is not limited to, all items in the ``List of Explosive 
Materials'' provided for in Sec.  555.23. Section 555.202 provides for 
three classes of explosive materials: (1) High explosives (e.g., 
dynamite, flash powders, and bulk salutes), (2) low explosives (e.g., 
black powder, safety fuses, igniters, igniter cords, fuse lighters, and 
display fireworks (except bulk salutes)), and (3) blasting agents 
(e.g., ammonium nitrate-fuel oil and certain water gels).
    Section 555.109 requires licensed manufacturers of explosive 
materials to legibly identify by marking all explosive materials 
manufactured for sale or distribution. The marks required by this 
section include the identity of the manufacturer and the location, 
date, and shift of manufacture. This section also provides that 
licensed manufacturers must place the required marks on each cartridge, 
bag, or other immediate container of explosive materials for sale or 
distribution, as well as on the outside container, if any, used for 
their packaging.
    Exceptions to the marking requirements are set forth in Sec.  
555.109(b). This section provides that (1) licensed manufacturers of 
blasting caps are only required to place the required identification 
marks on the containers used for the packaging of blasting caps, (2) 
the Director may

[[Page 30627]]

authorize other means of identifying explosive materials upon receipt 
of a letter application from the licensed manufacturer showing that 
other identification is reasonable and will not hinder the effective 
administration of part 555, and (3) the Director may authorize the use 
of other means of identification on fireworks instead of the required 
markings specified above.
    The current regulations do not require the marking of imported 
explosive materials.

II. Petition--Institute of Makers of Explosives

    The Institute of Makers of Explosives (IME) filed a petition with 
ATF, dated March 7, 2000, requesting an amendment of the regulations to 
require licensed importers to place the same identification marks on 
imported explosive materials that are currently required for explosive 
materials manufactured in the United States. As stated in the petition, 
IME is the safety association of the commercial explosives industry. 
Its mission is to promote safety and the protection of employees, 
users, the public and the environment, and to encourage the adoption of 
uniform rules and regulations in the manufacture, transportation, 
storage, handling, use, and disposal of explosive materials used in 
blasting and other operations.
    According to the petitioner, commerce in explosives is a global 
enterprise and it expects the quantity of imported explosives to 
increase over time. For example, the petitioner stated that between 
1994 and 1997, imports of high explosives increased 14-fold to account 
for approximately 17 percent of all high explosives used annually in 
the United States. IME further stated that while unmarked high 
explosives may have entered the United States over the years, it was 
not until 1999 that the association became aware of significant 
quantities of unmarked cast boosters being imported into the country. 
IME contended that, by the end of 1999, about two million unmarked 
units had been distributed in the United States. The petitioner further 
stated that many more thousands of tons of these high explosives were 
expected to be imported into the United States in the near future.
    Without a change in the regulations, IME was concerned that these 
explosives would enter into the commerce of the U.S. without marks of 
identification, posing significant safety and security risks to the 
public. Although IME informed ATF that many of its member companies 
importing explosives into the U.S. mark their imported explosive 
materials in an effort to ensure the traceability and accountability of 
the materials, it believes that all imported explosive materials should 
be appropriately identified. Therefore, it petitioned ATF to amend the 
Federal explosives regulations.
    By letter dated August 2, 2000, IME amended its petition to narrow 
its scope to importers of high explosives and blasting agents. IME 
stated that it did not understand that the scope of its initial 
petition would apply to importers of low explosives. IME noted that it 
has a specific standard recommending that high explosives and blasting 
agents be marked with a date/plant/shift code.

III. Advance Notice of Proposed Rulemaking

    Based on IME's petition, ATF published in the Federal Register on 
November 13, 2000, an advance notice of proposed rulemaking (ANPRM) 
requesting information and comments from interested persons on the 
desirability and feasibility of marking imported explosive materials 
(Notice No. 906, 65 FR 67669). Although ATF solicited comments on 
specific questions, it also requested any relevant information on the 
subject. The comment period for Notice No. 906 closed on January 12, 
2001.
    In response to Notice No. 906, ATF received three comments. Two 
commenters argued that licensed importers should place the same or 
similar identification marks on imported explosive materials that are 
currently required for explosive materials manufactured in the United 
States.
    The petitioner, IME, submitted the third comment. IME reiterated 
its position that imported high explosives and blasting agents should 
contain the same identification markings prescribed in the regulations 
for domestically manufactured explosives. IME also included an 
attachment as part of its comment that provided responses to the 
questions posed by ATF in the advance notice.

IV. Notice of Proposed Rulemaking

    On October 16, 2002, after consideration of the comments received 
in response to Notice No. 906, ATF published in the Federal Register a 
notice proposing to amend the regulations to require licensed importers 
to identify by marking all imported explosive materials (Notice No. 
956, 67 FR 63862). ATF stated its belief that the proposed marking 
requirements would help ensure that imported explosive materials can be 
effectively traced for criminal enforcement purposes. ATF also proposed 
to incorporate into the regulations the provisions of ATF Ruling 75-35, 
relating to methods of marking containers of explosive materials. In 
addition, ATF proposed to amend the regulations to remove the 
requirement that a licensee or permittee file for an amended license or 
permit in order to change the class of explosive materials described in 
their license or permit from a lower to a higher classification. The 
specific regulatory proposals in Notice No. 956 are discussed in the 
following paragraphs.

A. Amendments to Sec.  555.109

    In an effort to protect the public from the misuse of explosive 
materials, to more easily identify explosive materials, and to 
successfully trace misused explosive materials or explosive materials 
used in crimes, ATF proposed to amend Sec.  555.109 to provide that 
licensed importers and permittees must identify by marking all 
explosive materials they import for sale or distribution, or import for 
their own use. The required marks must be legible and in the English 
language, using Roman letters and Arabic numerals. The marks must 
identify the importer's or permittee's name and address, the location 
(city and country) where the explosive materials were manufactured, as 
well as the date and shift of manufacture. ATF did not propose to 
require the name of the foreign manufacturer on imported explosives as 
requested by IME in its comments submitted in response to the advance 
notice. Instead, ATF proposed to require placement of the name of the 
importer on the explosive materials because ATF does not have 
regulatory oversight over foreign manufacturers, particularly with 
respect to their recordkeeping practices.
    As proposed, the required marks must be placed on each cartridge, 
bag, or other immediate container of explosive materials that are 
imported, as well as on any outside container used for their packaging. 
This is consistent with current requirements for domestically 
manufactured explosives. The proposed regulations also provided that 
the required marks of identification must be placed on imported 
explosive materials within 24 hours of release from Customs custody.
    In addition, under the proposed regulations, the exceptions to the 
marking requirements currently specified in the regulations would apply 
to imported explosive materials as well.
    ATF also proposed other amendments to Sec.  555.109. ATF clarified 
that licensed manufacturers must place the required marks of 
identification on the explosive

[[Page 30628]]

materials at the time of manufacture. ATF also proposed to incorporate 
into the regulations the provisions of ATF Ruling 75-35 (1975-ATF C.B. 
65). This ruling authorizes any method, or combination of methods, for 
affixing the required marks to the immediate container of explosive 
materials, or outside containers used for the packaging thereof, 
provided the identifying marks are legible, show all the required 
information, and are not rendered unreadable by extended periods of 
storage. The ruling also provides that where it is desired to utilize a 
coding system and omit printed markings on the containers, a letterhead 
application displaying the coding to be used and the manner of its 
application must be filed by the licensed manufacturer with, and 
approved by, the Director prior to the use of the proposed coding. 
Finally, the ruling provides that where a manufacturer operates his or 
her plant for only one shift during the day, the shift of manufacture 
need not be shown. Upon the effective date of a final rule in this 
matter, ATF Ruling 75-35 would be declared obsolete.

B. Miscellaneous Proposals--Amendment of Sec. Sec.  555.55 and 555.41

    Section 555.55 provides that a licensee or permittee who intends to 
change the class of explosive materials described in his or her license 
from a lower to a higher classification (e.g., black powder to 
dynamite) must file an application on ATF Form 5400.13/ATF Form 5400.16 
(Application for License or Permit) with the ATF National Licensing 
Center. If the change in class of explosive materials would require a 
change in magazines, the amended application must include a description 
of the type of construction as prescribed in part 555. Business or 
operations with respect to the new class of explosive materials may not 
be commenced before issuance of the amended license or amended permit. 
Finally, upon receipt of the amended license or amended permit, the 
licensee or permittee must submit his or her superseded license or 
superseded permit and any copies furnished with the license or permit 
to the ATF National Licensing Center.
    ATF proposed to remove Sec.  555.55. ATF believes that removing 
this section would provide more flexibility to the explosives industry 
in terms of the classes of explosive materials involved in their 
businesses, while not reducing the requirement to store explosive 
materials in accordance with the regulations contained in subpart K.
    Section 555.41 provides general licensing and permit requirements 
under the Federal explosives laws. Technical amendments were made with 
respect to Sec.  555.41 in order to be consistent with the proposed 
amendment of Sec.  555.55.
    The comment period for Notice No. 956 closed on January 14, 2003.

V. Notice No. 956--Analysis of Comments and Decisions

    ATF received two comments in response to Notice No. 956. Trade 
associations, the IME (petitioner) and the American Pyrotechnics 
Association (APA), each submitted comments. IME stated that it 
represents United States manufacturers of high explosives and other 
companies that distribute explosives or provide related services. It 
also stated that over 2.5 million metric tons of explosives are 
consumed annually in the United States of which IME member companies 
produce over 95 percent and that the value of its shipments is 
estimated in excess of $1 billion annually. In addition, the commenter 
stated that part of its mission is ``to encourage the adoption of 
uniform rules and regulations in the manufacture, transportation, 
storage, handling, use and disposal of explosive materials used in 
blasting and other essential operations.'' IME expressed concerns that 
the proposed regulations would require different markings for imported 
and domestically manufactured explosives. It also requested 
clarification of some of ATF's statements in the proposed rule. IME's 
concerns and questions are discussed in the following paragraphs.
    As stated in its comment, the APA is the principal industry trade 
association representing manufacturers, importers, and distributors of 
fireworks in the United States. It has over 260 member companies that 
are responsible for 90 percent of the fireworks displayed in the United 
States. The APA stated that while it shares the same public safety 
concerns as the petitioner (IME) for initiating this rulemaking 
proceeding, it believes that high explosives and low explosives (e.g., 
fireworks) should be treated differently for the purposes of marking, 
recordkeeping, and tracking requirements. The commenter explained that 
the commercial explosives industry differs in many ways from the 
fireworks industry:

Products manufactured, imported and distributed by the commercial 
explosives industry are intended to function by detonation, and 
their products are generally stored and shipped in bulk form. * * * 
the display fireworks industry deals in fireworks classed as 1.3G 
explosives by the Department of Transportation, which have 
traditionally been deemed by ATF to be 'low explosives'. These 
devices, for the large part, function by deflagration. A typical 
fireworks shipment will consist of numerous different sizes and 
types of aerial display shells, since there is little demand for a 
fireworks display consisting of only one color or effect.

    The APA raised several concerns regarding the proposed regulations. 
Those concerns will also be addressed in the following paragraphs.

A. Marking Explosives for Manufacturer's/Importer's Own Use

    The current regulations at Sec.  555.109(a) provide that ``[e]ach 
licensed manufacturer of explosive materials shall legibly identify by 
marking all explosive materials he manufactures for sale or 
distribution.'' The proposed regulations specified that licensed 
manufacturers and licensed importers must identify by marking all 
explosive materials they manufacture or import for sale, distribution, 
``or their own use.'' The proposed regulations also specified that 
permittees must identify by marking all explosive materials they import 
for their own use. IME expressed concern that the proposed regulation 
``introduces a new requirement for licensees to mark explosives they 
will simply use, not distribute or sell.'' The commenter stated that it 
views this new requirement as having an effect on three major aspects 
of the commercial explosives industry. First, IME stated that 
manufacturers and importers make or import explosive raw materials that 
may not be sold or distributed, but will be used to make a finished 
explosive product. IME supports the marking of these raw materials. In 
contrast, the APA argued that markings should not be required until the 
product is completed. It stated that many times an individual firework 
shell may consist of different pyrotechnic compositions and that it 
would be impossible for the manufacturer to document and detail the 
identification requirements for each component of an individual shell. 
The APA further stated that pyrotechnic compositions are generally made 
by the manufacturer and then incorporated into the shell. The APA is 
concerned about the marking of component parts, and the recording of 
the manufacture and use of said products, prior to assembly into the 
final product. The APA believes that these requirements would put an 
undue burden on the manufacturer who typically manufactures the 
pyrotechnic composition and incorporates it into a final shell the same 
day. The commenter suggests that only pyrotechnic compositions that 
will be sold by the manufacturer should be marked.

[[Page 30629]]

    IME contended that the proposed amendment would also have an effect 
on the manufacture of experimental explosives. IME stated that 
manufacturers may make experimental explosives that will be used in 
tests. It supports marking experimental explosives if they are 
transported off the property of the manufacturing site. However, IME 
argues that experimental explosives that do not leave the property of 
the manufacturing site should not be required to have any markings.
    Finally, IME stated that the proposed amendment would require 
manufacturers of binary explosives to place markings on the mixture. 
Like experimental explosives, IME argued that binary explosives should 
only be marked if they are transported off the property of the 
manufacturing site. The commenter recommended that the final 
regulations provide an exemption from the marking requirements for 
experimental and binary explosives that are not transported off the 
property of the manufacturing site.
Decision
    Regarding the marking of manufactured and imported explosive 
materials that are not sold or distributed but will be used to make a 
finished explosive product, the Department recognizes the APA's concern 
and finds that the commenter has raised valid arguments. The Department 
does not believe that it is necessary to require the marking of 
pyrotechnic compositions that will be incorporated into a final shell. 
Such a requirement is unreasonable and would be unduly burdensome to 
the fireworks industry.
    With respect to the marking of experimental and binary explosives, 
the Department believes that the arguments raised by IME also have 
merit. The Department recognizes that experimental and binary 
explosives tend to be manufactured or imported in small quantities and 
used fairly quickly after manufacture. As such, the Department believes 
that the possibility that the explosives may be stolen from the site 
prior to use is minimal. As to binary explosives, it is not feasible 
and serves no law enforcement purpose to mark explosives manufactured 
and used the same day at a blasting site.
    Accordingly, based on the concerns expressed in the comments, this 
final rule does not adopt the proposal to require licensed 
manufacturers, licensed importers, and permittees to identify by 
marking all explosives they manufacture or import for their own use. 
Since permittees only import explosives for their own use, the 
reference to permittees in the final rule has been removed.

B. Name and Address of Importer on Imported Explosives

    The proposed regulations provided that imported explosive materials 
must be marked with the name and address (city and state) of the 
importer. IME objected to this proposal, arguing that such a 
requirement ``will eliminate nearly all off-the-shelf purchases of 
foreign-made explosives and force all imports to be specially made or 
remarked.'' Furthermore, IME contended that in most cases the cost of 
manually placing the importer's name and address on off-the-shelf, 
foreign-made explosives would be prohibitive. IME did not provide any 
cost estimates concerning these costs. On the other hand, IME 
acknowledged ATF's need to conduct traces of explosive materials and 
that ``a trace may be hampered by not knowing where to start the chain-
of-custody trace.'' The commenter suggested that ATF require importers 
to provide identifying information to it on imports that are not marked 
with the name and address of the importer. If all imports of commercial 
high explosives or blasting agents were reported to ATF along with the 
foreign manufacturer's marks of identification, IME estimates that ATF 
would receive these reports, ``at most, once a week.'' According to 
IME, ATF could file these reports and reference them to find the 
importer when needed.
Decision
    As noted in the proposed rule, ATF does not have regulatory 
oversight over foreign manufacturers, particularly with respect to 
their recordkeeping practices. ATF maintains that the identity (name 
and address) of the importer is necessary to ensure that explosive 
materials can be effectively traced for criminal enforcement purposes. 
Not only would this information be invaluable when conducting a trace, 
but the name and address of the importer may be key information located 
during a post-blast investigation. Such markings may identify the 
source of the explosives used at a bomb scene and may provide valuable 
leads to solving the crime.
    In addition, ATF's experience with tracing imported firearms 
indicates that relying upon the records of foreign manufacturers for 
tracing a firearm is ineffective. A significant number of countries 
either do not require manufacturers of firearms to retain records of 
production or require record retention for an insufficient period of 
time. Even where such records are retained and are available to a 
foreign manufacturer, cooperation of such manufacturers with foreign 
law enforcement is often sporadic or nonexistent. Thus, when importer's 
markings are missing, illegible, or inaccurate, ATF is frequently 
unable to trace a firearm by obtaining assistance from foreign firearms 
manufacturers. For this reason, ATF regulations implementing the 
marking requirements of the Gun Control Act of 1968 require importers 
to mark firearms with their name, city, and State, so that the tracing 
process begins with their records, rather than those of a foreign 
manufacturer.
    ATF believes that reliance upon the markings of a foreign 
explosives manufacturer to trace explosives will pose the same problems 
as explained above in relation to firearms tracing. Accordingly, 
consistent with regulations in 27 CFR 478.92, this rule imposes a 
requirement on importers to mark the explosives they import with the 
name and address of the importer, the location of the foreign 
manufacturer, and the date and shift of manufacture.
    Furthermore, an import report as suggested by IME would hinder 
ATF's ability to trace misused explosives, particularly in instances 
where there are multiple importers importing the same products. By 
having the importer's name and address on the misused product, ATF 
would not have to go through countless reports to determine the 
identity of the importer. Creating a tracing system for imported 
explosives by establishing an ATF database of import reports as 
suggested by IME would be more burdensome for both the industry and 
ATF. Instead of requiring the information to be placed on the 
explosives themselves, as is currently required for domestic 
explosives, such a system would require the completion of forms that 
provide detailed information on imported explosives that must be sent 
to ATF and maintained in a newly created ATF database. More 
significantly, such a tracing system would be inherently less reliable 
inasmuch as a mistake by an importer in entering the required 
information on the form would make a trace difficult or in some 
instances impossible. Requiring the information to be placed on the 
explosives would ensure that accurate information is available on the 
source of imported explosives, just as it is today for domestic 
explosives, through recovery of marked explosives or recovery of the 
marked component of the explosives at a crime scene. ATF believes that 
the ability to trace should be just as robust for imported explosives 
as it is for domestic explosives.

[[Page 30630]]

    The Department recognizes that this requirement will add some 
additional costs to imported explosives that are not properly marked 
during the manufacturing process. However, IME's comments indicate this 
would likely be a very small percentage of the market. ATF's experience 
since 1971 indicates that most imported explosives are manufactured 
specifically for a particular domestic importer pursuant to a 
particular contract, rather than importers buying from a ``spot 
market'' of already existing foreign products. ATF has no specific 
information concerning the ``spot market'' in foreign explosives 
referenced in IME comments. If such a ``spot market'' exists, importers 
can require that the explosives from that market be marked properly in 
the foreign country prior to shipment in order to reduce the need to 
mark the explosives when they arrive in the United States. Explosives 
that arrive in the United States unmarked may be marked at a safe 
location by the importer after the explosives are released from Customs 
custody. In any event, ATF believes that the potential costs incurred, 
approximately 1 cent per pound according to IME, for this small 
category of imported explosives are outweighed by the law enforcement 
need to ensure the adequate ability to trace explosives. Accordingly, 
this final rule adopts the amendment as proposed.

C. Location of Manufacturer on Imported Explosives

    The proposed regulations provided that imported explosive materials 
must be marked with the location (city and country) where the 
explosives were manufactured. IME objected to this proposal, arguing 
that it is unable to see the value of such a requirement, ``especially 
since ATF claims it `has no regulatory oversight over foreign 
manufacturers.' ''
Decision
    While the Department acknowledges that ATF does not have regulatory 
oversight over foreign manufacturers, it does have authority over 
licensed importers of explosive materials. The placement of the 
identifying marks required by this rule, including the location of the 
manufacturer, will enable ATF to better trace misused materials by 
narrowing the search through the importer's records and through Customs 
documents. It is not uncommon for importers to bring the same product 
into the United States from a number of foreign sources. Thus, by 
requiring markings that include the name and location of the foreign 
manufacturer, ATF will be able to trace explosives more quickly, by 
asking the importer to locate records only for that particular product 
manufactured by a particular foreign manufacturer. In addition, Customs 
entry documents and databases list the country of manufacture. In the 
event that ATF uses Customs information to determine when a particular 
explosives product entered the United States, the name of the country 
of manufacture and name of the manufacturer would greatly assist in 
identifying the shipment. As previously described, this information on 
the explosives may also provide valuable leads during a post blast 
investigation. In addition, this requirement is similar to country of 
origin markings required under the Customs laws in 19 U.S.C. 1304. 
Accordingly, this final rule requires that imported explosives be 
marked with the location (city and country) where the explosive 
materials were manufactured, which is consistent with the way 
domestically manufactured explosives are marked, and with markings 
required for imported firearms under 27 CFR 478.92.

D. Marking Imported Explosives Within 24 Hours of Release From Customs 
Custody

    The proposed regulations specified that imported explosive 
materials must be marked within 24 hours of the date of release from 
Customs custody if such explosive materials did not bear the required 
markings at the time of their release. IME stated that this requirement 
is impractical for several reasons. First, the commenter noted that 
most ports of entry do not have locations where the imported explosives 
could be safely marked and it will often take more than 24 hours for 
the explosives to reach a safe location for marking. Second, IME stated 
that even if there were a safe location near the port, most shipments 
could not be marked in 24 hours. Finally, and according to IME most 
importantly, ``any grace period exposes unmarked explosives to the risk 
of theft and degrades the effectiveness of the primary intent of the 
marking requirement.'' Because of this last concern, IME suggested that 
ATF require imported explosives to be properly marked prior to entry 
into the United States, noting that ``[t]his is consistent with the 
NPRM's requirement that domestic manufacturers place the markings on 
explosives `at the time of manufacture.' '' The commenter further 
stated that ``[t]here should be no concessions made to the security of 
imported explosives.''
    The APA stated that while the fireworks industry generally supports 
the proposed importer identification requirement, it does not support 
the proposed timetable for compliance. The commenter reiterated its 
position regarding the unique circumstances involving the fireworks 
industry and requested that additional time be provided for marking 
imported explosives released from Customs custody. The APA provided the 
following justification for requesting additional time to mark imported 
explosives:

Many shipments do not leave the port within 24 hours of customs 
clearance, let alone get unloaded or checked for labeling. It would 
be impossible to label each case of fireworks on a container within 
a 24 hour time period, especially when some companies receive 
multiple container loads per shipment. Thus, to require individual 
aerial shells (possibly thousands) to be labeled within a 24 hour 
time period is not feasible nor in the interest of public safety.

Decision
    While the Department shares IME's concern regarding the risk of 
theft of imported explosives released from Customs custody without the 
proper identification markings, it disagrees with IME's suggestion that 
ATF should require imported explosives to be properly marked prior to 
the time of importation. The Department believes that such a 
requirement would be overly restrictive and unduly burdensome for 
importers, particularly small importers. Small importers may not have 
the financial means to have a run of explosives manufactured bearing 
their name and address. However, based on the comments, the Department 
recognizes that the proposed requirement to mark imported explosives 
within 24 hours of release from Customs custody may be overly 
restrictive and impractical, particularly with respect to importers who 
are geographically distant from the point of importation.
    Accordingly, this final rule provides that licensed importers must 
place the required marks on all explosive materials imported prior to 
distribution or shipment for use, and in no event later than 15 days 
after the date of release from Customs custody. The Department believes 
that this is a sufficient amount of time for imported explosives to be 
marked without posing unnecessary and significant safety and security 
risks to the public. Furthermore, this is consistent with the marking 
requirements for imported firearms under 27 CFR 478.112(d). In the 
event additional time is needed to mark the imported explosives, the 
importer can request a variance

[[Page 30631]]

pursuant to the provisions of 27 CFR 555.22.
    Additionally, the Department points out that 27 CFR 555.214(b) 
requires that ``containers of explosive materials are to be stored so 
that marks are visible.'' Therefore, all containers of explosive 
materials placed in storage must have proper marks of identification on 
the immediate outside containers. The marking of individual internal 
packages may occur within the 15-day period specified in the 
regulations.

E. Director Approved Coding System

    As proposed, 27 CFR 555.109(c)(4) reads as follows:

If licensed manufacturers, licensed importers or permittees 
importing explosive materials desire to use a coding system and omit 
printed markings on the container, they must file with ATF a 
letterhead application displaying the coding that they plan to use 
and explaining the manner of its application. The Director must 
approve the application before the proposed coding can be used.

    IME stated that it is not entirely clear under what conditions a 
manufacturer or importer must seek the Director's approval for markings 
and it suggested that ATF ``clarify exactly what conditions invoke the 
need for the Director's approval of coding systems.'' IME stated that 
in 1971 its member companies implemented a product identification 
system for packaged explosives manufactured in the United States. The 
coding system utilizes a series of alpha and numeric characters to 
indicate the date, work shift, and location of the manufacturer. It 
does not indicate the name of the manufacturer. As an example, IME 
stated that a product manufactured on September 30, 1997, during the 
first shift at a plant that the manufacturer has assigned the letter 
``A'' would be ``30SE97A1.'' IME asked if each licensee or permittee 
using the standard IME coding system would need the Director's 
approval. IME also asked if a licensee or permittee using a bar code 
system would need the Director's approval.
Decision
    The current regulations specify that licensed manufacturers must 
place certain marks of identification on explosive materials they 
manufacture. The required marks of identification include the name of 
the manufacturer and the location, date, and shift of manufacture. This 
information must be legible, identifiable, and understandable. ATF 
Ruling 75-35 provides, in part, that where it is desired to utilize a 
coding system and omit printed markings on the container, i.e., stating 
the information required by Sec.  555.109, a letterhead application 
displaying the coding to be used and manner of its application must be 
filed with and approved by the Director. This provision of the ruling 
was incorporated into the proposed regulations. In response to IME's 
request that ATF clarify when coding systems are permissible, licensees 
using IME's coding system or a bar code system must file with ATF a 
letterhead application displaying the coding that they plan to use and 
explaining the manner of its application. The Director must approve the 
application before the proposed coding can be used. Without an 
explanation as to the meaning of the coding system, the information 
would be meaningless and ATF would be unable to trace products marked 
with such a system. In addition, the Department notes that IME's 
current coding system fails to provide the name of the manufacturer, 
and is not consistent with regulations in 27 CFR 555.109. Without the 
name of the manufacturer, or, in the case of imported explosives, the 
name of the importer, ATF does not have sufficient information to trace 
explosives. If industry members seek and obtain approved variances, ATF 
will have information to decode markings, determine the actual 
manufacturer or importer, and begin the tracing process. In the event 
that IME members or other members of the explosives industry are 
utilizing coding systems to mark domestic products, and such members do 
not have written approval from ATF to use such markings, the member 
should immediately apply for an alternate method or procedure pursuant 
to 27 CFR 555.109.
    Accordingly, this final rule clarifies that if licensed 
manufacturers or licensed importers desire to use a coding system and 
omit printed markings on the container that show all the required 
information specified in the regulations, they must file with ATF a 
letterhead application displaying the coding that they plan to use and 
explaining the manner of its application. The Director must approve the 
application before the proposed coding can be used.

F. Tracking the Acquisition and Disposition of Explosives by Date/Shift 
Code

    The APA expressed concern involving the required tracking of 
acquisition and disposition of explosive materials by date/shift code. 
In general, the APA agrees with the proposed markings for each 
individual aerial shell. It expressed concern, however, with tracking 
the distribution of shells by the date/shift code. The APA stated that 
fireworks package displays often contain shells of numerous sizes, 
colors and date/shift codes and that to track shells by date/shift code 
would pose an undue and unnecessary recordkeeping burden on industry 
members. The APA suggested that records of production and distribution 
for display fireworks should only show the number and size of the 
aerial shells. The commenter's suggestion is based on its belief that 
there is a low occurrence of display fireworks used in criminal 
activity and that most likely the criminal would transfer the explosive 
material from the shell to another container. Furthermore, the APA 
suggested that ATF require all shipping cartons of display fireworks to 
be marked with the name of the manufacturer or distributor and the date 
that the fireworks were shipped.
Decision
    It is the Department's decision that failure to incorporate the 
date/shift code in the acquisition and disposition records would hinder 
the effectiveness and purpose of placing the markings on each 
individual shell. A shell could be traced to the manufacturer or 
importer but it would be difficult or impossible to trace the shell any 
further if the records only contained type and count information. The 
date/shift code is essential in narrowing the records search to the 
appropriate time period. Manufacturers and importers manufacture and 
import thousands of the same type of product, so that marking with the 
date of shipment alone will not narrow the records search to locate a 
particular explosive within a reasonable time period. When explosives 
are used in a criminal incident, time is of the essence. Undue delay in 
identifying the record of acquisition and disposition for a particular 
explosive product can interfere in investigating bombings and other 
criminal incidents using explosives. Placing a code of sorts in the 
shipping carton could offer some assistance, but would not be effective 
in instances where the shells are no longer in their shipping cartons. 
Accordingly, the Department is not adopting the APA's suggestion.

G. Computerized Systems for Tracking Explosives

    Another concern of the APA relates to computerized systems for 
tracking explosive materials. The APA stated that it is aware that some 
companies are currently using, or looking into the implementation of, 
systems that use bar coding to identify and track their products. The 
commenter believes that

[[Page 30632]]

this technology will continue to expand in use in the fireworks 
industry and that significantly greater control over the tracking of 
individual items should become economically feasible within a few 
years. In the interim, the APA urged ATF to adopt regulations or 
policies that permit new methods of recordkeeping (including the use of 
computerized systems) to be implemented by companies without the need 
to apply for variances.
Decision
    The Department believes that the APA has raised a valid concern 
with respect to the use of computerized systems for tracking 
explosives. This issue is being addressed in another rulemaking 
proceeding (see Notice No. 968, January 29, 2003; 68 FR 4406). Until 
this rulemaking is completed, industry members may seek written 
authorization from ATF to use computerized recordkeeping systems that 
utilize bar coding or other computerized systems to streamline the 
process. As stated above, the use of coded marking requirements may 
also be approved through the variance process, and can be used in 
conjunction with a computerized recordkeeping system. The Department 
believes that the use of computerized recordkeeping systems will not 
negate the need to maintain the date shift codes in the records.
Miscellaneous Amendments
    Section 555.52 provides for limitations on permits and licenses in 
respect to business activity or permitted operations and specified 
class of explosives materials allowed. A technical amendment is being 
made in this final rule with respect to Sec.  555.52 in order to be 
consistent with the amendments made in Sec. Sec.  555.55 and 555.41, 
which are also being adopted as proposed.

VI. ATF Ruling 75-35

    This final rule incorporates the provisions of ATF Ruling 75-35 
(1975-ATF C.B. 65), relating to methods of marking containers of 
explosive materials. Accordingly, the provisions of ATF Ruling 75-35 
become obsolete upon the effective date of this final rule.

How This Document Complies With the Federal Administrative Requirements 
for Rulemaking

A. Executive Order 12866

    This rule has been drafted and reviewed in accordance with 
Executive Order 12866, ``Regulatory Planning and Review,'' section 
1(b), Principles of Regulation. The Department of Justice has 
determined that this rule is a ``significant regulatory action'' under 
Executive Order 12866, section 3(f), Regulatory Planning and Review, 
and accordingly this rule has been reviewed by the Office of Management 
and Budget. However, this rule will not have an annual effect on the 
economy of $100 million, nor will it adversely affect in a material way 
the economy, a sector of the economy, productivity, competition, jobs, 
the environment, public health, or safety, or State, local or tribal 
governments or communities. Accordingly, this rule is not an 
``economically significant'' rulemaking as defined by Executive Order 
12866.
    Further, the Department has assessed both the costs and benefits of 
this rule as required by Executive Order 12866, section 1(b)(6), and 
has made a reasoned determination that the benefits of this regulation 
justify its costs. The Department believes that the costs associated 
with compliance with the final regulations are minimal. Comments 
received in response to the ANPRM and the notice of proposed rulemaking 
indicate that in all likelihood the foreign manufacturer, rather than 
the U.S. importer, will place the required marks on explosives that are 
imported into the United States.
    However, some importers may not have the financial means to have a 
run of explosives manufactured bearing their name and address. ATF 
estimates that a very small percentage (one percent) of the 
approximately 413 Federally licensed importers will need to mark 
imported explosives. In general, the IME stated that marking costs are 
less than approximately one percent of the product cost, ranging from 
$.002/lb. to $.01/lb. ATF estimates that approximately five percent of 
imported explosives would need to be marked. To illustrate, according 
to the U.S. Census Bureau, approximately 155,240,707 pounds of 
explosives were imported into the United States in 2003. Based on IME's 
information, the marking costs associated with 7,762,035 pounds of 
imported explosives (five percent of 155,240,707 pounds) would range 
from approximately $15,524 to $77,620.

B. Executive Order 13132

    This regulation will not have substantial direct effects on the 
States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with section 6 
of Executive Order 13132, the Attorney General has determined that this 
regulation does not have sufficient federalism implications to warrant 
the preparation of a federalism summary impact statement.

C. Executive Order 12988

    This regulation meets the applicable standards set forth in 
sections 3(a) and 3(b)(2) of Executive Order 12988.

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 605(b)) requires an agency 
to conduct a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. Small entities include small 
businesses, small not-for-profit enterprises, and small governmental 
jurisdictions. The Attorney General has reviewed this regulation and, 
by approving it, certifies that this rule will not have a significant 
economic impact on a substantial number of small entities. Most U.S. 
importers should not be significantly affected by the final regulations 
because the foreign-manufactured explosives they import will already be 
marked in accordance with the provisions of 27 CFR 555.109. ATF 
estimates that a very small percentage (one percent) of the 
approximately 413 Federally licensed importers will need to mark 
imported explosives. In general, the IME stated that marking costs are 
less than approximately one percent of the product cost, ranging from 
$.002/lb. to $.01/lb. ATF estimates that approximately five percent of 
imported explosives would need to be marked. To illustrate, according 
to the U.S. Census Bureau, approximately 155,240,707 pounds of 
explosives were imported into the United States in 2003. Based on IME's 
information, the marking costs associated with 7,762,035 pounds of 
imported explosives (five percent of 155,240,707 pounds) would range 
from approximately $15,524 to $77,620. Accordingly, a regulatory 
flexibility analysis is not required.

E. Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule as defined by section 251 of the 
Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 
804. This rule will not result in an annual effect on the economy of 
$100 million or more; a major increase in costs or prices; or 
significant adverse effects on competition, employment, investment, 
innovation, or on the ability of United States-based companies to 
compete with foreign-based companies in domestic and export markets.

[[Page 30633]]

F. Unfunded Mandates Reform Act of 1995

    This rule will not result in the expenditure by State, local, and 
tribal governments, in the aggregate, or by the private sector of $100 
million or more in any one year, and it will not significantly or 
uniquely affect small governments. Therefore, no actions were deemed 
necessary under the provisions of the Unfunded Mandates Reform Act of 
1995.

G. Paperwork Reduction Act

    The collections of information contained in this final regulation 
have been reviewed and approved by the Office of Management and Budget 
in accordance with the requirements of the Paperwork Reduction Act (44 
U.S.C. 3507(d)) under control number 1140-0055. An agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a valid control number 
assigned by the Office of Management and Budget.
    The collections of information in this regulation are in 27 CFR 
555.109(b)(2). This information is required to properly identify 
imported explosive materials. The collections of information are 
mandatory. The likely respondents are businesses.
    The estimated average annual burden associated with the collections 
of information in this final rule is 46 hours.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to the Chief, 
Document Services Branch, Room 3110, Bureau of Alcohol, Tobacco, 
Firearms, and Explosives, 650 Massachusetts Avenue, NW., Washington, DC 
20226, and to the Office of Management and Budget, Attention: Desk 
Officer for the Department of Justice, Bureau of Alcohol, Tobacco, 
Firearms, and Explosives, Office of Information and Regulatory Affairs, 
Washington, DC 20503.

Disclosure

    Copies of the notice of proposed rulemaking (NPRM), all comments 
received in response to the NPRM, and this final rule will be available 
for public inspection by appointment during normal business hours at: 
ATF Reference Library, Room 6480, 650 Massachusetts Avenue, NW., 
Washington, DC 20226, telephone (202) 927-7890.

Drafting Information

    The author of this document is James P. Ficaretta; Enforcement 
Programs and Services; Bureau of Alcohol, Tobacco, Firearms, and 
Explosives.

List of Subjects in 27 CFR Part 555

    Administrative practice and procedure, Authority delegations, 
Customs duties and inspection, Explosives, Hazardous materials, 
Imports, Penalties, Reporting and recordkeeping requirements, Safety, 
Security measures, Seizures and forfeitures, Transportation, and 
Warehouses.

Authority and Issuance

0
Accordingly, for the reasons discussed in the preamble, 27 CFR Part 555 
is amended as follows:

PART 555--COMMERCE IN EXPLOSIVES

0
1. The authority citation for 27 CFR Part 555 continues to read as 
follows:

    Authority: 18 U.S.C. 847.


Sec.  555.41  [Amended]

0
2. Section 555.41 is amended by removing ``of the class authorized by 
this permit'' at the end of the second sentence in paragraphs (a)(3) 
and (b)(3)(ii).


Sec.  555.52  [Amended]

0
3. Section 555.52 is amended by removing the phrase ``and class (as 
described in Sec.  555.202)'' in paragraphs (a) and (b).


Sec.  555.55  [Removed]

0
4. Subpart D is amended by removing Sec.  555.55.

0
5. Section 555.108 is amended by adding a new paragraph (e) to read as 
follows:


Sec.  555.108  Importation.

* * * * *
    (e) For requirements relating to the marking of imported explosive 
materials, see Sec.  555.109.

0
6. Subpart F is amended by revising Sec.  555.109 and by adding a 
parenthetical text at the end of the section to read as follows:


Sec.  555.109  Identification of explosive materials.

    (a) General. Explosive materials, whether manufactured in the 
United States or imported, must contain certain marks of 
identification.
    (b) Required marks. (1) Licensed manufacturers. Licensed 
manufacturers who manufacture explosive materials for sale or 
distribution must place the following marks of identification on 
explosive materials at the time of manufacture:
    (i) The name of the manufacturer; and
    (ii) The location, date, and shift of manufacture. Where a 
manufacturer operates his plant for only one shift during the day, he 
does not need to show the shift of manufacture.
    (2) Licensed importers. (i) Licensed importers who import explosive 
materials for sale or distribution must place the following marks of 
identification on the explosive materials they import:
    (A) The name and address (city and state) of the importer; and
    (B) The location (city and country) where the explosive materials 
were manufactured, date, and shift of manufacture. Where the foreign 
manufacturer operates his plant for only one shift during the day, he 
does not need to show the shift of manufacture.
    (ii) Licensed importers must place the required marks on all 
explosive materials imported prior to distribution or shipment for use, 
and in no event later than 15 days after the date of release from 
Customs custody.
    (c) General requirements. (1) The required marks prescribed in this 
section must be permanent and legible.
    (2) The required marks prescribed in this section must be in the 
English language, using Roman letters and Arabic numerals.
    (3) Licensed manufacturers and licensed importers must place the 
required marks on each cartridge, bag, or other immediate container of 
explosive materials that they manufacture or import, as well as on any 
outside container used for the packaging of such explosive materials.
    (4) Licensed manufacturers and licensed importers may use any 
method, or combination of methods, to affix the required marks to the 
immediate container of explosive materials, or outside containers used 
for the packaging thereof, provided the identifying marks are legible, 
permanent, show all the required information, and are not rendered 
unreadable by extended periods of storage.
    (5) If licensed manufacturers or licensed importers desire to use a 
coding system and omit printed markings on the container that show all 
the required information specified in paragraphs (b)(1) and (2) of this 
section, they must file with ATF a letterhead application displaying 
the coding that they plan to use and explaining the manner of its 
application. The Director must approve the application before the 
proposed coding can be used.
    (d) Exceptions. (1) Blasting caps. Licensed manufacturers or 
licensed importers are only required to place the identification marks 
prescribed in this

[[Page 30634]]

section on the containers used for the packaging of blasting caps.
    (2) Alternate means of identification. The Director may authorize 
other means of identifying explosive materials, including fireworks, 
upon receipt of a letter application from the licensed manufacturer or 
licensed importer showing that such other identification is reasonable 
and will not hinder the effective administration of this part.

(Paragraph (b)(2) approved by the Office of Management and Budget 
under control number 1140-0055)

    Dated: May 19, 2005.
Alberto R. Gonzales,
Attorney General.
[FR Doc. 05-10618 Filed 5-26-05; 8:45 am]
BILLING CODE 4410-FY-P