Revisions to the Export Administration Regulations (EAR): Control of Aircraft and Related Items the President Determines No Longer Warrant Control Under the United States Munitions List (USML), 68675-68690 [2011-28504]

Agencies

• DEPARTMENT OF COMMERCE
• Bureau of Industry and Security

[Federal Register Volume 76, Number 215 (Monday, November 7, 2011)]
[Proposed Rules]
[Pages 68675-68690]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-28504]


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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 738, 740, 742, 770, 772 and 774

[Docket No. 110824536-1499-01]
RIN 0694-AF36


Revisions to the Export Administration Regulations (EAR): Control 
of Aircraft and Related Items the President Determines No Longer 
Warrant Control Under the United States Munitions List (USML)

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule describes how articles the President 
determines no longer warrant control under Category VIII (aircraft and 
related items) of the United States Munitions List (USML) would be 
controlled under the Commerce Control List (CCL) in new Export Control 
Classification Numbers (ECCNs) 9A610, 9B610, 9C610, 9D610, and 9E610. 
In addition, this proposed rule would control military aircraft and 
related items now controlled under ECCNs 9A018, 9D018 and 9E018 under 
new ECCNs 9A610, 9D610 and 9E610. This proposed rule also addresses 
license exception availability for items controlled by the five new 
ECCNs that would be created.
    This is the second in a planned series of proposed rules describing 
how various types of articles the President determines, as part of the 
Administration's Export Control Reform Initiative, no longer warrant 
USML control, would be controlled on the CCL and by the EAR. This 
proposed rule is being published in conjunction with a

[[Page 68676]]

proposed rule of the Department of State, Directorate of Defense Trade 
Controls, which would amend the list of articles controlled by USML 
Category VIII.
    In addition, this proposed rule would modify aspects of the Bureau 
of Industry Security's (BIS) July 15, 2011 proposed rule by adding 
cross references to ECCNs 9A018, 9D018 and 9E018; by adding provisions 
relating to License Exception Strategic Trade Authorization (STA) 
eligibility to clarify that its scope extends to the United States 
Government, to any person in the United States, and to the 
``development'' or ``production'' of items; and by including a general 
policy of denial for 600 series items for destinations that are subject 
to a United States arms embargo under the regional stability reasons 
for control.

DATES: Comments must be received by December 22, 2011.

ADDRESSES: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
The identification number for this rulemaking is BIS-2011-0033.
     By email directly to publiccomments@bis.doc.gov. Include 
RIN 0694-AF36 in the subject line.
     By mail or delivery to Regulatory Policy Division, Bureau 
of Industry and Security, U.S. Department of Commerce, Room 2099B, 14th 
Street and Pennsylvania Avenue NW., Washington, DC 20230. Refer to RIN 
0694-AF36.

FOR FURTHER INFORMATION CONTACT: Gene Christiansen, Office of National 
Security and Information Technology Controls, tel. (202) 482-2984, 
email gene.christiansen@bis.doc.gov.

SUPPLEMENTARY INFORMATION: 

Background

    On July 15, 2011, as part of the Administration's ongoing Export 
Control Reform Initiative, BIS published a proposed rule (76 FR 41958) 
(``the July 15 proposed rule'') that set forth a framework for how 
articles the President determines, in accordance with section 38(f) of 
the Arms Export Control Act (AECA) (22 U.S.C. 2778(f)), would no longer 
warrant control on the United States Munitions List (USML) instead 
would be controlled on the Commerce Control List (CCL). With that 
proposed rule, BIS also described its proposal for how military 
vehicles and related articles in USML Category VII that no longer 
warrant control under the USML would be controlled on the CCL.
    Following the structure of the July 15 proposed rule, this proposed 
rule describes BIS's proposal for how a second group of items--various 
military aircraft and related articles that are controlled by USML 
Category VIII--would be controlled on the CCL. The proposed changes 
described in this proposed rule and the State Department's proposed 
amendment to Category VIII of the USML are based on a review of 
Category VIII by the Defense Department, which worked with the 
Departments of State and Commerce in preparing the proposed amendments. 
The review was focused on identifying the types of articles that are 
now controlled by USML Category VIII that are either (i) Inherently 
military and otherwise warrant control on the USML or (ii) if it is a 
type common to civil aircraft applications, possess parameters or 
characteristics that provide a critical military or intelligence 
advantage to the United States, and that are almost exclusively 
available from the United States. If an article satisfied one or both 
of those criteria, the article remained on the USML. If an article did 
not satisfy either standard but was nonetheless a type of article that 
is, as a result of differences in form and fit, ``specially designed'' 
for military applications, then it was identified in the new ECCNs 
proposed in this notice. The licensing policies and other EAR-specific 
controls for such items also described in this notice would enhance 
national security by (i) Allowing for greater interoperability with our 
NATO and other allies while still maintaining and expanding robust 
controls and, in some cases, prohibitions on exports or reexports to 
other countries and for proscribed end users and end uses; (ii) 
enhancing our defense industrial base by, for example, reducing the 
current incentives for foreign companies to design out or avoid U.S.-
origin ITAR-controlled content, particularly with respect to generic, 
unspecified parts and components; and (iii) permitting the U.S. 
Government to focus its resources on controlling, monitoring, 
investigating, analyzing, and, if need be, prohibiting exports and 
reexports of more significant items to destinations, end uses, and end 
users of greater concern than our NATO allies and other multi-regime 
partners.
    Pursuant to section 38(f) of the AECA, the President shall review 
the USML ``to determine what items, if any, no longer warrant export 
controls under'' the AECA. The President must report the results of the 
review to Congress and wait 30 days before removing any such items from 
the USML. The report must ``describe the nature of any controls to be 
imposed on that item under any other provision of law.'' 22 U.S.C. 
2778(f)(1). This proposed rule describes how certain military aircraft 
and related articles in USML Category VIII would be controlled by the 
EAR and its CCL if the President determines that the articles no longer 
warrant control on the USML.
    In the July 15 proposed rule, BIS proposed creating a series of new 
ECCNs to control items that would be moved from the USML to the CCL, or 
that are items from the Wassenaar Arrangement on Export Controls for 
Conventional Arms and Dual Use Goods and Technologies Munitions List 
(Wassenaar Arrangement Munitions List or WAML) that are already 
controlled elsewhere on the CCL. The proposed rule referred to this 
series as the ``600 series'' because the third character in each of the 
new ECCNs would be a ``6.'' The first two characters of the 600 series 
ECCNs serve the same function as any other ECCN as described in Sec.  
738.2 of the EAR. The first character is a digit in the range 0 through 
9 that identifies the Category on the CCL in which the ECCN is located. 
The second character is a letter in the range A through E that 
identifies the product group within a CCL Category. In the 600 series, 
the third character is the number 6. With few exceptions, the final two 
characters identify the WAML category that covers items that are the 
same or similar to items in a particular 600 series ECCN.
    BIS will publish additional Federal Register notices containing 
proposed amendments to the CCL that will describe proposed controls for 
additional categories of articles the President determines no longer 
warrant control under the USML. The State Department will publish 
concurrently proposed amendments to the USML that correspond to the BIS 
notices. BIS will also publish proposed rules to further align the CCL 
with the WAML and the Missile Technology Control Regime Equipment, 
Software and Technology Annex.

Modifications to Provisions in the July 15 Proposed Rule

    In addition to the proposals mentioned above, this proposed rule 
would make the following modifications to the July 15 proposed rule.
     Additions to proposed paragraph (a)(13) in Sec.  740.2;
     Changes to the proposed Note to paragraph (c)(1) in Sec.  
740.20;
     Changes to ECCNs 9A018, 9D018 and 9E018;
     Addition of new Category 9 600 series ECCNs to Sec.  
742.6(a)(1); and
     Changes in eligible users for 600 Series under License 
Exception STA in Sec.  740.2(a)(13).

[[Page 68677]]

    A complete discussion of these modifications is described in the 
section ``Scope of this Proposed Rule.'' BIS will consider comments on 
the original proposals only for the specific paragraph, note, and ECCNs 
referenced above, and only in the context of the proposed rule's 
modifications to them.

Scope of This Proposed Rule

    This proposed rule would create five new 600 series ECCNs in CCL 
Category 9--9A610, 9B610, 9C610, 9D610, and 9E610--that would control 
articles the President determines no longer warrant control under USML 
Category VIII. Consistent with the regulatory construct identified in 
the July 15 proposed rule, this rule also would move items currently 
classified under ECCNs 9A018, 9D018, and 9E018 to the new ECCNs. As 
part of the proposed changes, these three 018 ECCNs would cross-
reference the new classifications in the 600 series. As noted in the 
July 15 proposed rule, moving items from 018 ECCNs to the appropriate 
600 series ECCNs would consolidate WAML and formerly USML items into 
one series of ECCNs.
    The rule would also create a new Supplement No. 4 to part 740 that 
would prohibit the use of License Exceptions STA or GOV to export or 
reexport, except to U.S. government agencies or personnel, ECCN 9D610 
software and ECCN 9E610 technology (other than ``build-to-print 
technology'') for the production of specific types of parts and 
components classified under ECCN 9A610.x.
    License Exception STA under Sec.  740.20(c)(1) generally would be 
available for eligible end items (as described in Sec.  740.20(g) of 
the July 15 proposed rule) and all other 600 series items if, at the 
time of export, reexport or transfer (in-country) the item is destined 
(i) For ultimate end use by the armed forces, police, paramilitary, law 
enforcement, customs, correctional, fire, and search and rescue 
agencies of a government in one of the Sec.  740.20(c)(1) countries 
(the ``STA-36'') or of the United States Government; or (ii) for the 
``production'' or ``development'' of an item for ultimate end use by 
any of those foreign government agencies in any of the thirty-six Sec.  
740.20(c)(1) countries, by the United States Government, or by any 
person in the United States. This condition means that exports and 
reexports to non-governmental end users in one of the STA-36 countries 
under STA would be permissible so long as the item at issue would 
ultimately be provided to, or for the production or development of an 
item to be provided to and for end use by, any of the foregoing 
agencies of a government of a STA-36 country, the United States 
Government, or any person in the United States. This eligibility under 
License Exception STA is proposed because the U.S. Government 
recognizes that there would be a significant volume of desirable trade 
between and among private companies in the STA-36 countries regarding 
``600 series'' end items that would ultimately be for use by one of the 
foregoing government agencies of an STA-36 country, the United States 
Government, and manufacturers in the United States. This proposal 
protects U.S. export control interests while at the same time 
facilitating permissible exports, reexports, and transfers (in-country) 
with the governments of the STA-36 countries and the United States. BIS 
particularly welcomes comments on the types of government agencies that 
would be eligible to ultimately receive items through this license 
exception. If, for example, there are types of agencies or persons that 
have been omitted from this list but that commenters believe should be 
included, commenters should provide BIS with this information, 
including specific examples of such agencies or persons.
    The proposed changes are discussed in more detail below.

New Category 9 600 Series ECCNs

    Certain military aircraft and related articles the President 
determines no longer warrant control in USML Category VIII would be 
controlled under proposed new ECCNs 9A610, 9B610, 9C610, 9D610, and 
9E610. These new ECCNs follow the 600 series construct identified in 
the July 15 proposed rule.
    Paragraphs .a through .k of ECCN 9A610 would consist of ``end 
items,'' as that term was defined in the July 15 proposed rule, and 
some types of related parts, components, accessories, attachments, 
equipment, and systems. Paragraphs .b, .c, .d, and .e would be reserved 
to make paragraphs .f through .i align with paragraphs on the WAML 
covering similar items. Paragraphs .l, .m, and .n would control 
Unmanned Aerial Vehicle (UAV)-related items that are not identified on 
the USML or the WAML, but which are identified on the Missile 
Technology Control Regime (MTCR) Equipment, Software and Technology 
Annex and which are proposed to be subject to the MT Column 1 reason 
for control. Paragraphs .o through .w would be reserved for possible 
future use. Paragraph .x would consist of parts, components, 
accessories and attachments (including certain unfinished products that 
have reached a stage in manufacturing where they are clearly 
identifiable as commodities controlled by paragraph .x) that are 
``specially designed'' for a commodity in paragraphs .a through .k or a 
defense article in USML Category VIII. Paragraph .y would consist of 25 
specific types of commodities that, if specially designed for a 
commodity subject to control in this 9A610 or a defense article in USML 
Category VIII, warrant less strict controls because they have little or 
no military significance. Commodities listed in paragraph .y would be 
controlled for antiterrorism (AT Column 1) reasons, which imposes a 
license requirement for five countries and, in accordance with the July 
15 proposed rule, if destined for a military end use to the People's 
Republic of China, as described in Sec.  744.21.
    This proposed rule does not add aircraft gas turbine engines to the 
proposed new ECCN 9A610. Instead, the Administration plans to issue a 
proposed rule later that would describe the U.S. Government's controls 
on gas turbine engines and related items for military aircraft, ships, 
and vehicles, which is currently anticipated to be new ECCN 9A619. 
Although this numbering deviates slightly from the WAML numbering 
approach, BIS believes that it would be more efficient to list all 600 
series controls for gas turbine engines and related items in one ECCN. 
The anticipated new ECCN will correspond to a new USML Category XIX 
that the State Department would propose creating to control USML-
controlled gas turbine engines and related articles. When BIS publishes 
the proposed rule to address gas turbine engines and related items for 
military aircraft, missiles, ships, and vehicles, cross references to 
the proposed new ECCN would be added to the new ECCNs proposed by this 
rule.
    ECCN 9B610.a would consist of test, inspection, and production 
equipment specially designed for the development or production of 
aircraft and related commodities and articles controlled by ECCN 9A610 
or USML Category VIII. ECCN 9B610.b would consist of environmental test 
facilities designed or modified for military aircraft and related 
commodities. These new ECCN paragraphs would also implement WAML 
Category 18, which applies to production equipment and components for 
items on the WAML generally, with respect to production equipment for 
military aircraft, and environmental test facilities for such aircraft 
and related commodities. ECCN 9B610.c would implement a Missile 
Technology Control Regime control on production facilities specially 
designed for certain

[[Page 68678]]

types of Unmanned Aerial Vehicles or drones.
    ECCN 9C610 would consist of materials specially designed for 
aircraft and related commodities controlled by ECCN 9A610 that are not 
specified elsewhere on the CCL, such as in CCL Category 1, or on the 
USML. USML subcategory XIII(f) would continue to control structural 
materials ``specifically designed, developed, configured, modified, or 
adapted for defense articles,'' such as aircraft controlled by USML 
subcategory VIII(a). The State Department plans to publish a proposed 
revision to XIII(f) that would make it a more positive list of the 
structural materials that are controlled by USML XIII(f). When that 
occurs, BIS will publish a corresponding proposed revision to ECCN 
9C610 so that it controls such items specially designed for ECCN 9A610 
items and USML Category VIII items that are not positively listed in 
any revised USML XIII(f).
    ECCN 9D610 would consist of software specially designed for 
commodities in 9A610, 9B610, or 9C610. ECCN 9D610 would also contain a 
``Note to License Exceptions Section'' referring readers to the 
proposed Supplement No. 4 to part 740, which would limit the use of 
License Exceptions GOV and STA for ECCN 9D610 software for the 
production or development of 15 types of parts and components.
    ECCN 9E610 would consist of technology that is required commodities 
in 9A610, 9B610, 9C610, or software 9D610. ECCN 9E610 would also 
contain a ``Note to License Exceptions Section'' referring to proposed 
Supplement No. 4 to part 740, discussed below, which would limit the 
use of License Exceptions GOV and STA for ECCN 9E610 technology (other 
than ``build-to-print technology'') for the production of 15 types of 
ECCN 9A610.x parts and components.
    ECCNs 9A610, 9B610, 9C610, 9D610, and 9E610 would each have a 
special paragraph designated ``.y.99'' to cover items that would 
otherwise fall within the scope of one of the ECCNs because, for 
example, they were ``specially designed'' for a military use, but which 
(i) Had been previously determined by the Department of State to be 
subject to the EAR and (ii) were not listed on the CCL. Items in these 
.y.99 paragraphs would be subject to antiterrorism controls.
    Items currently classified under ECCN 9A018 paragraphs .a, .c, .d, 
.e and .f would be moved to ECCN 9A610. In conjunction with the 
establishment of the new ECCN 9X610 entries and consistent with the 
July 15 proposed rule's statement that 018 entries would remain in the 
CCL for a time, but only for cross-reference purposes, this rule would 
amend ECCNs 9A018, 9D018, and 9E018 to be solely cross references to 
the new 600 series ECCNs that cover the items currently in those 018 
ECCNs. ECCN 9A018 would refer to ECCN 9A610 for aircraft related 
commodities (i.e., for items currently classified under ECCN 9A018 
paragraphs .a, .c, .d, .e, and .f). Similarly, for all items other than 
those applying to ground vehicles, ECCN 9D018 would refer to ECCN 9D610 
for software, and ECCN 9E018 would refer to ECCN 9E610 for technology.
    This proposed rule would remove Sec.  770.2(i) ``Interpretation 9 
Civil aircraft and Civil aircraft equipment (including parts, 
accessories, attachments, components and related training equipment).'' 
That section explains the licensing authorities of the Departments of 
State and Commerce with respect to aircraft and related items. It would 
no longer be needed given the text of proposed ECCN 9A610.
    In the July 15 proposed rule, BIS proposed moving items classified 
under ECCN 9A018.b (certain ground vehicles) to newly proposed ECCN 
0A606.b.4. With that rule, BIS identified a corresponding proposed 
amendment to ECCN 9A018 that cross-referenced ECCN 0A606.b.4 for former 
ECCN 9A018.b items. This rule proposes to further amend ECCN 9A018, 
maintaining the proposed reference to ECCN 0A606.b.4 for items 
currently classified under ECCN 9A018.b and cross-referencing ECCN 
9A610 for all other items currently classified under ECCN 9A018 (i.e., 
items classified under ECCN 9A018.a, .c, .d, .e and .f).
    The July 15 proposed rule indicated that software and technology 
applying to ground vehicle-related commodities, currently classified 
under ECCNs 9D018 and 9E018, would be classified under newly proposed 
ECCNs 0D606 and 0E606. However, the July 15 proposed rule did not 
propose cross-referencing language to be included in ECCNs 9D018 and 
9E018. As noted above, BIS is now proposing amendments to ECCNs 9D018 
and 9E018 to cross-reference ECCNs 9D610 and 9E610, for software and 
technology applying to those classified under ECCN 9A018 paragraphs .a, 
.c, .d, .e and .f. In conjunction with this proposal, BIS is also 
proposing amendments to ECCNs 9D018 and 9E018 that reference ECCNs 
0D606 and 0E606 for software and technology applying to those items 
classified under ECCN 9A018.b.

License Exception Restrictions

    Certain software and technology related to parts and components 
covered by .x items paragraphs of 600 series ECCNs warrant more 
restrictive license exception applicability than other software and 
technology currently on the CCL. This rule proposes creating a new 
Supplement No. 4 to Part 740 (600 Series Items Subject to Limits 
Regarding License Exceptions GOV and STA) that would identify 600 
series items that may not be exported, reexported, or transferred (in-
country) pursuant to License Exceptions STA (Sec.  740.20 of the EAR) 
or GOV (Sec.  740.11 of the EAR). The supplement would be structured to 
list by CCL category the items for which license exception 
applicability is limited.
    New Supplement No. 4 to part 740 would list 15 types of parts and 
components that would be classified under new ECCN 9A610.x and would 
state that License Exception STA (Sec.  740.20 of the EAR) may not be 
used to export, reexport, or transfer (in-country) any software 
classified under ECCN 9D610 or technology classified under ECCN 9E610--
other than ``build-to-print technology''--for the production or 
development of any types of the listed ECCN 9A610.x parts and 
components. Further, the supplement would state that License Exception 
GOV, other than the paragraphs that authorize shipments to U.S. 
government agencies for official use or U.S. government personnel for 
personal use or official use (Sec.  740.11(b)(2)(i) and (ii) of the 
EAR), is not available for the export or reexport of software and 
technology (other than ``build-to-print technology'') for the 
production or development of the ECCN 9A610.x parts and components 
listed in the supplement.
    A new note to Sec.  740.20(c)(1) would be added, and Sec.  
740.2(a)(13) would be clarified regarding the License Exception STA 
eligibility of end items and all other 600 series items. In the July 15 
proposed rule, the export of a 600 series item is eligible for License 
Exception STA if, at the time of export, reexport or transfer (in-
country), the item is destined for ultimate end use by the armed 
forces, police, paramilitary, law enforcement, customs and border 
protection, correctional, fire, and search and rescue agencies of a 
government in one of the STA-36 countries. This proposed rule would 
make 600 series items eligible for License Exception STA for such uses 
and also when exported, reexported, or transferred for the production 
or development of an item for ultimate end use by a STA-36

[[Page 68679]]

country government agency, by the United States Government, or by a 
person in the United States. In addition this proposed rule would 
replace the phrase ``customs and border protection'' with the phrase 
``customs'' because BIS believes that the latter more accurately 
describes the practice of most governments. This clarification would 
make no change to the STA restrictions in Sec.  740.20(b)(2), including 
the restriction that prohibits use of STA for missile technology (MT) 
controlled items.

Other Changes

    A new definition for ``build-to-print technology'' would be added 
to Sec.  772.1. This definition is needed to add precision to that term 
as used in new Supplement No. 4 to part 740.
    This rule proposes amending License Exception GOV (Sec.  740.11) by 
adding references to the new proposed Supplement No. 4 to Part 740 
supplement's prohibitions in paragraphs (a)(5), (b)(2)(iii)(A), 
(b)(2)(iv)(A), and (c)(2)(iv), as well as in a note to (d)(1). 
Similarly, this rule proposes to amend License Exception STA (Sec.  
740.20) by adding a reference to the proposed prohibitions in paragraph 
(b)(3).

Corresponding Amendments

    As discussed in further detail below, the July 15 proposed rule 
stated that one reason for control for items classified in the 600 
series is Regional Stability Column 1. Items classified under proposed 
ECCN 9A610, other than ECCN 9A610.y items, as well as related 
technology and software classified under ECCNs 9D610 and 9E610, would 
be controlled for this reason, among others. Correspondingly, this 
proposed rule would revise Sec.  742.6 of the EAR to apply the RS 
Column 1 licensing policy to commodities classified under ECCN 9A610, 
9B610, 9C610 (except paragraphs .y of those ECCNs), and to related 
software and technology classified under ECCNs 9D610 and 9E610. This 
proposed rule would also amend the RS Column 1 licensing policy to 
impose a general policy of denial for ``600 series'' items if the 
destination is subject to a United States arms embargo and a general 
policy of denial for items specially designed or required for F-14 
aircraft.

Relationship to the July 15 Proposed Rule

    As referenced above, the purpose of the July 15 proposed rule was 
to set up the framework for creating ECCNs that would cover articles 
that the President determines no longer warrant coverage on the USML, 
but for which export control under the EAR is appropriate. To 
facilitate that goal, the July 15 proposed rule contained definitions 
and concepts that were meant to be applied across Categories. However, 
as BIS undertakes rulemakings to move specific categories of items from 
the USML to the CCL, there may be unforeseen issues or complications 
that may require BIS to reexamine those definitions and concepts. The 
comment period for the July 15 proposed rule closed on September 13, 
2011.
    To the extent that this rule's proposals affect any provision in 
July 15 proposed rule or the July 15 proposed rule's provisions affect 
this proposed rule, BIS will consider comments on those provisions so 
long as they are in the context of the changes proposed in this rule. 
For example, BIS will consider comments on how the movement of Category 
VIII items from the USML to the CCL affects a definition, restriction, 
or provision that was contained in the July 15 proposed rule. BIS will 
also consider comments on the impact of a definition of a term in the 
July 15 proposed rule when that term is used in this proposed rule. BIS 
will not consider comments of a general nature regarding the July 15 
proposed rule that are submitted in response to this rulemaking.
    BIS believes that the following aspects of the July 15 proposed 
rule are among those that could affect this proposed rule:
     De minimis provisions in Sec.  734.4;
     Definitions of terms in Sec.  772.1;
     Restrictions on use of license exceptions in Sec. Sec.  
740.2, 740.10, 740.11, and 740.20;
     Change to national security licensing policy in Sec.  
742.4;
     Requirement to request authorization to use License 
Exception STA for end items in 600 series ECCNs and procedures for 
submitting such requests in Sec. Sec.  740.2, 740.20, 748.8 and Supp. 
No. 2 to part 748;
     Licensing policy in Sec.  742.4(b)(1)(ii); and
     Addition of 600 series items to Supplement No. 2 to Part 
744--List of Items Subject to the Military End-Use Requirement of Sec.  
744.21.
    BIS believes that the following aspects of this proposed rule are 
among those that could affect the provisions of the July 15 proposed 
rule:
    Addition of U.S. arms embargo policy regarding 600 series items set 
forth in Sec.  742.4(b)(1)(ii) (national security) of the July 15 
proposed rule to Sec.  742.6(b)(1) (regional stability) of this 
proposed rule;
     Addition of denial policy regarding 600 series items for 
F-14 aircraft set forth in Sec.  742.6(b)(1) of this proposed rule.

Positive, Tiered, and Aligned Control Lists

    In December 2010, the Departments of Commerce and State published 
Advanced Notices of Proposed Rulemaking that described the 
Administration's plan to make the USML and the CCL positive, tiered, 
and aligned so that they eventually can be combined into a single 
control list (See ``Commerce Control List: Revising Descriptions of 
Items and Foreign Availability,'' 75 FR 76664 (Dec. 9, 2010) and 
``Revision to the United States Munitions List,'' 75 FR 76935 (Dec. 10, 
2010)). This remains one of the Administration's ultimate Export 
Control Reform objectives. In order to reach more quickly the national 
security objectives described above, the Administration has decided, as 
an interim step, to propose revisions to both the USML and the CCL to 
make them more objective, but to delay its plan to tier the export 
control regime until a later date. The most significant aspect of the 
more positive proposed USML categories is that they would not contain 
controls on all generic ``parts,'' ``components,'' ``accessories,'' and 
``attachments'' that were in any way ``specifically designed or 
modified'' for a defense article, regardless of their significance to 
maintaining a military advantage for the United States. Rather, they 
would contain a positive list of specific types of parts, components, 
accessories, and attachments that continue to warrant control on the 
USML. All other parts, components, accessories, and attachments 
``specially designed'' for a defense article would become subject to 
the new 600 series controls on the CCL as described in the July 15 
proposed rule. The Administration will also propose revisions to the 
jurisdictional status of certain militarily less significant end items 
that do not warrant USML control, but the primary impact would be with 
respect to current USML controls on parts, components, accessories, and 
attachments that no longer warrant USML control.
    Based, in part, on a review of the comments received in response to 
the December 2010 notices, the Administration also has determined that 
fundamentally altering the structure of the USML by tiering and 
aligning it on a category-by-category basis would significantly disrupt 
the export control compliance systems and procedures of exporters and 
reexporters. For example, until the entire USML is revised and becomes 
final, some USML categories

[[Page 68680]]

would follow the legacy numbering and control structures while the 
newly revised categories would follow a completely different numbering 
structure. The only way to alleviate this impact would be to delay 
implementation until all categories are complete or to proceed with 
building positive lists now and returning to structural changes once 
complete. In order to allow for the national security benefits to flow 
from re-aligning the jurisdictional status of defense articles that no 
longer warrant control on the USML on a category-by-category basis 
while minimizing the impact on exporters' internal control and 
jurisdictional and classification marking systems, the Administration 
plans to proceed on a category-by-category basis with the approach 
described in this proposed rule.
    Finally, in order to prevent any aircraft-related commodity 
specially designed for a military use that is not described in the 
proposed revisions to the USML from inadvertently dropping out of the 
U.S. Government's export controls, the rule proposes to use the catch-
all phrase ``specially designed,'' as defined in the July 15 proposed 
rule, in the new ECCNs to control commodities not otherwise identified 
on the revised USML or elsewhere in the ECCN. The primary examples of 
this approach are ECCN 9A610.a, which controls any aircraft ``specially 
designed'' for a military use not identified on the USML or elsewhere 
on the CCL, and ECCN 9A610.x, which controls any part, component, 
accessory, or attachment ``specially designed'' for a military aircraft 
and not otherwise identified on the USML or elsewhere in the CCL. This 
approach is also part of a core objective of the Export Control Reform 
Initiative, which is to create a bright jurisdictional line between the 
USML and the CCL. As evidenced by the proposed revisions to USML 
Category VIII published by the State Department concurrently with this 
proposed rule, the Administration is following through on its 
commitment that the USML not contain generic, catch-all controls on 
every ``part,'' ``component,'' ``accessory,'' or ``attachment'' that is 
in any way specifically designed, modified, adapted, or configured, 
regardless of its military significance, for a defense article. The 
proposed USML revision is a substantially more positive list than the 
current list. Thus, to the extent an item is ``specially designed'' for 
a military use, it is subject to a 600 series ECCN in the EAR unless 
specifically identified on the ITAR's USML.

Effects of This Proposed Rule

    BIS believes that the principal effect of this rule will be to 
provide greater flexibility for exports and reexports to NATO member 
countries and other multiple-regime-member countries of items the 
President determines no longer warrant control on the United States 
Munitions List. This greater flexibility will be in the form of: 
application of the EAR's de minimis threshold principle for items 
constituting less than a de minimis amount of controlled U.S.-origin 
content in foreign made items; availability of license exceptions, 
particularly License Exceptions RPL and STA; elimination of the 
requirements for manufacturing agreements and technical assistance 
agreements in connection with exports of technology; and a reduction in 
or elimination of exporter and manufacturer registration requirements 
and associated registration fees. Some of these specific effects are 
discussed in more detail below.

De Minimis

    Section 734.3 of the EAR provides, inter alia, that under certain 
conditions items made outside the United States that incorporate items 
subject to the EAR are not subject to the EAR if they do not exceed a 
``de minimis'' percentage of controlled U.S. origin content. Depending 
on the destination, the de minimis percentage can be either 10 percent 
or 25 percent. If the July 15 proposed rule's amendments at Sec.  734.4 
of the EAR are adopted, the new ECCNs 9A610, 9B610, 9C610, 9D610 and 
9E610 proposed in this rule would be subject to the de minimis 
provisions set forth in the July 15 proposed rule because they would be 
``600 series'' ECCNs. Foreign-made items incorporating items in the new 
ECCNs would become eligible for de minimis treatment at the 10 percent 
level. The AECA does not permit the ITAR to have a de minimis treatment 
for these USML-listed items, regardless of the significance or 
insignificance of the item. Foreign-made items incorporating any items 
that currently are classified under ECCN 9A018 would be subject to the 
EAR if those foreign made items contain more than 10 percent U.S. 
origin controlled content, regardless of the destination and regardless 
of the proportion of the U.S. origin controlled content accounted for 
by the former ECCN 9A018 items.

Use of License Exceptions

    The July 15 proposed rule would impose certain limits for 600 
series items moving from existing 018 controls on the CCL. BIS believes 
that even with the July 15 proposed restrictions on the use of license 
exceptions and the additional restrictions identified in this proposed 
rule, restrictions on items currently on the USML would be reduced, 
particularly with respect to exports to NATO members and multiple-
regime member countries, if those items were moved from the USML to 
proposed ECCN 9A610. BIS also believes that, in practice, the movement 
of items from ECCN 9A018 to ECCN 9A610 would have little effect on 
license exception availability for those items because existing 
restrictions or the terms of the license exceptions themselves already 
preclude most transactions that would be precluded by the July 15 
proposed amendments to Sec.  740.2 of the EAR. However, BIS is aware of 
two situations (the use of License Exceptions GOV and STA) in which 
movement of items in ECCN 9A018 to ECCN 9A610 could, in practice, 
impose greater limits on use of license exceptions than currently is 
the case.
    First, the July 15 proposed rule would limit use of License 
Exception GOV for 600 series commodities to situations in which the 
United States Government is the consignee and end user or to situations 
in which the consignee or end user is the government of a country 
listed in Sec.  740.20(c)(1). Currently, commodities classified under 
ECCN 9A018 may be exported under any provision of License Exception GOV 
to any destination authorized by that provision if all of the 
conditions of that provision are met and nothing else in the EAR 
precludes such shipment.
    Second, the July 15 proposed rule would limit use of License 
Exception STA for ``end items'' in 600 series ECCNs to those end items 
for which a specific request for License Exception STA eligibility, 
filed in conjunction with a license application, has been approved and 
would require that the end item be for ultimate end use by a foreign 
government agency of a type specified in the July 15 proposed rule. The 
July 15 proposed rule also would limit exports of 600 series parts, 
components, accessories, and attachments under License Exception STA 
for ultimate end use by the same set of end users. Neither restriction 
currently applies to use of License Exception STA for commodities 
classified under ECCN 9A018. In addition, the July 15 proposed rule 
would limit shipment of 600 series items under License Exception STA to 
destinations listed in Sec.  740.20(c)(1). Currently, commodities 
classified under ECCN 9A018.c, .d, .e, and .f (which would be moved to 
ECCN 9A610 under

[[Page 68681]]

this proposed rule) and related software and technology (currently 
classified under ECCNs 9D018 and 9E018, and proposed to move to new 
ECCNs 9D610 and 9E610) may be shipped under License Exception STA to 
destinations listed in Sec.  740.20(c)(1) or (c)(2).

Making U.S. Export Controls More Consistent With the Wassenaar 
Arrangement Munitions List

    The Administration has stated since the beginning of the Export 
Control Reform Initiative that the reforms will be consistent with the 
obligations of the United States to the multilateral export control 
regimes. Accordingly, the Administration will, in this and subsequent 
proposed rules, exercise its national discretion to implement, clarify, 
and, to the extent feasible, align its controls with those of the 
regimes. For example, the proposed ECCN 9A610 tracks, to the extent 
possible, the numbering structure and text of WAML category 10 
pertaining to military aircraft not subject to the ITAR. It also 
implements in 9A610.x the controls in WAML category 16 for forgings, 
castings, and other unfinished products; in 9B610.a and .b the controls 
in WAML category 18 for production equipment; in 9D610 the applicable 
controls in WAML category 21 for software; and in 9E610 the applicable 
controls in WAML category 22 for technology.

Clarifying the Relationship Between U.S. Export Controls and the 
Missile Technology Control Regime (MTCR) Equipment, Software and 
Technology Annex

    This proposed rule would identify the specific paragraphs in 
proposed ECCNs 9A610, 9B610, 9D610, and 9E610 that list items that are 
also on the MTCR Equipment, Software and Technology Annex and apply the 
MT Column 1 reason for control to those paragraphs. This action would 
impose the missile technology based license requirements and licensing 
policy of Sec.  742.5 of the EAR to those items. Those items are 
currently subject to the ITAR, which does not specify the multilateral 
regime on which a license requirement is based. Listing these items on 
the CCL with the reason for control stated will correlate the 
underlying MTCR control with export license requirements and licensing 
policy.

Other Effects

    Pursuant to the framework identified in the July 15 proposed rule, 
commodities classified under ECCN 9A610 (other than ECCN 9A610.l, .m, 
.n, and. y), along with related test, inspection and production 
equipment, materials, software and technology classified under ECCNs 
9B610, 9C610, 9D610 and 9E610 (other than ECCNs 9B610.c. and 9X610.y) 
would be subject to the licensing policies set forth in Sec.  
742.4(b)(1) (national security, column 1). Commodities classified under 
ECCN 9A610.l, .m and .n, along with related test, inspection and 
production equipment, software and technology classified under ECCNs 
9B610.c, 9D610 and 9E610 would be subject to the licensing policy set 
forth in Sec.  742.5(b) (missile technology) because they are listed on 
the Missile Technology Control Regime Equipment, Software and 
Technology Annex. They would not be subject to national security 
controls because they are not identified on the WAML. All commodities 
in ECCN 9A610 (other than 9A610.y which is subject to an antiterrorism 
reason for control only and the prohibitions in Part 744) along with 
related test, inspection and production equipment, materials, software 
and technology classified under ECCNs 9B610, 9C610, 9D610 and 9E610 
(other than 9X610.y) would be subject to the licensing policies set 
forth in Sec.  742.6(a)(1) (regional stability, column 1).
    The July 15 proposed rule would change Sec.  742.4 to set forth a 
general policy of denial for 600 series items for destinations that are 
subject to a United States arms embargo, which would apply to all items 
controlled for national security reasons under this proposed rule. This 
proposed rule adds that general policy of denial to Sec.  742.6(b)(1) 
(regional stability column 1). This addition is needed so that the 
general denial policy for 600 series items would apply to items in 
proposed ECCNs 9A610, 9B610, 9D610 and 9E610 that are subject to the 
missile technology and regional stability reasons for control but not 
to the national security reason for control. This rule also adds a 
general policy of denial to Sec.  742.6(b)(1) for items specially 
designed or required for F-14 aircraft because Iran is the only country 
that has such aircraft in its active inventory.

Jurisdictional and Classification Status of Items Subject to Previous 
Commodity Jurisdiction Determinations

    The Administration recognizes that some items that would fall 
within the scope of the proposed new ECCNs will have been subject to 
commodity jurisdiction (CJ) determinations issued by the United States 
Department of State. The State Department will have either determined 
that the item was subject to the jurisdiction of the ITAR or that it 
was not. (See 22 CFR 120.3 and 120.4). Under this proposed rule, items 
the State Department determined to be not subject to the ITAR and that 
are now not described on the CCL would be subject to the AT-only 
controls of the ``.y99'' paragraph of the applicable ECCN if they would 
otherwise be within the scope of the ECCN. Thus, for example, ECCN 
9A610.x would control any part, component, accessory, or attachment not 
specifically identified in the USML or elsewhere in the ECCN if it was 
``specially designed'' for a military aircraft. If a particular part, 
component, accessory, or attachment was, as defined, ``specially 
designed'' for a military aircraft and was at the time of a CJ 
determination not identified on the CCL, it would be controlled under 
9A610.y.99. If it was identified or, as a matter of law or the result 
of a subsequent commodity classification (``CCATS'') determination by 
Commerce, controlled by another legacy ECCN, such as 9A991.d, 7A994, or 
9A003, that ECCN would continue to apply to the item. This general 
approach will, pending public comment, be repeated in subsequent 
proposed rules pertaining to other categories of items.
    If, however, the State Department had made a CJ determination that 
a particular item was subject to the jurisdiction of ITAR but that item 
is not described on the final, implemented version of a revised USML 
category, a new CJ determination would not be required unless there was 
doubt about the application of the new USML category to the item. (See 
22 CFR 120.4). Thus, unless there were doubts about the jurisdictional 
status of a particular item, exporters and reexporters would be 
entitled to rely on the revised USML categories when making 
jurisdictional determinations, notwithstanding past CJ determinations 
that, under the previous version of the USML, the item was ITAR 
controlled.
    Finally, if the State Department had made a CJ determination that a 
particular item was subject to the jurisdiction of the ITAR and that 
item remains in the revised USML, the item would remain subject to the 
jurisdiction of the ITAR.

Section-by-Section Description of the Proposed Changes

     Section 738.2(d)(2)(ii)--Adds a reference to STA 
paragraphs in some 600 series ECCNs that clarify STA eligibility 
regarding those ECCNs.
     Section 740.2--Republishes proposed new paragraph (a)(13) 
from the July 15 proposed rule with changes to make License Exception 
STA eligible for exports, reexports, and in-country transfers of items 
that would be used in the production of items for governments

[[Page 68682]]

of countries listed in 740.20(c)(1), or for the United States 
Government or any person in the United States.
     Section 740.11--Amends License Exception GOV to add 
references to Supplement No. 4 to part 740 and partially restates the 
prohibition on using provisions of License Exception GOV to export or 
reexport certain technology and software listed in that supplement, 
other than exports and reexports to personnel and agencies of the U.S. 
Government.
     Section 740.20--Amends License Exception STA to refer to 
Supp. No. 4 to part 740 and partially restate the prohibition on using 
license exception STA to export, reexport or transfer (in-country) 
certain technology and software listed in that supplement. Republishing 
a ``Note to paragraph (c)(1)'' from the July 15 proposed rule with 
additional text to make License Exception STA eligible for exports, 
reexports and in-country transfers of items that would be for or used 
for the production or development of items for governments of countries 
listed in 740.20(c)(1), or for the United States Government or any 
person in the United States.
     Supplement No. 4 to part 740--Prohibits using License 
Exception STA or provisions of License Exception GOV other than those 
authorizing exports and reexports to personnel and agencies of the U.S. 
Government to export, reexport or transfer software and technology 
(other than ``build-to-print technology'') for the development or 
production of specified ECCN 9A610.x items.
     Section 742.6--ECCNs 9A610, 9B610, 9C610, 9D610 and 9E610 
are added to Sec.  742.6(a)(1) to impose a RS Column 1 license 
requirement and licensing policy. Section 742.6(b)(1) would be amended 
to apply a general denial policy for applications to export or reexport 
``600 series'' to destinations that are subject to a United States arms 
embargo and to export items specially designed for or required for F-14 
aircraft to any destination.
     Section 770.2--Removes paragraph (i)--Interpretation 9: 
Civil aircraft and civil aircraft equipment.
     Section 772.1--Adds a definition of ``build-to-print 
technology.''
     Supplement No. 1 to part 774--Adds ECCNs 9A610, 9B610, 
9C610, 9D610 and 9E610. Replaces existing text of ECCNs 9A018, 9D018 
and 9E018 with cross-references to ECCNs 0A606, 0D606 and 0E606 for 
items related to ground vehicles that have been moved to those ECCNs 
and with references to new ECCNs 9A610, 9D610 and 9E610 for all other 
items (i.e., items related to aircraft) that have been moved to those 
ECCNs.

Request for Comments

    BIS seeks comments on this proposed rule. BIS will consider all 
comments received on or before December 22, 2011. All comments 
(including any personally identifying information or information for 
which a claim of confidentially is asserted either in those comments or 
their transmittal emails) will be made available for public inspection 
and copying. Parties who wish to comment anonymously may do so by 
submitting their comments via Regulations.gov, leaving the fields that 
would identify the commenter blank and including no identifying 
information in the comment itself.

Regulatory Requirements

    1. Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distribute impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated a ``significant regulatory 
action,'' although not economically significant, under section 3(f) of 
Executive Order 12866. Accordingly, the rule has been reviewed by the 
Office of Management and Budget (OMB).
    2. Notwithstanding any other provision of law, no person is 
required to respond to, nor is subject to a penalty for failure to 
comply with, a collection of information, subject to the requirements 
of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), 
unless that collection of information displays a currently valid OMB 
control number. This proposed rule would affect two approved 
collections: Simplified Network Application Processing + System 
(control number 0694-0088), which includes, among other things, license 
applications, and License Exceptions and Exclusions (0694-0137).
    As stated in the proposed rule published at 76 FR 41958 (July 15, 
2011), BIS believes that the combined effect of all rules to be 
published adding items to EAR that would be removed from the ITAR as 
part of the administration's Export Control Reform Initiative would 
increase the number of license applications to be submitted by 
approximately 16,000 annually resulting in an increase in burden hours 
of 5,067 (16,000 transactions at 17 minutes each) under control number 
0694-0088.
    Some items formerly on the USML would become eligible for License 
Exception STA under this rule. Other such items may become eligible for 
License Exception STA upon approval of a request submitted in 
conjunction with a license application. As stated in the July 15 
proposed rule, BIS believes that the increased use of License Exception 
STA resulting from the combined effect of all rules to be published 
adding items to EAR that would be removed from the ITAR as part of the 
administration's Export Control Reform Initiative would increase the 
burden associated with control number 0694-0137 by about 23,858 hours 
(20,450 transactions @ 1 hour and 10 minutes each).
    BIS expects that this increase in burden would be more than offset 
by a reduction in burden hours associated with approved collections 
related to the ITAR. This proposed rule addresses controls on military 
aircraft and related parts, components, production equipment, 
materials, software, and technology. The largest impact of the proposed 
rule would be with respect to exporters of parts and components 
because, under the proposed rule, most U.S. and foreign military 
aircraft currently in service would continue to be subject to the ITAR. 
Because, with few exceptions, the ITAR allows exemptions from license 
requirements only for exports to Canada, most exports to integrators 
for U.S government equipment and most exports of routine maintenance 
parts and components for our NATO and other close allies require State 
Department authorization. In addition, the exports necessary to produce 
parts and components for defense articles in the inventories of the 
United States and its NATO and other close allies require State 
Department authorizations. Under the EAR, as proposed, a small number 
of low level parts would not require a license to most destinations. 
Most other parts, components, accessories, and attachments would become 
eligible for export to NATO and other close allies under License 
Exception STA. Use of License Exception STA imposes a paperwork and 
compliance burden because, for example, exporters must furnish 
information about the item being exported to the consignee and obtain 
from the consignee an acknowledgement and commitment to comply with the 
EAR. It is, however, the Administration's understanding that complying 
with the requirements of STA is likely to be less burdensome

[[Page 68683]]

than applying for licenses. For example, under License Exception STA, a 
single consignee statement can apply to an unlimited number of 
products, need not have an expiration date and need not be submitted to 
the government in advance for approval. Suppliers with regular 
customers can tailor a single statement and assurance to match their 
business relationship rather than applying repeatedly for licenses with 
every purchase order to supply allied and, in some cases, U.S forces 
with routine replacement parts and components.
    Even in situations in which a license would be required under the 
EAR, the burden is likely to be reduced compared to the license 
requirement of the ITAR. In particular, license applications for 
exports of technology controlled by ECCN 9E610 are likely to be less 
complex and burdensome than the authorizations required to export ITAR-
controlled technology, i.e., Manufacturing License Agreements and 
Technical Assistance Agreements.
    3. This rule does not contain policies with Federalism implications 
as that term is defined under E.O. 13132.
    4. The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 
601 et seq., generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to the notice and comment 
rulemaking requirements under the Administrative Procedure Act (5 
U.S.C. 553) or any other statute, 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 Chief Counsel for Regulations, 
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. A summary of the factual 
basis for the certification is provided below.

Number of Small Entities

    The Bureau of Industry and Security (BIS) does not collect data on 
the size of entities that apply for and are issued export licenses. 
Although BIS is unable to estimate the exact number of small entities 
that would be affected by this rule, it acknowledges that this rule 
would affect some unknown number.

Economic Impact

    This proposed rule is part of the Administration's Export Control 
Reform Initiative. Under that initiative, the United States Munitions 
List (22 CFR part 121) (USML) would be revised to be a ``positive'' 
list, i.e., a list that does not use generic, catch-all controls on any 
part, component, accessory, attachment, or end item that was in any way 
specifically modified for a defense article, regardless of the 
article's military or intelligence significance or non-military 
applications. At the same time, articles that are determined to no 
longer warrant control on the USML would become controlled on the 
Commerce Control List (CCL). Such items, along with certain military 
items that currently are on the CCL, will be identified in specific 
Export Control Classification Numbers (ECCNs) known as the ``600 
series'' ECCNs. In addition, some items currently on the Commerce 
Control List would move from existing ECCNs to the new 600 series 
ECCNs. In practice, the greatest impact of this rule on small entities 
would likely be reduced administrative costs and reduced delay for 
exports of items that are now on the USML but would become subject to 
the EAR. This rule focuses on Category VIII articles, which are 
aircraft and related parts, components, production equipment, software, 
and technology. Most operational military aircraft currently in active 
inventory would remain on the USML. However, parts and components, 
which are more likely to be produced by small businesses than are 
complete military aircraft, would in many cases become subject to the 
EAR. In addition, officials of the Department of State have informed 
BIS that license applications for such parts and components are a high 
percentage of the license applications for USML articles review by that 
department.
    Changing the jurisdictional status of Category VIII items would 
reduce the burden on small entities (and other entities as well) 
through:

--Elimination of some license requirements,
--Greater availability of license exceptions,
--Simpler license application procedures, and
--Reduced (or eliminated) registration fees.

    In addition, parts and components controlled under the ITAR remain 
under ITAR control when incorporated into foreign-made items, 
regardless of the significance or insignificance of the item, 
discouraging foreign buyers from incorporating such U.S. content. The 
availability of de minimis treatment under the EAR may reduce the 
incentive for foreign manufacturers to avoid purchasing U.S.-origin 
parts and components
    Twenty-five types of parts and components, identified in ECCN 
9A610.y, would be designated immediately as parts and components that, 
even if specially designed for a military use, have little or no 
military significance. These parts and components, which under the ITAR 
require a license to nearly all destinations, would, under the EAR, 
require a license to only five destinations and, if destined for a 
military end use, the People's Republic of China.
    Many exports and reexports of the Category VIII articles that would 
be placed on the CCL by this rule, particularly parts and components, 
would become eligible for license exceptions that apply to shipments to 
United States Government agencies, shipments valued at less than 
$1,500, parts and components being exported for use as replacement 
parts, temporary exports, and License Exception Strategic Trade 
Authorization (STA), reducing the number of licenses that exporters of 
these items would need. License Exceptions under the EAR would allow 
suppliers to send routine replacement parts and low level parts to NATO 
and other close allies and export control regime partners for use by 
those governments and for use by contractors building equipment for 
those governments or for the United States government without having to 
obtain export licenses. Under License Exception STA, the exporter would 
need to furnish information about the item being exported to the 
consignee and obtain a statement from the consignee that, among other 
things, would commit the consignee to comply with the EAR and other 
applicable U.S. laws. Because such statements and obligations can apply 
to an unlimited number of transactions and have no expiration date, 
they would impose a net reduction in burden on transactions that the 
government routinely approves through the license application process 
that the License Exception STA statements would replace.
    Even for exports and reexports in which a license would be 
required, the process would be simpler and less costly under the EAR. 
When a USML Category VIII article is moved to the CCL, the number of 
destinations for which a license is required would

[[Page 68684]]

remain unchanged. However, the burden on the license applicant would 
decrease because the licensing procedure for CCL items is simpler and 
more flexible that the license procedure for UMSL articles.
    Under the USML licensing procedure, an applicant must include a 
purchase order or contract with its application. There is no such 
requirement under the CCL licensing procedure. This difference gives 
the CCL applicant at least two advantages. First, the applicant has a 
way of determining whether the U.S. government will authorize the 
transaction before it enters into potentially lengthy, complex and 
expensive sales presentations or contract negotiations. Under the USML 
procedure, the applicant will need to caveat all sales presentations 
with a reference to the need for government approval and is more likely 
to have to engage in substantial effort and expense only to find that 
the government will reject the application. Second, a CCL license 
applicant need not limit its application to the quantity or value of 
one purchase order or contract. It may apply for a license to cover all 
of its expected exports or reexports to a particular consignee over the 
life of a license (normally two years, but may be longer if 
circumstances warrant a longer period), reducing the total number of 
licenses for which the applicant must apply.
    In addition, many applicants exporting or reexporting items that 
this rule would transfer from the USML to the CCL would realize cost 
savings through the elimination of some or all registration fees 
currently assessed under the USML's licensing procedure. Currently, 
USML applicants must pay to use the USML licensing procedure even if 
they never actually are authorized to export. Registration fees for 
manufacturers and exporters of articles on the USML start at $2,500 per 
year, increase to $2,750 for organizations applying for one to ten 
licenses per year and further increases to $2,750 plus $250 per license 
application (subject to a maximum of three percent of total application 
value) for those who need to apply for more than ten licenses per year. 
There are no registration or application processing fees for 
applications to export items listed on the CCL. Once the Category VIII 
items that are the subject to this rulemaking are moved from the USML 
to the CCL, entities currently applying for licenses from the 
Department of State would find their registration fees reduced if the 
number of USML licenses those entities need declines. If an entity's 
entire product line is moved to the CCL, then its ITAR registration and 
registration fee requirement would be eliminated.
    De minimis treatment under the EAR would become available for all 
items that this rule would transfer from the USML to the CCL. Items 
subject to the ITAR remain subject to the ITAR when they are 
incorporated abroad into a foreign-made product regardless of the 
percentage of U.S content in that foreign made product. Foreign-made 
products that incorporate items that this rule would move to the CCL 
would be subject to the EAR only if their total controlled U.S.-origin 
content exceeded 10 percent. Because including small amounts of U.S.-
origin content would not subject foreign-made products to the EAR, 
foreig