Billing Code: 3510-33-P

DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 744 and 772

[Docket No. 0612243150-63150-01]

RIN: 0694-AD82

Authorization to Impose License Requirements for Exports or Reexports to Entities Acting Contrary to the National Security or Foreign Policy Interests of the United States.

AGENCY: Bureau of Industry and Security, Commerce

ACTION: Proposed Rule

SUMMARY: The Entity List (Supplement No. 4 to Part 744 of the Export Administration Regulations) provides notice to the public that certain exports and reexports to parties identified on the Entity List require a license from the Bureau of Industry and Security (BIS) and that availability of License Exceptions in such transactions is limited. This proposed rule would expand the scope of reasons for which BIS may add parties to the Entity List. This proposed rule would also amend the Export Administration Regulations (EAR) to state explicitly that a party listed on the Entity List has a right to request that its listing be removed or modified and would set procedures for addressing such requests.

DATES: Comments concerning this rule must be received by BIS no later than August 6, 2007.

ADDRESSES: Comments on this rule may be submitted to the Federal eRulemaking Portal at http://www.regulations.gov (follow the instructions for submitting comments) by e-mail directly to BIS at publiccomments@bis.doc.gov (refer to regulatory identification number 0694-AD82 in the subject line), by fax at (202) 482 3355, or on paper to Regulatory Policy Division, Office of Exporter Services, Bureau of Industry and Security, Room H2705, U.S. Department of Commerce, 14th Street and Pennsylvania Avenue, N.W. Washington, D.C. 20230. Refer to Regulatory Identification Number (RIN) 0694-AD82 in all comments.

FOR FURTHER INFORMATION CONTACT: Mike Rithmire, Office of the Assistant Secretary for Export Administration, Bureau of Industry and Security, e-mail mrithmir@bis.doc.gov , tel. 202 482 6105.

SUPPLEMENTARY INFORMATION

Background

The Entity List (Supplement No. 4 to Part 744 of the EAR) provides notice to the public of the identity of certain parties whose presence as a recipient of items subject to the Export Administration Regulations (EAR) can impose a license requirement in an export or reexport transaction. The reasons for which BIS may place an entity on the Entity List are stated in §§744.2, 744.3, 744.4, 744.6, 744.10 and 744.20 of the EAR.

In addition to those reasons, this proposed rule would create a new §744.11 to authorize BIS to add to the Entity List entities that BIS has reasonable cause to believe, based on specific and articulable facts, have been, are or pose a risk of being involved in activities that are contrary to the national security or foreign policy interests of the United States or those acting on behalf of such entities. This new section would not be used to add to the Entity List entities that are U.S. persons (as defined in §772.1 of the EAR). This new section also would not be used to add to the Entity List entities for which the EAR already impose a license requirement because those entities are already listed on the List of Specially Designated Nationals and Blocked Persons published by the Treasury Department, Office of Foreign Assets Control.

Reason for the changes proposed by this rule.

BIS is proposing to take this action to focus its export control efforts more closely on problematic potential recipients of items that are subject to the EAR, but who do not meet the criteria currently set forth in §§ 744.2, 744.3, 744.4, 744.6, 744.10 or 744.20. With this rule, the United States government would be able to conduct prior review and make appropriate licensing decisions regarding proposed exports and reexports to such recipients to the degree necessary to protect its interests. BIS would be able to tailor license requirements and availability of license exceptions for exports and reexports to parties who have taken, are taking, or will take actions that are contrary to United States national security or foreign policy interests without imposing additional license requirements that apply broadly to entire destinations or items. BIS believes that such targeted application of license requirements would provide the flexibility to deter use of items that are subject to the EAR in ways that are inimical to the interests of the United States with minimal costs to and disruption of legitimate trade. As export controls continue to focus not just on countries, but also on individual customers or entities, BIS believes it is important to provide more information to the public about entities of concern. Implementation of this rule will provide additional information to the public to enhance the ability to screen potential recipients of items subject to the EAR.

In addition, this proposed rule would simplify the EAR by reducing the need to issue general orders to impose license requirements on specific parties. License requirements currently imposed on specific entities through general orders would, under this rule, be imposed by adding such entities to the Entity List. Such an action would reduce the number of EAR provisions that the public would have to review to determine license requirements under the EAR.

Summary of the changes proposed by this rule.

This proposed rule would authorize BIS to impose foreign policy export and reexport license requirements, limit the availability of License Exceptions, and set license application review policy for exports and reexports of items subject to the EAR to entities that BIS has reasonable cause to believe, based on specific and articulable facts, have been, are or pose a risk of being involved in activities that are contrary to the national security or foreign policy interests of the United States or those acting on behalf of such entities. This proposed rule would not require that such activities involve items or activities that are subject to the EAR.

This proposed rule lists five types of conduct, in addition to the grounds set forth in §744.2, 744.3, 744.4, 744.6 or 744.20, that BIS could determine are contrary to U.S. national security or foreign policy interests. They are: (i) Supporting persons engaged in acts of terror; (ii) Actions that could enhance the military capability of, or the ability to support terrorism of governments that have been designated by the Secretary of State as having repeatedly provided support for acts of international terrorism; (iii) Transferring, developing, servicing, repairing, or producing conventional weapons in a manner that is contrary to United States national security or foreign policy interests or enabling such transfer, development, service, repair or production by supplying parts, components, technology, or financing for such activity; (iv) Deliberately failing or refusing to comply with an end use check conducted by or on behalf of BIS or the Department of State, Directorate of Defense Trade Controls by denying access, by refusing to provide information about parties to a transaction, or by providing information about such parties that is false or that cannot be verified or authenticated; and (v) Engaging in conduct that poses a risk of violating the EAR and raises sufficient concern that prior review of exports or reexports involving the party and the possible imposition of license conditions or license denial enhances BIS's ability to prevent violations of the EAR.

These criteria are illustrative of conduct that could be contrary to the national security or foreign policy interests of the United States. A party could be added to the Entity List if specific and articulable facts provided reasonable cause to believe that it is involved in, has been involved in, or poses a significant risk of being or becoming involved in one of the five listed illustrative activities or other activities that are contrary to U.S. national security or foreign policy interests.

This proposed rule also would authorize BIS to modify the license requirements, license exception availability or license application review policy that applies to any entity placed on the Entity List pursuant to this rule.

This proposed rule would not be used to add to the Entity List a party to which exports or reexports require a license pursuant to §§ 744.12, 744.13, 744.14 or 744.18 of the EAR. Those sections impose license requirements because of the presence of certain parties on the List of Specially Designated Nationals and Blocked Persons published by the U.S. Department of the Treasury, Office of Foreign Assets Control. This proposed rule would not authorize placing U.S. persons, as defined in §772.1 of the EAR, on the Entity List.

All impositions of license requirements or statements of license application review policy or any modification thereof made pursuant to this rule would be required to be made by publishing an amendment to the Entity List found at Supplement No. 4 to part 744 of the Export Administration Regulations. Under this proposed rule, license exceptions are not available for any entity added to the Entity List pursuant to this rule unless specifically authorized in the entry for the entity.

This proposed rule would explicitly set forth the ability of a party who is listed on the Entity List to request that its listing be removed or modified. Such requests, including reasons therefor, would have to be made in writing, and BIS would be required to provide a written response that would be the final agency decision on the request. Such requests would be reviewed by the Departments of Commerce, State, Defense, and Energy and, if appropriate in a particular case, the Treasury. The interagency decision, as communicated to the requesting entity by BIS, would be the final agency action on such a request.

This proposed rule would make a conforming change to the definition of U.S. person in §772.1 by adding §744.11 to the list of sections to which that definition applies.

The license requirements proposed by this rule would be an expansion of foreign policy export controls that would require a report to Congress in accordance with section 6 of the Export Administration Act. BIS will submit the appropriate report to Congress before implementing any such expanded controls.

Request for Comments

BIS is seeking public comments on this proposed rule and will consider all comments received on or before August 6, 2007 in developing any final rule. Comments received after that date will be considered if possible, but their consideration cannot be assured. All public comments on this proposed rule must be in writing (including fax or e-mail) and will be a matter of public record, available for public inspection and copying. The Office of Administration, Bureau of Industry and Security, U.S. Department of Commerce, displays these public comments on BIS's Freedom of Information Act (FOIA) Web site at http://www.bis.doc.gov/foia. This office does not maintain a separate public inspection facility. If you have technical difficulties accessing this website, please call BIS's Office of Administration at (202) 482-0953 for assistance.

Rulemaking Requirements

1.	This rule has been determined to be a significant rule pursuant to Executive Order 12866.

2.	Notwithstanding any other provision of law, no person is required to respond to nor be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), unless that collection of information displays a currently valid Office of Management and Budget (OMB) Control Number. This rule involves a collection of information that has been approved by the OMB under control number 0694-0088, "Multi-Purpose Application," which carries a burden hour estimate of 58 minutes to prepare and submit form BIS-748. Miscellaneous and recordkeeping activities account for 12 minutes per submission. Additionally, this rule contains a new collection of information subject to review and approval by OMB under the Paperwork Reduction Act. This collection will be submitted to OMB for approval. This rule proposes a procedure for a listed party to request removal or modification of its listing, as set forth in proposed §744.16. BIS estimates that this new collection will involve an annual burden of 15 hours.

Send comments regarding these burden estimates or any other aspect of these collections of information, including suggestions for reducing the burden, to David Rostker, OMB Desk Officer, by e-mail at david_rostker@omb.eop.gov or by fax to (202) 395-7285; and to the Regulatory Policy Division, Bureau of Industry and Security, Department of Commerce, P.O. Box 273, Washington, DC 20044.

3.	This rule does not contain policies with Federalism implications as this term is defined in Executive Order 13132.

4.	The provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, the opportunity for public participation, and a delay in effective date, are inapplicable because this regulation involves a military or foreign affairs function of the United States (see 5 U.S.C. 553(a)(1)). Further, no other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601 et. seq., are not applicable. However, to obtain the benefit of a variety of viewpoints before issuing any final rule, BIS is issuing this rule in proposed form with a request for comments.

List of Subjects

15 CFR Part 744

Exports, Reporting and recordkeeping requirements, Terrorism

15 CFR Part 772

Exports

Accordingly, parts 744 and 772 of the Export Administration Regulations (15 CFR Parts 730 - 774) are amended as follows:

PART 744 [AMENDED]

1. The authority citation for part 744 continues to read as follows:

Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 22 U.S.C. 3201 et seq.; 42 U.S.C. 2139a; Sec. 901-911, Pub. L. 106-387; Sec. 221, Pub. L. 107-56; E.O. 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. 179; E.O. 12851, 58 FR 33181, 3 CFR, 1993 Comp., p. 608; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 12947, 60 FR 5079, 3 CFR, 1995 Comp., p. 356; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13099, 63 FR 45167, 3 CFR, 1998 Comp., p. 208; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; E.O. 13224, 66 FR 49079, 3 CFR, 2001 Comp., p. 786; Notice of August 3, 2006, 71 FR 44551 (August 7, 2006); Notice of October 27, 2006, 71 FR 64109 (October 31, 2006).

2. In §744.1(a)(1), a new sentence immediately following the current sixth sentence and a new sentence immediately following the current tenth sentence are added, to read as follows:

§744.1 General Provisions

(a)(1)

* * *

Section 744.11 imposes license requirements, to the extent specified in Supplement No. 4 of this part on entities listed in Supplement No. 4 of this part for activities contrary to the national security or foreign policy interests of the United States.

* * *

Section 744.16 sets forth the right of a party listed in Supplement No. 4 of this part to request that its listing be removed or modified.

3. Section § 744.11 is added to read as follows:

§744.11 License requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States.

BIS may impose foreign policy export and reexport license requirements and limitations on availability of license exceptions and may set license application review policy based on the criteria in this section. Such requirements, limitations and policy are in addition to those set forth elsewhere in the EAR. License requirements, limitations on use of license exceptions and license application review policy will be imposed under this section by adding an entity to the Entity List with a reference to this section and by stating on the Entity List the license requirements and license application review policy that apply to that entity. BIS may remove an entity from the Entity List if it is no longer engaged in the activities described in paragraph (b) of this section and is unlikely to engage in such activities in the future. BIS may modify the license exception limitations and license application review policy that applies to a particular entity to implement the policies of this section. Any modification to the Entity List proposed to be made pursuant to this section will be reviewed by the Departments of Commerce, State, and Defense, and Energy and the Treasury as appropriate.

(a) License Requirement, Availability of License Exceptions, and License Application Review Policy. A license is required, to the extent specified on the Entity List, to export or reexport any item subject to the EAR to an entity that is listed on the Entity List in an entry that contains a reference to this section. License Exceptions may not be used unless authorized in that entry. Applications for licenses required by this section will be evaluated as stated in that entry in addition to any other applicable review policy stated elsewhere in the EAR.

(b) Criteria for revising the Entity List. Entities that BIS has reasonable cause to believe, based on specific and articulable facts, have been, are, or pose a significant risk of being or becoming involved in activities that are contrary to the national security or foreign policy interests of the United States and those acting on behalf of such entities may be added to the Entity List pursuant to this section. This section may not be used to place on the Entity List any party to which exports or reexports require a license pursuant to §§744.12, 744.13, 744.14 or 744.18 of this part. This section may not be used to place on the Entity List any party if exports or reexports to that party of items that are subject to the EAR are prohibited by or require a license from another U.S. government agency. This section may not be used to place any U.S. person, as defined in § 772.1, on the Entity List. Examples of activities that could be contrary to the national security or foreign policy interests of the United States include:

(1) Supporting persons engaged in acts of terror;

(2) Actions that could enhance the military capability of, or the ability to support terrorism of governments that have been designated by the Secretary of State as having repeatedly provided support for acts of international terrorism;

(3) Transferring, developing, servicing, repairing or producing conventional weapons in a manner that is contrary to United States national security or foreign policy interests or enabling such transfer, service, repair, development, or production by supplying parts, components, technology, or financing for such activity;

(4) Deliberately failing or refusing to comply with an end use check conducted by or on behalf of BIS or the Directorate of Defense Trade Controls of the Department of State, by denying access, by refusing to provide information about parties to a transaction, or by providing information about such parties that is false or that cannot be verified or authenticated; or

(5) Engaging in conduct that poses a risk of violating the EAR and raises sufficient concern that BIS believes that prior review of exports or reexports involving the party and the possible imposition of license conditions or license denial enhances BIS's ability to prevent violations of the EAR.

4. Section 744.16 is added to read as follows:

§744.16 Procedure for requesting removal or modification of an Entity List Entity. Any entity listed on the Entity List may request that its listing be removed or modified.

(a) All such requests, including reasons therefor, must be in writing and sent to: (Address to be added in final rule).

(b) BIS will review such requests in conjunction with the Departments of Defense, State and Energy, and if appropriate in a particular case, the Treasury.

(c) The Chair of the End User Review Committee will convey the decision on the request to the requester in writing. That decision will be the final agency action on the request.

PART 772 [AMENDED]

5. The authority citation for part 772 continues to read as follows:

Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 3, 2006, 71 FR 44551 (August 7, 2006).

6. In §772.1 the definition of U.S. person is amended by revising paragraph (a) introductory text to read as follows:

§772.1 Definition of terms as used in the Export Administration Regulations (EAR).

* * *

U.S. Person. (a) For purposes of §§ 744.6, 744.10, 744.11, 744.12, 744.13, and 744.14 of the EAR, the term U.S. person includes:

* * * * *

Dated

Christopher A. Padilla

Assistant Secretary

for Export Administration