Export Control Reform Initiative: Strategic Trade Authorization License Exception, 35276-35294 [2011-14705]

Agencies

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

[Federal Register Volume 76, Number 116 (Thursday, June 16, 2011)]
[Rules and Regulations]
[Pages 35276-35294]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-14705]



[[Page 35275]]

Vol. 76

Thursday,

No. 116

June 16, 2011

Part II





Department of Commerce





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Bureau of Industry and Security





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15 CFR Parts 732, 738, 740, et al.





Export Control Reform Initiative: Strategic Trade Authorization License 
Exception; Final Rule

Federal Register / Vol. 76, No. 116 / Thursday, June 16, 2011 / Rules 
and Regulations

[[Page 35276]]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 732, 738, 740, 743, and 774

[Docket No. 100923470-1230-03]
RIN 0694-AF03


Export Control Reform Initiative: Strategic Trade Authorization 
License Exception

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Final Rule.

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SUMMARY: This rule adds a new license exception to the Export 
Administration Regulations (EAR) that authorizes the export, reexport, 
and transfer (in-country) of specified items to destinations that pose 
relatively low risk that those items will be used for a purpose that 
license requirements are designed to prevent. Use of the exception is 
conditioned upon the creation and exchange by the parties to the 
transaction of notifications and statements designed to provide 
assurance against diversion of such items to other destinations. The 
exception is only relevant to exports, reexports, and transfers for 
which a license is required under the EAR. Thus, if the EAR do not 
impose an obligation to apply for and receive a license before 
exporting, reexporting, or transferring an item subject to the EAR, STA 
is not relevant to the transaction. The exception does not alter any of 
the General Prohibitions in the EAR against unlicensed exports, 
reexports, or transfers to proscribed end users, end uses, or 
destinations. This rule, has been cleared by several departments, 
including Defense, State, Homeland Security, and Justice. This rule is 
part of the Administration's Export Control Reform Initiative, 
undertaken as a result of the fundamental review of the U.S. export 
control system that the President announced in August 2009.

DATES: Effective date June 16, 2011.

FOR FURTHER INFORMATION CONTACT: William Arvin, Regulatory Policy 
Division, Bureau of Industry and Security, william.arvin@bis.doc.gov or 
202-482-2440.

SUPPLEMENTARY INFORMATION:

Background

The Administration's Export Control Reform Initiative

    In August 2009, the President directed a broad-based interagency 
review of the U.S. export control system with the goal of strengthening 
national security and the competitiveness of key U.S. manufacturing and 
technology sectors by focusing on current threats and adapting to the 
changing economic and technological landscape. The review determined 
that the current export control system is overly complicated, contains 
too many redundancies, and, in trying to protect too much, diminishes 
our ability to focus our efforts on the most critical national security 
priorities. See, e.g., August 30, 2010 press release by the White 
House, Office of the Press Secretary at https://www.whitehouse.gov/the-press-office/2010/08/30/president-obama-laysfoundation-a-new-export-controlsystem-strengthen-n. As a result, the Administration has begun 
the Export Control Reform Initiative, which will fundamentally reform 
the U.S. export control system. The Export Control Reform Initiative is 
designed to enhance U.S. national security and strengthen the United 
States' ability to counter threats such as the proliferation of weapons 
of mass destruction. The Administration determined that fundamental 
reform is needed with transformation to a single control list, a single 
licensing agency, a single information technology system, and a single 
primary enforcement coordination agency. The Administration is 
implementing the reform in three phases. The first two phases involve 
short-and medium-term adjustments to the current export control system, 
with a focus on establishing harmonized control lists and processes 
among the Departments of Commerce, State, and the Treasury to the 
extent practicable in order to build toward the third phase of the 
single control list, licensing agency, information technology system, 
and enforcement coordination agency. Under this approach, new criteria 
for determining what items need to be controlled and a common set of 
policies for determining when an export license is required will be 
implemented. The control list criteria will be based on transparent 
rules, which will reduce the uncertainty faced by our allies, U.S. 
industry, and its foreign partners, and will allow the government to 
erect higher enforcement walls around the most sensitive items in order 
to enhance national security.

A New License Exception as an Initial Step in Reform

    License Exception Strategic Trade Authorization (STA) authorizes, 
with conditions, the export, reexport and transfer (in-country) of 
specified items to destinations that pose relatively low risk of 
unauthorized uses. To safeguard against reexports to destinations that 
are not authorized under License Exception STA, License Exception STA 
imposes certain notification and consignee statement requirements. The 
exception does not alter any of the General Prohibitions in the EAR 
against exports, reexports, or transfers to proscribed end users, end 
uses, or destinations. Under the direction of the Office of Management 
and Budget, this rule was reviewed and cleared by the Departments of 
Defense, State, Energy, the Treasury, Homeland Security, and Justice.
    The exception is only relevant to exports, reexports, and transfers 
for which a license is required under the EAR. Thus, if the EAR do not 
impose an obligation to apply for and receive a license before 
exporting, reexporting, or transferring an item subject to the EAR, STA 
is not relevant to the transaction. For exports, reexports, and 
transfers where STA is relevant, its use is optional. Parties may use 
other license exceptions that authorize a planned transaction or apply 
for a license if they prefer to do so.
    On December 9, 2010, BIS issued a proposed rule (75 FR 76653) 
describing the proposed new License Exception STA that would be an 
initial step in the Export Control Reform Initiative. BIS received 41 
submissions commenting on the proposed rule. They are available for 
review at: https://www.regulations.gov (ID  BIS-2010-0038) and 
on https://efoia.bis.doc.gov/pubcomm/records-of-comments/record_of_comments_sta.pdf. This final rule implements License Exception STA. It 
reflects review and analysis of the public comments. A summary of the 
comments and responses are provided below under ``Review of Public 
Comments.''

Summary of Changes in the Final Rule as Compared to the Proposed Rule

    Releases of software source code and technology: Section 740.20 
makes specific reference to releases within a single country of 
software source code and technology to foreign nationals and provides a 
different notification procedure than that required for exports, 
reexports and other in country transfers. These changes are in response 
to public comments. They are described below under the topic heading 
``review of public comments.''
    Clarification of terminology in Sec.  740.20: The term 
``transactions'' in Sec.  740.20 has been replaced with the more 
explicit ``exports, reexports and in country transfers'' to avoid 
confusion that might otherwise arise when a single shipment or single 
sale includes some

[[Page 35277]]

items that are subject to License Exception STA and some that are not. 
Items in such shipment or sale that are not being exported, reexported 
or transferred pursuant to License Exception STA need not meet the 
requirements of License Exception STA.
    Notification to consignee, consignee statement and destination 
control statement: The revised provisions of Sec.  740.20(d) are based 
on consideration of the public's comments regarding the proposed 
notification requirements. The final rule retains the requirement to 
furnish to the consignee the ECCN of each item to be shipped to the 
consignee, but does not require that the ECCN be furnished for every 
successive shipment of the item at issue to the same consignee so long 
as the ECCN remains accurate. In addition, one consignee statement may 
be used for multiple shipments. The final rule, however, requires the 
exporter, reexporter, or transferor to keep a log or other written 
record that identifies each shipment made under License Exception STA 
and identifies the specific consignee statement that is associated with 
each shipment. In addition, the destination control statement described 
in the proposed rule is replaced with a more general notice 
requirement. The changes are described below under the topic heading 
``Final Rule Revisions to License Exception STA Safeguards.'' As 
revised, Sec.  740.20(d) provides the proper assurances that items 
shipped under License Exception STA will remain within the group of low 
risk destinations without posing excessive and complex burdens on 
parties trading in items subject to the EAR.
    STA paragraphs: Based on a suggestion in the public comments, the 
STA license exception paragraphs in 49 ECCNs have been revised to state 
more clearly that they apply only to the destinations listed in 
paragraph (c)(2) of Sec.  740.20 and not to STA as a whole. This change 
is described below under the topic heading ``review of public 
comments.''
    Removal of EI eligibility: Items controlled for encryption (EI) 
reasons are ineligible for License Exception STA, because of a 
determination that License Exception STA is not the appropriate 
approach to addressing the government interests in encryption export 
controls. Accordingly, BIS will address encryption-related aspects of 
the Export Control Reform Initiative separately.
    Removal of pathogen and toxin eligibility: Items described in ECCNs 
1C351.a, .b, .c, d.5, .d.6 or .e; 1C352; 1C353; 1C354; 1C360; 1E001 
(for 1C351.a, .b, .c, .d.5, .d.6 or .e, 1C352, 1C353, 1C354 or 1C360) 
or in ECCN 1E351 may not be exported, reexported, or transferred under 
the authority of License Exception STA. The potential of these items to 
make a direct contribution to the creation of weapons of mass 
destruction and United States Government policy to deter the spread of 
chemical and biological weapons warrants excluding them from STA 
eligibility.
    Items in ECCN 1C351.d.1, .2, .3, .4, .7, .8, .9, or .10 may be 
exported, reexported, or transferred under the authority of License 
Exception STA in quantities up to 100 milligrams of any one toxin per 
shipment and no more than six shipments may be sent to any one end user 
in any one calendar year. Unlike the items described in the previous 
paragraph, the items described in the ECCNs identified in this 
paragraph have more widespread commercial and medical applications and 
are not of a type that can be used to generate or grow large quantities 
of the toxin. The quantity and frequency cap in this aspect of STA is 
designed to allow for shipments under the exception to destinations of 
relatively low risk for appropriate end uses, but not allow for even 
the potential of unapproved stockpiling of such items in amounts that 
would create proliferation threats.
    Modifications to License Exception GOV: Supplement No. 1 to Sec.  
740.11 is revised to remove the prohibition on use of License Exception 
GOV to export items controlled for chemical and biological weapons 
reasons (CB) to agencies of cooperating governments (as defined in 
Sec.  740.11(b)(3)(ii) of the EAR) and to their embassies and 
consulates (as defined in Sec.  740.11(b)(2)(iv) of the EAR) located in 
Country Group B (Supp. No. 1 to part 740 of the EAR). This change is 
needed to facilitate the export of pathogens and toxins to governments 
of cooperating countries to facilitate collaborative responses to 
outbreaks of disease, whether man-made or naturally occurring, in the 
absence of eligibility under License Exception STA as noted above.
    Removal of certain gas turbine engine related software and 
technology eligibility: Section 740.20 is revised to make the following 
software and technology ineligible for license exception STA.
    (A) License Exception STA may not be used for 9D001 or 9D002 
``software'' that is specially designed or modified for the 
``development'' or ``production'' of:
     Components of engines controlled by ECCN 9A001 if such 
components incorporate any of the ``technologies'' controlled by 
9E003.a.1, 9E003.a.2, 9E003.a.3, 9E003.a.4, 9E003.a.5, 9E003.c, 9E003.i 
(other than technology for fan or power turbines), 9E003.h; or
     Equipment controlled by 9B001.
    (B) License Exception STA may not be used for 9D001 ``software'' 
that is specially designed or modified for the ``development'' of 
``technology'' controlled by 9E003.a.1, 9E003.a.2, 9E003.a.3, 
9E003.a.4, 9E003.a.5, 9E003.c, 9E003.i (other than technology for fan 
or power turbines) or 9E003.h.
    (C) License Exception STA may not be used for 9D004.f or 9D004.g 
``software''.
    (D) License Exception STA may not be used for 9E001 ``technology'' 
according to the General Technology Note for the ``development'' of 
9A001.b engines or components of engines controlled by 9A001.b if such 
components incorporate:
     Any of the ``technologies'' controlled by 9E003.a.1, 
9E003.a.2, 9E003.a.3, 9E003.a.4, 9E003.a.5, 9E003.c, 9E003.i (other 
than technology for fan or power turbines) or 9E003.h; or
     Any of the 9D001 or 9D002 software in paragraphs (A) or 
(B) above.
    (E) License Exception STA may not be used for 9E002 ``technology'' 
according to the General Technology Note for the ``production'' of 
components of engines controlled by 9A001.b if such components 
incorporate any of the ``technologies'' controlled by 9E003.a.1, 
9E003.a.2, 9E003.a.3, 9E003.a.4, 9E003.a.5, 9E003.c, 9E003.i (other 
than technology for fan or power turbines), 9E003.h.
    (F) License Exception STA may not be used for ``technology'' in 
9E003.a.1, 9E003.a.2, 9E003.a.3, 9E003.a.4, 9E003.a.5, 9E003.c, 9E003.i 
(other than technology for fan or power turbines) or 9E003.h.
    A review of gas turbine engine technology has been unable to 
establish a satisfactory method of distinguishing the foregoing gas 
turbine engine technology and software that is within the scope of Tier 
1 from such technology that is within the scope of Tier 2 (See 75 FR 
76665, December 9, 2010 for an explanation of the Tier 1 and Tier 2 
criteria). Accordingly, such technology and software may not be 
exported under the authority of License Exception STA.
Removal of Unneeded License Exception STA Paragraph From ECCN 7D002
    License Exception STA paragraphs appeared in 50 ECCNs in the 
proposed rule. Those paragraphs identified items that may not be 
shipped under License Exception STA authorizing paragraph (c)(2) (Sec.  
740.20(c)(2) of the EAR). In both

[[Page 35278]]

the proposed rule and this final rule the License Exception STA 
paragraphs in the ECCNs have no effect on authorizing paragraph (c)(1) 
of STA. Because software covered by ECCN 7D002 is controlled for 
missile technology reasons (MT), such software is ineligible for either 
authorizing paragraph (c)(1) or authorizing paragraph (c)(2) of License 
Exception STA. This final rule accordingly does not include a License 
Exception STA paragraph in ECCN 7D002.
Clarification of Applicability of Missile Technology Controls to ECCN 
7E001 and 7E002
    ECCNs 7E001 and 7E002 apply inter alia to technology for the 
development and production of equipment controlled by ECCNs 7A001, 
7A002 and 7A003.d. ECCNs 7E001 and 7E002 impose a national security 
reason for control on all of the technology that they cover and apply a 
missile technology reason for control to technology for the development 
or production of equipment controlled for missile technology reasons. 
ECCNs 7A001, 7A002 and 7A003.d impose a national security reason for 
control on all of the equipment that they cover and impose a missile 
technology reason for control on such equipment if the equipment meets 
the parameters of ECCN 7A101, 7A102, or 7A103. That pattern is the 
reverse of the pattern that prevails in the Commerce Control List, 
where an item that is subject to an ECCN with a lower number as the 
third character generally would not also be subject to an ECCN with a 
higher number as the third character. To guard against the possibility 
that readers will, as a result of this unusual pattern, erroneously 
conclude that certain 7E001 and 7E002 technology is not subject to the 
missile technology reason for control, this rule adds a sentence to the 
license requirements sections of ECCN 7E001 and 7E002 reminding readers 
that technology for 7A001, 7A002 and 7A003.d equipment is subject to 
the missile technology reason for control if that equipment meets the 
parameters of 7A101, 7A102 or 7A103.
Revisions to Eligible Destinations and Removal of Civil End-Use 
Requirement
    In this final rule, 36 countries are included in Sec.  
740.20(c)(1), which authorizes exports, reexports and in country 
transfers that are subject to multiple reasons for control. Eight 
destinations are included in Sec.  740.20(c)(2), which authorizes 
export, reexports and in country transfers that are subject to national 
security reasons for control. The paragraph (c)(1) destinations are: 
Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, 
Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, 
Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, 
Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, 
Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, and the 
United Kingdom. The paragraph (c)(2) destinations are: Albania, Hong 
Kong, India, Israel, Malta, Singapore, South Africa, and Taiwan. This 
final rule also removes the civil end use requirement that the proposed 
rule applied to destinations listed in paragraph (c)(2).
    Preclusion of License Exception APR paragraph (b) in addition to 
paragraph (a): As published in the proposed rule, this final rule 
precludes use of License Exception APR paragraph (a) (Sec.  740.16(a) 
of the EAR) for items that have been shipped pursuant to License 
Exception STA. Also as published in the proposed rule, this final rule 
requires consignees in subsequent exports, reexports and in country 
transfers authorized by License Exception STA to acknowledge that 
preclusion. However, paragraph (b) of License Exception APR authorizes 
reexports to most of the destinations authorized by License Exception 
STA and does not require such notice. Thus, under the proposed rule, a 
party could receive via APR an item that previously had been shipped 
under STA and would be unaware of the preclusion. To remedy this 
inconsistent result, this final rule revises Sec.  740.20 to preclude 
the use of License Exception APR paragraph (b) if an item previously 
has been shipped under License Exception STA and to add acknowledgement 
of that preclusion to the consignee statement required under License 
Exception STA.
    Resolution of items under consideration for Tier 1.
    The preamble to the proposed rule stated the U.S. Government was 
considering whether the following ECCNs, in whole or part: 0A919, 
1A002, 3A001, 3A002, 3A003, 3A201, 3A228, 3A229, 3A232, 4A001, 4A003, 
5A001, 6A001, 6A002, 6A003, 6A004, 6A005, 6A006, 7A001, 7A002, 7A003, 
7A004, 7A006, 8A001, 8A018, 9A001, 9A004, 9A012 and 9A018 and the 
technology ECCNs related to them, met the Tier 1 criteria and thus 
would be excluded from the scope of License Exception STA. Commenters 
on the proposed rule addressed 1A002, 3A001, 6A001, 6A002, 6A003, 
6A005, 7A004, 8A001, 9A001, 9A004, 9A018, 1E001, 6E002, and 9E003. 
Generally, those comments provided support that certain specific items 
covered by those ECCNs are widely available from suppliers abroad, 
including suppliers in destinations not eligible to receive items under 
License Exception STA under the proposed rule.
    Because planned export control tiers have not yet been established, 
nothing can formally be assigned to an export control tier at this 
time. However, after reviewing the public comments and consulting with 
other government agencies, BIS has concluded that the ECCNs, or 
portions thereof, that should be removed from the scope of STA at this 
time are those identified in Sec.  740.20(b)(2) of this final rule.
    Continuing efforts to improve export controls and refine License 
Exception STA.
    As part of the President's Export Control Reform Initiative, the 
process of identifying the appropriate export control tier for each 
item on the Commerce Control List will continue. In addition, agencies 
will continue to study two specific issues related License Exception 
STA.
    One issue is whether some ``build to print technology'' related to 
gas turbine engine components and controlled under ECCN 9E002 can be 
made eligible for License Exception STA while excluding more critical 
technology. In this instance, the term ``build to print technology'' 
refers to information that describes the physical and dimensional 
characteristics of a component, but does not reveal how to perform the 
processes that are used to produce a component with those physical and 
dimensional characteristics.
    Another issue for further review is whether technology controlled 
under ECCN 2E003.f related to the application of certain coatings is, 
in whole or in part, appropriate for exclusion from License Exception 
STA.
Review of Public Comments

Public Comments

    Some commenters remarked on the overall nature of License Exception 
STA. Many favored the concept in general and some noted that their own 
organizations likely would require fewer licenses as a result of STA. 
Others indicated that, as proposed, STA would provide little or no 
utility for their organizations. Some suggested specific changes or 
clarifications to STA or other steps that BIS could take in addition to 
or in lieu of License Exception STA. These ideas and BIS's responses 
are discussed below.
    Comments related to the general utility and feasibility of License 
Exception STA.
    Comment 1: Commenters' opinions were divided on the utility of STA.

[[Page 35279]]

Some believed that the license exception would substantially reduce the 
number of licenses needed by their organizations; others indicated that 
it would result in little or no change with respect to their 
transactions that are subject to the EAR.
    Response: BIS recognizes that License Exception STA does not 
address all issues of public concern or even all issues that have been 
identified as pointing to a need for export control reform. As noted in 
the preamble to the proposed rule, License Exception STA is only one 
step in the Administration's Export Control Reform Initiative. Other 
measures will be needed to effect the remaining aspects of that 
initiative.
    Comment 2: One commenter stated that STA provides no real benefit 
that is not already obtainable under License Exception GBS and that the 
latter lacks the documentation requirements and restrictions of STA. 
Several commenters indicated that they thought the restrictions and 
documentation requirements under STA would limit its utility.
    Response: BIS agrees that parties who engage only in transactions 
that currently do not require licenses or that currently are eligible 
for License Exception GBS would not benefit from License Exception STA. 
A party may continue to use License Exception GBS to the extent the 
export at issue is within the scope of that exception. However, because 
License Exception STA is available for more ECCNs than is License 
Exception GBS, some parties will benefit from this new license 
exception.
    Comment 3: Several commenters expressed concern that STA did not go 
far enough and cited unnamed ``government officials'' as having 
predicted that STA will replace GBS once the State and Commerce lists 
are merged.
    Response: BIS currently has no plan to remove License Exception GBS 
from the EAR. Determining whether GBS will be needed in a regulatory 
scheme based on a single control list is premature and beyond the scope 
of the proposed rule.
    Comment 4: Some commenters expressed concern that without broader 
license exceptions, BIS might be unable to handle the volume of 
licenses that it is likely to encounter once certain items are 
transferred from the United States Munitions List to the Commerce 
Control List. These commenters stated that although BIS's projection of 
License Exception STA replacing over 3,000 licenses annually is not 
insignificant, it is ``not a large portion of the low risk licensing 
volume currently facing BIS.'' Finally, these commenters stated that 
the State Department faced a 10,000 case backlog in 2007 and 
recommended that BIS proactively address potential increases in exports 
and minimize transaction-by-transaction authorization requirements in 
order to avoid a similar situation.
    Response: BIS recognizes that a transfer of a large number of items 
from the United States Munitions List to the Commerce Control List 
could significantly increase BIS's workload and, without adequate 
preparation, could result in backlogs and delays. BIS is working to 
develop means for addressing those concerns. However, License Exception 
STA is intended to provide a more efficient method of shipping items 
currently subject to the EAR to destinations that present a relatively 
low risk of diversion. Concerns about future transfers of items from 
the United States Munitions List are beyond the scope of the proposed 
rule.
    Comment 5: Some commenters on this topic proposed a range of 
changes to the EAR other than License Exception STA to address to the 
perceived need for fewer situations in which transaction-by-transaction 
authorization is required. Such proposals were: (i) Simply removing 
license requirements by removing X's from the boxes in the Country 
Chart table [Supp. No. 1 to part 738 of the EAR]; (ii) broadening the 
validated end-user program; (iii) creating an open general license 
similar to that used by the United Kingdom; and (iv) creating an intra-
company transfer license that imposes fewer requirements on users than 
BIS's 2008 proposal on that subject.
    Response: License Exception STA is intended as an initial step in a 
broad export control reform effort. It recognizes, consistent with U.S. 
international commitments, a limited group of destinations in which the 
risk of diversion to unauthorized destinations, parties or uses is low. 
It also imposes certain safeguards to provide reasonable assurance that 
items exported, reexported, or transferred pursuant to STA will not be 
diverted outside that group. Each of the types of proposed revisions 
noted above was considered. BIS ultimately determined that a license 
exception approach is the best way to address the goals of this aspect 
of the reform effort, which primarily include reducing the licensing 
burden with respect to exports to a limited group of destinations, 
consistent with U.S. international commitments, without a wholesale 
revision of the EAR, creating a method of notifying foreign consignees 
about the prohibitions on reexports outside such destinations, avoiding 
unintentionally re-imposing previously removed controls, and creating 
records sufficient for monitoring and enforcement of parties' 
compliance with the conditions and obligations of STA.
Comments Regarding Clarity
    Comment 6: One commenter stated that the effects of License 
Exception STA on encryption are unclear and asked whether License 
Exception ENC reporting requirements apply to an encryption item 
exported under License Exception STA.
    Response: The final rule does not permit items controlled for 
encryption reasons to be exported, reexported or transferred under 
License Exception STA. Accordingly, any lack of clarity on this point 
that may have been present in the proposed rule need not be addressed 
in the final rule.
    Comment 7: One commenter stated that BIS needs to make clear that 
items controlled for antiterrorism (AT) reasons are not excluded from 
STA. The commenter noted that a license is not required for AT reasons 
for any STA eligible destination.
    Response: This commenter's observation about the lack of an AT 
license requirement for any STA eligible destination is correct with 
respect to destination-based license requirements (although Part 744 of 
the EAR may impose an AT license requirement for specific end uses or 
end users in any destination). Like other License Exceptions in the 
EAR, STA would be used only where a license requirement exists; if no 
license is required there is no need to consider STA or any other 
license exception. Although most ECCNs include antiterrorism as a 
reason for control, that reason for control currently imposes a license 
requirement for only five destinations, none of which is eligible for 
STA. Although the absence of a reference to antiterrorism controls in 
License Exception STA might cause some readers to conclude erroneously 
that items controlled for antiterrorism reasons may not be shipped 
under license exception STA, adding such a reference might cause some 
readers to conclude erroneously that exports, reexports, and in country 
transfers to which antiterrorism controls do apply may be consummated 
under License Exception STA. The latter error has greater potential for 
harm than the former. Therefore, BIS does not believe that a change to 
the regulatory text on this point is desirable.
    Comments regarding deemed exports.
    Comment 8: Two commenters addressed the applicability of License 
Exception STA to deemed exports. One

[[Page 35280]]

indicated that it read the proposed rule as permitting License 
Exception STA to be used for deemed exports but suggested that specific 
authorizing language be added to STA for clarity. Another stated that 
STA would be useful for deemed exports and would be useful for some 
exports to some foreign subsidiary employees.
    Response: BIS's intent in publishing the proposed rule was for 
License Exception STA to authorize deemed exports. However, upon 
further review, BIS has concluded that the requirements to furnish 
ECCNs, to obtain a consignee statement, and to provide a destination 
control statement are not likely to be relevant or useful in deemed 
export situations, which typically involve an employer-employee 
relationship or researcher collaborations. Accordingly, this final rule 
changes Sec.  740.20 to address deemed exports and reexports separately 
from other exports and reexports. Releases of source code and 
technology are explicitly authorized. The authorization paragraphs 
explicitly refer to nationals of the destinations listed therein. 
Deemed exports and reexports are therefore explicitly authorized under 
License Exception STA. The ECCN notification, consignee statement, and 
destination control statement requirements are replaced with a 
requirement that the releaser of the technology or source code notify 
the recipient of the restrictions on further release. The notification 
must either expressly inform the recipient that the EAR impose limits 
on further disclosure or must be in the form of an agreement in which 
the recipient agrees to limits on further disclosure. Any such 
agreement must impose limits that are equivalent to or more restrictive 
than all limits on further disclosure that are imposed by the EAR. The 
notification must be in writing. The notification may be in a separate 
document or included in a document such as a contract or a 
nondisclosure agreement. If the document has an expiration date, it 
must provide that the restrictions on disclosure do not expire.
    Recommendation for new process for public input on eligible ECCNs 
for License Exception STA.
    Comment 9: One commenter recognized that statutory restrictions and 
regime controls place some restrictions on BIS. That commenter, 
however, recommended that BIS state in the final rule that it will 
conduct regular reviews of ECCNs and set up a process whereby exporters 
could submit a request to BIS setting forth the reasons that a 
particular ECCN should be eligible for STA.
    Response: BIS is reviewing the Commerce Control List as a whole as 
part of the Administration's Export Control Reform Initiative. In 
addition, the EAR (including the Commerce Control List) will be subject 
to the retrospective review requirements of Executive Order 13563. 
Those who wish to recommend any change to License Exception STA or any 
other provision of the EAR may do so in a number of ways, such as: 
informal contacts with BIS; contacting one of the technical advisory 
committees that advise BIS; or petitioning BIS for issuance, amendment 
or repeal of a rule, as contemplated by Sec.  756.1(a)(1) of the EAR. 
Although always open to suggestions, BIS does not plan to set up a 
special process to receive proposed changes to License Exception STA.
    Comment on end use restrictions in Sec.  740.20(c)(2)(ii) in the 
proposed rule.
    Comment 10: One commenter stated that by including the phrase 
``other than a military end use as defined in Sec.  744.21 of the EAR'' 
in the definition of ``civil end use'' in proposed Sec.  
740.20(c)(2)(ii), the proposed rule essentially took the China End Use 
Rule and applied the foreign policy behind that rule to a much larger 
group of countries even though many of those countries are not subject 
to the same foreign policy considerations as is China.
    Response: Because the final rule does not include a civil end-use 
requirement, a discussion of whether the definition of civil end-use in 
Sec.  744.21 is appropriate for STA is unnecessary.
    Proposal to expand the scope of STA.
    Comment 11: One commenter recommended that STA should be available 
for transactions where the exporter and consignee are the same 
organization.
    Response: License Exception STA is available for transactions where 
the exporter and the consignee are the same organization, but only if 
they otherwise meet the requirements for use of the license exception.
    Eligible destination comments.
    Comment 12: Several commenters raised questions regarding the 
limitations on License Exception STA eligibility for certain countries.
    Response: BIS has determined that for foreign policy reasons, the 
lists of destinations eligible for License Exception STA shall be 
limited to those destinations included in this final rule.
    Eligible items comments.
    Comment 13: Two commenters recommended that items controlled for 
missile technology reasons should be made eligible for License 
Exception STA under limited circumstances. One commenter stated that 
such items are needed for use in public light water reactors. Another 
commenter stated that the eligibility of certain items, which are in 
Category 7 of the Commerce Control List, could be limited to equipment 
required for or in support of safety of flight.
    Response: BIS does not have the discretion to include any item 
controlled for export for missile technology reasons in License 
Exception STA. Items are controlled on the Commerce Control List for 
missile technology reasons because they are listed in the Missile 
Technology Control Regime Annex. The exclusion of items on the Missile 
Technology Control Regime Annex is based on Section 6(l) of the Export 
Administration Act and the U.S. commitment to implement the Missile 
Technology Control Regime Guidelines.
    Comment 14: One commenter stated that ECCNs 2B232 and 2E001 should 
be eligible for STA. The commenter noted that manufacturers in China 
and India make comparable products.
    Response: ECCN 2B232 and the portion of 2E001 that addresses 
technology for the development of equipment controlled under 2B232 are 
controlled for nuclear proliferation reasons. Under both the proposed 
rule and this final rule, their License Exception STA eligibility is 
limited to the destinations in Sec.  740.20(c)(1) for foreign policy 
reasons.
    Comment 15: One commenter stated that it needs to ship items that 
are covered by ECCN 2B350 predominantly to Taiwan, Singapore, China and 
Israel. The commenter stated that it currently has about 100 licenses 
and that license requirements make it uncompetitive and cause it to 
lose business. This commenter asserted that similar parts made in South 
Korea can get a license in one to two weeks. A better approach than the 
proposed rule would be to allow less sensitive components to be 
exported without a license to more destinations.
    Response: For such destinations as Taiwan, Singapore and Israel, 
which are destinations listed in Sec.  740.20(c)(2), BIS proposed that 
License Exception STA may be used for transactions in which the only 
applicable reason for control is national security. ECCN 2B350 is 
controlled for chemical and biological weapons reasons. BIS has 
retained this limit in the final rule for foreign policy reasons.
    Comment 16: One commenter stated that exclusion of CCL Category 3 
and 4 items would limit the utility of License Exception STA.
    Response: Commerce Control List Categories 3 and 4 are not excluded 
in

[[Page 35281]]

their entirety from STA. All or portions of some ECCNs in Categories 3 
and 4 are excluded from eligibility to the eight destinations listed in 
Sec.  740.20(c)(2) because they cover items on the Wassenaar 
Arrangement Sensitive List. This limitation on items eligible for 
export to destinations listed in Sec.  740.20(c)(2) was included in the 
proposed rule, and BIS has concluded that retaining the rule's limit of 
eligibility for License Exception STA for these destinations to non-
Sensitive List items is appropriate for foreign policy reasons.
    Comment 17: One commenter stated that ECCN 6A002.a.2 and .a.3 
should be eligible for Sec.  740.20(c)(1) destinations.
    Response: Under both the proposed rule and this final rule, ECCNs 
6A002.a.2 and .a.3 are eligible for Sec.  740.20(c)(1) destinations 
except for those portions of paragraph .a.3 that are subject to control 
for missile technology (MT) reasons. For the reason noted in the 
response to Comment 13 above, BIS is not making MT controlled items 
eligible for License Exception STA. Portions of 6A002.a.2 and all of 
6A002.a.3 are ineligible for Sec.  740.20(a)(2) destinations because 
they are on the Wassenaar Arrangement Sensitive List.
    Comment 18: Two commenters stated that ECCN 6A003.b should be 
eligible for the 127 destinations set forth in Sec.  740.20(c)(2) of 
the proposed rule and one of those commenters also stated that ECCN 
9A018.b should be eligible.
    Response: The STA paragraph for ECCN 6A003 excludes all of 
paragraphs .b.3 and .b.4 from STA eligibility if the destination is one 
of the destinations in paragraph (c)(2) of the proposed rule (eight 
destinations in this final rule). BIS developed the STA paragraphs to 
provide a reasonable balance between the policy of excluding items on 
the Sensitive List from eligibility under Sec.  740.20(c)(2) and the 
need to make the regulations as clear as possible within substantive 
policy constraints. Rewriting the STA paragraph in 6A003 to match 
exactly the Sensitive List would add significantly to the length and 
complexity of the entry while providing relatively little change in the 
scope of eligible transactions. Moreover, ECCN 6A003.b.3 and .b.4.b are 
also controlled for regional stability reasons. Thus, even if the STA 
paragraph in 6A003 were rewritten to match the text of the Sensitive 
List exactly, the items in 6A003.b.3 and .b.4.b would continue to be 
excluded from eligibility under Sec.  740.20(c)(2) because of their 
regional stability control. ECCN 9A018.b is also subject to a regional 
stability control and, consistent with the policy stated above, is not 
eligible for Sec.  740.20(c)(2).
    Comment 19: One commenter recommended that ECCN 6A001.a.2.d.1 
(certain underwater heading sensors), .a.2.b.7 (certain towed 
hydrophone arrays) and .a.2.e.1 (certain bottom or bay cable systems) 
be made eligible for Sec.  740.20(c)(2) destinations. Without such 
eligibility, the ability to use STA to send repair items to vessels in 
port is limited. These items do not require a license to go to 
destinations in Country Group A:1 (Supp. No. 1 to Part 740 of the EAR), 
which includes most of the destinations eligible under Sec.  
740.20(c)(1). This commenter stated that if License Exception STA 
results in the repeal of License Exception RPL, it would be at a 
disadvantage.
    Response: This final rule excludes items listed on the Wassenaar 
Arrangement Sensitive List from destinations listed in Sec.  
740.20(c)(2). As set forth in the response to Comment 16, BIS has 
concluded that limiting these destinations to non-Sensitive List items 
is appropriate for foreign policy reasons. That said, BIS is not 
eliminating License Exception RPL. In addition, BIS can make one change 
to the 6A001 STA paragraph to track more accurately the Wassenaar 
Arrangement Sensitive List without adding undue length and complexity 
to the ECCN. Paragraph .a.2.a.4 is not on the Wassenaar Arrangement 
Sensitive List. Therefore, BIS is adding the phrase ``except .a.2.a.4'' 
immediately following the phrase ``or 6A001.a.2 in the STA paragraph of 
the License Exception Section of ECCN 6A001.''
    Comment 20: One commenter recommended that items in ECCN 8A001.c 
(unmanned tethered submersible vehicles) be made eligible for Sec.  
740.20(c)(2). The commenter noted that such vehicles already do not 
require a license for most of the 37 destinations in proposed Sec.  
740.20(c)(1) and so STA would not affect the licensing burden for these 
items to any great degree. This commenter stated that allowing full STA 
eligibility for these items would be consistent with the Wassenaar 
Arrangement's best practices agreed to at the 2006 Wassenaar 
Arrangement plenary meeting, which allows license exceptions for 
sensitive list items. Other Wassenaar members allow exports without an 
individual license. For example the United Kingdom permits such exports 
under an open general license. The safeguards imposed by License 
Exception STA allow for sensitive list items to be controlled and 
monitored consistent with U.S. national security interests and regime 
obligations. These vehicles cannot go far from their support vessel, 
cannot be preprogrammed and require considerable support equipment. In 
some cases a vessel or rig must be modified to handle the equipment and 
restored when the equipment is removed making diversion of such 
vehicles to military uses unlikely. Unmanned tethered submersible 
vehicles are not as sensitive from a national security perspective as 
untethered submersibles. Excluding 8A001.c unmanned tethered 
submersible vehicles while allowing 8A001.a manned tethered 
submersibles full STA treatment would be inconsistent.
    Response: Notwithstanding the arguments made in the Comment, BIS 
has determined that retaining the limitation set forth in the proposed 
rule that STA authorization for Wassenaar Arrangement Sensitive List 
items (as 8A001.a items are) is available only to the destinations 
listed in Sec.  740.20(c)(1) of this final rule is necessary for 
foreign policy reasons.
    Comments on information and consignee statement requirements.
    BIS received a number of comments on the proposed requirements to 
provide safeguards against diversion that were set forth in the 
proposed rule. Those safeguards are: the requirement to provide the 
consignee with the item description and ECCN; the requirement to obtain 
assurances from the consignee; and the requirement to furnish a special 
STA destination control statement. Some of the comments applied to the 
safeguards as a whole and others to specific safeguard measures.
    Comments regarding the safeguards as a whole.
    Comment 21: Some commenters stated that manufacturers already have 
processes in place to notify consignees not to reexport in violation of 
the EAR and to provide ECCNs and destination control statements or that 
language typically found in sales contracts and purchase order 
agreements is a more effective means of communicating compliance 
obligations.
    Response: Although BIS encourages parties trading in items subject 
to the EAR to inform their customers of EAR requirements and 
responsibilities of parties to the transaction, in general the EAR do 
not require parties to do so. License Exception STA could not function 
in its intended manner unless all exporters, reexporters, transferors 
and consignees are aware of their specific responsibilities. Some form 
of mandatory notice is, therefore, necessary.
    Comment 22: One commenter stated that the STA safeguards 
transferred

[[Page 35282]]

compliance responsibilities from the exporter to the consignee.
    Response: BIS does not believe that the creation of License 
Exception STA or the specific safeguard requirements that STA imposes 
constitute a ``transfer'' of responsibilities from one party to 
another. All parties dealing with items that are subject to the EAR are 
responsible for compliance with those regulations. The safeguard 
requirements of License Exception STA are intended to place parties on 
notice of their responsibilities and to verify that they are aware of, 
and will comply with, such responsibilities.
    Comments regarding the requirement to furnish the Export Control 
Classification Number.
    Comment 23: Several commenters stated that the requirement to 
furnish an ECCN is unnecessary. The reasons those gave were: ECCNs are 
already provided on the invoice and air waybill; the EAR already 
require the ECCN at least for the initial export; the ECCN is required 
in the STA consignee statement; and it would be difficult for U.S. 
exporters to verify that foreign buyers pass ECCN information along to 
their customers.
    Response: Although BIS encourages parties to notify their 
consignees of the EAR, compliance responsibilities, and other 
information that would aid compliance such as ECCNs, such activities 
are generally not required under the EAR. License Exception STA is 
intended to remove the burden of applying for a license in exports, 
reexports and in country transfers that are limited to certain 
destinations where there is a relatively low risk of diversion. 
Requiring that consignees be notified of the ECCN provides reasonable 
assurance that the consignee will be on notice that the item it is 
receiving is sensitive and that further distribution without a U.S. 
license must be restricted to the destinations for which no license is 
required, or for which STA or some other License Exception provides 
authorization.
    The EAR do not require exporters to monitor the conduct of foreign 
buyers to verify that they pass on ECCN information to their customers. 
The EAR do, however, prohibit, among other things, selling, 
transferring, transporting or servicing items subject to the EAR with 
knowledge that a violation has, will, or is intended to take place with 
respect to that item.
    Comment 24: One commenter asked who would be responsible if an 
erroneous ECCN is supplied and, as a result, the consignee reexports an 
item using License Exception STA in a transaction that is not 
authorized by STA. The commenter recommended that the reexporter not be 
liable in such a case.
    Response: BIS believes that the consignee should be able to place 
reasonable reliance on the ECCN furnished by its supplier in License 
Exception STA transactions. Accordingly, the final rule states that for 
purposes of determining reexport or transfer eligibility under STA, the 
consignee may rely on the ECCN provided to it by the party required to 
furnish the ECCN to the consignee unless the consignee ``knows'' that 
the ECCN is in error. The term ``know'' has the same meaning as the 
term ``knowledge'' in Sec.  772.1 of the EAR.
    Comments regarding the requirement to obtain consignee statement.
    Comment 25: Several commenters proposed that one consignee 
statement be permitted for multiple transactions. Various proposals 
were to allow a single statement for a specific project, a specific 
contract, a specific time period or for all items to be shipped to that 
consignee under STA. One commenter suggested that License Exception STA 
as proposed actually allows for a single statement to cover multiple 
shipments but clarification is desirable.
    Response: BIS agrees that a single consignee statement should be 
able to cover more than one transaction for the reasons provided by 
commenters and is revising the final rule to explicitly so state. These 
revisions are described more fully under the topic heading ``Final Rule 
Revisions to License Exception STA Safeguards'' below.
    Comment 26: One commenter stated that the requirement for a 
consignee acknowledgement is in direct opposition to BIS's statement 
that the eligible destinations are ``low risk.''
    Another commenter stated that the requirement for reexporters and 
transferors to obtain a statement from their consignees would impose a 
burden on a particular country's exporters without providing additional 
safeguards to U.S. export controls because that country has stringent 
export controls based on the same multilateral regimes as the United 
States. Several commenters noted that foreign customers are often 
reluctant or unwilling to acknowledge U.S. jurisdiction and suggested 
that this requirement continues a perception that dealing with U.S. 
companies is difficult.
    Response: An important purpose of the consignee statement is to 
ensure that the consignee is aware that the item has been shipped under 
a license exception that is limited to low risk destinations and agrees 
to take steps that will keep the item from leaving those destinations 
without authorization. It is integral to the overall purpose of STA, 
which is to provide license exception shipments throughout a group of 
low risk destinations. Regime membership is a key part of the overall 
structure for export controls in an importing country. STA is based, in 
part, on that structure but focuses further on actual transactions to 
ensure controlled items are properly exported and reexported.
    Comment 27: One commenter suggested that the requirement to obtain 
a consignee statement should not be needed for destinations in Sec.  
740.20(c)(2) because the eligible items are less sensitive than those 
available to destinations listed in Sec.  740.20(c)(1). This commenter 
noted that BIS has ample existing means of identifying violations and 
enforcing STA restrictions, including post shipment verifications and 
placing violators on the Entity List.
    Response: The purpose of the consignee statement is to make sure 
that the consignee is aware that the item has been shipped under a 
license exception that is limited to low risk destinations. It is 
integral to the overall purpose of STA, which is to provide license 
exception shipments throughout a group of low risk destinations. 
Although the items eligible to Sec.  740.20(c)(2) destinations are less 
sensitive than those eligible to Sec.  740.20(c)(1) destinations, the 
items are still sufficiently sensitive that obtaining the consignee's 
acknowledgement of the limits of STA is necessary to provide reasonable 
assurance that the item will not be reexported beyond the low risk 
group of authorized destinations.
    Comment 28: This commenter also suggested that if the consignee 
statement is retained, three specific provisions are unnecessary. 
First, the provision in which the consignee agrees not to export, 
reexport or transfer in violation of the EAR is not needed because it 
merely duplicates the requirements of the regulations. Second, 
consignees in Sec.  740.20(c)(2) destinations should not be required to 
acknowledge that items shipped under STA may not subsequently be 
shipped under License Exception APR paragraph (a) because that 
paragraph does not authorize reexports from any Sec.  740.20(c)(2) 
country. Third, the requirement to agree that items shipped under Sec.  
740.20(c)(2)(ii) [125 destinations in the proposed rule] may be used 
only in a civil end use is unneeded because it repeats a restriction in 
part 744 of the EAR and creates an unreasonable burden on all parties 
in a chain of transactions who are, in effect, agreeing not to 
incorporate the exported item into a United States Munitions List

[[Page 35283]]

defense article. This burden is particularly problematic for 
manufacturers of materials.
    Response: License exception STA authorizes exports, reexports and 
in country transfers in sensitive items that otherwise would require a 
license. As such, requiring acknowledgement of the regulations that 
apply to the shipment is reasonable.
    This commenter correctly notes that License Exception APR paragraph 
(a) does not directly authorize any reexport from a destination listed 
in Sec.  740.20(c)(2). However License Exception STA does authorize 
reexports from places listed in Sec.  740.20(c)(2) to destinations 
listed in Sec.  740.20(c)(1) and License Exception APR paragraph (a) 
does authorize reexports from those (c)(1) destinations to other 
destinations that are not eligible for STA. For the safeguards of 
License Exception STA to function effectively, all reexporters must 
notify their consignees of the STA restrictions. The party in a Sec.  
740.20(c)(2) location will need to be on notice of the APR paragraph 
(a) restriction in order to be able to obtain the needed assurance from 
any party in a Sec.  740.20(c)(1) destination to which it reexports.
    Because this final rule removes the civil end use limitation from 
Sec.  740.20(c)(2), the requirement to agree to that limitation is not 
needed and this final rule removes it from the consignee statement.
    Comments regarding the destination control statement.
    Comment 29: Some commenters objected to the special STA destination 
control statement, which under the proposed rule, the exporter, 
reexporter, or transferor would need to place on export control 
documents that accompany the shipment. The stated reasons for the 
objections were that the requirement would be superfluous to other EAR 
provisions, the cost and complexity of the requirements would 
discourage use of License Exception STA, and that a second destination 
control statement is not needed or would not be effective.
    Response: After review of the comments and further consideration, 
BIS has concluded that some form of notice to the consignee that the 
items it is receiving are subject to STA is needed. However that notice 
need not take the form of a destination control statement. Accordingly, 
BIS is replacing the destination control statement requirement with the 
notice requirement that is described under the heading ``Final Rule 
Revisions to License Exception STA Safeguards'' below.
    Final Rule Revisions to License Exception STA Safeguards.
    The proposed requirements to furnish an ECCN, to obtain a consignee 
statement and to furnish a destination control statement were intended 
to operate in concert to provide assurance against diversions. To 
address the points raised by some of the commenters regarding those 
proposed requirements while maintaining their concerted nature, BIS is 
making the changes described below.
    The final rule adds clarifying language to Sec.  740.20(d)(1) and 
(2) stating that the Export Control Classification Number furnished to 
the consignee may be used for multiple shipments of the same item by a 
given exporter to a given consignee under License Exception STA so long 
as the information remains accurate. The final rule also provides that 
for purposes of determining reexport or transfer eligibility under STA, 
the consignee may rely on the ECCN provided to it by the party required 
to furnish the ECCN to the consignee unless the consignee knows that 
the ECCN is in error. The term ``know'' has the same meaning as the 
term ``knowledge'' in Sec.  772.1 of the EAR.
    The final rule revises Sec.  740.20(d)(2) to provide that one 
consignee statement may be used for multiple shipments of the same item 
by the same exporter to the same consignee under License Exception STA 
provided descriptions of the item(s), ECCN(s) and names of the parties 
remain accurate. The final rule also removes the provision calling for 
the consignees' agreement that items shipped to certain destinations 
will be used only for civil end uses because the final rule does not 
impose a civil end use limitation. To facilitate verification of 
compliance with the consignee statement requirement, the final rule 
requires the exporter, reexporter, and transferor to maintain the 
specific consignee statement that is associated with each shipment and 
a log or other record that identifies each shipment made under License 
Exception STA and identifies the specific consignee statement that is 
associated with each shipment.
    The final rule replaces the destination control statement with a 
requirement that the exporter, reexporter or transferor, as applicable, 
notify the consignee in writing that the shipment is made pursuant to 
License Exception STA. The notice must either specify which items are 
subject to License Exception STA or state that the entire shipment is 
made pursuant to License Exception STA. The notice must clearly 
identify the shipment to which it applies. The written notice may be 
conveyed by paper documents or by electronic methods such as facsimile 
or email.
    BIS believes that with these changes, the STA safeguards provide 
appropriate assurances that items shipped under License Exception STA 
will remain within the group of low risk destinations without placing 
excessive and complex burdens on parties trading items subject to the 
EAR.
    Comments regarding the License Exception STA paragraphs.
    Comment 30: The STA paragraphs, which appear in 49 ECCNs in this 
final rule, designate those ECCNs or portions thereof as ineligible for 
License Exception STA if the destination is listed in Sec.  
740.20(c)(2) of the EAR. Those exclusion paragraphs have no effect on 
the availability of STA for destinations listed in Sec.  740.20(c)(1) 
of the EAR. Some commenters indicated that these exclusion paragraphs 
were confusing and would lead readers to conclude erroneously that the 
designated ECCNs or the designated portions were ineligible for License 
Exception STA for all destinations. In addition, some of the commenters 
appear to have misinterpreted the meaning of the STA exclusion 
paragraphs in exactly that manner. Commenters offered several 
suggestions to address this source of confusion.
    One suggestion was to employ two STA paragraphs in each ECCN on the 
Commerce Control List, one paragraph would state whether STA is 
eligible for destinations listed in Sec.  740.20(c)(1) and the other 
would state whether the License Exception is eligible for destinations 
listed in Sec.  740.20(c)(2). Each paragraph would take into account 
all of the reasons for control in the ECCN and any other relevant 
factors including whether the item is on the Wassenaar Arrangement 
Sensitive List.
    Another suggestion was to use some annotation in the STA paragraphs 
such as STA 1 for Sec.  740.20(c)(1) and STA 2 for Sec.  740.20(c)(2).
    A third suggestion was to reference the number of destinations that 
are excluded by the paragraph.
    A fourth suggestion was to create a matrix that would show the STA 
eligibility for each ECCN and destination.
    Response: BIS has decided to adopt the third suggestion in this 
final rule. Because the number of destinations listed in Sec.  
740.20(c)(2) in the final rule is eight compared to 36 eligible 
destinations under Sec.  740.20(c)(1), BIS believes that the best 
solution is to modify the STA paragraphs to reference the number of 
destinations in addition

[[Page 35284]]

to referencing the relevant STA eligibility paragraph, i.e. Sec.  
740.20(c)(1) or (c)(2).
    Accordingly, the STA exclusion paragraphs in this final rule have 
the format: ``License Exception STA may not be used to ship [list 
ineligible items] to any of the eight destinations listed in Sec.  
740.20(c)(2).'' The words ``or transmit'' immediately follow the words 
``to ship'' in software or technology ECCNs to be consistent with 
terminology used elsewhere in the EAR. BIS decided not to introduce STA 
paragraphs into every ECCN because ECCNs that include multiple reasons 
for control would require lengthy and complex STA paragraphs. This 
complexity would be compounded in the case of software and technology 
ECCNs in which one ECCN often encompasses not only multiple reasons for 
control but also references to multiple commodity ECCNs.
    BIS decided not to adopt separate annotations such as STA1 and STA2 
for the two authorizing paragraphs for two reasons. First, to be fully 
effective, this suggestion would require that the notations be in every 
ECCN, creating the same length and complexity issues noted above. 
Second, every License Exception paragraph in the Commerce Control List 
is designated by the symbol that is used to report shipments under that 
License Exception in the Automated Export System. All shipments under 
License Exception STA are to be reported under the symbol STA. Use of 
two different designators for a single license exception in the 
Commerce Control List could cause public confusion about the procedure 
for reporting License Exception STA shipments.
    BIS decided not to attempt to describe STA eligibility in the form 
of a matrix because this technique also would produce an unduly complex 
document. Such a matrix would have to account for every destination in 
the world and every paragraph of every ECCN, making it far larger than 
the current Country Chart found at Supp. No. 1 to part 738 of the EAR. 
The STA paragraphs apply to only eight destinations and to 49 ECCNs. 
BIS believes that revising the STA paragraphs themselves is a more 
practical way to reduce the possibility of confusion pointed out by 
these commenters.

Specific License Exception Provisions

Scope

    The license exception applies only to Commerce Control List based 
license requirements. Transactions in which a license is required 
because of an end-use--such as a proliferation end use described in 
part 744 of the EAR or a proscribed end user (such as a party on the 
Entity List in part 744 of the EAR)--or because the destination is 
subject to an embargo or special restrictions in part 746 of the EAR, 
are not eligible for License Exception STA. Items on the Commerce 
Control List that are subject to the encryption items (EI), short 
supply (SS), surreptitious listening (SL), missile technology (MT), or 
chemical weapons (CW) reasons for control are not eligible for License 
Exception STA because of various requirements imposed by statutes, 
treaties or U.S. implementation of international commitments. Items in 
ECCNs 0A981, 0A982, 0A983, 0A985 or 0E982 are not eligible. Those ECCNs 
apply to equipment designed for the execution of human beings, 
specially designed implements of torture, law enforcement restraint 
devices, discharge type arms and devices designed to administer 
electric shocks and certain related technology. The human rights 
concerns associated with those items are sufficiently great to justify 
precluding use of License Exception STA.
    Items in ECCNs 1C351.a, .b, .c, .d.5, .d.6 or .e; 1C352; 1C353; 
1C354; 1C360; 1E001 (for 1C351.a, .b, .c, .d.5, .d.6 or .e, 1C352, 
1C353, 1C354 or 1C360) or in ECCN 1E351 may not be shipped pursuant to 
License Exception STA because those ECCNs cover certain pathogens and 
toxins that have potential uses in developing chemical or biological 
weapons. Commodities in ECCN 1C351.d.1, .2, .3, .4, .7, .8, .9, or .10 
are eligible for License Exception STA so long as the exports, 
reexports or transfers are limited to no more than 100 milligr