Revisions to Defense Priorities and Allocations System Regulations, 32122-32140 [2010-13395]

Agencies

• DEPARTMENT OF COMMERCE
• Bureau of Industry and Security
• Industry and Security Bureau

[Federal Register Volume 75, Number 108 (Monday, June 7, 2010)]
[Proposed Rules]
[Pages 32122-32140]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-13395]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Part 700

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


Revisions to Defense Priorities and Allocations System 
Regulations

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would reorganize and clarify existing 
standards and procedures by which the Bureau of Industry and Security 
(BIS) may require that certain contracts or orders that promote the 
national defense be given priority over other contracts or orders. This 
rule also sets new standards and procedures by which BIS may allocate 
materials, services and facilities to promote the national defense. BIS 
is publishing this rule to comply with a requirement of the Defense 
Production Act Reauthorization of 2009 to publish regulations providing 
standards and procedures for prioritization of contracts and orders and 
for allocation of materials, services and facilities to promote the 
national defense.

DATES: Comments must be received by July 7, 2010.

ADDRESSES: You may submit comments, identified by RIN 0694-AE81, by any 
of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     By e-mail directly to bis@publiccomments.bis.doc.gov. 
Include RIN 0694-AE81 in the subject line.
     By mail or delivery to Regulatory Policy Division, Bureau 
of Industry and Security, U.S. Department of Commerce, Room 2705, 14th 
Street and Pennsylvania Avenue, NW., Washington, DC 20230.

FOR FURTHER INFORMATION CONTACT: John Isbell, Director (Acting), 
Defense Programs Division, Office of Strategic Industries and Economic 
Security, Bureau of Industry and Security; (202) 482-8229, 
jisbell@bis.doc.gov.

SUPPLEMENTARY INFORMATION:

Background

    This rule updates and expands 15 CFR part 700, the Bureau of 
Industry and Security's (BIS) Defense Priorities and Allocations System 
(DPAS) regulations. The DPAS regulations implement BIS' administration 
of priorities and allocations actions involving industrial resources. 
BIS administers the DPAS pursuant to authority under Title I of the 
Defense Production Act (50 U.S.C. app. 2071 et seq.) (DPA) as delegated 
by Executive Order 12919 (June 3, 1994). The DPAS has two principal 
components: Priorities and allocations. Under the priorities component, 
certain contracts between the government and private parties or between 
private parties for the production or delivery of industrial resources 
are required to be given priority over other contracts to facilitate 
expedited delivery in promotion of the U.S. national defense. Under the 
allocations component, materials, services, and facilities may be 
allocated to promote the national defense. For both components, the 
term ``national defense'' is defined broadly and can include critical 
infrastructure protection and restoration, emergency preparedness, and 
recovery from natural disasters. BIS has extensive experience using its 
prioritizations authorities. However, BIS has not used its allocations 
authorities in more than fifty years.
    On September 30, 2009, the Defense Production Act Reauthorization 
of 2009 (Pub. L. 111-67, 123 Stat. 2006, September 30, 2009) (DPAR) was 
enacted. That act requires that within 270 days of its enactment (that 
is, by June 20, 2010), all agencies to which the

[[Page 32123]]

President has delegated priorities and allocations authority under 
Title I of the DPA must publish final rules establishing standards and 
procedures by which that authority will be used to promote the national 
defense in both emergency and nonemergency situations. That act also 
required all such agencies to consult ``as appropriate and to the 
extent practicable to develop a consistent and unified Federal 
priorities and allocations system.'' (123 Stat. 2006, at 2009). This 
rule is one of several rules to be published to implement the 
provisions of the DPAR. The final rules of the agencies with DPAR 
authorities, which are the Departments of Commerce, Energy, 
Transportation, Health and Human Services, Defense, and Agriculture, 
will comprise the Federal Priorities and Allocations System.
    BIS is publishing this proposed rule as the initial rulemaking 
stage in compliance with the provision of the DPAR noted above. BIS 
believes that its existing rules regarding priorities satisfy the 
DPAR's requirement that agencies have standards and procedures in place 
to implement the DPA's authorities. However, in the interest of 
promoting a unified priorities and allocations system, and to update 
many of the existing DPAS procedures, BIS is setting forth in this 
proposed rule changes that will clarify and reorganize the DPAS to make 
it consistent with the regulations issued by other agencies, and to 
make it easier to understand. Additionally, although allocations 
provisions were previously contained in the DPAS, this proposed rule 
expands those provisions to clearly set forth the procedures to be 
followed for allocations actions. The specific changes proposed by this 
rule are more fully described below.

Analysis of the Proposed Priorities and Allocations System

Subpart A

    Proposed Subpart A would be titled ``Purpose, Overview and 
Definitions'' and would reflect all three concepts.
    Proposed Sec.  700.1 would state the purpose of the DPAS in general 
terms and would largely restate information that appears at 15 CFR 
700.1 in the existing regulations. However, extensive language about 
the source of BIS's legal authority would not be incorporated into the 
proposed Sec.  700.1 on the grounds that such language is not 
regulatory in nature. BIS believes that the language regarding the 
DPAS' purpose would be clearer if it is not submerged in extensive 
discussions of legal authority, particularly where those discussions 
have no legal effect.
    Proposed Sec.  700.2 would provide an overview of the DPAS program. 
This section would incorporate much of the discussion that currently 
appears in Subpart B of the existing regulations, but would describe 
briefly all aspects of the DPAS, eliminating the need for the more 
extensive descriptions found in Sec. Sec.  700.3 through 700.7 of the 
existing regulations.
    The ``Definitions'' section, which appears in Sec.  700.8 in 
Subpart C of the current regulations, would appear in proposed Sec.  
700.3 in Subpart A with the following modifications. Proposed Sec.  
700.3 would state that the definitions therein apply to all of part 700 
unless otherwise specified in a particular definition. The reference to 
the definitions found in the DPA and in the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act (42 U.S.C. 5195 et seq.) that 
appear in the current regulations would be removed and all relevant 
definitions would appear in full in Sec.  700.3, thereby eliminating 
the need to consult statutes for definitions. Although references to 
these statutes are being removed, the definitions contained in proposed 
Sec.  700.3 would be consistent with those set forth in the statutes.
    New definitions would be added for the following terms: Allocation, 
allocation authority, allocation order, allotment, critical 
infrastructure, prioritization directive, allocation directive, 
emergency preparedness, national defense, priorities authority, 
priority rating, priority performance, program identification symbols, 
resource agency, and short supply item. These new definitions are 
needed to promote clarity of meaning, to remove the need to consult 
authorizing statutes for definitions, to implement the new provisions 
regarding allocations, and to develop a consistent and unified Federal 
priorities and allocations system.
    The definition of the term ``MRO'' would be revised to replace the 
term ``Maintenance, and repair and operating supplies'' with the term 
``Maintenance, repair and/or operating supplies.'' For years, BIS has 
interpreted the term MRO to apply to maintenance, to repair, to 
operating supplies, to any combination of two of the three, or to all 
three. BIS is proposing to revise the language because it believes that 
the proposed language more clearly expresses the meaning that BIS has 
applied for years. In other respects, the definition is unchanged.
    The definition of the term Person would be expanded to include 
international organizations in order to clarify the scope of the 
entities subject to or eligible to be a recipient of authority 
(delegated or direct) as provided in this part. BIS proposes to modify 
the definition to clarify that international organizations are among 
the entities eligible to request priority ratings to obtain items in 
the United States in support of approved programs. This proposed change 
would codify existing agency practice.
    The definition of the term ``Production equipment'' would be 
changed to emphasize that the characteristics of the equipment that 
give it a useful life of more than one year (as distinct from the 
actual amount of time that it actually will be used) is a relevant 
factor in determining whether a piece of equipment is production 
equipment. The wording of the other factors in the definition, unit 
acquisition cost in excess of $2,500 and use in producing materials or 
furnishing services, remains unchanged.
    Finally, the definition of the term Set-aside, which appears as a 
parenthetical in Sec.  700.30 of the existing regulations, would be 
revised to more clearly state what is required of a person who is 
issued a set-aside. The current definition uses outdated language that 
makes the meaning of the term unclear.

Subpart B

    Proposed Subpart B would be based largely on language that appears 
in Subparts D, I and L of the existing regulations and would be titled 
``Industrial Priorities and Allocations,'' reflecting the fact that the 
subpart will address certain matters that are common to both priorities 
and to allocations as opposed to the current title of subpart D 
``Industrial Priorities,'' which reflects a narrower scope.
    Proposed Sec.  700.10, ``Authority,'' would incorporate language 
that appears in the existing regulations at Sec.  700.10 of existing 
Subpart D, however the existing language would be revised to describe 
more fully the President's delegations to the Department of Commerce 
and to other agencies that have roles in the Federal priorities and 
allocation system. It would also describe, in general terms, the items 
subject to each agency's jurisdiction and note that the Department of 
Commerce has delegated certain authorities to other agencies. BIS is 
proposing this change to facilitate public understanding of the role 
that each delegate agency plays in the overall priorities and 
allocations system.
    Proposed Sec.  700.11, ``Priority ratings,'' which is based on 
language that appears in existing Sec.  700.11, would be revised and 
shortened to eliminate language newly included in the proposed

[[Page 32124]]

definitions section of Subpart A regarding ``program identification 
symbols.'' This revision is necessary for clarity and to prevent 
redundancy with the definitions in Subpart A.
    Proposed Sec.  700.12, ``Prioritization directives and allocation 
orders,'' would incorporate language from existing Sec.  700.62(b) and 
(c) and would provide a discussion of the use of prioritization 
directives and allocation orders. The definition for ``directive'' in 
Sec.  700.62(a) would be replaced by definitions of ``allocation 
directive'' and ``prioritization directive'' in proposed Sec.  700.3 
along with the other definitions of terms used in this proposed rule. 
Paragraphs (b) and (c) of the existing regulations at Sec.  700.62 
would become paragraphs (a) and (b) respectively in proposed Sec.  
700.12. Proposed paragraph (c) is a new paragraph that provides that 
allocation orders take precedence over prioritization directives, DX 
rated orders, DO rated orders, and unrated orders, unless a contrary 
instruction appears in the allocation order.
    Language in proposed Sec.  700.13, ``Examples of emergency 
preparedness,'' provides examples of what constitutes ``emergency 
preparedness activities'' and explains how those considerations impact 
decisions with regard to priority ratings and allocation orders. The 
material in this section is new.
    Language in proposed Sec.  700.14, ``Changes or cancellations of 
priority ratings, rated orders and allocation orders,'' is largely 
identical to language that appears in existing Sec.  700.16 ``Changes 
or cancellations of priority ratings and rated orders.'' However, the 
scope would be expanded to include language describing the action 
necessary to change an allocation order.
    Proposed Sec.  700.15, ``Adjustments or exceptions,'' incorporates 
language that appears in existing Sec.  700.80 ``Adjustment or 
exceptions'' found in Subpart K. Proposed Sec.  700.15 would reflect 
the time period in which the Office of Strategic Industries and 
Economic Security should respond to requests for adjustments to or 
exceptions. For such requests related to a priority rated order, 
response should occur within 20 business days. For requests for 
adjustments to or exceptions from an allocation order, response should 
occur within 2 (two) business days. BIS believes that a deadline for 
responses to requests for exceptions or adjustments is appropriate to 
provide predictability in the priorities and allocations processes. In 
addition, because allocations, if used, would address national 
emergencies, BIS believes that a shorter deadline to respond in those 
instances is appropriate.
    Proposed Sec.  700.16, which incorporates language from Sec.  
700.81 of the existing regulations, sets forth the procedures for 
appealing to the Assistant Secretary for Export Administration for 
review of a decision regarding a request for an exception from or 
adjustment to a priority rated order or allocation order. Most of the 
language in proposed Sec.  700.16 is taken from language that appears 
in Sec.  700.81 of the existing regulations. However, Sec.  700.81 
provides no express procedure for appeals from a decision regarding a 
request for an exception from or adjustment to allocation orders. This 
rule would adopt the appeals procedures currently prescribed for 
requests for exceptions from, or adjustments to, priority rated orders 
to appeals from allocation orders with one exception. Appeals from 
allocation orders would have to be received in the Office of the 
Assistant Secretary for Export Administration within 5 (five) business 
days of the receipt of the decision by the party appealing that 
decision. The Assistant Secretary for Export Administration would have 
discretion to accept appeals after the 5 day deadline. For priority 
rated orders, the deadline would continue to be 45 calendar days. The 
proposed rule also would continue to give the Assistant Secretary 
discretion to accept appeals after that 45 day deadline, but would 
remove the phrase ``for good cause shown from the sentence authorizing 
such acceptances because the phrase adds nothing of substance to the 
sentence. Because BIS will issue allocation orders only during a 
national emergency, the urgent nature of the circumstance and its 
possible impact on industry make a five business day deadline for 
filing an appeal necessary.
    Language in proposed Sec.  700.17 ``Protection against claims'' is 
identical to the language that appears in existing Sec.  700.90 of 
Subpart L. BIS is proposing to move the language to Sec.  700.17 in 
Subpart B to emphasize the point that the protections in this section 
would apply equally to persons complying with official actions related 
to priorities and to allocations.

Subpart C

    Proposed Subpart C would address matters related to priorities and 
would be based largely on language currently in Subpart D and Subpart 
F. The proposed subpart would be titled ``Complying with Priority 
Ratings and Orders'' to reflect the subpart's narrower scope as 
compared to proposed Subpart B. However, as noted above, the language 
in Sec.  700.10, ``Delegation of Authority,'' and Sec.  700.16, 
``Changes or cancellations of priority ratings and rated orders,'' of 
the existing regulations would be modified, retitled, and moved to 
proposed Subpart B. BIS is proposing these changes because it believes 
that discussing matters related to priorities in the order set forth in 
this proposed rule is more logical and easier to follow than the order 
in which such matters are discussed in the existing rule.
    Proposed Sec.  700.21, ``Rated Orders,'' would reflect language 
that appears in existing Sec.  700.3 but would be revised and shortened 
to prevent redundancy with language provided in the proposed 
definitions section of Subpart A. The new title also distinguishes this 
section from proposed Sec.  700.11.
    Proposed Sec.  700.22, ``Elements of a rated order,'' includes 
language that appears in existing Sec.  700.12 but would include the 
phrase ``program identification symbol'' in proposed paragraph (a) to 
clarify what constitutes an official priority rating in accordance with 
Schedule 1. In addition, a new element setting forth language that 
should be included in those rated orders for emergency preparedness 
requirements for which expedited action is necessary and appropriate to 
meet such requirements, would be added. The language would identify the 
rated order as one for an emergency preparedness requirement and would 
specify that the order must be accepted or rejected within a specified 
number of workings days. When issuing the rated order, the rating 
agency would insert a number of working days ranging from one through 
fourteen as appropriate to the transaction. This section also would be 
reworded to clarify the text.
    Proposed Sec.  700.23, ``Use of rated orders,'' incorporates the 
text from existing Sec.  700.17. This proposed section would describe 
when and how a person would use a rated order. BIS would also 
incorporate language that appears in Sec.  700.17 of the existing 
regulations into proposed Sec.  700.23 to improve the organization of 
the proposed rule.
    Language in proposed Sec.  700.24, ``Limitations on placing rated 
orders,'' draws from the language that appears in existing Sec.  700.18 
but is modified to recognize that in some instances, other agencies' 
regulations would authorize the placement of rated orders. Existing 
Sec.  700.18 prohibits placing rated orders that are not authorized by 
``this regulation.'' BIS would recognize other agencies' authority by 
modifying the language in paragraph (a) of proposed Sec.  700.24 to 
state that rated orders issued pursuant to this part (i.e., 15 CFR part 
700) may not be used except as

[[Page 32125]]

authorized by this part. BIS is making this change because it does not 
intend to regulate conduct that is subject to the regulations of other 
agencies and not subject to regulations that are administered by BIS.
    In proposed Sec.  700.25, ``Acceptance and rejection of rated 
orders,'' the proposed rule would move the language that appears in 
Sec.  700.13 of the existing regulations, and modify it to specify the 
timeframes within which persons must accept or reject rated orders for 
emergency preparedness-related approved programs. This section was also 
revised by removing reference to the OMB control number because such 
reference is not needed in the regulatory text.
    The proposed rule would add language to proposed Sec.  700.25 to 
distinguish the time frame within which persons must respond to 
priority rated orders for certain emergency preparedness requirement 
orders from other rated orders. The recipient would be required to 
accept or reject rated orders that contain the deadline specific 
language set forth in proposed Sec.  700.22(b) within the time 
specified in the order. That time could be in the range of one through 
fourteen working days. The issuing agency would select the number of 
days according to the urgency of the situation for which the order is 
issued at the time of the order's issuance.
    The timeframe for acceptance or rejection of rated orders for all 
other approved programs remains fifteen days for DO programs and ten 
days for DX programs. BIS is proposing the shorter time limits in which 
the recipient must respond to a rated order issued in connection with 
an emergency preparedness program because such programs would involve 
disaster assistance, emergency response or similar activities. BIS 
believes that the exigent circumstances inherent in emergency 
preparedness related programs justify requiring a response time 
commensurate with the exigencies of the situation. In addition, a note 
would be added to alert the public that in some instances, for example 
certain emergency preparedness situations, a shorter time limit may be 
specified. The proposed note also alerts the public that priorities 
regulations issued by other Delegate Agencies may have shorter time 
limits than the time limits provided by BIS, and the recipient of a 
rated order must follow the regulations of the Delegate Agency issuing 
the rated order.
    The language in proposed Sec.  700.26 ``Preferential scheduling,'' 
proposed Sec.  700.27 ``Extension of priority ratings,'' and proposed 
Sec.  700.28 ``Metalworking machines,'' incorporates the language that 
appears in the existing regulations at Sec. Sec.  700.14, 700.15 and 
700.31 respectively. BIS is proposing to move the language of these 
sections to Subpart C because it believes placing the language 
governing priorities in a single subpart would make the regulations 
easier to understand and would clarify the organization of these 
regulations. The proposed sections retain much of the original language 
from those sections, but also have been amended to provide examples in 
some instances, and to make the processes described in each section 
clearer.

Subpart D

    Proposed Subpart D, ``Industrial Priorities for Energy Programs,'' 
describes the use of priority rating authority to support energy 
programs approved by the Department of Energy.
    Proposed Sec.  700.30, ``Use of priority ratings for energy 
programs'' and Sec.  700.31, ``Application for priority rating 
authority,'' would use text that appears in the existing regulations at 
Sec. Sec.  700.20 and 700.21, respectively. The phrase ``for energy 
programs'' would be added to the header of proposed Sec.  700.30 to 
describe accurately the scope of the text of that section. Proposed 
Sec.  700.31 would not contain language that appears in paragraphs (a) 
and (d) of Sec.  700.21 the exiting regulations. Paragraph 700.21(a) of 
the existing regulations describes a procedure and process used by the 
Department of Energy that is more appropriately addressed in that 
agency's regulations, and therefore this proposed rule would not 
include that discussion from regulations. Paragraph 700.21(d) of the 
existing regulations describes an internal BIS procedure that is not 
regulatory in nature and thus would not be included in the regulations. 
Apart from those changes, the text of proposed Subpart D is the same as 
the text of existing Sec. Sec.  700.20 and 700.21.

Subpart E

    Proposed Subpart E ``Special Priorities Assistance'' describes 
instances in which BIS would provide assistance in resolving matters 
related to priority rated contracts and orders. The text is taken from 
existing Subpart H with principle changes discussed below.
    Proposed Sec.  700.40 ``General provisions'' is based on existing 
Sec.  700.50, but has been modified to make it clearer and more 
succinct. Discussions unrelated to the special priorities assistance 
that BIS can provide would be eliminated as would a recitation of the 
OMB Paperwork Reduction Act control number for the form used to request 
assistance from BIS because they are unnecessary and detract from the 
main point of the section, which is to illustrate when and how BIS can 
provide special priorities assistance. Although special priorities 
assistance may be requested for any reason, three examples would be 
provided. These examples are based on BIS's experience and illustrate 
circumstances where BIS has been able to provide assistance in the 
past.
    In proposed Sec.  700.41 ``Request for priority rating authority'' 
is largely the same text that appears in Sec.  700.51 of the existing 
regulations, except that the statement in existing Sec.  
700.51(c)(3)(v), which states that BIS will consider the political 
sensitivity of the project in reviewing requests for rating authority 
in advance of a prime contract would not be included, because BIS would 
not consider that factor in deciding whether to grant rating authority.
    Proposed Sec.  700.42 and Sec.  700.43 reflect the same text that 
appears in existing Sec.  700.53 and Sec.  700.55 respectively, with 
one exception. In proposed Sec.  700.42 the word ``develop'' would 
replace the word ``effect'' that is currently in Sec.  700.53 to make 
that language clearer.
    In some instances, BIS can provide priorities assistance to persons 
located in foreign nations or to international organizations (e.g., 
NATO, United Nations agencies, etc.) seeking assistance in obtaining 
military and critical infrastructure items in the United States or 
priority rating authority for military and critical infrastructure 
items to be purchased in the United States. In addition, BIS can 
sometimes provide informal assistance to persons in the United States 
who are seeking assistance in obtaining items from foreign countries. 
In this proposed rule, BIS would expand the language describing this 
assistance pursuant to the changes specific to the new availability of 
critical infrastructure items to non-U.S. persons set forth in the 
DPAR, and for the purpose of clarification.
    This proposed rule would add a new section that specifically 
describes military assistance with respect to Canada (proposed Sec.  
700.44, ``Military assistance programs with Canada''), and would create 
another section describing such assistance with respect to other 
nations and international organizations (proposed Sec.  700.45, 
``Military assistance programs with other nations and international 
organizations''). Currently, information about military assistance with 
respect to all eligible foreign nations appears in Sec.  700.55 of the 
existing regulations, and that section does not mention international

[[Page 32126]]

organizations. BIS is proposing to create a new section that speaks to 
military assistance with respect to Canada because the Canadian 
Government has been authorized to place priority ratings in the United 
States to support approved defense programs without the endorsement of 
the U.S. Department of Defense (DOD). Persons in other foreign 
countries may place priority ratings in the United States if their 
requests for military assistance are sponsored by their government and 
have DOD approval and endorsement. BIS believes that this difference 
justifies creation of separate sections to address these procedures. In 
addition, because BIS has provided assistance to international 
organizations in the past, adding a reference to international 
organizations in proposed Sec.  700.45 merely codifies existing agency 
practice and does not represent a change in policy.
    In addition, this rule proposes to add new Sec.  700.45 that would 
add Finland to the list of nations that have bilateral security of 
supply arrangements with the U.S. Department of Defense, reflecting an 
agreement signed by the United States and Finland in October 2009. 
Proposed Sec.  700.45 would also make it clear that persons in 
countries that do not have bilateral security of supply arrangements 
with the U.S. Department of Defense (DOD) may still seek assistance in 
obtaining defense items in the United States or priority rating 
authority for defense items to be purchased in the United States.
    Proposed Sec.  700.46, ``Critical infrastructure assistance 
programs with other nations and international organizations,'' is also 
a new section that would describe how persons in foreign nations or 
international organizations may place priority ratings in the United 
States if their requests for critical infrastructure assistance are 
sponsored by their government or organization and have received the 
approval and endorsement of the U.S. Department of Homeland Security. 
The Department of Commerce is adding this section pursuant to the 
requirements of the DPAR, which include critical infrastructure 
protection and restoration assistance to foreign nations and 
international organizations.

Subpart F

    Proposed Subpart F ``Official Actions'' is taken largely from 
existing Subpart I of the same name. Proposed Sec. Sec.  700.50, 700.51 
and 700.52 employ the text of existing Sec. Sec.  700.60, 600.61 and 
700.63, respectively, without substantive change. The substance of 
existing Sec.  700.62 ``Directives'' has been amended to clarify that 
these directives are ``prioritization directives'' and has been 
incorporated into the definitions in proposed Sec.  700.3. These 
changes are being made to improve the clarity and flow of the 
regulations.

Subpart G

    Proposed Subpart G ``Allocations in a National Emergency'' contains 
mostly new material and would replace language in existing Subpart F. 
Proposed Subpart G would provide the public with detailed information 
on the procedures governing allocations actions. Allocations actions 
will likely be used in response to a national emergency.
    Proposed Sec.  700.61 describes allocations and when and how 
allocation orders would be used. Specifically, allocation orders would 
be used only if priorities authority would not provide a sufficient 
supply of material, services or facilities for national defense 
requirements, or when use of priorities authority would cause a severe 
and prolonged disruption in the supply of resources available to 
support normal U.S. economic activities. Allocation orders would not be 
used to ration materials or services at the retail level. Allocation 
orders would be distributed equitably among the suppliers of the 
resource(s) being allocated and would not require any person to 
relinquish a disproportionate share of the civilian market. BIS is 
proposing the standards set forth in proposed Sec.  700.60 because it 
believes that they provide reasonable assurance that allocation orders 
will be used only in situations were the circumstances justify such 
orders.
    Proposed Sec.  700.62 would provide that, in the event of a 
conflict between a priority order or prioritization directive and 
allocation order or allocation directive, the latter would take 
precedence. BIS is proposing this order of precedence because it 
believes that given the extreme and rare circumstances under which 
allocation orders would be issued as compared to the serious, but more 
frequently encountered circumstances under which priority orders are 
issued, it can reasonably predict that the justification for the 
allocation order will overcome any justification for any priority order 
that conflicts with the allocation order.
    Proposed Sec.  700.63 describes the three types of allocation 
orders that BIS might issue, which are a set-aside, an allocation 
directive, and an allotment. A set-aside is an official action that 
would require a person to reserve resource capacity in anticipation of 
receipt of rated orders. An allocation directive is an official action 
that would require a person to take or refrain from taking certain 
actions in accordance with its provisions (an allocation directive can 
require a person to stop or reduce production of an item, prohibit the 
use of selected items, divert supply of one type of product to another, 
or to supply a specific quantity, size, shape, and type of an item 
within a specific time period). An allotment is an official action that 
would specify the maximum quantity of an item authorized for use in a 
specific program or application. The text in proposed Sec.  700.63 is 
largely new. BIS is proposing these three types of allocation orders 
because it believes that, collectively they describe the types of 
actions that might be taken in any situation in which allocation is 
justified.
    Proposed Sec.  700.64 ``Elements of an allocation order,'' is a new 
section that sets forth the minimum elements of an allocation order. 
Those elements are:
    (a) A detailed description of the required allocation action(s);
    (b) Specific start and end calendar dates for each required 
allocation action;
    (c) The written signature on a manually placed order, or the 
digital signature or name on an electronically placed order, of the 
head of the Resource Agency placing the order. The signature or use of 
the name certifies that the order is authorized under the DPAS 
regulations and that the requirements of those regulation are being 
followed; and
    (d) A statement that reads in substance: ``This is an allocation 
order certified for national defense use. [Insert the legal name of the 
person receiving the order] is required to comply with this order, in 
accordance with the provisions of 15 CFR 700.''
    BIS is proposing these elements because it believes that they 
provide a proper balance between the need for standards to permit the 
public to recognize and understand an allocation order if one is 
issued, and the expectation that any actual allocation orders will have 
to be tailored to meet unforeseeable circumstances. The language of 
proposed Sec.  700.64 would not preclude BIS from including additional 
information in an allocation order if circumstances warrant doing so.
    Proposed Sec.  700.65 ``Mandatory acceptance of allocation orders'' 
would require that an allocation order must be accepted if a person is 
capable of fulfilling the order. This section also states that a person 
may not discriminate against an allocation order in any manner, such as 
by charging higher prices or imposing terms and conditions different 
than what the person imposed on contracts or orders

[[Page 32127]]

for the same resource(s) that were received prior to receiving the 
allocation order. This section also instructs the public on the 
procedures to follow to reject an allocation order, and refers the 
public to proposed Sec.  700.15 for information on how to seek 
adjustment of or exception to an allocation order. BIS is proposing 
Sec.  700.65 to make it clear to the public that the limited 
circumstances and emergency situations that trigger issuance of an 
allocation order require immediate response from the public in order to 
address the situation in an expedient fashion.
    Proposed Sec.  700.66 ``Changes or cancellations of allocation 
orders'' would provide notice that the Department of Commerce may 
modify or cancel an allocation order. BIS is proposing this language 
because it believes that the uncertain nature of the events attributed 
to allocation orders, and the need for flexibility in dealing with a 
national emergency, require that BIS be able to modify or cancel orders 
to address changing circumstances as they arise.

Subpart H

    Proposed Subpart H, ``Compliance,'' is taken largely from the 
language that appears in Subpart J of the existing regulations with 
little change. The language in existing Sec. Sec.  700.70, 700. 71, 
700.72, 700.73, 700.74 and 700.75 of Subpart J would appear in 
Sec. Sec.  700.70, 700.72, 700.73, 700.74, 700.75, and 700.76, 
respectively, in Subpart H. The term ``official actions'' would be 
removed from the text of this subpart. This term would be removed 
because its inclusion in the text suggested that official actions were 
something other than the activities set forth in part 700. 
Additionally, throughout Subpart H, references to ``related statutes'' 
would be removed from the phrase the ``Defense Production Act, the 
Selective Service Act and related statutes'' because the Defense 
Production Act and the Selective Service Act are the legal basis for 
BIS's administrative and enforcement activities set forth in the 
Defense Priorities and Allocations System regulations (15 CFR part 
700). The removal of the reference to unnamed ``related statutes'' does 
not impact BIS's authority or public understanding of the compliance 
requirement that Subpart H is intended to address. The language 
currently in Sec.  700.70(b) stating that persons who place rated 
orders should be familiar with and must comply with this regulation 
does not appear in proposed Sec.  700.70 because BIS believes that it 
is unnecessary either for public understanding of the rule or as a 
basis for enforcement.
    Proposed Sec.  700.71 reflects language that appears in Sec.  
700.91 ``Records and reports'' in Subpart L of the existing 
regulations. BIS believes that placing all compliance related 
previsions in a single subpart improves the organization of the DPAS. 
Additionally, the language in proposed Sec.  700.72 would be modified 
to clarify that personal service of a demand for information or 
inspection authorization may be made by leaving a copy of the document 
with a person who is at least eighteen years of age. The language that 
appears in Sec.  700.71 of the existing regulations provides that the 
person must be of ``suitable age and discretion.'' The Department of 
Commerce is proposing this change in conformity with the proposed rules 
of other agencies delegated authority under the DPA and in conformity 
with the language in existing Sec.  700.71(f)(3), which requires that a 
person receiving service of a demand for information or inspection 
authorization must be at least eighteen years of age.

Subpart I

    Proposed Subpart I ``Miscellaneous Provisions'' is taken largely 
from Subpart L of the existing regulations. The language in existing 
Sec. Sec.  700.92 and 700.93 would become Sec. Sec.  700.80 and 700.81, 
respectively. Language in proposed Sec.  700.80(c) would mirror the 
language that appears in Sec.  700.92(c) of the existing regulations 
but would include a reference to the Defense Priorities and Allocations 
System because the Defense Priorities and Allocations System superseded 
both the Materials System and the Defense Priorities System, in 1984. 
Language in proposed Sec.  700.80(d) would reflect the language that 
appears in Sec.  700.92(d) of the existing regulations but would 
reflect current terminology. Substantively, existing Sec.  700.92(d) 
provides that repeals of rules, orders, schedules and delegations of 
authority will not affect any penalty or liability incurred while such 
rules, orders, schedules and delegations of authority were in force. As 
previously noted, the language in Sec.  700.90 ``Protection against 
claims'' of the existing regulations would be moved to proposed Sec.  
700.17 in proposed Subpart B, and the language in Sec.  700.91 
``Records and Reports'' of the existing regulations would be moved to 
proposed Sec.  700.71 in proposed Subpart H to make the DPAS 
regulations more organized and easier to read. BIS is proposing the 
language in proposed Sec.  700.80(c) and (d) to state more precisely 
meaning that BIS has attributed to those two paragraphs for years.

Rulemaking Requirements

    1. This rule has been determined to be significant for purposes of 
Executive Order 12866.
    2. Notwithstanding any other provision of law, no person is 
required to respond to nor be subject to a penalty for failure to 
comply with a collection of information, subject to the requirements of 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), 
unless that collection of information displays a currently valid Office 
of Management and Budget (OMB) Control Number. This regulation contains 
two collections previously approved by OMB. OMB control number 0694-
0053 authorizes the requirement that recipient 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 e-mail at jseehra@omb.eop.gov or by 
fax to (202) 395-7285 and to John Isbell, jisbell@bis.doc.gov.
    3. This rule does not contain policies with Federalism implications 
as that term is defined in Executive Order 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, unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities. 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 Acting Chief Counsel of Regulations,

[[Page 32128]]

Department of Commerce, certified to the Chief Counsel for Advocacy, 
Small Business Administration that this proposed rule, if promulgated, 
will not have a significant impact on a substantial number of small 
entities for the reasons explained below. Consequently, BIS has not 
prepared a regulatory flexibility analysis.

Number of Small Entities

    Small entities include small businesses, small organizations and 
small governmental jurisdictions. For purposes of assessing the impacts 
of this proposed rule on small entities, a small business, as described 
in the Small Business Administration's Table of Small Business Size 
Standards Matched to North American Industry Classification System 
Codes (August 2008 Edition), has a maximum annual revenue of $ 33.5 
million and a maximum of 1,500 employees (for some business categories, 
these number 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. Because the rule affects 
commercial transactions, BIS believes that small organizations and 
small governmental jurisdictions are unlikely to be affected by this 
rule. However, BIS has no basis on which to estimate the number of 
small businesses that are likely to be affected by this rule.

Impact

    BIS believes that any impact that this rule might have on small 
businesses would be minor. The rule has two principle components: 
prioritization and allocation. Prioritization is the process that is, 
by far, more likely to be used. Under prioritization, BIS designates 
certain orders, which may be placed by Government or by private 
entities, and assigned under one of two possible priority levels. Once 
so designated, such orders are referred to as ``rated orders.'' The 
recipient of a rated order must give it priority over an unrated order. 
The recipient of a rated order with the higher priority rating must 
give that order priority over any rated orders with the lower priority 
rating and over unrated orders. A recipient of a rated order may place 
two 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 any 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 mutually 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 as follows:
    Set-aside: An official action that requires a person to reserve 
resource capacity in anticipation of receipt of rated orders.
    Allocation directive: An official action that requires a person to 
take or refrain from taking certain actions in accordance with its 
provisions. An allocation 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.
    Allotment: An official action that specifies the maximum quantity 
of an item authorized for use in a specific program or application.
    BIS has not taken any actions under its existing allocations 
authority since the early 1950s (during the Korean conflict) 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. Sec.  2071), hereinafter 
``DPA,'' and by Section 201(d) of Executive Order 12919 of June 3, 
1994, as amended, BIS may implement allocations only if the Secretary 
of Commerce made, and the President approved, a finding ``(1) that the 
material [or service] is a scarce and critical material [or service] 
essential to the national defense, and (2) that the requirements of the 
national defense for such material [or service] cannot otherwise be met 
without creating a significant dislocation of the normal distribution 
of such material [or service] in the civilian market to such a degree 
as to create appreciable hardship.'' The term ``national defense'' is 
defined to mean ``programs for military and energy production or 
construction, military or critical infrastructure assistance to any 
foreign nation, homeland security, stockpiling, space, and any related 
activity. Such term includes emergency preparedness activities 
conducted pursuant to title IV of the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act (42 U.S.C. 5195 et seq.) and 
critical infrastructure protection and restoration.''
    Any allocation actions taken by BIS would also have to comply with 
Section 701(e) of the DPA (50 U.S.C. app. 2151(e)), which provides that 
``small business concerns shall be accorded, to the extent practicable, 
a fair share of the such material [including services] in proportion to 
the share received by such business concerns under normal conditions, 
giving such special consideration as may be possible to emerging 
business concerns.''

Conclusion

    Although BIS cannot determine precisely the number of small 
entities that would be affected by this rule, BIS believes that the 
overall impact on such entities would not be significant. With respect 
to priorities authority, this rule is not likely to increase the number 
of priority rated contracts compared to the number being issued 
currently. In addition, in most instances, rated contracts would be in 
addition to other (unrated) contracts and not reduce the total amount 
of business of the firm that receives a rated contract.
    BIS's lack of experience with allocations makes gauging the impact 
of an allocation, should one occur, difficult. Because allocations can 
be imposed only after a determination by the President, and the fact 
that BIS has taken no allocations actions in more than fifty years, one 
can expect allocations will be a rare occurrence. However, BIS believes 
that the requirement for a Presidential

[[Page 32129]]

determination and the provisions of section 701 of the DPA provide 
reasonable assurance that any impact on small business will not be 
significant.
    Therefore, for the reasons set forth above, the Chief Counsel for 
Regulations at the Department of Commerce certified that this action 
would not have a significant impact on a substantial number of small 
entities.

List of Subjects in 15 CFR Part 700

    Administrative practice and procedure, Business and industry, 
Government contracts, National defense, Reporting and recordkeeping 
requirements, Strategic and critical materials.
    For the reasons stated in the preamble, 15 CFR part 700, is 
proposed to be revised as follows:

PART 700--[AMENDED]

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

    Authority: 50 U.S.C. App. 2061, et seq.; 42 U.S.C. 5195, et 
seq.; 50 U.S.C. App 468; 10 U.S.C. 2538; 50 U.S.C. 82; E.O. 12919, 
59 FR 29525, 3 CFR, 1991 Comp. 901; E.O. 13286, 68 FR 10619, 3 CFR, 
2003 Comp. 166; E.O. 12742, 56 FR 1079, 3 CFR, 1991 Comp. 309; E.O. 
12656, 53 FR 226, 3 CFR, 1988, Comp. 585.

    2. Subpart A is revised to read as follows:
Subpart A--Purpose, Overview and Definitions.
Sec.
700.1 Purpose.
700.2 Overview.
700.3 Definitions.

Subpart A--Purpose, Overview and Definitions.


Sec.  700.1  Purpose.

    This part implements the Defense Priorities and Allocations System 
(DPAS) that is administered by the U.S. Department of Commerce, Bureau 
of Industry and Security. The DPAS implements the priorities and 
allocations authority of the Defense Production Act specific to 
industrial resources, including use of that authority to implement 
emergency preparedness activities pursuant to Title VI of the Stafford 
Act (Title VI (Emergency Preparedness) 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, all with 
respect to industrial resources. The DPAS ensures the timely 
availability of industrial resources for approved programs and provides 
an operating system to support rapid industrial response to a national 
emergency.


Sec.  700.2  Overview.

    (a) Certain national defense and energy programs (including 
emergency preparedness activities) are approved for priorities and 
allocations support. For example, military aircraft production, 
ammunition, and certain programs which maximize domestic energy 
supplies are ``approved programs.'' 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 or allocation 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 suppliers and subcontractors. Schedule I includes a list of 
agencies to which the Department of Commerce has delegated authority.


Sec.  700.3  Definitions.

    The definitions in this section apply to the entirety of this part 
unless otherwise stated in a specific definition.
    Allocation. The control of the distribution of materials, services 
or facilities for a purpose deemed necessary or appropriate to promote 
the national defense.
    Allocation Authority. The authority to allocate materials, 
facilities and services for use in approved programs.
    Allocation Directive. An official action that requires a person to 
take or refrain from taking certain actions in accordance with its 
provisions. An allocation directive can require a person to stop or 
reduce production of an item, prohibit the use of selected items, 
divert the 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.
    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 an item for specified use to promote the national defense.
    Approved Program. A program determined by the Secretary of Defense, 
the Secretary of Energy or the Secretary of Homeland Security as 
necessary or appropriate for priorities and allocations support to 
promote the national defense.
    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.
    Delegate Agency. A government agency authorized by delegation from 
the Department of Commerce to place priority ratings on contracts or 
orders for industrial resources needed to support approved programs.
    Defense Production Act. The Defense Production Act of 1950, as 
amended (50 U.S.C. App. 2061, et seq.), is the statute authorizing the 
President to require the priority performance of contracts and orders 
necessary or appropriate to promote the national defense over other 
contracts or orders and to require the allocation of materials, 
services, and facilities as necessary or appropriate to promote the 
national defense.
    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.
    Industrial Resources. All materials, services, and facilities, 
including construction materials that are needed to establish or 
maintain an efficient and modern defense industrial capacity, the 
authority for which has not been delegated to other agencies under 
Executive Order 12919. 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.
    MRO. Maintenance, repair and/or operating supplies as those three 
terms are defined in this section. However, MRO does not include items 
produced or obtained for sale to other persons or

[[Page 32130]]

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. The elements of MRO are defined as follows:
    (1) Maintenance is the upkeep necessary to continue any plant, 
facility, or equipment in working condition,
    (2) 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, and
    (3) 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.
    National Defense. Programs for military and energy production or 
construction, military or critical infrastructure assistance to a 
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 this part. Subparts B, F and H describe the official 
actions that may be taken by the Department of Commerce. Official 
actions include the issuance of set-asides, rating authorizations, 
allocation or prioritization directives, letters of understanding, 
demands for information, inspection authorizations, and administrative 
subpoenas.
    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, 
including the United States Government and any authorized foreign 
government or agency thereof, or international organization 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. The Department of 
Commerce uses the priority rating DO and DX; with DX having priority 
over DO.
    Prioritization Directive. An official action which requires a 
person to take or refrain from taking certain actions in accordance 
with its provisions. A prioritization directive may require a person to 
satisfy a rated requirement within a specific time period.
    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 and the potential for maintaining its integrity 
as a capital item in excess of one year.
    Program Identification Symbols. Abbreviations used to indicate 
which approved program is supported by a rated order. The list of 
approved programs and their identification symbols is found in Schedule 
I of this part. For example, A1 identifies defense aircraft programs 
and A7 signifies defense electronic programs. Program identification 
symbols, in themselves, do not connote any priority.
    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.
    Resource Agency. Any U.S. Government agency delegated priorities 
and allocations authority in Section 201 of Executive Order 12919.
    Selective Service Act. Section 18 of the Selective Service Act of 
1948 (50 U.S.C. app. 468), authorizes the President to place an order 
with a supplier for any articles or materials required for the 
exclusive use of the U.S. armed forces whenever the President 
determines that in the interest of national security, prompt delivery 
of the articles and materials is required. The supplier must give 
precedence to the order so as to deliver the articles or materials in a 
required time period.
    Set-Aside. An official action that requires a person to reserve 
resource capacity in anticipation of the receipt of rated orders.
    Short Supply Item. An item that is in short supply due to a sudden 
and substantial increase in demand or decrease in supply.
    Stafford Act. Title VI (Emergency Preparedness) of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5195 
et seq.).
    3. Subpart B is revised to read as follows:
Subpart B--Industrial Priorities and Allocations
Sec.
700.10 Authority.
700.11 Priority ratings.
700.12 Prioritization directives and allocation orders.
700.13 Examples of emergency preparedness.
700.14 Changes to or cancellations of priority ratings, rated orders 
and allocation orders.
700.15 Adjustments or exceptions.
700.16 Appeals.
700.17 Protection against claims.

Subpart B--Industrial Priorities and Allocations


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 12919 of June 3, 
1994 (59 FR 29525, 3 CFR, 1991 Comp., p. 901). The priorities 
authorities of the President under the Selective Service Act with 
respect to industrial resources have also been delegated to the 
Secretary of Commerce under Executive Order 12742 of January 8, 1991 
(56 FR 1079, 3 CFR 1991 Comp., p. 309).
    (b) Delegations by the Department of Commerce. In turn, 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 
12919, 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, 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

[[Page 32131]]

    (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 (delegated to the 
National Communications System under Executive Order 12472 of April 3, 
1984, 49 FR 13471, 3 CFR, 1985 Comp., p. 193).


Sec.  700.11  Priority ratings.

    (a) Levels of priority. (1) There are two levels of priority 
authorized by this subpart, identified by the rating symbols ``DO'' and 
``DX.''
    (2) All DO rated orders have equal priority with each other and 
take precedence over unrated orders. All DX rated orders have equal 
priority with each